Ault v. Canada (Attorney General)

COURT FILE NOS.: 04-CV-026378&A; 04-CV-026588&A; 04-CV-026986&A;

04-CV-028197&A; 05-CV-031616&A; 05-CV-031747&A;

06-CV-034480&A; 07-CV-037376&A; 07-CV-037377&A

DATE: 2008/09/03

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

)

MARGARET AULT/ROBERT

) Dougald E. Brown, for the Plaintiffs

COLLIER/ ROBERT C. TEMPLE/ROD

SHEPHERD/RICHARD FINDLAY/DAVID

LUCK/LUCIE NOBERT/MARIE-FRANCE

DUFOUR/BRYAN C. ARMSTRONG

)

Plaintiffs )

)

- and -

)

ATTORNEY GENERAL OF CANADA

) Anne M. Turley, Elizabeth Richards and

) Sharon Johnston, for the Defendant

)

Defendant )

)

- and -

)

SYLVAIN PARENT, WELTON PARENT

INC., LOBA LIMITED and RAYMOND

JEMUS

) Howard Yegendorf and Marcia A. Green,

) for the Third Parties, Sylvain Parent,

) Welton Parent Inc., and Loba Limited

)

) Bruce F. Simpson, for the Third Party,

) Raymond Jemus

Third Parties )

)

) HEARD: October 15-19, 22-26, 29,

) November 2, 5, 13-16, 19, 22-23, 26-30,

) December 3-7, 10-13, 2007 and

- 2 -

) January 8-11, 2008

REASONS FOR JUDGMENT

Aitken J.

Table of Contents

REASONS FOR JUDGMENT....................................................................................................... 1

Table of Contents............................................................................................................................ 1

Nature of Proceedings..................................................................................................................... 8

Parties............................................................................................................................................ 10

Plaintiffs.................................................................................................................................... 10

Defendant.................................................................................................................................. 11

Third Parties.............................................................................................................................. 11

(a)

(b)

(c)

(d)

Parent..................................................................................................................... 11

Loba....................................................................................................................... 12

WBP ...................................................................................................................... 13

Jemus..................................................................................................................... 13

Background Context ..................................................................................................................... 14

Management of Pensions by and for the Federal Public Service.............................................. 14

(a)

(b)

(c)

(d)

Treasury Board...................................................................................................... 14

Public Works and Government Services Canada.................................................. 14

Employing Departments – Human Resources ...................................................... 16

Canada Revenue Agency ...................................................................................... 16

Key Players within the Federal Public Service......................................................................... 18

(a)

(b)

(c)

(d)

(e)

(f)

Charko, Pensions Division, TBS........................................................................... 18

Gravelle, Pensions Division, TBS......................................................................... 18

Macpherson, Pensions Division, TBS................................................................... 19

Soucoup and Swan, Superannuation Directorate, PWGSC .................................. 19

Godwin, Registered Plans Division, CRA ............................................................ 20

Desnoyers, Commercial Crime Unit, RCMP........................................................ 20

Public Service Superannuation Plan......................................................................................... 20

Reciprocal Transfer Agreements .............................................................................................. 21

Transition Arrangements .......................................................................................................... 23

Parent and Reciprocal Transfer Agreements ............................................................................ 24

Loba Marketing Measures ........................................................................................................ 28

Jemus and Reciprocal Transfer Agreements............................................................................. 31

Loba Limited................................................................................................................................. 33

Corporate Structure of “Parent’s Companies”.......................................................................... 33

Loba Reciprocal Transfer Agreement....................................................................................... 33

Loba Pension Plan..................................................................................................................... 35

(a)

(b)

(c)

(d)

(e)

Original Plan Text................................................................................................. 35

March 31, 1997 Amendment................................................................................. 37

October 27, 1997 Amendment .............................................................................. 40

August 11, 1998 Amendment................................................................................ 40

November 20, 2001 Amendment .......................................................................... 40

- 2 -

Signing on with Loba................................................................................................................ 42

(a)

(b)

Employment Agreement ....................................................................................... 42

Pension Transfer Administration Agreement........................................................ 42

Information Required from the Government............................................................................ 44

Actuarial Valuations of Entitlements under the Loba Pension Plan......................................... 45

Anticipated Benefits from the Loba Arrangements.................................................................. 50

(a)

(b)

Benefits for Departing Public Servants................................................................. 50

Benefits to Loba, WBP, and Parent....................................................................... 51

Defendant’s Concerns Regarding the Loba RTA and the Loba Pension Plan Prior to October 15,

2000............................................................................................................................................... 52

Concerns of the TBS respecting AMB and Cryptic Web......................................................... 53

Concerns of the TBS respecting Loba ...................................................................................... 56

Concerns of the CRA respecting Loba ..................................................................................... 60

Concerns of the RCMP............................................................................................................. 71

Memorandum from Charko to Claydon September 11, 2000................................................... 76

(a)

(b)

(c)

Pensions Division’s Understanding of CRA Concerns......................................... 76

Pensions Division Concerns.................................................................................. 78

Steps Taken or To Be Taken................................................................................. 79

Memorandum from Claydon to President of the Treasury Board October 5, 2000 ................. 80

General Information Regarding RTAs Available Prior to October 15, 2000............................... 81

Newspaper Articles................................................................................................................... 81

CRA Question and Answer 11.................................................................................................. 83

APEX Bulletin .......................................................................................................................... 83

Compensation Advisors, Pay and Benefits Officers, Heads of HR within Departments ......... 84

(a)

(b)

Superannuation Administration Manual ............................................................... 84

Special Bulletins 1998-2002 ................................................................................. 85

Treasury Board Information Bulletins...................................................................................... 87

(a)

(b)

August 31, 2000 .................................................................................................... 87

September 7, 2000................................................................................................. 88

PWGSC Notice to Employees .................................................................................................. 88

(a)

(b)

September 12, 2000............................................................................................... 88

September 13, 2000............................................................................................... 88

Third Parties’ Knowledge of the Defendant’s Concerns Regarding the Loba RTA and the Loba

Pension Plan.................................................................................................................................. 89

Communications from the Pensions Division (TBS)................................................................ 89

Communications from Registered Plans Division (CRA)........................................................ 97

Communications from Non-Government Sources.................................................................. 100

Communications from RCMP ................................................................................................ 104

Information Provided to the Plaintiffs by Parent Prior to October 15, 2000.............................. 104

Standard Presentation.............................................................................................................. 104

Parent’s Communication of Government Concerns ............................................................... 109

Events After October 15, 2000 ................................................................................................... 110

Chronology from October 15, 2000 to November 16, 2000................................................... 110

November 16, 2000 Meeting .................................................................................................. 112

- 3 -

Chronology from November 16, 2000 to December 21, 2001 ............................................... 118

Criminal Charges – December 2001....................................................................................... 132

Chronology from December 2001 forward............................................................................. 134

Outcome for Individual Public Servants................................................................................. 141

Individual Actions....................................................................................................................... 141

Richard Findlay (action no. 05-CV-031616).......................................................................... 141

Margaret Ault (action no. 04-CV-026378)............................................................................. 148

Rodney Shepherd (action no. 04-CV-028197) ....................................................................... 155

Robert Collier (action no. 04-CV-026588)............................................................................. 162

Robert Temple (action no. 04-CV-026986)............................................................................ 168

Bryan Armstrong (action no. 07-CV-037377)........................................................................ 173

David Luck (action no. 05-CV-031747)................................................................................. 179

Lucie Nobert (action no. 06-CV-034480)............................................................................... 183

Marie-France Dufour (action no. 07-CV-037376).................................................................. 189

Negligent Misrepresentation....................................................................................................... 191

Lifting the Corporate Veil....................................................................................................... 191

(a)

(b)

Parent................................................................................................................... 192

Jemus................................................................................................................... 193

Overview................................................................................................................................. 195

Duty of Care............................................................................................................................ 195

(a)

(b)

(c)

(d)

Jurisprudence....................................................................................................... 195

Did the Defendant owe a duty of care to the Plaintiffs? ..................................... 199

Did Parent, Loba and WBP owe a duty of care to the Plaintiffs?....................... 211

Did Jemus owe a duty of care to the Plaintiffs?.................................................. 214

Untrue, Inaccurate or Misleading Representation .................................................................. 214

(a)

(b)

Jurisprudence....................................................................................................... 214

Did the Defendant make an untrue, inaccurate or misleading representation to the

Plaintiffs?............................................................................................................................ 218

(c) Did Parent, Loba or WBP make an untrue, inaccurate or misleading representation

to the Plaintiffs?.................................................................................................................. 228

(d) Did Jemus make an untrue, inaccurate or misleading representation to the

Plaintiffs?............................................................................................................................ 231

Negligence .............................................................................................................................. 232

(a)

(b)

Jurisprudence....................................................................................................... 232

Was the Defendant negligent regarding the misrepresentations made to the

Plaintiffs?............................................................................................................................ 236

(i)

(ii)

Nature of the occasion......................................................................................... 236

Status of the advisor............................................................................................ 237

(iii) Purpose for which the representation was made. ................................................ 237

(iv) Knowledge of the average person about the subject-matter of the representation.

............................................................................................................................. 237

(v)

Plaintiffs’ need for the information..................................................................... 239

(vi) Foreseeable use to be made of the representation............................................... 240

(vii) Foreseeable damage resulting from the misrepresentation. ................................ 240

- 4 -

(viii) Defendant’s ability to appreciate the likelihood of damages resulting from the

misrepresentation. ............................................................................................... 241

(ix) Defendant’s possession of important, relevant information................................ 244

(x)

Defendant’s ability to provide the information to the Plaintiffs. ........................ 244

(xi) Indicators of the appropriate standard of care in the circumstances ................... 246

(xii) Conclusion........................................................................................................... 254

(c)

Was Parent, Loba or WBP negligent regarding the misrepresentation made to the

Plaintiffs?............................................................................................................................ 260

(d)

Was Jemus negligent regarding the misrepresentation made to the Plaintiffs? .. 265

Reasonable Reliance............................................................................................................... 266

(a)

(b)

Jurisprudence....................................................................................................... 266

Individual Plaintiffs............................................................................................. 267

Findlay................................................................................................................. 267

Ault...................................................................................................................... 269

(i)

(ii)

(iii) Shepherd.............................................................................................................. 271

(iv) Collier.................................................................................................................. 273

(v)

Temple................................................................................................................. 274

(vi) Armstrong............................................................................................................ 276

(vii) Luck..................................................................................................................... 278

(viii) Nobert.................................................................................................................. 280

(ix) Dufour ................................................................................................................. 282

(c)

Reliance Placed on the Defendant’s Negligent Misrepresentations.................... 283

Reliance Placed on Negligent Misrepresentations of Parent, Loba and WBP.... 290

Reliance Placed on Jemus’ Negligent Misrepresentations.................................. 291

Conclusion........................................................................................................... 292

(d)

(e)

(f)

Breach of Fiduciary Duty............................................................................................................ 293

Lifting the Corporate Veil....................................................................................................... 293

(a)

(b)

Parent................................................................................................................... 293

Jemus................................................................................................................... 294

Overview................................................................................................................................. 294

Is Parent, Loba or WBP liable for breach of fiduciary duty? ................................................. 297

(a)

(i)

(ii)

Individual Plaintiffs and Dufour ......................................................................... 297

Findlay................................................................................................................. 297

Ault...................................................................................................................... 298

(iii) Shepherd.............................................................................................................. 298

(iv) Collier.................................................................................................................. 299

(v)

Temple................................................................................................................. 299

(vi) Armstrong............................................................................................................ 299

(vii) Luck..................................................................................................................... 300

(viii) Nobert.................................................................................................................. 301

(ix) Dufour ................................................................................................................. 301

(b)

Did Parent, Loba or WBP owe a fiduciary duty to the Plaintiffs and Dufour?... 302

Parent/Loba as Administrator; Parent/WBP as Third Party Administrator ........ 303

Parent/WBP as Consulting Actuaries.................................................................. 305

(i)

(ii)

- 5 -

(c)

Did Parent, Loba and WBP breach their fiduciary duties to the Plaintiffs and

Dufour? 310

Is Jemus liable for breach of fiduciary duty?.......................................................................... 314

(a)

(i)

(ii)

Individual Plaintiffs and Dufour ......................................................................... 315

Findlay................................................................................................................. 316

Ault...................................................................................................................... 316

(iii) Shepherd.............................................................................................................. 317

(iv) Collier.................................................................................................................. 317

(v)

Armstrong............................................................................................................ 317

(vi) Dufour ................................................................................................................. 318

(b)

(c)

Did Jemus owe a fiduciary duty to the Plaintiffs and Dufour? ........................... 318

Did Jemus breach his fiduciary duty to Dufour?................................................. 321

Is the Defendant liable for breach of fiduciary duty? ............................................................. 321

Damages...................................................................................................................................... 322

Causation of Damages ............................................................................................................ 322

(a)

(b)

(c)

But for Test.......................................................................................................... 322

Intervening Event: De-registration of the Loba Pension Plan............................. 323

Plaintiffs Leaving the Public Service for Reasons Other Than the Loba RTA and

Pension Promise .................................................................................................. 324

Foreseeability of Losses.......................................................................................................... 324

Taxation of Damages for Pension Loss .................................................................................. 325

Expert Evidence...................................................................................................................... 326

Assumed Retirement Date ...................................................................................................... 329

(a)

(b)

(c)

(d)

(e)

(f)

(g)

(h)

(i)

Findlay................................................................................................................. 331

Ault...................................................................................................................... 332

Shepherd.............................................................................................................. 333

Collier.................................................................................................................. 333

Temple................................................................................................................. 334

Armstrong............................................................................................................ 334

Luck..................................................................................................................... 335

Nobert.................................................................................................................. 335

Dufour ................................................................................................................. 336

RRSPs and Additional RRSP Room....................................................................................... 336

Mitigation of Loss................................................................................................................... 337

(a)

(b)

(c)

(d)

(e)

(f)

Shepherd.............................................................................................................. 337

Collier.................................................................................................................. 337

Temple................................................................................................................. 338

Luck..................................................................................................................... 338

Nobert.................................................................................................................. 339

Dufour ................................................................................................................. 340

Quantification of Damages ..................................................................................................... 340

Individual Plaintiffs ................................................................................................................ 341

(a)

(i)

Findlay................................................................................................................. 342

Pension Loss........................................................................................................ 342

- 6 -

(ii)

Salary Loss.......................................................................................................... 342

(iii) Severance Pay Loss............................................................................................. 344

(b)

Ault...................................................................................................................... 345

Pension Loss........................................................................................................ 345

Salary Loss.......................................................................................................... 345

(i)

(ii)

(iii) Severance Pay Loss............................................................................................. 347

(c)

Shepherd.............................................................................................................. 347

Pension Loss........................................................................................................ 347

Salary Loss.......................................................................................................... 348

(i)

(ii)

(iii) Severance Pay Loss............................................................................................. 350

(iv) Cost of Replacement Life Insurance................................................................... 350

(v)

(d)

Cost of Replacement Health Insurance ............................................................... 350

Collier.................................................................................................................. 351

Pension Loss........................................................................................................ 351

Salary Loss.......................................................................................................... 351

(i)

(ii)

(iii) Severance Pay Loss............................................................................................. 353

(iv) Cost of Replacement Life Insurance................................................................... 353

(v)

(e)

Cost of Replacement Health Coverage ............................................................... 354

Temple................................................................................................................. 354

Pension Loss........................................................................................................ 354

Salary Loss.......................................................................................................... 354

(i)

(ii)

(iii) Severance Pay Loss............................................................................................. 356

(iv) Investment Loss Claim........................................................................................ 356

Armstrong............................................................................................................ 356

(f)

(i)

(ii)

Pension Loss........................................................................................................ 357

Salary Loss.......................................................................................................... 357

(iii) Severance Pay Loss............................................................................................. 359

(g)

(i)

(ii)

Luck..................................................................................................................... 359

Pension Loss........................................................................................................ 361

Salary Loss.......................................................................................................... 361

(iii) Severance Pay Loss............................................................................................. 362

(iv) Cost of Replacement Health Coverage ............................................................... 362

(v)

Interest Expense Claim........................................................................................ 363

(vi) Investment and Rental Income............................................................................ 363

(h)

Nobert.................................................................................................................. 363

Pension Loss........................................................................................................ 363

Salary Loss.......................................................................................................... 364

(i)

(ii)

(iii) Severance Pay Loss............................................................................................. 366

Dufour ................................................................................................................. 366

(i)

(ii)

Pension Loss........................................................................................................ 366

Salary Loss.......................................................................................................... 366

Apportionment of Damages for Negligent Misrepresentation.................................................... 368

Jurisprudence .......................................................................................................................... 368

Contributory Negligence......................................................................................................... 369

- 7 -

(a)

(b)

Jurisprudence....................................................................................................... 369

Did the Plaintiffs exercise due diligence before resigning from the public service

to join Loba? ....................................................................................................................... 372

(i)

(ii)

Findlay................................................................................................................. 382

Ault...................................................................................................................... 384

(iii) Shepherd.............................................................................................................. 384

(iv) Collier.................................................................................................................. 386

(v)

Temple................................................................................................................. 387

(vi) Armstrong............................................................................................................ 388

(vii) Luck..................................................................................................................... 389

(viii) Nobert.................................................................................................................. 390

(ix) Dufour ................................................................................................................. 392

(c)

Did the Plaintiffs act reasonably and prudently after December 21, 2001?........ 392

Findlay................................................................................................................. 393

Ault...................................................................................................................... 395

(i)

(ii)

(iii) Shepherd.............................................................................................................. 396

(iv) Collier.................................................................................................................. 397

(v)

Temple................................................................................................................. 398

(vi) Armstrong............................................................................................................ 398

(vii) Luck..................................................................................................................... 399

(viii) Nobert.................................................................................................................. 400

(ix) Dufour ................................................................................................................. 400

Apportioning Fault Between the Defendant and Parent/Loba/WBP ...................................... 400

Conclusion Regarding Fault ................................................................................................... 408

Prejudgment Interest................................................................................................................... 409

Costs............................................................................................................................................ 409

Appendix A: Acronyms and Abbreviations................................................................................ 409

Appendix B: Names and Titles................................................................................................... 412

Endnotes...................................................................................................................................... 416

- 8 -

Nature of Proceedings

[1] In 2000, approximately 120 public servants resigned from the federal

public service to join Loba Ltd. (“Loba”), a consulting company that had a

reciprocal transfer agreement (“RTA”) with the federal government.¹The

Plaintiffs were part of that group. While federal public servants,²the Plaintiffs

were members of the Public Service Superannuation Plan (“PSSP”) created by the

Public Service Superannuation Act³(“PSSA”). They resigned from the public

service on the understanding that they would become employees of Loba and their

pension entitlement under the PSSA would be transferred on a tax-deferred basis to

the Loba pension plan pursuant to the Loba RTA. Most intended to work for Loba

only until such time as their pension monies had been transferred. At that point,

they would have resigned from Loba and received the value of their pension

benefits in a combination of a transfer to a registered retirement savings plan, an

individual pension plan (“IPP”), or another retirement vehicle and/or a cash

payment.

[2]

In making this decision, the Plaintiffs were unaware that: (1) the

Treasury Board Secretariat (“TBS”), the Canada Customs and Revenue Agency

(“CRA”)⁴and the Royal Canadian Mounted Police (“RCMP”) had serious

concerns about the legitimacy of the Loba arrangements and, more particularly,

about the existence of an employer/employee relationship at Loba; (2) transfers

under the Loba RTA had been put on hold by the Treasury Board between May

and August 2000 as a result of these concerns; (3) the CRA was of the view that

the Loba pension plan likely did not meet the primary purpose test for pension

plans under the Income Tax Act⁵and that consequently the Loba pension plan was

at significant risk of being de-registered; and (4) the RCMP was investigating Loba

and its principals for fraud. Had the Plaintiffs been advised of these serious

government concerns, they would not have resigned from the public service to join

Loba, because doing so would have entailed too significant a risk to their financial

well-being.

[3]

After the Plaintiffs had resigned from the public service and joined

Loba, the Treasury Board again placed all transfers under the Loba RTA on hold.

The RCMP laid fraud charges against the Third Parties, Sylvain Parent (“Parent”),

Loba, and Welton Beauchamp Parent Inc. (“WBP”). The CRA concluded that the

Plaintiffs were not employees of Loba and the Loba pension plan did not meet the

primary purpose test under the Income Tax Act. The CRA revoked the registration

- 9 -

of the Loba pension plan. The Plaintiffs’ entitlements under the PSSP were never

transferred to the Loba pension plan. All of the Plaintiffs are now, or will be, in

receipt of their PSSP pensions but based only on their salaries and service up to the

date of their resignation from the public service in 2000. All earned less after

leaving the public service than they would have earned had they remained in the

public service until their assumed retirement date. Finally, all of the Plaintiffs lost

the health and life insurance available to public servants, but not available to Loba

employees.

[4]

The Plaintiffs are suing the federal government for damages for

negligent misrepresentation arising from the government’s failure to advise them

of the significant, identifiable risks they were facing by resigning from the public

service to join Loba – risks that related to the government’s assessment of the

legitimacy of the Loba arrangements. The damages the Plaintiffs are claiming

relate to the difference in value between: (1) the benefits (salary, pension,

severance pay, health coverage, life insurance coverage) they would have received

between their date of resignation from the public service and the date they likely

would have retired from the public service had they not joined Loba; and (2) the

benefits (earnings, pension) they actually received over the same period.

[5]

For the reasons that follow, I conclude that the federal government

was negligent in the way it held out RTAs, including Loba’s, as a legitimate

“opportunity” for public servants to pursue without, at the same time, highlighting

the significant, identifiable risks associated with electing a transfer of pension

entitlements under RTAs such as Loba’s. Throughout this litigation, the federal

government has attempted to deflect criticism to the Plaintiffs and to the Third

Parties. Although I conclude that the Third Parties (other than Jemus) also

negligently misled the Plaintiffs by not advising them of risks of which they were

aware, their culpability is less than that of the government due in part to their

reduced appreciation of the risks. Finally, although I conclude that some of the

Plaintiffs were negligent in not making further inquiries about certain aspects of

the Loba arrangements, that negligence was minor in comparison with that of the

government and, in most cases, no causal connection between it and the damages

which those Plaintiffs have suffered has been established.

[6]

What has been disturbing to me is the highly aggressive stance taken

by the federal government in its dealings with both the Plaintiffs and the Third

Parties. As the events which are the subject-matter of this litigation were

- 10 -

unfolding, the TBS and RCMP operated under the assumption that the Third

Parties were acting fraudulently. That attitude still lingered at trial and coloured

both the questioning of witnesses and the Defendant’s submissions, even though

all criminal charges against the Third Parties were withdrawn four years ago. In

regard to the Plaintiffs, the Defendant’s pejorative attitude is best epitomized in the

opening lines of the submissions filed by its counsel:

The Plaintiffs gambled with their public service pension in the hopes of a large

financial windfall. … it is the Plaintiffs who were the authors of their own

misfortune. They took a calculated risk and now look to the Defendant to

compensate them for that gamble. To this day, the Plaintiffs believe that it was a

legitimate employment opportunity and the use of a legitimate loophole by the

Third Parties. Nothing would have stopped them from passing up this once in a

lifetime opportunity for a large financial windfall.

[7]

It was the federal government who held out the Loba RTA as a legitimate

opportunity for departing public servants. The Plaintiffs cannot be faulted for

seizing that opportunity just because, had matters unfolded as they had assumed

they would, the Plaintiffs would have reaped a significant financial benefit.

Parties

Plaintiffs

[8]

The eight Plaintiffs in these actions, along with a former plaintiff

(Dufour) who settled her action with the Defendant, are former, long-term,

members of the federal public service. The following chart shows the date the

Plaintiff joined the federal public service, the effective date of his or her

resignation from the public service, his or her years of pensionable service, and the

date that Plaintiff would have retired from the public service if he or she had not

resigned earlier to join Loba. Dufour is included in the chart in that the Defendant

is seeking contribution and indemnity from the Third Parties for any damages the

Defendant has agreed to pay Dufour pursuant to their settlement.

Date of Birth

Date Joined

PSSP

Effective

Date of

Resignation

Oct. 12/00

Oct. 13/00

Oct.13/00

Years of

Service

Assumed

Retirement

Date

Dec. 5/02

Oct. 10/04

June 7/04

Margaret Ault⁶

Robert Collier⁷

Rodney

Dec. 5, 1942

Oct. 10, 1949

June 7, 1949

Feb. 15, 1982

Jan. 1, 1973

Oct. 1, 1972

18.63

27.75

28.0

Shepherd⁸

- 11 -

Robert Temple⁹

David Luck¹⁰

May 3, 1941

Dec. 11, 1939

Aug. 4, 1948

Sept. 23, 1950

May 2, 1950

May 13, 1968

Apr. 17, 1978

May 30, 1977

Mar. 16, 1986¹³

July 31, 1978 –

Jan. 31, 1979

Jul 28, 1975

Oct. 12/00

Oct. 13/00

Sept. 29/00

Oct. 13/00

32.38

22.46

23.34

26.57

22.17

May 13/03

Apr. 17/03

May 30/07

Mar. 16/04

After 30

Richard Findlay¹¹

Lucie Nobert¹²

Bryan Armstrong¹⁴

years

Oct. 1/00

Marie-France

Dufour¹⁵

June 1, 1952

June 9/00

24.96

Defendant

[9]

The Plaintiffs allege that the Defendant, as represented by officials

within the Human Resources Division of their respective employing departments

and within the Pensions Division of the TBS, owed them a duty of care. The

Plaintiffs claim that the Defendant breached the applicable standard of care by

failing to provide the Plaintiffs with information that would have permitted them to

make informed decisions on whether to leave the public service and request a

reciprocal transfer payment to the Loba pension plan. The Plaintiffs claim that, as

a result, they suffered damages.

[10]

Under s. 3 of the Crown Liability and Proceedings Act¹⁶(“CLPA”), the

Crown is liable for the damages for which, if it were a person, it would be liable in

respect of a tort committed by a servant of the Crown. Public servants are servants

of the Crown. Pursuant to s. 23(1) of the CLPA, proceedings against the Crown

may be taken in the name of the Attorney General of Canada.

[11]

The Defendant claims that, if the Plaintiffs suffered losses, those

losses were caused or contributed to by the Plaintiffs themselves and by the

conduct of Parent, Loba, WBP and Jemus.

Third Parties

(a) Parent

[12]

Parent, who was certified as an actuary in 1985, is a fellow of the

Canadian Institute of Actuaries (“CIA”) and a member of the Society of Actuaries.

In 1989 Parent joined Welton Beauchamp, Nixon Inc., an Ottawa actuarial firm,

and he has worked with various “Welton Beauchamp” companies in the IT,

employee benefits and pension fields until the present time. In this capacity,

Parent has provided actuarial advice to pension plan administrators and retirement

- 12 -

planning advice to individuals and has administered several public,¹⁷corporate and

individual pension plans.

[13]

Parent is at the centre of this litigation. He was the actuary who

conceptualized the Loba RTA and the Loba pension plan. His firm, WBP, acted as

the consulting actuary for Loba and the third party pension plan administrator for

the Loba pension plan. At all material times, Parent was the President of Loba and

instigated marketing efforts to attract departing public servants to Loba. He

represented Loba in key communications with representatives of the federal

government. Through his holding company, Syglam Inc. (“Syglam”), Parent had

an ownership interest in both WBP and Loba. Most importantly, Parent met with

or spoke to all of the Plaintiffs in order to explain what their relationship would be

with Loba and what benefits they could receive under the Loba RTA and Loba

pension plan. He answered the Plaintiffs’ questions about the Loba arrangements –

both before and after they joined Loba.

[14]

In short, Parent wore several hats throughout the interactions that

resulted in this litigation, and that has been problematic.

(b) Loba

[15]

Loba was originally incorporated by Debrah Martin (“Martin”), a

former public servant, so that an RTA could be negotiated with the federal

government for her benefit. Initially she was the sole shareholder and the

President of Loba. On March 31, 2000, Martin sold her interest in Loba to Syglam

so that Parent could market Loba as a consulting firm that departing public

servants could join, thereby taking advantage of its RTA.

[16]

In 2000, WBP and Loba occupied the same premises. Parent and his

administrative assistant, Laura Burnside (“Burnside”), worked for both companies.

Initially Leon Touchette (“Touchette”) was the General Manager of Loba. After

October 15, 2000, Touchette was replaced by Claude Desrochers (“Desrochers”).

Prior to October 15, 2000, correspondence between Loba and the Superannuation

Directorate or the Treasury Board was sent under Touchette’s name; however, it

was Parent and Burnside who did the bulk of the work for Loba and who met with

the Plaintiffs.

[17]

One key issue that arose as events unfolded was whether the

individuals who left the public service to join Loba were true employees of Loba –

- 13 -

a requirement that underpinned both their entitlement to utilize the Loba RTA and

the eligibility of the Loba pension plan to be registered under the Income Tax Act.

(c) WBP

[18]

WBP was incorporated in 1997 as an actuarial firm focusing on

pension work, with Parent as its principal actuary. Since July 2000, WBP has been

owned by Syglam. In 2001, WBP changed its name to Welton Parent Inc.¹⁸WBP

is well known in the Ottawa area as providing both actuarial advice regarding

federal public pension plans and third party administrative services regarding

public and private pension plans.

[19]

At all material times, WBP was the consulting actuary for Loba and

the third party administrator of the Loba pension plan. WBP provided actuarial

advice to the Plaintiffs both before and after they joined Loba, and it was based at

least in part on that actuarial advice that each Plaintiff determined that it was

financially to his or her benefit to utilize the Loba RTA.

[20]

Burnside has worked for WBP since 1995 both as a third party plan

administrator and as Parent’s administrative assistant. At all material times,

Burnside worked alongside Parent in Loba and WBP, communicating frequently

with the Plaintiffs and at times with representatives of the federal government on

behalf of Loba, WBP or the Plaintiffs. Burnside was initially named as a Third

Party in these actions. During the course of the trial, the claims against Burnside

were withdrawn on the understanding that, if any liability would have attached to

Burnside’s behaviour, WBP or Loba would be liable by way of vicarious liability.

(d) Jemus

[21]

Ray Jemus (“Jemus”) was a federal public servant from 1964 to the

mid-1990s. He spent most of his career with PWGSC working in the area of

pensions, pay and benefits. He took a leave of absence from the federal public

service to become a life insurance agent with National Life. In 1991, Jemus

incorporated a company called Pension Positive¹⁹of which he was a shareholder,

officer and director. In 1996, Jemus started to provide pension consulting services

through Pension Positive. From 1997 to 2000, Jemus gave seminars to public

servants considering retiring from the federal public service.

- 14 -

[22]

In the period leading up to October 15, 2000, approximately 100

individuals contacted Pension Positive with inquiries about Loba. Jemus prepared

calculations showing the financial impact if an individual chose different pension

options, including a deferred pension or a transfer value under the PSSA and a

transfer under the Loba RTA. Thirty-five of the public servants who spoke to

Jemus eventually joined Loba. They included six of the original Plaintiffs:

Armstrong, Ault, Collier, Dufour, Findlay and Shepherd. Jemus is a Third Party in

their actions.

Background Context

Management of Pensions by and for the Federal Public Service

[23]

Several branches of the federal government play a role in the

management, administration and regulation of pensions for federal public servants.

(a) Treasury Board

[24]

The administration of the PSSA is vested in the President of the

Treasury Board.²⁰The Treasury Board, as employer of public servants, provides

the policy framework for pension administration.²¹The Pensions Division of the

TBS (Treasury Board Secretariat) is responsible to advise the President of the

Treasury Board on policy issues respecting the design, funding and administration

of the PSSP. The Pensions Division also has oversight responsibilities for the

direct administration of the PSSP.

[25]

The Pensions Division of the TBS distributes to the Heads of

Personnel or Human Resources at government departments and agencies

Information Bulletins regarding general policy issues of interest to a wide audience

for distribution to the employees within their respective departments or agencies by

way of a website, e-mails or hard copies.

(b) Public Works and Government Services Canada

[26]

The actual administration of the PSSP falls under the authority of

Public Works and Government Services Canada (“PWGSC”). It is responsible for

designing systems and procedures to manage the day-to-day operations of the

PSSP and to provide direct services to plan members and annuitants. The

functions and responsibilities of the PWGSC in regard to the PSSA are divided

- 15 -

between the Superannuation Directorate, located in Shediac, New Brunswick, and

the Regional Services Offices or paying offices under PWGSC direction.

[27]

The Superannuation Directorate maintains all records relating to the

PSSP, including contributions made by plan members, a member’s pensionable

service, any elections taken by a member, a member’s early and normal retirement

dates, benefits to which members are entitled, options available to members, and

payments to be made to members. It is the Superannuation Directorate which

oversees all individual calculations necessary in the day-to-day administration of

the PSSP for plan members and annuitants, and which actually makes payments

relating to entitlements under the PSSP. More specifically, the Superannuation

Directorate is responsible for: “…determining the amount of contributions and

interest to be transferred pursuant to a Reciprocal Agreement, and calculating the

length of pensionable service purchased by a transfer…”.²²

When the

Superannuation Directorate is unclear regarding a policy issue, it takes direction

from the TBS.

[28]

The Compensation Sector of PWGSC has the following

responsibilities:²³

i)

providing product and administrative policy development, systems support

and functional direction in the areas of administration, contributions, statistics,

payments and legislative interpretation and application;

ii)

issuing the Superannuation Administration Manual, procedures manuals,

information bulletins and providing appropriate training.

[29]

The Director General of the Compensation Sector, who has overall

responsibility for the operation of the payroll and pension systems for the federal

government, disseminates information, directions and guidelines regarding the

administration of the PSSA to the Compensation Community²⁴working throughout

the federal government through the Superannuation Administration Manual

(“SAM”), Special Bulletins under the SAM, and broadcast messages.

[30]

The SAM provides an overview of the policies relating to the

administration of the PSSA. Special Bulletins are issued by PWGSC to deal with

specific, and often technical, information that compensation advisors need for the

detailed administration of the PSSA and the proper performance of their functions

in this regard.

- 16 -

(c) Employing Departments – Human Resources

[31]

Employing departments and agencies play an important role in

pension administration by advising employees of plan features and providing and

maintaining contributor data required to support plan administration.²⁵Their

functions include: “… providing a counselling service to employees of all

superannuation matters, with particular reference to elections, contributions

required during extended periods of leave without pay, benefit entitlements and

options, significant amendments to the Act, Regulations, Reciprocal Agreements,

etc. …”.²⁶Those working in Human Resources who provide this counselling

service within departments and agencies are referred to within the government and

in government publications as either compensation advisors or compensation

specialists.²⁷I refer to them as compensation advisors.

(d) Canada Revenue Agency

[32]

The Registered Plans Division (now Directorate) of the CRA is

responsible for administering those parts of the Income Tax Act and Income Tax

Regulations²⁸that pertain to pension plans.²⁹More specifically, the Registered

Plans Division is charged with ensuring that all deferred income plans, including

registered pension plans, meet the requirements of the Income Tax Act and

Regulations. The Registered Plans Division is divided into four sections:

Registration Division, Actuarial Division, Compliance Division and Policy

Division. The Registration Division initially ensures that a pension plan, and any

amendments thereto, meet the criteria for plan registration under the Income Tax

Act. The Compliance Division undertakes ongoing active monitoring of pension

plans through both its desk audit and field audit programs. The Policy Division is

responsible for drafting all publications and managing that portion of the CRA

website related to registered deferred income plans.

[33]

In order for an employer to get a pension plan registered, the

employer completes an application for registration and submits that to the

Registered Plans Division of the CRA along with a copy of the pension plan text, a

funding document and any other relevant documents. The Registered Plans

Division reviews the documentation and, on the basis of the documentation alone,

decides whether the pension plan meets the requirements for registration. On an

ongoing basis, the plan sponsor submits annual returns to the CRA. As well, any

subsequent amendments to the plan text must be submitted within 60 days of the

- 17 -

amendment being adopted. Additionally, in order to have the plan registered under

the Income Tax Act, a plan sponsor must have submitted an application for

registration under the applicable federal or provincial pension benefits legislation.

In Ontario, that is the Pension Benefits Act.³⁰

[34]

There are two types of pension plans – defined benefit plans and

defined contribution (or money purchase) plans. Defined benefit pension plans

define and guarantee specific pension benefits at retirement. If the plan involves

employee contributions, then the rate of employee contributions is also specifically

defined. The plan sponsor is required to fund the guaranteed benefits under the

plan to the extent that they are not funded by the employees’ contributions.

Limitations may be set as to the extent to which the employees’ contributions fund

the guaranteed benefits.³¹

[35]

Defined contribution plans define specific contributions to be paid by

the plan sponsor and usually specific contributions to be paid by the plan member.

These contributions are paid into a fund and are accumulated, with investment

yield, on the member’s behalf until the member’s retirement, at which time the

fund is used to purchase an annuity for the member.³²

[36]

Section 147.3 of the Income Tax Act sets out the rules that apply for

the transfer of amounts between deferred income plans. The Income Tax Act does

not restrict the amount that can be transferred between defined benefit pension

plans because the legislation already puts restrictions on the formula that can be

used to determine the amount payable out of a defined benefit pension plan for the

benefit of a plan member. The Income Tax Act does impose limits as to what can

be transferred from a defined benefit pension plan to a defined contribution

pension plan.

[37]

Under the Income Tax Act and Regulations, a registered pension plan

can provide for individuals to receive the value of their benefits in one or more

lump sum payments, provided the pension plan promises a lifetime retirement

benefit in respect to a participant’s service as an employee. It is as a result of these

provisions that commuted value payments are allowed. The Income Tax Act

permits the payment of those lump sums in cash directly to the former plan

member and those payments are taxable in the year that they are received. Under

the Pension Benefits Act, once a pension is locked in, the plan member is not

entitled to receive a lump sum payment in cash in lieu of an annuity, deferred or

- 18 -

immediate. However, there is an exception in circumstances where the Income

Tax Act limits what can be transferred into another pension plan or locked-in

retirement vehicle, such as a registered retirement savings plan. In those

circumstances, the legislation allows the excess to be paid out in cash to the former

plan member.

[38]

The most fundamental requirement for registration of a pension plan

under the Income Tax Act is the primary purpose test set out in Reg. 8502(a) of the

Income Tax Regulations.³³That regulation reads:

8502. For the purposes of section 8501, the following conditions are applicable in

respect of a pension plan:

PRIMARY PURPOSE

(a)

the primary purpose of the plan is to provide periodic payments to

individuals after retirement and until death in respect of their service as

employees; …

There are no provisions in the Income Tax Act that require an employee to be a

member of a pension plan for any minimum period of time, the one caveat being

that the pension plan has to satisfy the primary purpose test.

Key Players within the Federal Public Service

[39]

In the events and communications that form the subject-matter of this

litigation, public servants working in the Pensions Division at the TBS, in the

Superannuation Directorate at PWGSC, in the Registered Plans Division of the

CRA and in the Commercial Crime Unit of the RCMP are particularly implicated.

The Plaintiffs’ allegations of negligent misrepresentation relate to the actions or

omissions of some of these individuals.

(a) Charko, Pensions Division, TBS

[40]

Prior to April 2000, Phil Charko (“Charko”) was the Director General,

Compensation Sector of the Government Operational Service at PWGSC. From

April 2000 forward, Charko was the Assistant Secretary of the Pensions Division

at the TBS. While in this position, at all material times, Charko was Ann

Gravelle’s manager. Charko testified at trial.

(b) Gravelle, Pensions Division, TBS

- 19 -

[41]

Ann Gravelle (“Gravelle”) first joined the TBS in 1985 as a senior

policy analyst in pensions. When she became Manager of Portability Policy in

1997, Gravelle was responsible for dealing with all issues relating to the portability

of pensions, an important function at a time when the federal public service was

downsizing. She was responsible for negotiating RTAs with outside employers,

resolving issues that arose under those agreements, and interfacing with the

Superannuation Directorate to ensure that it had the necessary information to

perform its functions relating to RTAs. From the spring of 2001 to 2004, Gravelle

was in the position of Director of Programme Management and Regulatory Policy

for the Pensions Division. In 2004, she left the TBS.

[42]

Gravelle was produced for examination for discovery on behalf of the

Defendant. She also testified at trial.

(c) Macpherson, Pensions Division, TBS

[43]

Heather Macpherson (“Macpherson”) was a subordinate of Gravelle

who worked closely with her on issues relating to RTAs. Macpherson had day-to-

day carriage of the Loba file. She had more ongoing contact with the

Superannuation Directorate and the RCMP regarding Loba than Gravelle did.

Despite this, the Defendant did not call Macpherson as a witness and no proper

explanation was provided for her absence.

[44]

As stated in The Law of Evidence in Canada:³⁴

6.321 In civil cases, an unfavourable inference can be drawn when, in the

absence of an explanation, a party litigant does not testify, or fails to provide

affidavit evidence on an application, or fails to call a witness who would have

knowledge of the facts and would be assumed to be willing to assist that party. In

the same vein, an adverse inference may be drawn against a party who does not

call a material witness over whom he or she has exclusive control and does not

explain it away. Such failure amounts to an implied admission that the evidence

of the absent witness would be contrary to the party’s case, or at least would not

support it.

[45]

I draw the adverse inference that Macpherson’s evidence would not

have been helpful to the Defendant.

(d) Soucoup and Swan, Superannuation Directorate, PWGSC

- 20 -

[46]

At the Superannuation Directorate, Val Soucoup (“Soucoup”) and

Glenda Swan (“Swan”) were primarily responsible for the Loba file, and the TBS

contacted either of them with questions and directions regarding Loba. Despite

their ongoing involvement, the Defendant did not call either to testify at trial. I

draw the adverse inference that the evidence of Soucoup and Swan would not have

been helpful to the Defendant.

(e) Godwin, Registered Plans Division, CRA

[47]

From 1998 to 2006, Michael Godwin (“Godwin”) was the Chief of the

Technical Services Section in the Policy Division of the Registered Plans Division

at the CRA. This Section provides technical assistance to the rest of the Registered

Plans Division, and is called upon to answer questions for the Minister and

inquiries from other departments. Throughout the period material to this litigation,

Godwin and Gravelle were in communication about the Loba arrangements and the

CRA’s concerns about such arrangements. Godwin testified at trial.

(f) Desnoyers, Commercial Crime Unit, RCMP

[48]

Denis Desnoyers³⁵(“Desnoyers”) joined the RCMP in 1985. In 1997,

Desnoyers was assigned to the Commercial Crime Unit of the RCMP in Ottawa as

a fraud investigator. In November 1999, Desnoyers was assigned to a fraud

investigation regarding Cryptic Web Information Technology Security Inc.

(“Cryptic Web”). By May 2000, the investigation had been broadened to include

AMB Automation Inc. (“AMB”) and Loba. In December 2001, based on

Desnoyers’ investigation and recommendations, Parent, Loba, WBP and others

were charged with fraud. The charges were eventually withdrawn in 2004.

Desnoyers testified at trial.

Public Service Superannuation Plan

[49]

The PSSP is a contributory defined benefit plan. The defined benefit

is 2% of the employee’s best average five-year salary multiplied by the years of

pensionable service (a maximum of 35 years). The benefit is payable from age 60

without a reduction for age. Benefits may be payable as early as age 50, subject to

potential reductions. The benefit is reduced at age 65 to take into account benefits

payable under the Canada Pension Plan (“CPP”). The benefits are fully indexed to

- 21 -

inflation both before and after retirement. A survivor benefit is payable to a

surviving spouse, calculated as 50% of the benefit payable to the employee.

[50]

There are a variety of termination or retirement benefit options under

the PSSP. If an employee has less than two years of pensionable service upon

termination of employment, the employee is only entitled to a refund of employee

contributions with interest.

[51]

If an employee has at least two years of pensionable service upon

termination of employment, the employee is entitled to either an immediate

annuity or a deferred annuity, depending on the employee’s age. If the employee

is under age 50, the employee may elect to transfer a lump-sum equivalent of his or

her pension entitlements to: (1) another registered pension plan if allowed under

the terms of the other plan; (2) a prescribed retirement savings plan or fund; or (3)

a financial institution to purchase an immediate or deferred prescribed annuity. In

addition, upon termination at any age, the employee may transfer pension credits to

his or her new employer’s pension plan pursuant to a transfer agreement that the

new employer has with the Treasury Board.

Reciprocal Transfer Agreements

[52]

Since the creation of the PSSP in 1953, there has been a provision in

the PSSA allowing for the reciprocal transfer of pension dollars between the federal

government and certain employers to facilitate the portability of pension

entitlements for employees moving in or out of the federal public service. Initially,

the federal government could enter transfer agreements only with other “public

service employers”, as defined in the PSSA. In 1966, the PSSA was amended to

allow for transfer agreements with any “approved employer.”³⁶That term meant

“…an employer for the benefit of whose employees there is an established

superannuation or pension fund or plan approved by the Minister for the purposes

of the Act, and includes the administrator of any such superannuation or pension

fund or plan established for those employees.”³⁷This provision has continued in

the PSSA up to the present time.³⁸RTAs as a form of transfer agreement could be

negotiated up to 1997. Since then, pension transfer agreements (“PTAs”) have

been introduced to replace RTAs.

[53]

Prior to October 1997, when a new employer expressed an interest in

negotiating an RTA with the federal government, the TBS would verify that the

employer had a viable business, had at least one employee and had a pension plan

- 22 -

for that employee. The TBS would review the company’s pension plan to ensure

that it contained certain necessary features, such as:

• The pension plan was registered under the Income Tax Act and complied

with the applicable federal or provincial pension benefits legislation.

• The pension plan allowed for entry into an RTA.

• The pension plan recognized service in respect of which funds were to be

transferred under the RTA and described how the transferred funds were

to be treated as relating to such service.

• The pension plan dealt appropriately with the locking in of any funds

transferred into the plan from the government that represented employer

contributions.

[54]

If the pension plan met the government’s requirements, the TBS

would then draft an RTA, using its standard template.³⁹Once the RTA was signed,

it was managed by the Superannuation Directorate at PWGSC. The TBS would

only become involved if the RTA had to be amended due, for example, to changes

in the company’s pension plan. Once the RTA was signed, the government had no

process in place to ensure that the requirements regarding the nature of the

company’s pension plan continued to be met on an ongoing basis.

[55]

In order to take advantage of an RTA, the contributor to the PSSP had

to cease to be employed by the federal public service. Within six months of

leaving the public service, the individual had to become employed by a new

employer that had an RTA with the Treasury Board. Finally, the individual had to

complete and deliver an application for the transfer (“Appendix B”). The

Superannuation Directorate would then assemble updated service and salary

records for the individual, determine the amount that was available to be

transferred under the RTA (“the amount available”), and advise the new employer

of this amount. With RTA agreements, the amount available was twice the

contributions the public servant had made to the PSSP with respect to the period of

pensionable service, plus interest.⁴⁰

[56]

The new employer would then determine how much money was

needed under the new pension plan to recognize the individual’s pensionable

service under the PSSA as if it had actually occurred under the new employer’s

- 23 -

plan (“the amount required”). The new employer would advise the Superannuation

Directorate accordingly. The Superannuation Directorate would pay into the new

employer’s pension plan the amount required up to the maximum of the amount

available from the Superannuation Account maintained under the PSSA. In most

cases, the amount available exceeded the amount required because few pension

plans are as generous as that created by the PSSA. Once the payment was made,

the former public servant ceased to be entitled to any benefit under the PSSP in

respect of the period of pensionable service to which the payment related.⁴¹

[57]

In certain situations, the sum to be transferred under the RTA was

significantly greater that the actuarial value of the employee’s pension entitlements

under the PSSP. The sum was also significantly greater than the sum that would

be transferred on behalf of a departing public servant to a registered retirement

savings plan, an annuity, or another pension plan in circumstances where the

individual’s new employer did not have an RTA with the government.

[58]

By the mid-1990s, the government was of the belief that calculating

the transfer value at twice contributions plus interest provided a windfall to

departing public servants who could take advantage of RTAs, and this resulted in

inequitable treatment for those departing public servants who were not moving to

new employment with an employer with an RTA. Consequently, in 1996, the

federal government amended the PSSA⁴²to bring an end to RTAs effective October

15, 2000, to introduce a new mechanism for pension portability (namely PTAs),

and to provide a new methodology for determining the dollar value of the benefits

to be transferred.

Transition Arrangements

[59]

The 1996 amendment to the PSSA to add s. 40.2, which came into

effect on October 15, 1997, created PTAs as the new mechanism to replace RTAs.

The key difference was that, with PTAs, the valuation of the benefits was based on

the actuarial value of those benefits accrued in respect of the pensionable service of

the public servant, rather than twice the public servant’s contributions under the

PSSA in respect of that service.⁴³No new RTAs could be entered after October 15,

1997,⁴⁴and existing RTAs were to terminate effective October 15, 2000, unless

terminated earlier.⁴⁵Regulations to give effect to the legislative authority to enter

into new PTAs did not come into effect until August 1998. As of September 14,

1999, any RTAs that continued to exist could only be used by a public servant who

- 24 -

ceased employment with the federal public service prior to October 15, 2000.⁴⁶

There were approximately 300 RTAs in existence in 2000.

Parent and Reciprocal Transfer Agreements

[60]

In the mid-1990s, the federal government was in the process of

downsizing the public service. Many functions were being privatized and there

were several initiatives introduced to encourage public servants to retire or seek

employment elsewhere. In this climate, the possibility of using an RTA to

maximize the value of one’s pension benefits under the PSSP upon termination of

employment with the public service was attractive to many public servants.

[61]

Parent first learned of RTAs in the summer of 1995 as a result of an

article that appeared in the July 11, 1995 Ottawa Citizen (“Citizen”) entitled “PS

pension option packs big payoff. Departing workers can triple benefits under little-

known transfer plan”. A second article in the same edition of the Citizen entitled

“Ignoring the Pension Parachute” also dealt with RTAs.⁴⁷

[62]

Martin, Michal Zeithammel (“Zeithammel”) and Ron MacGillivray

(“MacGillivray”), all federal public servants, contacted Parent for information

about RTAs. On August 16, 1995, at Parent’s request, Burnside wrote to

Macpherson asking for recommendations with respect to RTAs and advising that

WBP would use those recommendations in the establishment of pension plans or

plan provisions dealing with employees currently leaving the public service.⁴⁸

[63]

Macpherson responded on August 22, 1995 with a summary of what

the Treasury Board would require in order to enter an RTA with a company.⁴⁹The

objective of the agreement had to be “… the recognition by the importing

employer of an employee’s pensionable service with another employer, as though

that service actually occurred under the new employer’s plan.” In regard to the

calculations, Macpherson noted that “…certain flexibility is possible in

establishing the amounts required by, or held for transfer by, the other employer:

both incoming and outgoing amounts, however, must be determined in the same

manner.” The company had to have a pension plan approved by the CRA and any

applicable pension benefits legislation. Macpherson enclosed an Information

Sheet and a draft RTA.

[64]

Parent met with Gravelle and other TBS staff to discuss the creation of

a number of RTAs. WBP went on to assist in the negotiation of RTAs for the

- 25 -

following companies: AMB (owned by Zeithammel), Cryptic Web (owned by

MacGillivray), Loba (owned by Martin), Horler Information Inc. (“Horler”),

Lafleur de la Capitale Inc. (“Lafleur”), L’expert des Parcs J. Aubin Inc. (“Aubin”),

Terrapro Corporation (“Terrapro”), and Welton Beauchamp Nixon Inc. (“WBN”).

Parent was the person at WBP involved in the negotiations and the provision of

advice to the companies and individuals involved. The Treasury Board entered

RTAs with these companies on the understanding that they were “approved

employers” within the meaning of s. 40 of the PSSA.⁵⁰

[65]

Zeithammel, MacGillivray and Martin all left the public service and

applied to have the value of their accrued pension benefits transferred to the

companies which they had created to become their new employers.

[66]

In the fall of 1997, Parent was still getting requests from departing

public servants interested in taking advantage of the RTA option. Due to the

amendments to the PSSA, he could not negotiate any new RTAs with the federal

government. Parent contacted Zeithammel, MacGillivray and Martin to inquire if

they would be prepared to expand their one-person companies to include other

departing public servants who could then take advantage of the company’s RTA.

Zeithammel and MacGillivray were interested and embarked upon an advertising

campaign to attract other public servants to join their respective companies. The

availability of AMB and Cryptic Web’s RTAs was used as an enticement. Parent

assisted with this advertising campaign because WBP had negotiated a

compensation agreement with AMB and Cryptic Web under which WBP stood to

gain from any transfers under these RTAs. On September 30, 1997, the Citizen

published an article by Parent entitled “Leaving the public service? There are new

options to consider”.⁵¹In that article Parent stated:

For terminating employees who have become self-employed, you may want to

consider a working arrangement with an umbrella-type company that has an

RPTA agreement with the public service. Several Ottawa-area companies offer

this type of ancillary service to self-employed consultants. Contact your financial

advisor for more information.

[67]

In October 2003, Charko reported to the CRA that approximately 15

individuals had left the public service to join AMB and approximately 38 had left

to join Cryptic Web.⁵²It was Desnoyers’ understanding that most of these

individuals terminated their involvement with these companies within a few days

- 26 -

to a few months after funds were transferred on their behalf from the PSSP to the

company pension plan.⁵³

[68]

Under the Income Tax Act, significantly more money could be

transferred from one defined benefit pension plan (such as the PSSP) to another

defined benefit pension plan than could be transferred from a defined benefit plan

to a defined contribution plan. WBP created pension plans for the companies

mentioned above with defined benefit provisions in respect of the service that was

being transferred from the PSSP, but with a defined contribution provision for

service going forward. In regard to the Lafleur, Aubin and Terrapro pension plans,

once the payment had been received from the federal government, the receiving

pension plan was amended to allow for a conversion of the defined benefit

provisions into defined contribution provisions, at the option of the individual

concerned. One consequence of this was that it created a cash amount that had to

be paid out to the individual because the full amount of the transfer was not

required to fund the defined contribution plan and it could no longer be sheltered

within the pension plan. All of the individuals in these three pension plans chose

to convert their benefits to a defined contribution arrangement. Parent’s evidence

was that the AMB, Cryptic Web and Loba pension plans did not have comparable

conversion features.

[69]

In late 1998, Parent became aware that the CRA was contemplating

cancelling the AMB and Cryptic Web RTAs. One reason provided was that these

company pension plans allegedly contained a conversion feature allowing the

defined benefit provision to be converted to a defined contribution provision once

the government had made the transfer payment, with the former public servant then

being able to access as cash a significant portion of that transfer payment. On

November 27, 1998, Parent wrote to Gravelle at Treasury Board advising that the

AMB pension plan did not have a conversion feature.⁵⁴

[70]

On February 4, 1999, Special Bulletin: 1999-002, entitled

“Cancellation of Certain Reciprocal Transfer Agreements”, appeared in the

SAM.⁵⁵The Bulletin was signed by Charko as Director General, Compensation

Sector, Government Operational Service. The purpose of the Bulletin was to

inform the Compensation Community of the cancellation of the following RTAs:

AMB, Cryptic Web, Lafleur, Aubin, Terrapro and WBN. These RTAs were to

remain in force only until such time as any payments described in the agreement

had been made in respect of individuals who applied for transfers no later than

- 27 -

May 19, 1999. The only two RTAs negotiated with the assistance of WBP that

were not cancelled at this time were the Loba and Horler agreements. I accept the

evidence of Gravelle that the Loba agreement was not cancelled at the time

because it had only been used by Martin to transfer her pension entitlement to the

Loba pension plan; it had not been used to entice other public servants to follow

suit. Article 2.3 of the Special Bulletin stated: “Given that the opportunity for

individuals to participate under the agreement is limited, it is of utmost important

that those individuals be advised of the deadline.”

[71]

When Parent became aware that Loba was one of the few surviving

RTAs in existence for private companies, he approached Martin with a proposal

that she turn Loba into a consulting company for other former public servants – not

just herself. Parent would arrange for the marketing of Loba to individuals

considering leaving the public service. The advantages available to such

individuals under the Loba RTA, such as accessing a higher transfer value than

otherwise available, would be explained. Those public servants joining Loba

would become members of the Loba pension plan and would work for Loba on

whatever contracts they could arrange. Payments under the contracts would be

made to Loba who in turn would pay the consultants. WBP would be compensated

for its efforts in assisting public servants under the Loba RTA and Loba pension

plan. Martin would benefit through actuarial gains to the Loba pension plan

because the amounts being transferred into the Loba pension plan from the

government would be greater over time than the amounts eventually payable to

departing Loba employees when they ceased to be members of the Loba pension

plan.

[72]

Initially Martin was interested in the proposal. When Parent was

asked about RTAs, either when giving retirement seminars, or when consulted by

public servants, he referred individuals to Loba because he had crafted the Loba

pension plan so as to maximize the amount that could be transferred from the

PSSP. Eventually Martin decided that she did not want to operate a consulting

business, and she agreed to sell Loba to Syglam. Parent considered the purchase a

good business opportunity because he anticipated Loba generating business income

and there would be actuarial and administrative fees for WBP.⁵⁶The deal closed

on March 31, 2000.⁵⁷

[73]

Eventually 120 individuals joined Loba. A transfer of monies into the

Loba pension plan under the Loba RTA occurred for Martin and then one other

- 28 -

individual in January 1998. No subsequent transfers were ever made for the

remaining 118 individuals who joined Loba, including the Plaintiffs and Dufour.⁵⁸

Loba Marketing Measures

[74]

Once Syglam purchased Loba, Loba immediately commenced a

recruiting campaign to attract departing public servants. Under the auspices of the

Retirement Planning Institute,⁵⁹Loba published a one-page advertisement that

appeared weekly in the Hill Times from April to October 2000 counting down the

weeks until October 15, 2000, when all RTAs terminated. The advertisement

showed a person walking away from large buildings with a briefcase in his hand

with a dollar sign on it.⁶⁰The caption read:

- 29 -

OCTOBER 15, 2000 DEADLINE!

Pension portability

If you are considering leaving or retiring from the Public Service or a Crown

Corporation and would like to bring your pension dollars with you – even after

age 50 …

www.october-15.com

[75]

This website was operated by Loba.⁶¹It talked about October 15,

2000 being the last day on which an application could be made under an RTA with

the federal government. It highlighted the benefits available under an RTA and

listed the conditions for eligibility. It advised that Loba had an RTA with the

federal government and provided interested persons with a link to WBP to get

more information.

[76]

The same advertisement appeared once or twice in the government

Executive (a publication for senior federal public servants) and an issue of the

Communiqué (a publication of the Professional Institute of the Public Service

(“PIPS”)). Parent sponsored an edition of the APEX Bulletin⁶²that included a

message from the Pensions Division, Human Resources Branch, TBS describing

RTAs and alerting people of the October 15^thtermination date.⁶³In the July 2000

edition of Reflections, the newsletter of the Retirement Planning Institute, a

detailed explanation of RTAs was provided and interested individuals were

referred to the www.october-15.com website.⁶⁴This newsletter was sent to

everyone who had attended a retirement seminar put on by the Retirement

Planning Institute. Parent provided the editor of Reflections with the background

information for this article. Parent was aware that others, such as financial

advisors associated with WBP who hoped to manage investments for the Loba

pension plan and for any IPPs created for former Loba employees, were also

marketing the Loba RTA.⁶⁵

[77]

Parent, on behalf of WBP, also entered into an agreement with

Zeithammel, the owner of AMB, whereby Zeithammel through another company

he owned, Komokoa Corporation (“Komokoa”), would actively recruit departing

public servants to join Loba. Zeithammel had already developed a marketing

program which he had used to attract people to AMB when it still had a valid RTA.

Zeithammel aggressively marketed Loba, and one group in particular that he

targeted were CRA auditors in Toronto. In August 2000, Zeithammel ran

Komokoa advertisements on the CFRA radio station and was a guest on Experts on

Line to discuss RTAs. Parent also participated in the program to deal with

- 30 -

actuarial topics. Zeithammel spoke to over 2000 people in regard to the Loba

RTA. He whittled this group down to a few hundred serious candidates whom he

referred to WBP. Usually he attended the meetings that Parent had with those

candidates.

[78]

Parent, on behalf of WBP, also entered an agreement with Pension

Positive, owned by Jemus whereby it would “act to promote the recruitment of

employees for Loba Limited who ha[d] a Reciprocal Transfer Agreement with the

Public Service Superannuation Act”⁶⁶in return for a referral fee in respect of any

employees that Pension Positive brought to Loba.

[79]

The fee arrangement negotiated by Parent with Jemus and

Zeithammel was that WBP would pay Pension Positive or Zeithammel two-thirds

of the fee to which WBP was entitled from Loba or the Loba pension plan in

regard to any individual joining the Loba pension plan under the Loba RTA. As

well, WBP would pay Pension Positive or Zeithammel 60% of the commissions it

earned from investments made on behalf of individuals joining Loba. Finally,

WBP would pay Pension Positive or Zeithammel 50% of the fees earned by WBP

through the establishment of an IPP for the individual.⁶⁷Zeithammel was also

entitled to a flat referral fee from Loba of $2,800 for each person whom he referred

to Loba and who became a Loba employee.

[80]

Kyle Reid (“Reid”) was an associate of WBP who recruited for Loba

and received 20% of WBP’s actuarial fees respecting any individual joining Loba’s

pension plan pursuant to the Loba RTA. One marketing initiative he undertook

was to send an August 8, 2000 e-mail to public servants advising of the October

15^thdeadline to apply for a transfer under a RTA and referring public servants to

the WBP website for a personal analysis.

[81]

Parent acknowledged that the fee arrangement WBP had with

Zeithammel, Jemus and Reid was not a usual arrangement for an actuarial firm

acting as pension plan administrators. He justified these arrangements as being

part of both Loba’s and WBP’s business plans.⁶⁸

[82]

Finally, Loba agreed to pay $1,000 for every new Loba employee

referred to Loba by another Loba employee. Between 2000 and 2002, Loba paid

approximately $80,000 under this employee recruitment incentive program.

- 31 -

[83]

Methods used by Loba recruiters included sending e-mails to

employees of CRA, Indian and Northern Affairs Canada (“INAC”) and PWGSC

and placing flyers on cars outside federal government buildings.

[84]

requests for information were received through the WBP website. Parent did

calculations for approximately 600 of these individuals. He met with

The Loba marketing campaign was fruitful. Approximately 1500

approximately 300 individuals, seeing up to 15 people a day during September and

the beginning of October. Of this group 118 individuals eventually joined Loba.

Jemus and Reciprocal Transfer Agreements

[85]

In 1997, public servants attending Pension Positive pre-retirement

seminars started to ask Jemus about RTAs that were being advertised as attractive

options for departing public servants. Jemus was unfamiliar with how they worked

and sought information from WBP. Parent put Jemus in touch with both AMB and

Cryptic Web. Jemus referred interested public servants to Cryptic Web. He did

not receive any finder’s fee for doing so; instead, he hoped to earn commissions

from the sale of life insurance, annuities or investments to Cryptic Web workers.

Jemus believed that the use of an RTA being made by Cryptic Web was legitimate.

His wife was one of the public servants who took advantage of the Cryptic Web

agreement.

[86]

Shortly after the Cryptic Web RTA was cancelled by the Treasury

Board, Jemus learned that Loba had an RTA similar to that of Cryptic Web. Jemus

approached Parent, believing that WBP was the administrator of the Loba pension

plan. Jemus understood that Martin was the owner of Loba, even though by this

time Loba was owned by Syglam. After months of negotiating, on October 6,

2000, Jemus and WBP signed a Memorandum of Agreement⁶⁹which promised a

referral fee for any employees Jemus brought to Loba. Jemus was named as a

party to the agreement and he signed it, without any reference to Pension Positive.

His evidence, which I accept, was that he signed the agreement on behalf of

Pension Positive and any commissions paid were paid to Pension Positive, not to

himself personally. Jemus anticipated that he would earn $612,375 by way of a

finder’s fee for the 35 individuals he referred to Loba.⁷⁰

[87]

When Jemus saw public servants considering the Loba option, he ran

calculations explaining their pension options under the PSSA, including use of the

Loba RTA. As far as Parent was aware from his review of the calculations, Jemus’

- 32 -

methodology was sound and his calculations accurate. This was not challenged at

trial.

- 33 -

Loba Limited

Corporate Structure of “Parent’s Companies”

[88]

In January 1997, Parent and his wife gained a 50% interest in WBP.

On March 24, 2000, they incorporated Syglam as a holding company. On March

31, 2000, Syglam purchased all of the shares of Loba from Martin for $175,000.

In July 2000, Parent, with a loan from friends,⁷¹purchased the remaining shares in

WBP through Syglam.

[89]

A corporate chart of the Welton Parent Group of Companies as of

September 9, 2002,⁷²shows Syglam as the sole owner of Loba and WBP. It shows

Loba with an American subsidiary, Loba USA Limited, and WBP with three

subsidiaries: WBP Insurance Agency Ltd., ProSource Plus Inc. (“ProSource”) and

L. Paul Frechette Consulting Services Inc. (“Frechette”). As of March 31, 2000,

Parent was President of Loba, the consulting actuary for Loba’s pension plan, the

President of WBP (the third party administrator of the Loba pension plan), the sole

trustee of the Loba pension plan, and ultimately – through Syglam – the owner of

Loba and WBP.

[90]

At some later date, NMG Canada Inc. (“NMG”) owned by Parent’s

friends, exchanged their loan for 50% of the shares of Syglam. NMG then became

the sole owner of Frechette that in turn operated the Retirement Planning Institute.

The Institute provided retirement planning seminars, and the federal government

was one of its largest clients. NMG also held a 49% interest in RocheBanyan Inc.

(“RocheBanyan”), a financial advice firm licensed to sell mutual funds. Malcolm

Fletcher (“Fletcher”) owned 51% of RocheBanyan and was its manager. WBP

provided actuarial and technical advice to Frechette and RocheBanyan.

RocheBanyan provided the pension component for Retirement Planning Institute’s

retirement planning seminars.⁷³

Loba Reciprocal Transfer Agreement

[91]

The Loba RTA⁷⁴was dated August 8, 1996 and was signed by Martin

on behalf of Loba and the President of the Treasury Board on behalf of the

Government of Canada. The agreement confirmed that Loba was “an approved

employer” under the PSSA. For the government to pay into the Loba pension plan

an amount on account of a former public servant under the Loba RTA, that

individual had to: (1) no longer be employed in the public service; (2) be employed

- 34 -

by Loba within six months from the time he or she ceased to be employed in the

public service; (3) not have received or receive any amount as a return of

contributions or other benefit under the PSSA in respect of any period of

pensionable service to his or her credit under the PSSA upon ceasing to be

employed in the public service; and (4) prior to October 15, 2000 execute and

deliver two copies of Appendix B to the Loba RTA, one for the government and

one for Loba.

[92]

Under the Loba RTA, the amount to be transferred from the

government to the Loba pension plan on behalf of a departing public servant was

the lesser of the cost to recognize service in the Loba pension plan as determined

by WBP using actuarial assumptions set out in Appendix C to the Loba RTA (“the

amount required”), and two times employee contributions with interest at the

Superannuation Account rate of return as determined by the government (“the

amount available”). Before WBP could determine the amount required, it needed

to receive accurate information from the government regarding the public servant’s

service and salary records. Upon the government transferring money to the Loba

pension plan on behalf of a former public servant, the individual was entitled to

count as credited service under the Loba pension plan what he or she had

accumulated in pensionable service under the PSSA before leaving the public

service, subject to the limit of what the transfer payment could fund under the

terms of the Loba pension plan.⁷⁵

[93]

The Loba RTA could be terminated by either party on six months

written notice, but the agreement still operated to the benefit of public servants

who became employed by Loba prior to the termination date.⁷⁶

[94]

The process contemplated under the RTA was as follows. Loba

would forward a signed copy of Appendix B to the Superannuation Directorate of

PWGSC in Shediac. The Superannuation Directorate would determine the amount

available to be transferred. WBP would determine the amount required. The Loba

pension plan was structured so that the amount required was always equal to or

greater than the amount available to be transferred. Once WBP knew what amount

was being paid by the government, it calculated the credited service to which this

transfer amount would relate under the Loba pension plan.

[95]

The funds payable from the PSSP were to be deposited into a money

market account at Clarica Life (“Clarica”), the trustee of the Loba pension plan.

- 35 -

Such an account late in 2000 was earning only 3.5% interest – an inadequate rate

of return to fund the benefits promised under the Loba pension plan. This was not

of concern to Parent because it was anticipated that the vast majority of Loba

workers would terminate employment shortly after the transfer of funds occurred

and take a transfer value, or, they would establish an IPP, the assets of which they

would manage.

Loba Pension Plan

(a) Original Plan Text

[96]

The Pension Plan for Employees of Loba Limited, effective January 1,

1996, and submitted to the Registered Plans Division of the CRA on February 20,

1996,⁷⁷provided for the creation of a contributory defined benefit pension plan.

“Normal retirement date” was when the member became 65.⁷⁸The benefit payable

upon normal retirement was calculated through different formula, depending on

whether the pension was payable for a calendar year before 1991 or after 1990.

Essentially the benefit was limited to 2% of the member’s indexed compensation

for a calendar year or such lesser amount allowed under the Income Tax Act.⁷⁹

Employee contributions were 7.5% of earnings. The pension was indexed by the

annual increase in the Consumer Price Index less 1%.

[97]

For the purpose of calculations, “credited service” meant: “the period

or periods, measured in years including fractions thereof, throughout which a

member is employed in Canada by, and receives compensation from, the employer

after 1990 and contributes to the [Loba pension plan] after 1995, or during any

years recognized from a previous employer with whom the employer has entered

into a reciprocal transfer agreement, …”.⁸⁰One purpose of this provision was to

bring into credited service the years any plan member had as pensionable service

under the PSSA.

[98]

Under the Loba pension plan, the member’s normal retirement

pension was to be paid to the member for the member’s lifetime.⁸¹Spousal

benefits existed if the member died after retirement. If the member died after

retirement leaving no spouse or if the member and the spouse died within five

years of the normal retirement date, a commuted value was payable to a designated

beneficiary.⁸²

- 36 -

[99]

If the member’s employment with Loba ceased prior to his or her

normal retirement date, the member could elect to receive an early retirement

pension for life. The early retirement pension was calculated based on the

commuted value on the early retirement date of the normal retirement pension that

would be payable to the member if the member commenced to receive his normal

retirement pension on his normal retirement date.⁸³The same spousal benefits

existed as for a normal retirement pension.⁸⁴There were additional provisions in

the pension plan dealing with deferred retirement and pre-retirement death

benefits. If a member died prior to retirement, the surviving spouse had the option

of receiving a spousal pension or a lump sum payment representing the commuted

value of the member’s benefits under the plan. If there was no surviving spouse,

the lump sum could be left to another beneficiary.

[100]

Under the original plan text, the “commuted value” of a pension or of

any right under the plan was defined as: “… the value of that pension or right,

calculated in accordance with generally accepted actuarial principles, and subject

to any requirements of the applicable legislation and the revenue rules”.⁸⁵

[101]

In the original text, article 10 of the Loba Pension Plan dealt with the

ownership of any surplus.⁸⁶

ARTICLE 10 OWNERSHIP OF SURPLUS

10.1 Surplus – on wind up of plan

Any assets remaining in the plan after satisfaction of all rights and benefits under

the plan shall be the property of the employer and shall, subject to the applicable

legislation, be paid to the employer on the winding up of the plan.

10.2 Surplus – continuing plan

Subject to the applicable legislation, the employer may use any actuarial surplus

to satisfy the employer’s obligations under the plan.

[102]

In the original text, article 11 dealt with portability rights.⁸⁷

ARTICLE 11 PORTABILITY RIGHTS

11.2 Transfer

A member may require the employer to pay an amount equal to the commuted

value of the benefits accrued in respect of the member to the date of termination

(a)

to the pension fund related to another pension plan, if the administrator of

the other pension plan agrees to accept the payment;

(b)

(c)

into a prescribed retirement savings arrangement;

into a registered retirement income fund that meets the requirements of the

Pension Benefits Act.

- 37 -

(d)

for the purchase for the member of a life annuity that will not commence

to be paid before the earliest date on which the member would have been entitled

to receive a pension under the plan.

…

11.4 Benefits and service credited under plan of a former employer

1.

The plan may accept a transfer of funds from the plan of a member’s

former employer where the transfer occurs pursuant to a reciprocal transfer

agreement between the employer and the former employer. The funds shall be

held in the trust fund for the purpose of providing for the member those benefits

credited under the plan in respect of credited service recognized with the former

employer, to the extent that those benefits may be provided in accordance with the

Income Tax Act.

2.

The administrator shall amend the plan as required by the Income Tax

Act, the Pension Benefits Act and the revenue rules in order to provide the

member with the benefits referred to in subclause 1 of this clause.

3.

That proportion of the transferred funds that represents contributions plus

interest on those contributions under the former plan shall be deemed to be

member contributions plus interest on those contributions under the plan.

(b) March 31, 1997 Amendment

[103]

On March 31, 1997, WBP advised the Registered Plans Division of

the CRA that the Loba pension plan had been amended effective January 1, 1996

to add a second eligibility group and to include defined contribution provisions

which applied to that second group.⁸⁸This amendment was done because Loba’s

President at the time, Martin, was contemplating hiring another departing public

servant. The Plaintiffs joined Loba after these amendments to the Loba pension

plan text had been made. All fall under this second eligibility group, known as

Schedule B employees.

[104]

Under the amended plan text,⁸⁹employees of Loba were divided into

two categories: Schedule A employees, who were non-commissioned employees,

and Schedule B employees, who were commissioned employees. The definition of

“commuted value” was amended to add the following sentence: “With respect to

service after joining the [Loba pension plan] for Schedule B employees, the

commuted value shall be equal to the balance of the member’s account at the date

of determination.”⁹⁰The “determination date” in relation to a member meant “…

the earliest of the date when the member’s employment with the employer ceases

and the commencement date”, the date a pension is first paid to a member.⁹¹

- 38 -

[105]

Schedule B employees joined the Loba pension plan immediately

upon being hired by Loba. The rights and benefits of Schedule B employees

transferred to the Loba pension plan under the Loba RTA vested in the member

immediately. Each Schedule B employee contributed to the Loba pension plan 2%

of compensation received on a monthly basis, and that sum was allocated to the

member’s account. Loba, as employer, matched these contributions for Schedule

B employees. Under the amended plan text, new formulae were added to calculate

the benefits to which Schedule B employees were entitled. For credited service

prior to joining Loba, a defined benefit provision existed, similar to what existed

under the original plan text and what continued under the amended plan text for

Schedule A employees. What was new in regard to Schedule B employees was

that, for credited service with Loba after joining the Loba pension plan, the pension

payable to a member was “… that which can be purchased from a life insurer with

the balance in the member’s account as of the date of purchase, or that which can

otherwise be provided with the funds in the member’s account”.⁹²In addition to

their normal or early retirement pension, Schedule B employees were entitled to

receive a bridging benefit for credited service recognized pursuant to an RTA for

the period between their actual retirement date and age 65.⁹³

[106]

Under the amended plan text, the following provision applied to

surplus accumulated within the Loba pension plan:⁹⁴

ARTICLE 11 OWNERSHIP OF SURPLUS

…

11.2 Surplus – continuing plan

Subject to the applicable legislation, the employer may use any actuarial surplus:

a)

b)

c)

d)

e)

to reduce or eliminate future Company contributions;

to be retained as a contingency reserve;

to be refunded in cash to the Company;

to be paid to a Participant or Beneficiary in a single lump sum; or

failing the existence of either a Participant or Beneficiary, to be

paid to the estate of the Participant or to the estate of the

Beneficiary if so designated in writing by the Participant.

[107]

Under the amended plan text, the following provision replaced the

earlier one in regard to portability rights for benefits and service credited under a

former employer’s pension plan:⁹⁵

ARTICLE 12 PORTABILITY RIGHTS

…

- 39 -

12.4 Benefits and service credited under plan of a former employer

1.

The Plan may accept a transfer of funds from the plan of a member’s

former employer where the transfer occurs pursuant to a reciprocal transfer

agreement between the employer and the former employer. The funds transferred

shall be held in the trust fund for the purpose of the Plan.

2.

Upon transfer in respect of a member under subclause 1, the administrator

shall amend the plan so as to provide benefits in respect of the recognized service

of the member with the member’s former employer in accordance with the terms

of the reciprocal transfer agreement.

3.

That proportion of the transferred funds that represents member

contributions plus interest on those contributions under the former plan shall be

deemed to be member contributions plus interest on those contributions under the

plan.

[108]

Under both the original and amended plan texts, the Loba pension

plan could be amended at any time to reduce the benefits provided under the plan

in respect of any member where such amendment was necessary to avoid

revocation of the registration of the plan under the Income Tax Act, such

amendment being subject to the approval of the Pension Commission of Ontario.⁹⁶

[109]

The following new provision regarding plan administration was added

to the amended plan text:⁹⁷

ARTICLE 14 ADMNISTRATION

14.1 Administrator of the plan

The employer is the administrator of the plan and is responsible for the overall

administration of the plan.

…

14.3 Costs of the plan

1.

the plan itself or the employer if he elects to do so.

2. Without restricting the generality of subclause 1, administration costs

All administration costs of the plan and of the trust fund shall be borne by

include the initial and subsequent actuarial valuations, fees associated with the

establishment, administration and amendment of the plan, investment fees and

any fees associated with the services rendered by the trustee under the trust

agreement.

[110]

Parent acknowledged that these amendments to the Loba pension plan

made it similar to the AMB and Cryptic Web plans in terms of providing benefits

based on a defined contribution formula. When Parent was advised by Gravelle in

a November 26, 1998 letter⁹⁸that a pension plan of this nature would not be

acceptable to the Treasury Board as the basis of an RTA, Parent did not tell the

- 40 -

TBS that Loba also had that feature; he did not believe that he was required to do

so.⁹⁹

(c) October 27, 1997 Amendment

[111]

Effective October 27, 1997, the Loba pension plan was further

amended to replace article 11.2b regarding the uses the employer could put to any

actuarial surplus to read: “…to be left in the plan, subject to applicable

legislation”.¹⁰⁰

(d) August 11, 1998 Amendment

[112]

On August 18, 1998, WBP advised the Registered Plans Division of

the CRA of a further amendment to the Loba pension plan to amend article 12.4.2

to read: “Upon transfer in respect of a member under subclause 1, the administrator

shall provide benefits in respect of the recognized service of the member with the

member’s former employer in accordance with the terms of the RTA.”¹⁰¹

(e) November 20, 2001 Amendment

[113]

On November 20, 2001, WBP advised the Registered Plans Division

of the CRA of further amendments to the Loba pension plan effective January 1,

1996. Article 2 was amended to incorporate additional definitions required by

other amendments. The definition of “employer” in relation to a member was

stated as meaning “Loba Limited and where a period of employment with a prior

employer is included in the credited service of the member, includes the prior

employer”.

[114]

Section 3.2 of Article 3 was amended to provide immediate vesting to

members who joined after January 1, 2000. Section 4.6 was added to Article 4 to

provide for voluntary contributions. A member could elect to make voluntary

contributions as permitted under the Income Tax Act. Section 9.8 was added to

Article 9 to provide for the purchase of annuities. Under the amendment, Loba, in

its sole discretion, could require the Trustee of the pension plan to purchase from a

life insurer out of the pension fund an annuity that provided the same benefits in

respect of a member as were provided under the pension plan in regard to that

member, subject to applicable legislation.

- 41 -

[115]

Whenever the Loba pension plan was amended, WBP provided a copy

of the amendment to the Registered Plans Division of the CRA and to the

provincial regulator. It did not file copies of the amendments with the TBS

because, according to Parent, that was not required and was never done in regard to

other RTAs. At Macpherson’s request, Parent forwarded a copy to her on May 10,

2000.¹⁰²That is when matters heated up.

- 42 -

Signing on with Loba

When public servants wished to take advantage of Loba’s RTA, in

[116]

addition to filing their Appendix Bs with the government, they had to sign two

additional documents with Loba:

(a) Employment Agreement

[117]

The following terms of employment were initially included in a

standard form letter prepared by Loba for signature by Loba and the prospective

employee transferring to Loba from the public service:¹⁰³

• Your employment is effective [relevant date included].

• You agree to represent Loba as a resource providing consulting services to

other employers and/or individuals on a contractual basis.

• You agree to solicit new consulting assignments where you have the required

skills, ability and experience to perform the duties required by such

assignment on behalf of Loba.

• You agree to perform all services in a diligent manner in accordance with

reasonable professional and industry standards and will conform to the current

laws, ordinances and regulations.

• Your compensation will be calculated as 77 % of the payments received by

Loba in respect of your services plus 4% statutory vacation entitlement.

• Loba will issue a pay cheque, subject to applicable withholding, statutory and

pension contributions; within 6 business days of the day that Loba has

received payment for services rendered by you.

• As a commissioned employee, you may join the “Pension Plan for employees

of Loba Limited”.

• Your employment may be terminated by either of the parties for any reason, at

any time, on 14 days notice.

[118]

In approximately October 2000, this employment agreement was

reformatted into a formal legal document rather than a letter.¹⁰⁴

(b) Pension Transfer Administration Agreement

[119]

The Pension Transfer Administration Agreement signed by the

departing public servant and Loba guaranteed that individual that ultimately he or

she would receive at least 92.5% of the amount transferred by the government to

Loba on behalf of the individual’s pension entitlements under the PSSA with

- 43 -

interest plus an amount called the “net transfer adjustment”. The standard terms of

the Pension Transfer Administration Agreement were as follows:¹⁰⁵

1.

As per the terms of the Transfer Agreement and the [Loba pension plan],

Loba will determine the benefit entitlements to be credited (the “Credited

Entitlements”) to the Employee in respect of the payment received into the Plan.

2.

Within 30 days of reception of the payment, Loba will advise the

Employee of the amount (the “Transfer Amount”) that was received and provide

a statement describing the particulars of the Credited Entitlements to the

Employee.

3.

Upon expiry of the terms of employment, death of the Employee or earlier

if Loba elects to do so, Loba shall improve the Credited Entitlements to the

Employee.

4.

For the purpose of Article 3 above, the Minimum Value shall be

determined as follows:

Minimum Value = .925 x (Transfer Amount + Interest), where

Interest shall be calculated to represent the investment income earned by the Plan

on the Transfer Amount from the date the Transfer Amount was received until the

end of the month preceding the date of payment of the Minimum Value.

5.

For the purpose of Article 3 above, the Net Transfer Adjustment shall be

determined in accordance with the attached Transfer Adjustment Calculator

updated to reflect factual information in respect of the terms of employment of the

Employee.

[120]

Parent explained the Net Transfer Adjustment as follows. Pursuant to

the employment contract signed by the prospective Loba employee, the employee

would receive only a percentage of the contract income he or she generated. The

balance would be payable to Loba. Loba would use that sum to pay its

contributions on behalf of that individual to the Canada Pension Plan (“CPP”),

employment insurance, the Loba pension plan, Workers Compensation and the

employer health tax. From the balance remaining, Loba was entitled to keep a

once-only profit/overhead amount of $2,800. Any further amounts accumulated

within Loba would be notionally added to the minimum guaranteed amount

representing the commuted value of benefits that had to be afforded the individual

if he or she chose a transfer value option upon termination of employment with

Loba. From a cash flow perspective, any amount in excess of $2,800 would

remain with Loba as part of its net corporate income; however, for purpose of

computing the minimum transfer value to which a departing Loba employee was

- 44 -

entitled, the notional excess amount over $2,800 was added to 92.5% of the

amount transferred under the Loba RTA so as to increase the guaranteed minimal

transfer value. The sample Loba Transfer Adjustment Calculator¹⁰⁶attached to the

standard Pension Transfer Administration Agreement illustrated how the Net

Transfer Amount was calculated. More will be said of this in a moment.

Information Required from the Government

[121]

When the public servant first contacted WBP for more information

concerning RTAs, he or she was advised that all relevant information concerning

his or her service and salary records under the PSSA had to be obtained. Some

public servants obtained that directly from a compensation advisor within their

departments. On occasion Burnside or Jemus obtained it from the Superannuation

Directorate pursuant to an authorization given by the public servant. In this regard,

in August and September 2000, Jemus obtained the necessary information for

some individuals through a contact he had at the Superannuation Directorate,

rather than waiting for the information to arrive through formal channels. The

Defendant argued that this was improper. Whether improper or not, nothing turns

on this.

[122]

On September 11, 2000, Parent e-mailed Gravelle to advise that the

response individual public servants were receiving from their pay and benefits

personnel varied wildly from department to department and included the

following:¹⁰⁷

• some said such information was not available

• some said they could not provide the information for 2-5 weeks

• some advised that one could not transfer after age 50

• some said they had been advised by their supervisor not to process such

request

According to Parent, only a small number of requests for information had been

dealt with in an efficient and cooperative fashion. Parent stated that, with the

October 15, 2000 deadline rapidly approaching, and with numerous requests being

made to him by public servants interested in the option of an RTA, it was

imperative that Treasury Board provide the necessary information in a timely

fashion.

- 45 -

[123]

In response to Parent’s suggestion that all of the requests for

information be forwarded to one contact person at the Superannuation Directorate

in Shediac so as to centralize the flow, Gravelle in a September 14, 2000 e-mail

responded:¹⁰⁸

The information you are seeking is available to employing departments and it is

clearly their responsibility to provide this and all other pension-related

information to active plan members. The most practical approach is for the

individual to provide you with the name of his or her compensation advisor

(everybody has one); either the individual or you (with the employee’s

authorization) could deal directly with the advisor.

When Parent remained sceptical that he would receive the necessary information

on time, Gravelle responded on September 27, 2000 that PWGSC had recently

issued a message to pay and benefits personnel asking them to give priority to

requests for information in light of the October 15^thexpiration of RTAs.¹⁰⁹In fact

the message was issued by PWGSC on October 10, 2000 in the form of a broadcast

message to the Compensation Community stating that all requests for a RTA-IN

appendix had to be faxed to the Superannuation Directorate to the attention of the

“RTA Deadline” at a particular fax number no later than October 13, 2000.¹¹⁰

[124]

The exchange of e-mails between Parent and Gravelle leaves no doubt

that Gravelle and Macpherson knew in September 2000 that a significant number

of public servants were interested in taking advantage of the Loba RTA. They

knew that those public servants were consulting WBP for an analysis of the value

of various pension options available to them. They knew that the public servants

were obliged – by direction of the TBS – to contact their compensation advisors in

order to obtain the necessary information to enable the calculations to be done.

They realized that the individuals needed those calculations before they could

make an informed decision regarding their continued employment with the public

service and their pension options. They understood that all of this had to occur so

that interested public servants could make a decision no later that October 14,

2000.

[125]

I find that approximately 118 requests for transfer to the Loba pension

plan were received by PWGSC during the weeks leading up to October 15, 2000.

Actuarial Valuations of Entitlements under the Loba Pension Plan

- 46 -

[126]

As indicated above, the PSSA as amended from time to time together

with the Loba RTA set out how a public servant’s entitlements under the PSSA

would be valued for purpose of a transfer from the PSSP to the Loba pension plan.

The amount was the lesser of the present day value of the pension promised to an

individual under the Loba pension plan for years of service under the PSSP

(“amount required”) or twice the contributions made under the PSSA plus interest

(“amount available”). When Parent advised the Treasury Board of the amount that

was required to fund the employee’s defined benefit entitlements under the Loba

pension plan, he assumed the individual would work to his or her normal

retirement date; in other words, when the individual turned 60 years of age, when

he or she had 30 years of service, or when the individual’s age plus years of service

equalled 85. In virtually all situations, this meant that the amount requested was

more than twice the individual’s contributions plus interest. Parent anticipated that

he would have to do a second calculation to determine how the years of credited

service under the PSSA would have to be reduced to produce a present day value

equal to the amount actually available for transfer from the government.

[127]

When Parent conceptualized the RTA for Loba, he operated under the

assumption that most Loba workers would terminate employment with Loba

shortly after the transfer of funds occurred under the Loba RTA. Therefore, he

expected that 100% of the transferred funds would not be required to fund a

lifetime benefit for members of the Loba pension plan. Parent anticipated that a

significant surplus would remain in the Loba pension plan after all of its members,

aside from himself and his wife, would have ceased employment with Loba. He

could not predict with certainty the amount of that surplus since he did not know in

advance when the individuals would terminate employment and what the economic

factors relating to pension transfer values would be at that time. It was

theoretically possible that the pension transfer value payable when an individual

left the Loba pension plan would be greater than the amount received from the

Superannuation Account on behalf of that individual. If that occurred, the Loba

pension plan would cover the loss from any surplus that had accumulated in the

plan. In the very unlikely scenario of the assets within the plan being inadequate to

cover liabilities, any shortfall would have to be made up by Loba, as plan sponsor.

Parent never anticipated that such a scenario would develop.

[128]

In order to determine transfer values for payments out of the Loba

pension plan if a Loba employee terminated employment with Loba or established

an IPP, under s. 42(1) of the Pension Benefits Act, WBP, as the actuaries for the

- 47 -

Loba pension plan, were obliged to follow s. 19(1) of R.R.O. 1990, Reg. 909. That

regulation stated that the commuted value of the pension, deferred pension or

ancillary benefit will not be less than the value determined in accordance with the

“Recommendations for the Computation of Transfer Values from Registered

Pension Plans” (“Transfer Value Recommendations”) issued by the CIA.¹¹¹That

document set out the general principles, the demographic assumptions and the

economic assumptions to be used by an actuary in calculating the minimum

transfer values to be paid from a pension plan that is registered under the Income

Tax Act when the method of settlement, upon termination of employment, is a

lump sum payment in lieu of an immediate or deferred pension. Under the

Transfer Value Recommendations, the economic assumptions used to calculate the

minimum transfer value vary according to the economic context at the time of

termination of employment. For fully indexed pensions, the minimum transfer

value varies in accordance with the “real return” as determined in reference to the

real rate of interest on long-term Government of Canada real return bonds from

time to time. Due to the ongoing fluctuation of this rate, any calculation of the

minimum transfer value done in advance of the actual termination date can only be

an estimate. As the real return increases, the transfer value decreases and vice

versa.

[129]

Since the statutory and contractual framework regarding actuarial

assumptions for calculating the transfer values for payments into the Loba pension

plan from the PSSP was different from the statutory and contractual framework for

calculating the minimum transfer values for payments out of the Loba pension

plan, the transfer value entitlement of a Loba employee upon terminating

employment with Loba was different from the payment received into the Loba

pension plan on the employee’s behalf when the employee joined Loba. Due to the

fluctuation regarding the real return rates, Parent could not advise a public servant

who was contemplating joining Loba exactly what transfer value the individual

would be entitled to receive upon subsequent termination of employment with

Loba, if the individual wanted a transfer value rather than an immediate or deferred

pension. In order to reassure prospective Loba employees, Loba guaranteed that

the individual would be entitled to receive at least 92.5% of the amount transferred

from the PSSP with interest, plus the Net Transfer Adjustment amount. What was

anticipated was that, when a Loba employee terminated employment, WBP would

adjust the pension benefits to which the employee was entitled under the Loba

pension plan to ensure that, by applying the calculations required under the

Transfer Value Recommendations, and using the real rate of return at the date of

- 48 -

termination, the value of the employee’s pension benefits would be at least 92.5%

of the amount originally transferred from the Superannuation Account with interest

plus the Net Transfer Adjustment amount – all as promised in the Pension Transfer

Administration Agreement signed by Loba and the departing public servant.

[130]

According to Parent, upon termination of employment with Loba, if a

member of the Loba pension plan chose to transfer the transfer value of his or her

pension to certain eligible “locked-in” vehicles (such as a registered retirement

savings plan, a registered retirement income fund or a money purchase pension

plan) in accordance with the relevant articles in the Loba pension plan,¹¹²the

Income Tax Act¹¹³and Regulations¹¹⁴limited the amount that could be transferred

on a tax exempt basis. Where the prescribed amount under the Income Tax Act and

Regulations was less than the value of the member’s benefits under the Loba

pension plan, s. 42(6.1) of the Pension Benefits Act required the Loba pension plan

to pay the excess to the member in a lump sum, which was then taxable in the

member’s hands. Alternatively, article 12.5 of the amended text of the Loba

pension plan¹¹⁵allowed for a partial commutation of a member’s entitlement

thereby enabling the payment of a temporary pension until age 65 in lieu of the

cash payment otherwise required. According to Parent, this was permissible under

the Income Tax Act.

[131]

In the period leading up to October 15, 2000, Parent explained these

complicated concepts and provisions to public servants contemplating joining Loba

through use of the Termination/Retirement Option Statement Estimate¹¹⁶which

either he or Jemus prepared. This document showed the individual’s pensionable

service under the PSSA, the “required amount” under the Loba pension plan, the

“available amount” under the PSSA, and the available pension benefits under the

PSSA if the public servant were to cease employment with the federal public

service in 2001. This document showed what the public servant would receive by

way of an immediate or deferred pension or by way of a transfer value if he or she

were to retire from the federal public service in July 2001.¹¹⁷The document also

showed what the individual could expect to receive if the Loba RTA was used and

the individual commenced employment with Loba after resigning from the public

service and then terminated employment in July 2001, when it was anticipated the

transfer payment under the Loba RTA would have been paid by the government to

the Loba pension plan. This included an immediate or deferred annuity or a

transfer value payment. For the purpose of these illustrations, Parent assumed that

the real rate of return in July 2001 would be 4.5%. He considered this a reasonable

- 49 -

assumption in that the real rate of return in the summer of 2000 was 4%. If the real

rate of return in July 2001 turned out to be higher than 4.5%, the individual would

still receive the level of benefits that would produce a commuted value at least

equal to 92.5% of the amount received under the Loba RTA with interest plus the

Net Transfer Adjustment amount through an amendment to the Loba pension plan

terms to increase the benefit entitlement for that individual.¹¹⁸If the real rate of

return in July 2001 turned out to be lower than 4.5%, the individual would be

entitled to receive a transfer value based on the commuted value of the benefits

promised under the Loba pension plan, even if that commuted value was higher

than the guaranteed amount stipulated in the Pension Transfer Administration

Agreement.

[132]

For certain public servants, the transfer value option in regard to the

PSSP shown in the Termination/Retirement Option Statement Estimate was

notional only, in that, if they left the public service and did not access an RTA,

they would not be entitled to a transfer value – their only option would be to take

an immediate or deferred annuity. Parent explained that he nevertheless included

this entry on all Termination/Retirement Option Statement Estimates prepared for

prospective Loba employees to explain how the transfer value option under the

Loba pension plan compared with a notional transfer value option under the PSSA

assuming the same transfer date.

[133]

Parent noted that in February 2005, the CIA revised its Transfer Value

Recommendations. The mortality tables to be used were revised to reflect a future

expected improvement in mortality. New guidelines for interest rates to be used in

the calculations were also provided. Between 2000 and 2007, the real rate of

return fell significantly. The combination of new mortality tables and a lower real

rate of return would have had the effect of increasing the commuted value of

pension entitlements. According to Parent, had transfer payments been made to

Loba from the government pursuant to the Loba RTA, these trends could have

resulted in the funds held within the Loba pension plan being insufficient to fund

the transfer payments promised under the Pension Transfer Administration

Agreement. Loba would have had to cover any shortfall.

[134]

The Loba RTA and the Loba pension plan were structured by Parent

on the understanding that the Treasury Board, as the employer of federal public

servants, was a “participating employer” under s. 147.1 of the Income Tax Act,

which reads:

- 50 -

“participating employer” – “participating employer”, in relation to a pension plan,

means an employer who has made, or is required to make, contributions to the

plan in respect of the employer’s employees or former employees, or payments

under the plan to the employer’s employees or former employees, and includes a

prescribed employer;

Parent believed that, since it was the President of the Treasury Board, the employer

of public servants, who is required under the PSSA to make a payment into the

Loba pension plan under the reciprocal transfer provisions in the PSSA, and not a

trustee of the funds held under the PSSA, the “participating employer” definition in

the Income Tax Act applied and made the Treasury Board a participating employer

under the Loba pension plan. This understanding on the part of Parent was critical

to his conceptualization of the arrangement he created regarding the Loba RTA.

Anticipated Benefits from the Loba Arrangements

(a) Benefits for Departing Public Servants

[135]

The Loba RTA was an effective recruitment tool for Loba, enabling it

to attract departing public servants who otherwise would have had no reason to

join Loba. Some public servants contemplating leaving the public service were

looking for ways to maximize the value of the pension entitlements that they had

accumulated under the PSSA. For some, the prospect of crystallizing the value of

those pension entitlements at two times contributions plus interest was very

attractive when any option for realizing the value of their pension entitlements

under a mechanism other than an RTA (such as receiving a transfer value, an early

retirement pension or a deferred pension) resulted in their benefits being valued at

a lower amount.

[136]

For some the allure was the accessibility of a transfer value option

under the Loba pension plan at any age and stage when, under the PSSA, a transfer

value was an available option only if the individual had two or more years of

pensionable service and was not entitled to an immediate annuity.¹¹⁹WBP had

been the consulting actuaries for both the AMB and Cryptic Web pension plans.

Parent was aware that the majority of individuals who left the public service to join

these companies and who transferred the value of their pension entitlements under

an RTA took a transfer value payment out of those pension plans as soon as the

money arrived from the federal government, or very shortly thereafter.

- 51 -

[137]

Receiving a transfer value from Loba was attractive to individuals for

several reasons. First, they could manage the investment of their pension assets.

Secondly, depending on a number of factors, they might be able to improve the

benefit received by a surviving spouse upon their death. In this regard, one factor

was that the survivor benefit under the PSSA was 50% of the pensioner’s annuity¹²⁰

whereas under the Loba pension plan, it was two-thirds. Thirdly, especially

through use of a transfer value or IPP, they could ensure that their estate or a

named beneficiary would receive the residual value of their pension entitlements,

and would not be limited to the minimum guarantee of 60 annuity payments under

the PSSA.¹²¹The flexibility to increase what would be payable to a named

beneficiary was particularly attractive to single or divorced individuals or those

with dependent children. The flexibility regarding estate planning was also helpful

to those with a shortened life expectancy. Fourthly, a transfer value opened up the

possibility that the individual would be entitled to an immediate cash payment due

to the provisions of the Income Tax Act limiting what could be transferred between

retirement vehicles. If the amount transferred under the Loba RTA was greater

than the actuarial value of the person’s PSSP pension, then the cash payment

available upon a subsequent transfer value being paid out of the Loba pension plan

would likely be greater than what the public servant would have received if he or

she had been entitled to take a transfer value directly from the PSSP.

(b) Benefits to Loba, WBP, and Parent

[138]

The main benefit of these arrangements for Loba was the potential to

access any surplus remaining in the Loba pension plan after all Loba workers had

resigned. A minor benefit was the profit to be made from the consulting contracts.

[139]

The arrangements created numerous opportunities for WBP to

increase its revenues. It was the consulting actuary for the Loba pension plan and

could receive professional fees relating to all of the actuarial services it had to

perform in regard to the creation and registration of the Loba pension plan, the

negotiation and preparation of the Loba RTA, the preparation of the individual

illustrations for prospective Loba employees, the provision of necessary actuarial

advice to prospective Loba employees during their initial interviews and the

provision of administrative assistance in regard to all aspects of the Loba pension

plan and the Loba RTA. These fees were payable either by the Loba pension plan

or by Loba, if it elected to do so.¹²²The agreement between Loba and WBP was

that WBP would receive 50% of the difference between the amounts received by

- 52 -

the Loba pension plan under its RTA and the amount ultimately paid to employees

from the Loba pension plan. Parent referred to that as an actuarial gain.

[140]

Parent anticipated that the maximum actuarial gain would be 7.5%. In

September 2000, he estimated that could be approximately $1.8 million, if about

100 individuals joined Loba. Parent expected monies would start flowing from the

PSSP to the Loba pension plan in late 2001 or mid-2002, approximately 12 to 18

months after requests to transfer were submitted.¹²³He also anticipated that once

funds were transferred from the PSSP, the Loba employee would terminate

employment with Loba or would set up an IPP. It would only be at that time that

WBP would receive one-half of the actuarial gain as fees for services and the

balance would remain in the Loba pension plan as surplus. Parent hoped that WBP

would be able to access that surplus through charging additional actuarial fees and

that Parent himself would eventually be able to access the remaining surplus,

possibly as the last employee of Loba.

[141]

In addition, when WBP had a mutual funds division within the

company, it was in a position to gain commissions through the sale of mutual funds

to Loba employees. This division of WBP was transferred to RocheBanyan in

2002. RocheBanyan continues to provide services to some individuals introduced

to the WBP group of companies through the Loba RTA and receives commissions

from the provider of products, such as annuities, used by its clients. Finally, Parent

anticipated WBP receiving 1% of monies transferred into an IPP as additional fees

for the creation of the IPP.

[142]

Any financial benefit to Loba or WBP would ultimately be a financial

benefit to Parent, either as an officer of the companies or through his ownership

interest in Syglam.

Defendant’s Concerns Regarding the Loba RTA and the Loba Pension Plan

Prior to October 15, 2000

[143]

The Pensions Division of the TBS, as the government agency with

direct responsibility for pension policy and for overseeing RTAs, played a pivotal

role in the unfolding of events concerning Loba and the Loba RTA. It was the

government division where concerns were initially raised and investigations

regarding Loba were initiated. The Superannuation Directorate (PWGSC) and

initially, to some extent, the Registered Plans Division (CRA) took their lead from

the Pensions Division. Once the RCMP became involved, the Pensions Division,

- 53 -

the Registered Plans Division and the RCMP stirred a common pot of information,

allegations, interpretations and concerns that resulted in criminal charges being laid

and the registration of the Loba pension plan being revoked.

Concerns of the TBS respecting AMB and Cryptic Web

[144]

In June 1998, irregularities in certain RTAs, specifically in regard to

the employer/employee relationship and the treatment of funds once transferred,

were brought to the attention of the Pensions Division. On June 22, 1998, the

Pensions Division directed the Superannuation Directorate to suspend transfers to

AMB and Cryptic Web and to advise the compensation advisors in government

departments and agencies accordingly.¹²⁴In July, AMB and Cryptic Web provided

clarification regarding the legal test for an employment relationship. The Pensions

Division reinstated transfers. In July and August, the Pensions Division requested

a copy of the most recent pension plan texts and clarification of the treatment of

funds once received by the companies.¹²⁵

[145]

On August 4, 1998, V. Peter Harder (“Harder”), Secretary of the

Treasury Board, sent to the President of the Treasury Board a memorandum

prepared by Gravelle regarding a review of RTAs being undertaken by the TBS

due to concerns that they were not being used for the purpose for which they were

negotiated.¹²⁶The TBS understood that, with respect to the pension plans

associated with Cryptic Web, AMB, Lafleur, Aubin, Terrapro and WBN, as soon

as monies were transferred to the plan from the PSSP pursuant to the RTA, the

individual’s benefit under the company pension plan was being converted to a

defined contribution component, resulting in an excess of funds within the pension

plan, at least a portion of which was then paid to the individual. The TBS was

awaiting receipt of amendments to the pension plans that would confirm this.

[146]

The TBS had two chief concerns about this development. First, the

former public servant was able to receive cash representing his or her benefits

under the PSSA, something the TBS believed other public servants could not

access when they left the federal public service. Secondly, the new employers

seemed to have entered RTAs – not for the purpose of providing a defined benefit

to former public servants in regard to their years of pensionable service with the

federal public service – but for the sole purpose of maximizing the funds

transferred from the PSSP. The TBS was aware that all of the companies in

question had the same consulting actuary, WBP and, more particularly, Parent.

- 54 -

[147]

On November 6, 1998, in another memorandum to the President of the

Treasury Board written by Gravelle, Harder recommended the cancellation of the

Cryptic Web, AMB, Lafleur, Aubin, Terrapro and WBN RTAs upon six months

notice because they were being used to provide cash payments to transferring

employees. The pension plans these companies had established were described as

combining defined benefit and defined contribution elements. The amount to be

transferred from the Superannuation Account was calculated on the basis of the

defined benefits to which the departing public servant was entitled; however, once

the money arrived in the company pension plan, due to the defined contribution

elements of the company pension plan, the individual had certain choices that

enabled him or her to receive a portion of the amount transferred. The

memorandum also recommended that all transfers under the Cryptic Web and

AMB agreements be suspended because both companies had recently made

significant changes to their pension plans and confirmation of their continuing

registration under the Income Tax Act should be obtained. Harder noted that both

companies were aggressively marketing their RTAs with the federal government as

a recruitment device.

[148]

The President of the Treasury Board accepted these recommendations

and in November 1998 notified Cryptic Web, AMB, Lafleur, Aubin, Terrapro and

WBN that their RTAs would be cancelled effective May 19, 1999 on policy

grounds.¹²⁷As explained by Charko to Frank Claydon “(Claydon”), Secretary of

the Treasury Board, in a memorandum dated September 11, 2000, also prepared by

Macpherson:¹²⁸

… one of our basic principles in establishing transfer agreements is that the

“pension character” of transferred funds must be preserved, i.e. moneys

contributed for pensions must continue to be used only for the purpose of

providing pensions. In these six agreements, a portion of the funds transferred to

the new employer’s pension plan became available to the employee or the new

employer as cash. I should mention that this action is permissible under the tax

rules.

[149]

The reason for the cancellation of the six RTAs was explained in more

detail in notes prepared for a briefing to the Superannuation Directorate Executive

Committee in September 2000:¹²⁹

This action was taken after the plans were amended to provide a defined benefit

component for past service and a defined contribution component for current

service.

This combination has had the effect of providing individuals

- 55 -

participating under these agreements with access to pension funds, (by way of a

refund of PSSA contributions) not normally available to other public servants

terminating their employment. The cancellation clause was not invoked in Loba’s

case at that time as it appeared the Loba plan had not been amended as the other

six had.

[150]

On November 26, 1998, Gravelle advised Parent that no payments

would be made under the RTAs until the CRA had confirmed that the recent

amendments to the various companies’ pension plans were acceptable.¹³⁰On

November 27, 1998, Parent faxed Gravelle to advise that there was no provision

under the AMB pension plan that permitted an employee to convert his or her

defined benefit entitlement into a defined contribution entitlement.¹³¹Gravelle had

no recollection of ever having seen this fax, though she acknowledged that it had

been sent to the correct number and, in the circumstances, she should have seen it.

On January 25, 1999, the Pensions Division directed the Superannuation

Directorate to reinstate payments following discussions with the Registered Plans

Division of the CRA.¹³²

[151]

Individuals who applied for transfer under any of the six RTAs up to

May 19, 1999 had their pension monies transferred under these RTAs. The

Treasury Board did not cancel the Loba RTA at this time because the Pensions

Division understood that the Loba RTA had not been amended to permit the

conversion to a defined contribution arrangement, and the Loba RTA had been

inactive since its early days.¹³³

[152]

On September 2, 1999, Sharon Hamilton (“Hamilton”), the Assistant

Secretary of the Pensions Division at the TBS, together with Gravelle and

Macpherson, learned that the RCMP was investigating Cryptic Web and, at their

suggestion, would also investigate AMB. More will be said of this in the section

dealing with “Concerns of the RCMP”.

[153]

By this time, the Pensions Division was concerned as to whether an

employment relationship existed at both Cryptic Web and AMB. It had sought

legal advice in this regard and it had also instructed the Superannuation Directorate

to obtain confirmation of employment before any transfers were made. The

Pensions Division was concerned that, under the terms of the Cryptic Web and

AMB RTAs and pension plans, public servants were able to transfer money from

the company pension plan to their own registered retirement savings plan in a way

that was not the intended use of RTAs. Therefore, although the arrangement might

- 56 -

be legal, it produced an outcome that was contrary to the policies underlying the

creation of RTAs. The Pensions Division believed at the time that the government

was suffering a loss by transferring to Cryptic Web and AMB funds in excess of

those that would normally be available to terminating employees.

Concerns of the TBS respecting Loba

[154]

By early May 2000, Macpherson had become aware of Loba’s

aggressive marketing campaign through the advertisement in the Hill Times.

Macpherson asked Parent for a copy of the most recent plan text for the Loba

pension plan and that was provided to her on May 10^th. In Macpherson’s view, the

latest amendments to the Loba pension plan incorporated defined contribution

features that made the Loba pension plan similar to those of Cryptic Web and

AMB. On May 10, 2000, Macpherson e-mailed this new information to

Gravelle.¹³⁴I find that this was the first time Gravelle became aware that the Loba

pension plan had been amended to have what she understood to be defined

contribution features.¹³⁵Gravelle acknowledged that, when the Treasury Board

had cancelled the other six RTAs negotiated by Parent, had it believed that the

Loba pension plan had a conversion feature allowing defined contribution features

to replace defined benefit features, the Treasury Board would have cancelled it as

well.¹³⁶

[155]

On May 10, 2000, a memorandum prepared by Macpherson but

signed by Gravelle was sent to Soucoup at the Superannuation Directorate

(PWGSC) stating:¹³⁷

It has now come to our attention … that the same concerns regarding

manipulation exist with these two agreements as with the other six. Heather

asked for and received the most recent version of Loba’s pension plan text from

their actuary. Upon review, it is apparent that the plan was amended in February

1997, retroactive to 1996, to implement the defined benefit/defined contribution

feature that we have so many reservations with.

As a result, I would ask that you investigate the “employee/employer”

relationship for any individual who requests a transfer under these two

agreements. I believe it would be appropriate, as in the AMB and Cryptic Web

situations, to ask the company to:

1.

relationship they have indicated exists, is still in effect; and

2. Provide a list or description of the work that was performed under the

Confirm that in each instance the employment contract, or employment

contract.

…

- 57 -

[156]

On May 10, 2000, Gravelle forwarded Macpherson’s e-mail to Charko

and added:¹³⁸

The authors of the Cryptic Web/AMB situation¹³⁹[namely WBP] have amended

two other pension plans with whom we have agreements to permit the very same

thing which made us cancel our agreements with CW and AMB. It might be

argued that we should have been following up on those other plans more

diligently, particularly once we cancelled such popular vehicles, but it is rather

impractical for us to be policing plan changes among our partners. We should

move to cancel these additional agreements, as well, but we would be invoking a

six month cancellation clause, and that would take us past the October 15 date at

which they would expire anyway. The course of action Heather has proposed and

is already embarking on is, I believe, the most we can do: subject them to the

same scrutiny that we did the others, test the employer/employee relationship in

the same way, and include them as grist in the mill for an RTA policy review.

[157]

Macpherson alerted the Security Division of the TBS so that this

information could be relayed to the RCMP. The Security Division in turn notified

the RCMP of the Pensions Division’s concerns and advised Macpherson and

Gravelle to deal directly with the RCMP from that point forward.

[158]

On May 17, 2000, Macpherson visited the Komokoa website and

called the telephone number advertised there. She asked Zeithammel what

“portability arrangements” were being referred to on the Komokoa website in that

the Treasury Board had no RTA with Komokoa. Zeithammel stated that Komokoa

had agreements with a couple of employers, but he refused to identify them, he

said for fear of jeopardizing those arrangements.¹⁴⁰This interaction raised the

suspicions already harboured by Macpherson, Gravelle and Desnoyers.

[159]

On May 17, 2000, Gravelle instructed Soucoup that clarifying the

employer/employee relationship through an examination of employment contracts

would likely not be sufficient justification for issuing payments to those who were

applying under the Loba and Horler RTAs. She stated: “We have a number of

questions about these agreements and the relationship of these employers with

other employers whose agreements we have cancelled. Until further notice, please

ensure that no payments are made under either the Loba or Horler agreement.

…”.¹⁴¹This directive was issued because the Pensions Division did not know how

Komokoa related to Loba or Horler. All it knew was that Zeithammel was

involved with Komokoa, Zeithammel had been the principal of AMB, the AMB

- 58 -

RTA had been cancelled, Komokoa did not have an RTA with the federal

government and Komokoa was advertising as if it did have such an RTA.

According to Gravelle, until the Pensions Division could sort out the relationships

between Komokoa, AMB and Loba, it did not want any Loba transfers to be made.

Gravelle acknowledged that by May 17, 2000, the concerns of the Pensions

Division regarding the Loba RTA went beyond the existence of an

employer/employee relationship.

[160]

I find that by May 17, 2000, the TBS had serious concerns about the

Loba pension plan and RTA that were not assuaged by the Superannuation

Directorate getting confirmation from Loba and Loba employees that an

employment relationship existed.¹⁴²First, the Pensions Division understood that

the Loba pension plan carried the potential for a cash bonus being paid to plan

members, as was the case with the six other RTAs negotiated by Parent that had

been cancelled by the Treasury Board. This created the potential for the transfer

payment to lose its pension character. This use of an RTA was contrary to the

objectives underlying the portability provisions in the PSSA. Secondly, the

Pensions Division was concerned because Parent had negotiated the Loba RTA

and he was under investigation by the RCMP for his role in the AMB and Cryptic

Web RTAs. The concern was that Parent was using the Loba RTA and pension

plan to defraud the government. Thirdly, the Pensions Division had ongoing

questions about the employer/employee relationship at some of the other

companies for which Parent had negotiated RTAs,¹⁴³these suspicions carried over

to Loba, and the suspicions remained despite receipt of the standard employment

confirmation letters.

[161]

Gravelle acknowledged that, by this time, the concerns of the Pensions

Division went beyond mere policy concerns; there were concerns about the legal

validity of the Loba RTA.¹⁴⁴The concern was that, if there was not an

employer/employee relationship, the Loba RTA was not being used in a legal

fashion.¹⁴⁵A further legal concern was that the Loba pension plan be a properly

registered plan under the Income Tax Act. If it was not a registered pension plan,

then any monies transferred from the PSSP to the Loba pension plan would lose

their tax-sheltered status. As a practical matter, the Treasury Board would not

authorize the payment of a transfer amount to a non-registered plan.¹⁴⁶Both of

these concerns continued up to and beyond the October 15^thdeadline.

- 59 -

[162]

I find that Gravelle and Macpherson strongly disapproved of the way

Parent was using the Cryptic Web, AMB and Loba RTAs. They were anxious to

prevent the RTA system from being misused and to prevent more money leaving

the Superannuation Account than, in their view, should have been available to

terminating public servants. Their scepticism and negative attitude toward Parent

is apparent in an e-mail which Macpherson sent to Gravelle on June 6, 2000 in

which she referred to “our friends at Loba”.¹⁴⁷Gravelle acknowledged that this

was said “tongue in cheek”.

[163]

On May 18, 2000, Soucoup wrote to Martin requesting confirmation

of the employment status of Loba’s first three workers, including Nicholas Todd

(“Todd”).¹⁴⁸Touchette responded on June 2, 2000, enclosing copies of the

individuals’ employment contracts.¹⁴⁹On the same date, Soucoup sought

confirmation from Todd of the employment arrangements.¹⁵⁰On June 14, 2000,

Todd responded, also enclosing a copy of his employment contract.¹⁵¹On June 15,

2000, Soucoup provided copies of the employment contracts to Macpherson.¹⁵²

[164]

On July 18, 2000, after she had seen the correspondence from

Touchette and Todd regarding the employment relationship between Loba and

Todd, Macpherson instructed Swan to proceed with the transfer of Todd’s pension

entitlement from the Superannuation Account to the Loba pension plan, once she

had received all of the required documentation.¹⁵³By this time, Macpherson and

Gravelle had satisfied themselves that there were sufficient indicators of an

employment relationship that the transfer could proceed. The Treasury Board

decided to lift the hold on transfers to Loba.

[165]

On August 15, 2000, Macpherson, on instructions from Gravelle,

advised Swan that she should seek the same confirmation of employment from

others applying for a transfer under the Loba RTA that she had obtained from

Todd and, assuming she received that, she should proceed with processing the

transfers.¹⁵⁴Thereafter, the Superannuation Directorate did not forward to the

Pensions Division copies of the replies from Loba workers. Gravelle confirmed

during her testimony that she never heard from the Superannuation Directorate that

any of the Loba workers provided the Directorate with any inaccurate or false

information concerning their employment status.

[166]

According to Charko, the Treasury Board had received sufficient

clarification to satisfy itself that it had a valid, legally-binding RTA with Loba, that

- 60 -

Loba was a legitimate company, and that Loba had a defined benefit pension plan

for its employees. This does not accurately reflect the opinion of either Gravelle or

Macpherson at that time. It is clear from all of the evidence that Gravelle and

Macpherson remained highly suspicious of Parent and of the arrangements he had

put into place. Gravelle acknowledged that she was not prepared at that time to

enter any discussions with Parent regarding a PTA for Loba. As well Gravelle

acknowledged that the Pensions Division continued to have concerns as to whether

a valid employer/employee relationship existed between Loba and its workers.¹⁵⁵

These ongoing concerns were not shared with Parent at this time.

[167]

In a June 14^thbriefing note to Serge St. Pierre (“St. Pierre”), a Senior

Communications Strategist at Treasury Board,¹⁵⁶Gravelle stated that, in addition to

policy concerns regarding the AMB and Loba arrangements, there was one area

where there was some question about the legality of those arrangements. RTAs

were available for “employees” of the receiving company. If those transferring to

AMB or Loba were not true employees, then the RTAs were being used

improperly. She went on to state that the Treasury Board, as a prudent plan

administrator, had a responsibility not just to transferring plan members, but to

those who remained in the PSSP and to the taxpayers whose taxes supported the

PSSP.

[168]

By August 30, 2000, Macpherson, Gravelle and Charko had been told

that WBP was receiving a 10% commission for processing a transfer under the

Loba RTA.¹⁵⁷It is clear that all of them considered this highly suspect.

Concerns of the CRA respecting Loba

[169]

I find that by May 2000, Gravelle had already contacted Godwin of

the Registered Plans Division of CRA to gain a better understanding of the nature

of an employer/employee relationship that must exist to satisfy the registration

requirements for pension plans under the Income Tax Act. During their numerous

conversations, Gravelle provided Godwin with information regarding Loba’s

arrangements with its employees that had been gleaned from marketing

advertisements, from the documentation submitted to the Superannuation

Directorate by Loba and its employees, and from individuals who had called the

Superannuation Directorate or the Pensions Division with questions relating to

Loba. She highlighted such factors as employees not working for a long period of

time for Loba, employees not working full-time for Loba, and employees working

- 61 -

as consultants on a contract basis with third parties. At this time, the Registered

Plans Division did not know how the relationship between Loba and its employees

would be characterized for pension plan registration purposes, but Godwin realized

that there could be a risk of de-registration of the pension plan. He explained this

risk to Gravelle.

[170]

I find that Gravelle understood that some of the circumstances she

was raising could lead the CRA to question the existence of an employment

relationship, and that in turn could put the registration of a pension plan in

jeopardy. More specifically, during their conversations, Godwin explained to

Gravelle that, where it became apparent that even one member of a pension plan

did not have a legitimate employer/employee relationship, registration of the plan

could be revoked.

[171]

I find that on June 21, 2000, Gravelle alerted John O’Meara

(“O’Meara”), Director of the Compliance Division at the Registered Plans Division

of the CRA about the advertising being done on behalf of WBP and Loba relating

to the October 15, 2000 deadline and the possibility for plan members to receive a

significantly greater amount from the PSSP by way of transfer payment than would

be available following October 15^th.¹⁵⁸She shared the concerns of the TBS

regarding this advertising and the arrangements that were being promoted.

Gravelle contacted O’Meara for the purpose of determining whether the CRA

would have any concerns about the Loba arrangements.

[172]

O’Meara shared Gravelle’s information regarding WBP and Loba

with Godwin, Annelisa Richardson (“Richardson”), Director of the Registration

Division of the Registered Plans Division, and Robert D’Aurelio (“D’Aurelio”),

Director of the Registered Plans Division. At this point, the CRA already had

concerns about the establishment of IPPs that had been created and aggressively

marketed by a promoter in Southern Ontario to accept a transfer of funds from a

prior registered pension plan. What was being offered to the departing public

servants in that case was similar to what was being offered to prospective Loba

workers. D’Aurelio immediately inquired whether O’Meara had shared with

Gravelle CRA’s concerns about the legitimacy of such arrangements.

[173]

As a first step by way of follow-up to O’Meara’s e-mail, Godwin

asked Allan Robusky (“Robusky”), a member of the Technical Services Section of

the Policy Division of the Registered Plans Division, to send Gravelle information

- 62 -

concerning CRA’s concerns about the IPP situation. I find that he did so because it

was obvious that the promotion of Loba was very similar to the promotion of the

IPP alternative in Southern Ontario, and the CRA had the same concerns about

both from the perspective of whether the IPP or Loba pension plan would satisfy

registration requirements under the Income Tax Act.

[174]

On June 28, 2000, Robusky forwarded to Gravelle copies of letters

that D’Aurelio had sent to public plan administrators and to individual plan

members expressing the CRA’s concerns regarding certain IPPs.¹⁵⁹The CRA

questioned whether the IPPs would meet the requirements for registration under

the Income Tax Act. D’Aurelio explained that, as a condition of registration, every

registered pension plan, individual or group, must have as its primary purpose the

provision of retirement benefits to individuals in respect of their service as

employees. This purpose could not be met if there was no legitimate employment

relationship or if the real purpose for establishing the IPP was to get around the

limits on the transfer of pension funds to registered retirement savings plans upon

leaving employment. Also, if only nominal earnings were received from the new

employer, the benefits under the IPP would be less than what would have been

available under the previous defined benefit pension plan, creating a surplus in the

IPP. This, as well, supported the conclusion that the primary purpose test had not

been met. D’Aurelio warned:¹⁶⁰

If it is apparent at the time of registration that the IPP will not meet the

primary purpose test, the CCRA will refuse to register the pension plan.

Unfortunately, in many cases, it will not be apparent until a year or two later that

the primary purpose test was not met. This situation can be more problematic for

individuals as they may have already transferred funds into the IPP.

If it is determined that a registered plan does not, and never did, meet the

primary purpose test, the plan’s registered status can be revoked as of the original

effective date. The impact of this action is that all of the assets will no longer

receive the tax-sheltered status that registered plans enjoy.

It is for this reason that we want to ensure that individuals considering this

transaction are made aware of these concerns. Once aware, we hope that those

who do not anticipate establishing a bone-fide (sic) employer/employee

relationship or those that do not expect to receive earnings at a level comparable

to the earnings they received from the prior employer, will decide that this may

not be the best option for them at this time. If however, they choose to proceed,

they will have done so with full knowledge of our concerns. This information

may also convince some to delay the transfer to the IPP until the individual is

comfortable that the primary purpose test will in fact be met.

…

- 63 -

[175]

CRA realized that public servants contemplating moving their pension

entitlements to an IPP needed to know before the move the risks inherent in the

move, because after the transfer took place, it was too late. Although the

individual would know before setting up an IPP what relationship was

contemplated with the plan sponsor, the CRA might not be able to assess that for a

year or two after the move was made. The CRA could still deregister the IPP at

that time, right back to its date of inception.

[176]

I accept Gravelle’s evidence that, although she had heard of the

primary purpose test in regard to pensions, this was the first time that the

importance of the primary purpose test was clearly brought home to her.¹⁶¹The

primary purpose test then became an additional concern she had regarding the

Loba pension plan.¹⁶²

[177]

The concerns D’Aurelio summarized regarding IPPs were the same

concerns that the CRA had in regard to the pension plans, like Loba’s, that Parent

had created in association with the RTAs he had negotiated. The information

provided in the letters was of the same nature as the information that Gravelle had

sought from Godwin in regard to the Loba pension plan. I reject Gravelle’s

evidence that, although she found these letters “a little bit helpful” because they set

out clearly how central the employer/employee relationship was to the registration

of pension plans, they did not make any light bulbs come on in regard to the Loba

pension plan being vulnerable to de-registration.

[178]

I find that Gravelle realized that Godwin had asked for D’Aurelio’s

letter to be sent to her because the CRA concerns expressed in the letter applied to

the Loba pension plan as well as certain IPPs. Gravelle acknowledged that this

letter did bring home to her the importance of the primary purpose test for the

continuing registration of any pension plan. She understood the need for a valid

employer/employee relationship before the primary purpose test could be met. She

realized that if there was not a true employment relationship, a pension plan could

lose its registration under the Income Tax Act resulting in serious tax consequences

for its members.

[179]

Throughout her lengthy career in the federal public service, Gravelle

had always worked in the field of pensions. She knew the basic criteria for the

registration of a pension plan. She would have realized that the concerns

D’Aurelio described regarding certain IPPs could apply equally well to the Loba

- 64 -

pension plan, as she understood it at the time. She had been questioning Parent

since 1997 about the existence of an employer/employee relationship at Cryptic

Web, AMB and Loba. She had been raising as a concern the true purpose of these

companies’ RTAs. The parallels between these companies’ pension plans and the

IPPs described in D’Aurelio’s letters were obvious.

[180]

I digress briefly to refer to s. 241of the Income Tax Act that reads:

241.(1) Except as authorized by this section, no official shall

241.(1)(a)

knowingly provide, or knowingly allow to be provided, to any

person any taxpayer information;

241.(1)(b)

knowingly allow any person to have access to any taxpayer

information; or

241.(1)(c)

knowingly use any taxpayer information otherwise than in the

course of the administration or enforcement of this Act, the Canada Pension Plan,

the Unemployment Insurance Act or the Employment Insurance Act or for the

purpose for which it was provided under this section.

Although numerous exceptions are provided under this section, none of them

applies to the provision of taxpayer information about Loba to the Pensions

Division of the TBS.

[181]

The Treasury Board is the sponsor of the PSSP, and in this regard is

considered a taxpayer, just like any other taxpayer under the Income Tax Act.

Loba is a pension plan sponsor and a taxpayer under the Income Tax Act. The

CRA was obliged to treat the Treasury Board and Loba in the same way in terms

of respecting taxpayer confidentiality. The fact that the Treasury Board had

entered an RTA with Loba did not alter this. Put another way, just because the

Treasury Board was another arm of the federal government did not mean that the

CRA had the right to share with it taxpayer information concerning Loba. To do

so would have been a breach of the CRA’s confidentiality obligations under s. 241

of the Income Tax Act.

[182]

For this reason, both Gravelle and Godwin noted in testimony that,

under s. 241 of the Income Tax Act, Godwin could not divulge any information

about a particular taxpayer’s file and therefore all conversations between himself

and Gravelle had to deal only with “hypotheticals”. Despite this strong assertion

by both, I have no hesitation in finding that both Gravelle and Godwin knew that

they were discussing the circumstances of existing RTAs and pension plans, one

being Loba. Gravelle acknowledged that, when she called Godwin, she advised

- 65 -

him that she was calling about Loba; however, due to his constraints in not being

permitted to speak about a particular taxpayer, she would then switch gears and

speak at a more hypothetical level. But there was no question that Godwin knew

that she was raising concerns about Loba during the course of their conversations,

and Gravelle knew that the issues discussed by Godwin related to Loba.¹⁶³

[183]

Back to the chronology, sometime prior to August 25, 2000,

Richardson, the Director of the Registration Division of the Registered Plans

Division, had become aware that the CRA auditors in Toronto had been targeted

by WBP as public servants who might be interested in leaving CRA, joining Loba

and transferring their pension entitlements under the Loba RTA.¹⁶⁴The CRA’s

primary concern was with the legitimacy of the employer/employee relationship to

be established by Loba. The Assistant Commissioner wanted a briefing note for

the Commissioner, and Godwin was tasked to provide this. The Director of the

Taxation Service Office in Toronto was concerned about losing employees. He

also wanted to ensure that the Loba option was a legitimate option for his

colleagues. D’Aurelio, Godwin and Robusky decided it would be useful to get

information out directly to CRA employees to ensure that they were fully informed

before taking a decision to pursue the Loba transfer. Robusky worked with Larry

Menard (“Menard”), the Director of Compensation within the CRA, to get

appropriate information into the hands of individual CRA employees. In preparing

the briefing note for the Commissioner and the Information Sheet for CRA

employees, Godwin and Robusky used the briefing note regarding IPPs that they

had prepared earlier in 2000.

[184]

The September 1, 2000 briefing note from McCloskey to Wright

entitled “Reciprocal Transfer Agreement between PSSA and Consulting Firms”

was tendered in evidence to prove the truth of its contents regarding the CRA’s

concerns at the time and the steps it took in regard thereto.¹⁶⁵The issue being

addressed in the note was that consulting firms were actively encouraging federal

public servants to terminate from the public service and join their company to take

advantage of an RTA between the company and the federal government which

allowed for the transfer of the full value of their pension benefits under the PSSA.

The note went on to state:

…We are concerned that, as a result of some of these transfers, the registered

status of the receiving pension plans may be jeopardized. If the registration of

such a pension plan is revoked, the retirement funds of the individuals

- 66 -

participating in the plan will lose their tax-sheltered status, creating serious tax

consequences for these individuals. …

…Because of the emphasis these ads place on the transfer of pension benefits

from the PSSA, we have some concerns about the legitimacy of some of these

arrangements. …

To be a member of a pension plan, an individual must be an employee of an

employer that participates in the plan. We believe that in some cases, individuals

are working on a contract basis which may bring into question the legitimacy of

the employee/employer relationship. If a proper employee/employer relationship

has not been established for an individual, the pension plan will be in a revocable

position when pension benefits are promised to that individual. …

We are also concerned that in some cases the individual may receive

substantially lower earnings from their new employer than they received from the

public service. … Because the amount of the pension benefit may decrease under

the receiving plan, the value of the reduced benefit may be less than the amount

transferred in from the PSSA by the member. Any subsequent transfer out of the

plan would reflect this lower value. …

While we recognize that many of these arrangements will be acceptable, we

are still concerned that some cases may not, which could jeopardize the retirement

funds of all individuals participating in these plans. Therefore, we are preparing

information to be provided to those considering these arrangements, so they will

be in a position to make informed decisions. We have discussed these

arrangements with the Director of Compensation for CCRA, who has agreed to

pass this information to the compensation offices across the country, who will

then distribute it to interested parties. We will also be contacting Public Works

and Government Services Canada to establish a similar communications

agreement for all of the public service. Our website will also be updated to

include a copy of our information package.

[185]

On August 31, 2000, Godwin provided D’Aurelio with the first draft

of the Information Sheet that he proposed be sent to the Treasury Board and the

CRA compensation officers. The e-mail and attachment were tendered in evidence

to prove the truth of their contents.¹⁶⁶In the e-mail Godwin stated:

…I have spoken with the director of CCRA compensation and he has promised to

give this to all compensation officers throughout the country. They in turn can

pass this on to interested individuals when they approach the compensation

officer for a quote.

- 67 -

I have also spoken with Anne Gravelle at Treasury Board. She has also agreed to

pass this information on to Shediac so that all of Public Works (and all civil

servants) will get this information when they request a quote. She was actually

very glad that we were willing to provide such information.

…

[186]

The attachment was entitled “General Information Regarding

Transfers from the PSSA”. The wording in this document was virtually the same

as the wording in the Information Sheet that had been circulated earlier regarding

IPPs. It is also the wording that subsequently was used by Godwin in his letter of

September 7, 2000 to Gravelle at the TBS¹⁶⁷and in an Information Sheet which he

attached to a September 15, 2000 letter to Parent.¹⁶⁸The Information Sheet clearly

identified the following CRA concerns, which are summarized below:

• There must be a legitimate employer/employee relationship in order to

obtain and maintain a pension plan’s registered status;

• A pension plan must have as its primary purpose the provision of lifetime

retirement benefits to individuals in respect of their service as employees;

• Working on a contract basis may call into question the existence of an

employer/employee relationship;

• “Where it becomes apparent that even one member of the plan does not have

a legitimate employer-employee relationship, registration of the Plan can be

revoked”; and

• “The Earnings which may be used in the formula [to calculate a defined

benefit promise] must be earnings received from an employer who

participates in the plan from which the benefit will actually be paid. In the

circumstances at hand, the federal public service is not a participating

employer in the private RPP. Only the private sector corporation is the

participating employer”. If private sector earnings are lower than public

service earnings, the benefit for all of the years of service will be calculated

using lower earnings. This could lead to the employee not getting the

benefit of the higher value transferred into the private plan.

[187]

There is no question that, prior to September 7, 2000, Godwin was

concerned about public servants transferring their pension monies to an outside

pension plan that might be de-registered as a result of the absence of a legitimate

employer/employee relationship and the failure to meet the primary purpose test.¹⁶⁹

I find that he conveyed this concern to Gravelle during their numerous telephone

- 68 -

conversations during the summer of 2000, and he promised to send her a document

for distribution clarifying the key factors necessary to maintain a pension plan’s

registration.

[188]

Godwin prepared a letter for Gravelle dated September 7, 2000

summarizing the concerns of the Registered Plans Division arising from the

marketing of the Loba RTA and pension plan.¹⁷⁰I find that Godwin provided this

letter to Gravelle so that she could pass it on to the Superannuation Directorate for

distribution to all public servants requesting a quote for purpose of a transfer under

an RTA prior to the October 15^thdeadline. The letter was virtually identical to the

Information Sheet he had forwarded to D’Aurelio on August 31, 2000.¹⁷¹The

letter arrived at the Pensions Division of the Treasury Board Secretariat on

September 21, 2000. At trial, no explanation was provided for the delay. Due to

the importance of this letter, it is reproduced in its entirety.

- 69 -

Treasury Board of Canada

Pensions Division

5th Floor West Tower

300 Laurier Avenue West

OTTAWA, Ontario

K1A 0R5

Attention: Anne Gravelle

September 7, 2000

Dear Anne:

This letter is further to our discussion regarding a recent trend whereby members

of federal public service pension plans are recruited to become “consultants” for a

private corporation and encouraged to transfer their pension entitlement to a

private sector plan. The Registered Plans Division (RPD) has been asked to

comment on these arrangements.

In general terms, the proposal involves individuals near retirement age leaving a

public sector employer. They become “consultants” for a private corporation.

The private corporation has registered a defined benefit (DB) pension plan which

will recognize the individual’s prior service under the public sector plan. The

individual retires from the public service and then transfers the commuted value

of his public sector pension (or in some cases, an amount representing twice the

individual’s contributions to the public sector plan) to the corporation’s registered

pension plan (RPP).

RPD has granted registration to plans to which retired public servants will transfer

their public pension entitlement pursuant to this proposal. The terms of these

plans satisfy our requirements for registration. This is not to say that RPD does

not have certain concerns about the arrangements. Our concerns can be outlined

as follows.

Employee – Employer Relationship

In order to obtain and maintain registered status, a pension plan must have as its

primary purpose the provision of lifetime retirement benefits to individuals in

respect of their service as employees. Canada Customs and Revenue Agency

calls this the “Primary Purpose Rule”.

One consideration raised by the primary purpose rule is that there must be a

legitimate employer-employee relationship between the plan member and the plan

sponsor.

- 70 -

Whether there is such a relationship is a question fact. If there is no such

relationship, the plan’s registration is jeopardized.

It appears that some of the plan members may be working on a contract basis

which would call into question the existence of a bona fide employer-employee

relationship. Where it becomes apparent that even one member of the plan does

not have a legitimate employer-employee relationship, registration of the Plan can

be revoked.

Earnings level

The benefit promise in a DB provision is generally comprised of three (3) factors:

1.

2.

3.

a specific benefit accrual rate

earnings

years of service.

Example: 2% x final average Earnings (best 3 years) x Service

Although a plan may recognize the Service rendered to a prior employer under

another RPP, the same is not true of Earnings.

The Earnings which may be used in the formula must be earnings received from

an employer who participates in the plan from which the benefit will actually be

paid. In the circumstances at hand, the federal public service is not a participating

employer in the private RPP. Only the private sector corporation is the

participating employer.

Accordingly, in calculating the benefit which a member will accrue under the

private RPP, he may only use earnings figures which reflect his remuneration

from the private corporation.

A member’s benefit for all years of service (public and private sector) will be

calculated using his private sector earnings. If his earnings while a member of the

private RPP are lower than the earnings he received as a public servant, his

benefit will also be lower.

Impact of lower benefit

It is important to recognize that in a DB plan, there is a pooling of assets and

liabilities. All funds coming into the plan are available for all liabilities payable

from the plan. It is possible that the amount transferred in by the member will

exceed the value of the private plan benefit he accrues. In such a case, the excess

- 71 -

amount originating from his transfer in is no longer associated with his promised

lifetime retirement benefit under the private RPP.

This factor will be relevant on any subsequent transfer of the member’s benefit to

his RRSP or any other deferred income plan. In effecting such a transfer, the

available transfer amount will be calculated based upon the lower benefit accrued

under the private plan.

I trust my comments will be of assistance, but should you require additional

information, please do not hesitate to contact our General Inquiries Line at (613)

954-0419 (English) or (613) 954-0930 (French).

Yours truly,

“Michael Godwin” signed

Michael Godwin

Chief, Technical Services Section

Registered Plans Division

Canada Customs and Revenue Agency

Ottawa, ON K1A 0L5

[189]

On September 25, 2000, Ginette Tremblay (“Tremblay”), an

employee of the Pensions Division, faxed Godwin’s letter to Swan at the

Superannuation Directorate stating:¹⁷²

I am sending you the copy of a letter we have received from the Registered Plans

Division of Canada Customs and Revenue Agency. We have been told that this

letter can be sent to members of the federal public service pension plans who are

recruited to become <consultants> for a private corporation and encourage (sic) to

transfer their entitlement to a private sector plan.

It gives a general explanation of the registration criteria and also a phone number

where people can call to get more info.

We though (sic) that this could be of some help to you or people handling these

(sic) type of enquiry.

[190]

Godwin’s letter was not sent to the Compensation Community

throughout the public service to pass on to anyone making an inquiry about an

RTA prior to the October 15^thdeadline.

Concerns of the RCMP

- 72 -

[191]

Prior to September 1999, Greg Hurst (“Hurst”), a Vancouver financial

advisor, lodged a complaint about Cryptic Web with the RCMP Commercial

Crime Unit. The essence of the complaint was that: (1) Cryptic Web’s pension

plan had been established solely to permit a larger transfer from the PSSP than

would otherwise have been the case if no RTA were available; (2) the Cryptic Web

workers were not true employees; and (3) Cryptic Web retained a fee from the

pension monies transferred from the PSSP to the Cryptic Web pension plan.¹⁷³

[192]

RCMP officers met with Hamilton, Gravelle and Macpherson on

September 2, 1999 to discuss a possible fraud on the part of Cryptic Web against

the federal government and how the RCMP could access information in the

government’s records to assist with their investigations. The Pensions Division

understood that the complaint was that Cryptic Web had no employees and that

departing public servants moving to Cryptic Web had to pay a substantial fee to the

company to effect the transfer. The alleged fee came as a surprise to the Pensions

Division personnel. In the view of the RCMP, the Superannuation Account

suffered a loss because the government transferred funds to Cryptic Web under an

RTA in excess of those that would normally be available to terminating employees.

The TBS representatives advised the RCMP that they shared their concerns about a

possible fraud being committed against the Treasury Board.¹⁷⁴

[193]

On this occasion, TBS representatives advised the RCMP that they

had concerns about whether there was an employer/employee relationship between

Cryptic Web and the transferring individuals, and it had sought legal advice on this

point before transferring funds. They advised the RCMP that they had a similar

level of discomfort with AMB. The Pensions Division agreed to cooperate with

the RCMP in its investigation with the assistance of its own Security Division and

to share information about the investigation extremely narrowly in order not to

jeopardize the investigation. In essence, only the senior staff at the Pensions

Division knew of the RCMP investigation.

[194]

As a result of the criminal investigation, the Pensions Division

instructed the Superannuation Directorate to withhold transfers under the Cryptic

Web and AMB RTAs pending further notice.¹⁷⁵The Pensions Division wanted

time to assess whether the RCMP investigation should result in their handling the

requested transfers differently. By November 1999, the Pensions Division had

decided that the fact of the RCMP investigation was insufficient to stop payments

and the transfers were reinstated. MacGillivray, Zeithammel and Parent were not

- 73 -

advised that transfers had been placed on hold as a result of concerns raised by the

RCMP.

[195]

In November 1999, Desnoyers became the lead investigator on the

file. Gravelle and Macpherson provided Desnoyers with technical information

regarding pension plans and their regulation, RTAs generally and the eight private

companies for which Parent had negotiated RTAs. Desnoyers did corporate

searches, conducted surveillance on business addresses and investigated company

websites. The main targets of his investigation at this stage were Cryptic Web and

AMB.

[196]

On May 3, 2000, Desnoyers interviewed Wendy MacNaughton

(“MacNaughton”), a public servant who had considered joining Cryptic Web, but

had decided against it after having received financial and legal advice. Later in

May, Desnoyers interviewed MacNaughton’s financial advisor and her lawyer.

Desnoyers received advice from both as to the difference between an employee

and an independent contractor, and relied on that advice during the course of his

investigation. He also relied on their opinion that it was hard to reconcile with the

practices of a legitimate business, first, Cryptic Web’s termination of its

relationship with its worker as soon as funds were transferred under its RTA and,

secondly, its keeping a percentage of those funds.

Desnoyers advised

MacNaughton not to divulge to anyone her conversation with Desnoyers for fear of

compromising the RCMP investigation.

[197]

On May 17, 2000, Macpherson advised Desnoyers that the Pensions

Division had concerns about the Loba RTA and pension plan similar to its

concerns about the Cryptic Web and AMB plans. I find that during this

conversation, Desnoyers advised Macpherson in a general way about the progress

he was making in his investigation. After this discussion, Macpherson and

Gravelle understood that the RCMP would be adding Loba to the group of

individuals and companies it was investigating for fraud.

[198]

On May 30, 2000, Desnoyers sent a Privacy Act¹⁷⁶request to PWGSC

to obtain details of all the former public servants who participated in the RTAs

negotiated by WBP on behalf of the eight small companies already referred to.¹⁷⁷

Desnoyers understood at this time from discussions with the Superannuation

Directorate that over 100 public servants had transferred to these companies.

Desnoyers received a reply to his request only in September 2000. By September

- 74 -

5, 2000, if not before, Desnoyers had formed the opinion that those who had

transferred pension monies from the PSSP to one of the pension plans of the eight

companies under review “had received more PSSA money than they should

have”.¹⁷⁸He saw this as the federal government having lost money, stating:¹⁷⁹

A very conservative guesstimate of 100 ex-employees receiving $50,000 to

$100,000 extra, places the loss to the federal government at $5 to $10 million

dollars. Due to the companies continued aggressive recruitment and the pension

settlements averaging over $100,000, the total loss will easily double or triple.

[199]

Meanwhile on August 19, 2000, Desnoyers heard a radio interview

with Zeithammel, extolling the benefits of an RTA that could be accessed through

Komokoa. Desnoyers learned that the RTA being promoted was that of Loba.

[200]

On September 5, 2000, Desnoyers spoke with Rick Dowedall

(“Dowedall”), the former federal public servant who had consulted Hurst before

moving to Cryptic Web in 1999. Subsequently, Desnoyers had Dowedall

interviewed by the RCMP in Vancouver. Dowedall was advised not to divulge to

anyone the inquiries being made by the RCMP. The information Desnoyers

gleaned from these interviews made him particularly suspicious as to whether

Cryptic Web, AMB and Loba workers had an employment relationship with the

company. I find that, during his periodic conversations with Macpherson,

Desnoyers shared his belief, and I would say confidence, that Loba, Loba workers,

Parent and WBP were all involved in a fraud against the federal government.

[201]

For example, during an August 31, 2000 telephone conversation,

Desnoyers advised Macpherson that the original complainant regarding Parent was

a financial advisor in B.C., that Cryptic Web “is no more”, that an actuary had

been approached by Parent to be the “West Coast ‘contact’ for this scheme” but

had declined the opportunity, and that there was a worry that Parent might be a

“flight risk” because he had ties with South Africa.¹⁸⁰It is unclear why Desnoyers

would be sharing any of this information with Macpherson who, at the highest, was

an employee of an organization that Desnoyers considered a complainant in his

criminal investigation of Parent, Loba and WBP, and who potentially would be a

witness in subsequent criminal proceedings.

[202]

On September 27, 2000, Desnoyers obtained an Authorization to

Intercept Private Communication from Justice Dorval for the interception of

communications between Parent, Zeithammel, MacGillivray, Ron Lepine

- 75 -

(“Lepine”)¹⁸¹and two undercover RCMP officers. The intent of the undercover

operation was to have the undercover officers pose as public servants with several

years of service interested in making use of an RTA to transfer their pension

entitlements under the PSSA through Komokoa. It was hoped that this operation

would produce evidence of mens rea of fraud against Parent, Zeithammel and

MacGillivray, the targets whom Desnoyers considered “the controlling minds

behind the fraudulent pension scheme”.

[203]

I find that on September 27, 2000, Desnoyers met with Gravelle and

Macpherson to provide them with an update regarding the RCMP investigation.

He asked for their assistance in preparing false pension history documents for the

undercover operators. They undertook to get the necessary paperwork done

through PWGSC, and did so.¹⁸²I find that both Gravelle and Macpherson were

aware of the existence of the undercover operation before it occurred, and were

aware that the RCMP was in the process of collecting evidence against Parent,

Loba and WBP for the purpose of laying criminal charges. I reject Desnoyers’

evidence that Gravelle and Macpherson would not have known that he needed the

phoney service and salary files for the purpose of an undercover operation

targeting Parent, Loba and WBP. I also reject Gravelle’s evidence that, although

she knew that the RCMP had an ongoing investigation involving Loba and Parent,

she had no way of gauging the status or seriousness of that investigation. I find

that both Gravelle and Macpherson were well aware by September 2000 that the

RCMP was of the view that what Parent, Loba and WBP were involved in was

illegal. I also find that some officials at the CRA were aware of the undercover

operation because Desnoyers had summarily briefed CRA’s representative in the

Proceeds of Crime Division of the Commercial Crime Unit in Ottawa.

[204]

The two undercover officers met with Parent and Zeithammel on

October 10, 2000. What Desnoyers concluded, after listening to the tapes, was that

Parent and Zeithammel were rolling along in “a really nice fraudulent scheme”.

He interpreted what Parent and Zeithammel said to the two undercover officers as

showing their intent to deceive the Treasury Board. Of particular interest to

Desnoyers was that the undercover officers were told that they had to find their

own work; Loba would not be finding it. Desnoyers thought this was a very

important factor in this case.

[205]

Desnoyers understood that there were approximately 100 public

servants interested in joining Loba, and he understood that approximately the same

- 76 -

number had been involved in an earlier phase of the scheme (presumably with

AMB and Cryptic Web). Desnoyers was not worried about any of these public

servants or former public servants. He assumed that they were individuals who

would be leaving the federal public service in any event. He assumed that the

transfer value to which they would be entitled in the absence of an RTA was safe,

and the participants would receive that regardless of the outcome of the criminal

investigation. He assumed that the only thing at risk was what he referred to as

“the top-up amount”; namely, the difference between the transfer value and the

amount that would be transferred to the Loba pension plan under the Loba RTA.

In his view, the departing public servants were not entitled to that legally in any

event; therefore, it was of no concern to him if they did not receive it. He did not

consider the public servants who might decide to transfer the value of their pension

entitlement to the Loba pension plan under the Loba RTA to be victims. He saw

them more as participants in a fraudulent scheme. I find that this attitude

influenced how Gravelle and Macpherson viewed those in the position of the

Plaintiffs. It clouded their judgment as to the duty of care that was owed to them

as public servants and members of the PSSP.

Memorandum from Charko to Claydon September 11, 2000

[206]

On September 11, 2000, prior to Gravelle’s receipt of Godwin’s

September 7^thletter, Charko forwarded to Claydon, the Secretary of the Treasury

Board, a memorandum drafted by Macpherson and approved by Gravelle, the

subject of which was “Loba Limited Reciprocal Pension Transfer Agreement”.¹⁸³

A copy was sent to Nouvet, Chief Human Resources Officer at the TBS. The

Defendant admits that the September 11^thmemorandum speaks for itself. It has

been admitted to prove the truth of its contents. The purpose of the memorandum

was to inform the Secretary of the Treasury Board of the concerns of the TBS and

the CRA regarding Loba and the steps being taken by both in regard thereto. I find

that it is an accurate representation of the concerns of the Pensions Division and

the understanding of the Pensions Division about the concerns of the CRA at that

time, and an accurate reflection of what the Pensions Division considered a

reasonable response to those concerns.

(a) Pensions Division’s Understanding of CRA Concerns

[207]

On September 11, 2000, the Pensions Division understood the CRA to

have the following concerns regarding Loba:

- 77 -

1.

Loba appears to have selected CCRA employees for particular attention.

CCRA officials have described an extremely aggressive campaign targeting

auditors in their Toronto district office. This is a major concern to CCRA given

their difficulty in retaining these qualified employees.

2.

CCRA’s second concern is the burden being placed on their compensation

community to respond to requests for information generated by a private

company.

3.

In their role as the administrator of the Income Tax Act (ITA), including

the requirements for registration of pension plans, CCRA officials have expressed

serious reservations about the employee/employer relationship underlining the

pension plan arrangements of Loba and other similar small companies.

[208]

At trial, Gravelle’s evidence was that in the September 11^th

memorandum, in order to keep the memorandum short and catchy, she had

expressed the third concern more definitively than Godwin had expressed it to her

previously. I reject this evidence and find that she expressed the concerns exactly

as they had been conveyed to her. I find that Gravelle went out of her way during

her testimony to state that at no time did she and Godwin during their discussions

ever use the actual names of companies (i.e. taxpayers), such as Loba. Her

evidence was that at all times they spoke hypothetically about possible situations.

In sticking to this assertion, Gravelle went so far as to state that she had lied to

Charko, Nouvet and Claydon by allowing the September 11, 2000 memo to go

forward from Charko to Claydon with a statement suggesting that CRA officials

(i.e. Godwin) had confided in her their serious reservations about the

employer/employee relationship underlying Loba’s pension plan arrangements.

[209]

I do not believe that Gravelle lied or misled anyone about the concerns

the CRA had about Loba. Gravelle acknowledged that during the spring and

summer of 2000, when she was having numerous conversations with Godwin

about issues relating to RTAs, they only spoke about RTAs that Parent had been

involved in, and the only one that was active at that time was the Loba RTA. She

had shared with Godwin the content of the letters the Superannuation Directorate

had received from Loba and Loba employees regarding the employment

relationship. Godwin expressed to Gravelle concerns regarding the legitimacy of

the employment relationship and advised Gravelle that even if one member of a

pension plan did not have a legitimate employer/employee relationship,

registration of the plan could be revoked by CRA.¹⁸⁴There can be no doubt that

both Gravelle and Godwin knew that they were speaking about Loba, regardless of

what code words they may have used during their discussions. Their discussions

- 78 -

were not restricted to hypothetical situations and concerns that could arise in some

unidentified situation in the future; their discussions related to the existing situation

they faced with Loba.

[210]

By the late summer of 2000, the Pensions Division understood that the

CRA had “serious reservations about the employee/employer relationship

underlining the pension plan arrangements of Loba”.¹⁸⁵

(b) Pensions Division Concerns

[211]

The TBS’s concerns on September 11, 2000, as set out in the

memorandum, were:

1.

Loba’s advertising is misleading in that it promotes the notion that

effective, October 15^th, the federal government will no longer be negotiating

pension portability agreements. In fact, we have already negotiated a number of

agreements under our new legislative authorities and are prepared to continue to

do so with other eligible employers.

2.

We also have concerns surrounding the employee/employer relationship.

Our concern is that the agreements specifically require that only individuals who

are employees are entitled to participate. At this point I should also mention that

the RCMP, acting on a complaint, are investigation (sic) the possibility of fraud.

3.

The pension administration has advised us that they do not believe they

can cope with the number of requests they are receiving from employees

concerning the Loba agreement. Their immediate concern is that they will be

unable to provide them with the information necessary to make an informed

decision concerning what is a significant financial, as well as personal, situation.

[212]

Gravelle’s evidence in regard to the second TBS concern was that the

TBS wanted to make sure that there were no pension registration problems under

the Income Tax Act due to the absence of an employment relationship.

[213]

I accept the evidence of both Gravelle and Charko that the third TBS

concern was that, leading up to the October 15, 2000 deadline, the Compensation

Community would not be able to cope with the volume of requests for information

regarding service and salary records and the calculation of the amount available for

transfer. This was what was being referred to when the memo stated that “some

people will not receive the information they need in order to make an informed

decision within the time remaining until October 15^th”. This was not referring to

individuals not having information prior to October 15^thabout the concerns of the

TBS regarding Loba.

- 79 -

(c) Steps Taken or To Be Taken

In the memorandum Charko summarized the steps taken or

[214]

contemplated by the TBS to deal with these concerns:

Steps Taken/Continuing Issues

1.

We are currently working on a notice to employees that we believe will

correct this misinformation about the future of transfer agreements. [This had

already been issued on September 7, 2000 as an Information Bulletin: “Pension

Transfers: Old rules give way to new”¹⁸⁶] CCRA will be producing a bulletin

outlining their concerns about these small employers and we have agreed to assist

in its distribution to employees making enquiries.

2.

[Redacted portion] … We have instructed the pension administration, in

each and every case, to request detailed information to demonstrate the existence

of such a relationship. [I find this refers to an employer/employee relationship.]

Payments to the new pension plan are only made once such documentation is

provided. While the fact the RCMP is investigating is currently unsettling,

…[redacted portion]. This agreement [I find this refers to the Loba RTA.] will

remain in force until October 15^th, and provided they meet the eligibility

requirements, individuals have the right to take advantage of it.

3.

It appears highly likely that some people will not receive the information

they need in order to make an informed decision within the time remaining until

October 15^th. … [redacted portion]

4.

Media lines … were prepared about a month ago in response to an article

in the Financial Post by Jonathan Chevreau. This article was fair, with a neutral

slant …

5.

We are also considering issuing a letter to Heads of Personnel on this

situation. [Italics added]

[215]

Respecting the first paragraph, Charko’s evidence was that, in regard

to correcting any suggestion the Loba advertising campaign was leaving with

public servants that there would be no portability provisions available to them as of

October 15, 2000, the TBS issued an Information Bulletin on September 7, 2000 to

explain the new pension transfer agreements that were replacing RTAs.¹⁸⁷I find

that the CRA Information Bulletin referred to in the second sentence was the

Information Bulletin distributed to the Compensation Community within the

CRA.¹⁸⁸Despite the expressed intention of the TBS to distribute this Bulletin to

all public servants making inquiries about transferring their pension entitlement

under an RTA, this was never done.

- 80 -

[216]

In regard to the second paragraph dealing with the employment

relationship, in that half of it has been redacted, I cannot take the remaining portion

as expressing the entirety of the TBS’s planned response to the issue. Charko’s

evidence was that, as of September 11, 2000, despite the existence of the RCMP

investigation, the TBS believed that it had a valid agreement with Loba, it was

conducting sufficient due diligence through PWGSC obtaining confirmation of the

employer/employee relationship on every case, and the Treasury Board should

therefore continue with the transfers. I do not accept this as being entirely

accurate. I find that, as of September 11, 2000, the Pensions Division had decided

that the best course of action was to have the Superannuation Directorate seek

confirmation of employment and start to process the Loba transfers while the TBS

waited for feedback from the RCMP regarding the status of the criminal

investigation. The TBS knew that the Superannuation Directorate would take

several months processing the applications and would likely not be in a position to

make any payments until after the TBS had learned of the outcome of the criminal

investigation. In this way, the TBS could not be criticized for doing nothing to

implement the transfers; however, at the same time, no harm would be done if

criminal charges eventually were laid and transfers permanently suspended.

[217]

In regard to the pressures on the Superannuation Directorate to

produce service and salary records prior to the October 15^thdeadline, the TBS’s

response was to analyze the situation as to procedures and resource allocation at

PWGSC. In this regard, PWGSC issued a broadcast message to compensation

advisors on October 10, 2000 stating: “all requests for a RTA-in appendix have to

be faxed to the Superannuation Directorate to the attention of: RTA Deadline” …

no later than October 13, 2000. The name of the outside employer must be

included. …” ¹⁸⁹

[218]

I do not accept Gravelle’s evidence relating to the final paragraph that

the letter that the TBS was considering sending to Heads of Personnel “on this

situation” would deal only with the challenges faced by the Compensation

Community in handling the number of requests for information. I find that the

letter referred to would have dealt more broadly with the Treasury Board’s

concerns about certain RTAs like Loba’s. Such a letter was never circulated to the

Heads of Personnel.

Memorandum from Claydon to President of the Treasury Board October 5,

2000

- 81 -

[219]

On October 5, 2000, Claydon sent a memorandum written by

Macpherson to the President of the Treasury Board entitled “Loba Limited

Reciprocal Pension Transfer Agreement”.¹⁹⁰The purpose of the memorandum was

to alert the President to the Loba situation, and more particularly to its “extremely

aggressive” marketing of the Loba RTA. Claydon stated:

As a result of this campaign, departmental pay and benefits units, the pension

administration and officers in the Pensions Division have been receiving daily

enquiries from individuals requesting information concerning their personal

situation and soliciting advice as to their most advantageous course of action. Of

course, we inform these individuals that we are not in a position to provide this

kind of advice especially considering it is such a significant life decision.

The President was asked to redirect to the Pensions Division anyone calling his

office for assistance in hastening the process of transferring funds under the Loba

RTA.

[220]

The significance of this document is that: (1) the topic of the Loba

RTA was important enough to warrant briefing the President of the Treasury

Board; (2) control of inquiries regarding the Loba RTA was retained in the

Pensions Division of the TBS; (3) the TBS was aware that there was a keen interest

in the Loba RTA within the public service; (4) public servants were calling their

compensation advisors, the Superannuation Directorate and the Pensions Division

for information concerning Loba; and (5) critical information concerning the

concerns of the TBS and CRA regarding the Loba arrangements would have been

deliverable to interested public servants through their compensation advisors, the

Superannuation Directorate and the Pensions Division at the time inquiries were

made.

General Information Regarding RTAs Available Prior to October 15, 2000

[221]

Prior to October 15, 2000, the information generally available to

public servants about the Loba RTA did not reflect the serious concerns held by

the TBS, the CRA and the RCMP.

Newspaper Articles

[222]

The July 11, 1995 Citizen published two articles referring to pension

options available to departing federal public servants. In the first entitled “PS

pension option packs big payoff. Departing workers can triple benefits under little-

- 82 -

known transfer plan”,¹⁹¹Michael Cohen (“Cohen”), an actuary and consultant with

William Mercer Ltd. and a former Director General of Pension Benefits in the

Office of the Superintendent of Financial Institutions, compared the value of a

deferred pension under the PSSA with a lump sum payout available to departing

federal public servants. In that article, Gravelle was reported as saying: “…she

knows of no reason why a self-employed person couldn’t set up an agreement for

his or her own company, although she’s never seen it done”.¹⁹²Gravelle testified

that this quote, though accurate, misrepresented what she had said. She had gone

on to caution that it was not clear that the government would approve transfers to a

one-person company because that would not necessarily reflect the goal of

promoting mobility. Treasury Board approval was discretionary and was based on

policy considerations. Gravelle did not contact the author of the Citizen article to

have this point clarified.

[223]

In the second article entitled “Surviving the Cuts. Ignoring the pension

parachute”¹⁹³, Cohen was reported as stating that use of an RTA could result in an

individual ending up with nearly three times more value than if the individual took

a lump sum cash-out of contributions and transferred that to a registered retirement

savings plan. Cohen suggested that people in their forties with many years of

pensionable service could benefit from an RTA, whereas those 50 and older

generally would do better by leaving their pension funds in the PSSP.

[224]

These were the articles that led Zeithammel, MacGillivray and Martin

to ask Parent about RTAs.

[225]

On September 30, 1997, Parent wrote an article for the Citizen entitled

“Leaving the public service? There are new options to consider”.¹⁹⁴In this article,

Parent compared the benefits available to a departing public servant depending on

whether the public servant chose a deferred pension payable at age 60, the transfer

of a commuted value to a registered retirement savings plan, or a transfer to a

company pension plan under an RTA. He concluded by stating:

If you have recently left the public service and are working for a new company,

ask your employer about transfers under an RPTA. Many large companies have

such an agreement with the public service. For terminating employees who have

become self-employed, you may want to consider a working arrangement with an

umbrella-type company that has an RPTA arrangement with the public service.

Several Ottawa-area companies offer this type of ancillary service to self-

employed consultants. Contact your financial advisor for more information.

- 83 -

CRA Question and Answer 11

In the summer and fall of 2000, Question 11 under the Frequently

[226]

Asked Questions section of the CRA website (“FAQ 11”) dealt with the IPP

situation.¹⁹⁵This document summarized CRA’s concerns about IPPs respecting

the legitimacy of the employer/employee relationship and the ability of the IPP to

meet the primary purpose test. The document raised the possibility of an IPP,

though originally registered, being subsequently de-registered due to its failure to

meet the primary purpose test.

[227]

No reference was made in this document to RTAs. No separate

Question and Answer was ever posted in regard to RTAs between the Treasury

Board and private consulting firms.

APEX Bulletin

[228]

APEX Bulletins were published by the Association of Professional

Executives of the Public Service (“APEX”). APEX is an association of executive-

level employees in the various departments and agencies of the federal

government. The APEX Bulletin of August 2000 (Vol. 16, No. 5,6)¹⁹⁶was entitled

“Pension Transfers: Old rules give way to new” and was stated as being a message

from the Pensions Division, Human Resources Branch, TBS.

[229]

The communications staff at the Pensions Division worked with

APEX to produce this bulletin which was based on a bulletin that the Pensions

Division was circulating to the Heads of Personnel in the various departments and

agencies.¹⁹⁷The APEX Bulletin explained that RTAs would soon be a thing of the

past in that approximately 300 existing RTAs would be expiring on October 15,

2000. It advised that new agreements, known simply as PTAs, could be negotiated

under 1996 amendments that had been made to the PSSA. It pointed out that one

of the main differences between RTAs and PTAs was the method of calculating

amounts to be transferred to the outside employer. With RTAs, amounts were

calculated as twice the employee’s contributions plus interest; whereas with PTAs,

the calculation was done on an actuarial basis.

[230]

The Bulletin went on to state: “Executives are further advised to bring

this situation to the attention of any staff who may be in a position to take

advantage of existing agreements.” The Bulletin closed by stating that for a listing

- 84 -

of employers having RTAs with the federal government, an interested individual

should contact the compensation advisor in that person’s department or agency.

Gravelle acknowledged that the compensation advisor would then refer to the list

of employers with RTAs in the SAM.

Compensation Advisors, Pay and Benefits Officers, Heads of HR within

Departments

[231]

In 2000, departments and agencies were charged with the

responsibility of providing employees with information concerning the features of

the PSSP.¹⁹⁸A public servant with a question about his or her pension

entitlements, including the availability of an RTA, was expected to first consult the

compensation advisor in his or her department or agency.¹⁹⁹

(a) Superannuation Administration Manual

[232]

The SAM is published by PWGSC with technical assistance, when

needed, from the Pensions Division of the TBS. The Defendant acknowledges that

the function of the SAM is to provide compensation advisors in the various

departments and agencies with information that they need in order to carry out

their responsibilities for PSSP members.²⁰⁰In this regard, the SAM acts as a

reference manual for compensation advisors.

[233]

One purpose of the SAM is to examine the roles and responsibilities

of compensation advisors in regard to the administration of the PSSA. It covers

their functions, which are identified in the SAM as being: (1) to determine

employees’ eligibilities; (2) to provide forms to employees and to coordinate their

proper completion; (3) to complete pay action forms on the basis of whether the

pay office will commence, amend, or cease deductions; and (4) to counsel

employees regarding different aspects of the superannuation plan.²⁰¹

[234]

Chapter 3.7.4 of the SAM deals with “Reciprocal Transfer

Agreements, Transfers out of the Public Service”²⁰²and was in effect in the

summer and fall of 2000.²⁰³As a first step, prior to advising a public servant that

he or she may transfer funds from the PSSA to a new employer, compensation

advisors were instructed to confirm with their Client Service Center at the

Superannuation Directorate whether an RTA with the new employer currently

existed. Gravelle acknowledged that, during the summer and fall of 2000, under

the existing procedure, compensation advisors in the various departments would be

- 85 -

calling the Superannuation Directorate and asking whether there was an RTA in

place between the Treasury Board and Loba.²⁰⁴

[235]

The SAM 3.7.4 dealing with “Reciprocal Transfer Agreements and

Transfers out of the Public Service” stated that should there be more funds

available for transfer than requested by the new employer, the employee would

receive a refund of the excess of his contributions without related interest. If a

portion of pensionable service was not accepted by the approved employer, the

contributions in respect of that period of service would be refunded to the

employee.²⁰⁵

[236]

As well, Chapter 3.8.1 of the SAM listed the RTAs that were in place

at various points in time. At all material times in the summer and fall of 2000 up

to October 15, 2000, Loba was included on that list as a company with which the

federal government had a valid RTA.²⁰⁶Gravelle acknowledged that, since Loba

was on the list, she knew in the summer and fall of 2000 that compensation

advisors would tell those making inquiries that a valid RTA did exist between the

Treasury Board and Loba.²⁰⁷In the summer and fall of 2000, the information

available to compensation advisors about an RTA between the Treasury Board and

a company was limited to what was in the SAM.²⁰⁸

(b) Special Bulletins 1998-2002

[237]

From time to time, Special Bulletins dealing with pension matters

were issued to persons in government departments, agencies or Crown

corporations involved in pension matters, such as compensation advisors.

[238]

Special Bulletin 1998-05 dated April 30, 1998 entitled

“Communications with Public Works and Government Services Canada (PWGSC)

Compensation Services Officers and Superannuation Directorate” was sent to the

Compensation Community, including compensation advisors, and was in effect

until October 15, 2000.²⁰⁹In this Special Bulletin, compensation advisors were

advised that, when researching a PSSA issue, they should consult on-line pensions

systems and help texts, the SAM, Superannuation Procedures Manuals, Bulletins,

and Directives, make use of courses offered to them and contact the Advisory

Service Network created to offer advice regarding PSSA issues. If the information

could not be found, then the compensation advisor should contact the PWGSC

Compensation Services Office serving his or her area. Compensation advisors

- 86 -

were told not to address general inquiries relating to active employees directly to

the Superannuation Directorate. Clearly compensation advisors were encouraged

to be self-sufficient and to consult, rely on and take at face value written materials

available to them.

[239]

Special Bulletin 1999-002 dated February 4, 1999 and entitled

“Cancellation of Certain Reciprocal Transfer Agreements”²¹⁰advised the

Compensation Community of the cancellation of the AMB, Cryptic Web, Lafleur,

Aubin, Terrapro and WBN RTAs. It stated that each RTA would remain in force

and effect only until such time as payments described in the agreement had been

made in respect of any individual who signed an Appendix B no later than May 19,

1999. The Compensation Community was advised that “given the opportunity for

individuals to participate under the agreement is limited, it is of utmost importance

that those individuals be advised of the deadline”.

[240]

Special Bulletin 2000-002 dated April 3, 2000 was entitled “New

Pension Transfer Agreements”.²¹¹It was not superseded or amended prior to

October 15, 2000. Its purpose was to provide compensation advisors with details

regarding the new policies relating to PTAs. After advising of the new actuarial

value method of calculation of the amount to be transferred under the terms of new

PTAs, the Bulletin provided the following information regarding existing RTAs:

2

POLICY

…

2.3

Most existing RTAs will expire on October 15, 2000, unless they are

cancelled or replaced prior to that date. Discussions, concerning new agreements,

between the Federal Government and other employers began in the fall of 1998.

2.4

If the agreement is one which will terminate on October 15, 2000,

employees should be assured that, so long as they request the transfer by signing

the necessary appendix prior to that date and forwarding it within the time

specified in that agreement, the transfer will be completed.

[241]

The Bulletin went on to advise that certain forms had to be completed

for a reciprocal transfer to occur: (1) Form 2472 - Estimate Request and

Information Release Authorization for Reciprocal Transfer Agreement Purposes,

and (2) Appendix B – Transfers to the Outside Employer. In the summer and fall

of 2000, when seeking an estimate request, the public servant in question would go

to a pay and benefits officer or a compensation advisor and ask for an estimate.

That person, along with the public servant, would complete form 2472 and submit

it to PWGSC. Once the public servant received the estimate of the funds available

- 87 -

for transfer, if the public servant wanted to proceed with a reciprocal transfer, he or

she completed Appendix B, indicating the outside pension plan to which the

pension monies should be transferred.

[242]

The Bulletin provided compensation advisors with a Notice to

Employees which they could use. That notice included the following assurance

with respect to transfers under existing RTAs:²¹²

In the past, pension funds were transferred under the terms of a Reciprocal

Transfer Agreement (RTA). Most existing RTAs will expire on October 15,

2000. If the agreement is one which will expire on October 15, 2000, as long as

you request the transfer by signing the necessary document prior to that date and

forward it within the time specified in that agreement, the transfer will be

completed.

Treasury Board Information Bulletins

(a) August 31, 2000

[243]

The Pensions Division prepared a TBS Information Bulletin dated

August 31, 2000 for circulation by Nouvet, the Chief Human Resources Officer, to

the Heads of Human Resources in government departments.²¹³The Information

Bulletin was entitled “Pension Transfers: Old rules give way to new”. The Heads

of Human Resources were advised that: “…employees should be made aware that,

unless renegotiated under the new rules and new name in the meantime, some 300

existing transfer agreements signed under the old rules will expire on October 15,

2000.” Employees were to be warned that it was likely that when existing RTAs

expired, there could be a gap in time before a new PTA was negotiated with the

federal government, and one might never be finalized with the employer. It was

noted that one of the main differences between the old RTAs and the PTAs was the

method of calculating amounts to be transferred, with the amount under the old

RTAs being twice the employee’s contributions plus interest, whereas under the

new PTAs, the calculation would be done on an actuarial basis. In the

Backgrounder annexed to the Information Bulletin it stated that “Compensation

Advisors have access to a listing of the outside employers involved in [Reciprocal

Transfer Agreements due to expire on October 15, 2000] and can provide such

information on request.” No mention was made in this Information Bulletin of any

concerns on the part of the Treasury Board, the CRA or the RCMP regarding Loba,

Loba’s pension plan or Loba’s RTA.

- 88 -

(b) September 7, 2000

On September 7, 2000, the TBS issued an identical Information

[244]

Bulletin addressed to Heads of Human Resources, Heads of Agencies, Heads of

Crown corporations and Heads of other Employers subject to the PSSA.²¹⁴No

mention was made in this Information Bulletin about any concerns on the part of

the Treasury Board, the CRA or the RCMP regarding Loba, Loba’s pension plan or

Loba’s RTA.

PWGSC Notice to Employees

(a) September 12, 2000

[245]

On September 12, 2000, PWGSC distributed to government

departments a document entitled “Pension Transfer Agreements – Notice to

Employees” for general distribution to employees.²¹⁵One purpose of this

document was to provide information on the nature of PTAs. The document

differentiated between PTAs and RTAs. The notice stated:

Eligibility

In the past, pension funds were transferred under the terms of a Reciprocal

Transfer Agreement (RTA). Most existing RTAs will expire on October 15,

2000. If the agreement is one which will expire on October 15, 2000, as long as

you request the transfer by signing the necessary document prior to that date and

forward it within the time specified in that agreement, the transfer will be

completed.

At Environment Canada, the Notice was electronically forwarded to employees by

means of the Department’s computer network.²¹⁶

(b) September 13, 2000

[246]

On September 13, 2000, PWGSC distributed via e-mail to the Heads

of Human Resources, the Heads of Agencies, the Heads of Crown Corporations,

and the Heads of other Employers subject to the PSSA a document entitled

“Pension Transfers: Old rules give way to new”, plus a Backgrounder attachment

with details concerning pension transfer agreements.²¹⁷This Bulletin was the same

as that distributed on September 7, 2000, though it was not in the format of a TBS

Information Bulletin.

- 89 -

Third Parties’ Knowledge of the Defendant’s Concerns Regarding the Loba

RTA and the Loba Pension Plan

Communications from the Pensions Division (TBS)

[247]

On October 3, 1997, Hamilton, the Assistant Secretary of the Pensions

Division of the TBS, wrote to Parent in regard to the article he had written for the

September 30, 1997 edition of the Citizen.²¹⁸In that article, Parent had referred to

the existence of several small Ottawa-area consulting companies with RTAs and to

the possibility of departing public servants who were planning to work as

consultants joining those companies so as to take advantage of the RTAs. In

addition to reminding Parent that as of 1996, by direction of the Treasury Board,

no new RTAs were being negotiated, and the Treasury Board anticipated that as of

October 15, 1997 there would be a specific legislative prohibition on their use,

Hamilton went on to warn:²¹⁹

In addition, your last paragraph proposes that self-employed individuals

take advantage of existing agreements by establishing particular working

arrangements with companies that already have pension transfer agreements with

the federal government. As a matter of longstanding policy, these agreements

have been concluded to support and facilitate ongoing mobility between two

employers. Using them only to “bonus” an individual employee who would

normally be entitled to a transfer value represents a significant departure from

their intended use. It is unlikely that Ministers of the Treasury Board, who are

responsible for establishing the terms and conditions under which the President

can enter into agreements, would support such an approach in either new or

existing agreements.

[248]

From this point forward, Gravelle and Parent had numerous telephone

conversations about their different interpretations of the options that should be

available to departing public servants in terms of pension portability. Gravelle

took the position that those transferring pension entitlements under an RTA should

not be able to access from the Superannuation Account a sum significantly greater

than what others not using an RTA could access. As well, monies transferred to

represent a departing public servant’s defined benefits under the PSSA should be

used to provide defined benefits under the new pension plan; they should not

become accessible to the individual through converting the benefits to a defined

contribution provision. Parent was of the view that those using an RTA should be

able to access the full amount allowed under the agreement and their pension

plans. In his view, the way the federal government calculated the “transfer value”

- 90 -

for defined benefits where no RTA was available was unfair to departing public

servants. As well, in his view, the limited amount available for transfer to defined

contribution plans under the Income Tax Act should not determine how much

should be available for transfer in regard to defined benefits, even if, once the

money was received, the benefits are converted to a defined contribution plan. Tax

policy should not dictate pension policy. Finally, individuals should have the right

to make their own choices about the pension option best suited to them, and to

assume control of their pension dollars, rather than relying on the plan sponsor to

provide a benefit upon retirement.²²⁰

[249]

Parent formally responded to Hamilton’s letter on October 20, 1997,

acknowledging his understanding that, even though the government would not be

entering any new RTAs, existing agreements would be honoured for a period of

three years from October 15, 1997. He added:²²¹

I believe that there is a legitimate opportunity for terminating employees who

have become self-employed to join an umbrella-type company that has an RPTA

agreement. These companies, albeit small, have established these RPTA

agreements in good faith with the intention of granting their employees the same

privilege offered to employees migrating from the public service to larger

employers. A self-employed individual is free to deliver his or her services to a

large or small organization. If there is a benefit to provide those same services as

an employee of a corporation of his or her choice, he or she has the right to elect

to do so.

[250]

Parent did not receive any response to this letter. His offer to meet

with someone at the Pensions Division was not pursued.

[251] By the end of July, 1998, Parent was aware that the TBS had serious

concerns about any transfer agreement with a company that enabled money to be

transferred from the Superannuation Account on the basis of a transfer from one

defined benefit pension plan to another defined benefit pension plan when

immediately after the transfer the receiving plan was amended to allow for a

defined contribution component.²²²Therefore he knew that any such provision in

the Loba pension plan would raise policy concerns with the TBS.

[252]

On July 31, 1998, Gravelle wrote to Parent at WBP to express the

concerns of the TBS about how the Cryptic Web pension plan dealt with “past

service”. Parent had previously advised Gravelle that the past service benefits

represented the maximum defined benefit allowed under the Income Tax Act. The

- 91 -

Cryptic Web plan stated that the company would amend the plan to provide what

benefits would be provided with the funds transferred in respect of a member under

the RTA; however, the TBS had not been provided with a copy of that plan

amendment. Gravelle reminded Parent that the expectation of the Treasury Board

was that funds transferred in order to provide a defined benefit in respect of past

service would, in fact, be used for that purpose.

[253]

On August 18, 1998, Gravelle wrote Parent at WBP in regard to

Treasury Board concerns about the treatment of “past service” transferred under

the terms of the AMB RTA.²²³She alerted Parent that the Treasury Board had

always expected when negotiating an RTA that funds transferred in order to

provide a defined benefit in respect of past service would in fact be used for that

purpose. She also questioned how WBP had calculated the value of the defined

benefit component of the AMB pension plan relating to past service. It seemed to

require twice as much money as what was available under the PSSA and yet the

PSSA provided benefits generally recognized as being very generous. Gravelle

warned Parent that the Treasury Board would be asking similar questions with

respect to any other RTAs that raised the same concerns.

[254]

On November 26, 1998, Gravelle wrote Parent advising that the

Treasury Board was cancelling any RTAs where the receiving pension plan had

both defined benefit and defined contribution features. She advised that, pending

confirmation from the CRA that plan amendments submitted by WBP in regard to

its clients had not altered the registration status of the affected pension plans, no

transfers would be made to those plans under the RTAs.

[255]

On February 4, 1999, PWGSC issued the SAM Special Bulletin:

1999-002, entitled “Cancellation of Certain Reciprocal Transfer Agreements”,

advising of the cancellation of the AMB, Cryptic Web, Lafleur, Aubin, Terrapro

and WBN RTAs. This document came to the immediate attention of Parent as the

actuary for all of these pension plans and through WBP as the third party

administrator of these plans.

[256]

On April 1, 1999, Gravelle sent a standard letter to all companies,

including Loba, with which the Treasury Board had an RTA, advising them of the

expiration of existing RTAs on October 15, 2000 unless they were earlier cancelled

or replaced.²²⁴Some of the differences between the old RTAs and the new PTAs

were highlighted; but it was noted that the same principles informed both. One

- 92 -

was “to ensure that funds accrued for the purpose of providing a pension benefit

retain that ‘pension’ character on transfer.”

[257]

On May 18, 2000, Soucoup of the Superannuation Directorate wrote

to Martin as President of Loba in regard to three individuals²²⁵who had submitted

an Appendix B under the Loba RTA.²²⁶The letter was forwarded to Parent (for

Syglam), the new owner of Loba. The letter stated:

As you are no doubt aware the existence of an employee/employer relationship is

a critical pre-condition to transferring funds under a pension transfer agreement.

Therefore, in order to determine employee transfer eligibility we are requesting

the following information:

1.

2.

Copy of employment contract for each of these individuals.

Confirmation that in each instance the employment contract or

employment relationship with Loba Limited is still in effect; and

3. Provide a list or description of the work that was performed under the

contract.”

[258]

On June 2, 2000, Touchette responded on behalf of Loba, confirming

that employment continued for the individuals in question and stipulating the

nature of the work being performed by the individuals.²²⁷Copies of their

employment agreements with Loba were also enclosed. Touchette confirmed that

WBP would be forwarding copies of such employment agreements along with any

request for a transfer under the Loba RTA.

[259]

In June 2000, Parent also became aware through Todd that Soucoup

was sending to anyone applying for a transfer under the Loba RTA a letter

advising that “the existence of an employee/employer relationship is a critical pre-

condition to transferring funds under a pension transfer agreement”.²²⁸The

individual was asked to provide the Superannuation Directorate with the same

information and documentation requested of Loba in the May 18, 2000 letter.

Parent assisted Todd in responding to this letter.²²⁹Soucoup followed up on July

6, 2000 with a request for clarification as to whether Todd was being paid by the

third party with whom Loba had a contract for Todd’s services or directly by

Loba.²³⁰On July 11, 2000, Todd responded that he was paid directly by Loba.²³¹

[260]

In a June 15, 2000 letter to Touchette at Loba, Gravelle set out the

Pensions Division’s concerns regarding Loba and the Loba RTA and asked him to

forward the letter to the new President of Loba.²³²The letter stated:

- 93 -

Loba Limited should be aware that the Pensions Division and the

Superannuation Directorate of Public Works and Government Services Canada, in

our respective capacities as pension plan sponsor and prudent plan administrator,

and driven by the interest of all plan members, have some significant concerns

about amendments to Loba’s pension plan. These amendments seem to provide

the opportunity for employees using this transfer agreement to be “unfairly

advantaged” in relation to other employees ceasing their coverage under the

Public Service Superannuation Act (PSSA). Concerns over similar provisions in

a number of other pension plans led the President of the Treasury Board to invoke

the cancellation clause in the agreements with those plan sponsors. As a result I

have asked the Superannuation Directorate to withhold all payments under the

agreement and to document, in each case, the individual’s relationship with Loba

Limited. If the Directorate has not already contacted you they will have questions

around the “employee/employer” relationship and the nature of the work each

individual was performing.

Finally, you should know that we are somewhat confused about Loba

Limited itself, given the information that is readily available on a number of

websites and in newspaper advertisements. Could you please clarify what the

nature of the company is, what services you provide and to whom? We would

particularly appreciate any comments you might wish to offer on the relationship

between Loba Limited and other organizations, including AMB Inc. and

KomoKoa Corporation. In light of the recent sale, can we still conclude that Loba

Limited is an independent company?

In closing, I would like to reiterate that we will not issue any payments

until we are satisfied that the terms of the agreement and its underlying principles

are being honoured. I am looking forward to Loba’s response.

[261]

Parent was not surprised that transfers under the Loba RTA had been

put on hold because transfers under AMB and Cryptic Web had been put on hold a

number of times. He expected the Pensions Division to look closely at the

employment relationship between Loba and its workers, as it had done with

Cryptic Web and AMB. Nevertheless, in a June 20, 2000 letter to Gravelle on

Loba letterhead, Parent strongly objected to the steps being taken by Treasury

Board in regard to the Loba RTA and he questioned what right the federal Crown

had to suspend transfers under the Loba RTA.²³³He noted that Loba’s relationship

with the federal Crown was governed, in its entirety, by the Loba RTA. He

reiterated his understanding that an employer/employee relationship had to exist

between Loba and the transferring public servants. He pointed out that Loba had

provided all of the information and documentation requested by the

Superannuation Directorate regarding each transferee’s employment status. He

questioned the right of the TBS to have information concerning Loba’s relationship

- 94 -

with AMB or Komokoa, as such information was not required under the Loba

RTA. He requested that a new PTA for Loba be put into place to replace the Loba

RTA. Finally he stated:

In closing, I urge you to respect the terms of the RTA and make the payments that

it requires. Your actions have caused distress to current employees, grave

concern to prospective employees and may cause economic harm to the

Company. I am anxious to see that the legitimate expectations of transferees, and

their rights under the RTA, are respected.

[262]

Gravelle, surprised by the tone of Parent’s letter, did not respond until

July 4, 2000, when she simply stated: “We are still in the process of completing

our investigation and I will write to you again, once it has been concluded.”²³⁴

Between June and August Parent called Gravelle on a few occasions to inquire of

the status of the transfers. I accept Parent’s evidence that he assumed that the next

time he heard from Gravelle the Treasury Board investigation would have been

concluded. Gravelle acknowledged that this was a fair inference on his part.

[263]

On August 22, 2000, in response to his letter of June 20, 2000,

Gravelle sent Parent an e-mail stating:²³⁵

Following further discussion with our legal advisor, we have asked the

Superannuation Directorate to contact each individual who has requested a

transfer under the pension transfer agreement between the federal government and

Loba Limited, regarding his or her employment situation. We have advised the

Directorate to proceed with payment in any case upon receipt of the necessary

information from the individual.

[264]

Parent responded on the same date asking Gravelle if the Pensions

Division would be following up with him shortly in respect of his earlier request to

establish a PTA. Parent never heard back from Gravelle in regard to a PTA.

[265]

As of this time, Parent was aware that the Superannuation Directorate

had copies of the standard form employment agreements in respect to at least four

individuals who had submitted an Appendix B to the Treasury Board, information

regarding the work performed by those individuals on behalf of Loba, and

confirmation that Loba (not a third party) was paying the individuals directly. The

relationship Loba had established and was planning to establish with all of those

joining Loba pursuant to the Loba RTA was the same. I accept Parent’s evidence

that, upon receipt of Gravelle’s August 22^nde-mail, he believed that the legal

- 95 -

hurdle of establishing a valid employment relationship for all departing public

servants joining Loba had been met as of that date.

[266]

This view was reinforced when Parent was given a copy of an e-mail

Gravelle had sent to Karen Bryden (“Bryden”) on September 19, 2000 in response

to Bryden’s request for advice on September 11, 2000 “regarding the safety of

transferring my pension” to the Loba pension plan under the Loba RTA. Gravelle

responded to Bryden:²³⁶

The pension plan for Loba is subject to the normal regulatory requirements of any

pension plan operating in Ontario, namely the Pension Benefits Act of Ontario

and the federal Income Tax Act. My understanding is that the Loba

arrangements meet the requirements of these pieces of legislation.

The federal government had a number of pension transfer agreements with other

employers that operated plans similar to that provided by Loba. We cancelled

those other agreements, not because of concern about the legality of the

transactions they were permitting, but on policy grounds. The Loba agreement

was not cancelled at that time because we were not aware that it contained the

particular provision that we were concerned with, - namely the treatment of PSSA

funds once they were transferred to the Loba plan. Our view is that funds

contributed and accumulated for the purpose of providing pension benefits should

maintain that “pension character” i.e. they should continue to be used for that

purpose and should not be subsequently available to the individual and the new

employer as cash.

Obviously we here in the Pensions Division are not in favour of the arrangement

now being promoted for employees who move to Loba, but the agreement

between us is still in place, and as long as the individual meets the eligibility

requirements of the agreement, transfers will be processed. [Emphasis added.]

[267]

I accept the evidence of Zeithammel and Burnside that, when they

saw this response from Gravelle, they, as well as Parent, understood that this was a

reassurance that the transfers to Loba would go through in a routine fashion.

[268]

On September 29, 2000, Charko wrote WBP to voice his concern

about the series of advertisements in the Hill Times and the www.october15

website. He stated:²³⁷

In this regard my primary concern with your advertising campaign is that

it deflects the focus away from the primary issue, an individual’s decision to

change employment from the federal government to your company Loba Limited,

to what is in my view a secondary issue, what happens to their pension as a result

of making such a decision. As you know, the purpose of pension portability

- 96 -

agreements is to facilitate the transfer of employees between the federal

government and eligible public and private sector employers. These agreements

are not designed to encourage individuals to leave their employment for the sole

purpose of gaining access to their pension funds.

Charko’s second concern was that Loba’s advertisements ignored the fact that

portability of pensions would continue after October 15, 2000 in the form of PTAs.

Charko basically told Parent to ensure that in his discussions with departing public

servants regarding Loba, Parent educated them concerning the purpose and design

of RTAs.

[269]

Parent, as President and actuary of WBP, responded on November 16,

2000 – well after the October 15^thdeadline – confirming his understanding that the

primary issue was an individual’s decision to change employment, that

advertisements regarding Loba were aimed only at those considering leaving or

retiring from the Public Service or a Crown corporation, that interested people

were told not to leave their employment because of the RTA, and that new transfer

agreements would be introduced to replace RTAs.²³⁸

- 97 -

Communications from Registered Plans Division (CRA)

[270]

On August 28, 2000, Parent was told by Zeithammel that certain of

the Toronto auditors who were interested in the Loba RTA had contacted Godwin

at the CRA for his opinion regarding the Loba RTA. Zeithammel advised Parent

that Godwin would be preparing a communiqué regarding the Loba RTA similar to

a communiqué that Godwin had published on the CRA website regarding IPPs.

That communiqué raised concerns as to whether the IPPs in question met the

“primary purpose test” under the Income Tax Act. Zeithammel asked Parent if he

was sure that the Loba pension plan would pass the primary purpose test.

Zeithammel went on to state in regard to the message he had received from the

Toronto auditor:²³⁹

He essentially stressed that we have to have a strong employer-employee

relationship (which we know) and must have the guys pay in line with their

Government pay (which we know). He did say that under the act they only can

deal with problems by de-registering the plan, however negotiations can take

place (which you know).

[271]

On approximately September 23, 2000, WBP received a very

important package of documents from Godwin.²⁴⁰That package included: (1) a

letter from Godwin to Parent dated September 15, 2000 advising that the package

had been sent to Cryptic Web, Loba, AMB and Lafleur; (2) a copy of a letter from

Godwin to each company dated September 15, 2000; and (3) an Information Sheet

regarding CRA concerns prepared for departing public servants considering joining

one of these companies. The letter to the companies and the attached information

sheet were admitted to prove the truth of their contents. The letter read:

This letter is in response to advertisements encouraging federal public employees

to terminate from the public service and join certain consulting firms, in part to

take advantage of RTAs (RTAs) between them and the Federal Government. The

RTA allows the employees to transfer the full value of their pension benefits

under the Public Service Superannuation Act (OSSA) to the consulting firm’s

registered pension plan. I am writing to you because your company sponsors a

plan that may have such an agreement with the Federal Government.

The Canada Customs and Revenue Agency (CCRA) has granted registration to

plans to which retired public servants can transfer their public pension entitlement

pursuant to this proposal. The terms of these plans satisfy our requirements for

registration. This is not to say that the CCRA does not have concerns about the

arrangements. Our concerns are outlined on the attached information sheet. I

- 98 -

would appreciate it if you would provide this information to those who may be

considering this option, so they will be in a position to make informed decisions.

I thank you in advance for your cooperation. Should you have any questions or

require additional information, please do not hesitate to contact me.

[272]

The Information Sheet, which was similar to the draft information

sheet Godwin had sent to D’Aurelio on August 31, 2000,²⁴¹read:

You should be aware that the Canada Customs and Revenue Agency may have

some concerns with the type of arrangement you are considering with respect to

the impact it may have on your pension benefits. These concerns are outlined

below.

Employee – Employer Relationship

In order to obtain and maintain registered status, a pension plan must have as its

primary purpose the provision of lifetime retirement benefits to individuals in

respect of their service as employees. Canada Customs and Revenue Agency

calls this the “Primary Purpose Rule”.

One consideration raised by the primary purpose rule is that there must be a

legitimate employer-employee relationship between the plan member and the plan

sponsor. Whether there is such a relationship is a question of fact. If there is no

such relationship the plan’s registration is jeopardized.

Working on a contract basis could call into question the existence of an

employee-employer relationship. Where it becomes apparent that even one

member of the plan does not have a legitimate employer-employee relationship,

registration of the Plan can be revoked.

Earnings level

The benefit promise in a defined benefit (DB) pension plan is generally comprised

of three (3) factors:

1.

2.

3.

a specified benefit accrual rate

earnings

years of service

Example: 2% x final average Earnings (best 3 years) x Service

Although a plan may recognize the Service rendered to a prior employer under

another RPP, the same is not true of Earnings.

- 99 -

The Earnings which may be used in the formula must be earnings received from

an employer who participates in the plan from which the benefit will actually be

paid. In the circumstances at hand, the federal public service is not a participating

employer in the private RPP. Only the private sector corporation is the

participating employer.

Accordingly, in calculating the benefit which a member will accrue under the

private RPP, he may only use earnings figures which reflect his remuneration

from the private corporation.

A member’s benefit for all years of service (public and private sector) will be

calculated using his private sector earnings. If his earnings while a member of the

private RPP are lower than the earnings he received as a public servant, his

benefit will also be lower.

Impact of lower benefit

It is important to recognize that in a DB plan, there is a pooling of assets and

liabilities. All funds coming into the plan are available for all liabilities payable

from the plan. It is possible that the amount transferred in by the member will

exceed the value of the private plan benefit he accrues. In such a case, the excess

amount originating from his transfer in is no longer associated with his promised

lifetime retirement benefit under the private RPP.

This factor will be relevant on any subsequent transfer of the member’s benefit to

his RRSP or any other deferred income plan. In effecting such a transfer, the

available transfer amount will be calculated based upon the lower benefit accrued

under the private plan.

[273]

Parent understood from these documents that the CRA was concerned

that: (1) there was no true employment relationship between Loba and those

departing public servants joining Loba; and (2) the federal Crown would not be

considered a “participating employer” in the Loba pension plan for the purpose of

calculating an individual’s earnings – one factor used to determine the benefits to

which an individual would be entitled under the Loba pension plan.

[274]

Parent’s evidence was that he was aware of the requirement for an

employment relationship, but after receiving Gravelle’s August 22, 2000 e-mail, he

believed that Loba had satisfied Treasury Board that an employment relationship

existed. I accept this evidence and find that Parent did not appreciate that,

- 100 -

although Treasury Board might be satisfied that an employment relationship

existed, the CRA might not be so satisfied.

[275]

According to Parent, before receipt of Godwin’s letter, he had not

been aware of the provisions in the Income Tax Act and Regulations that would

result in the federal Crown not being considered a “participating employer” for the

purpose of calculating the defined benefits to which a Loba pension plan member

would be entitled. He had done all calculations in regard to the AMB, Cryptic

Web and Loba plans as if the federal Crown was a participating employer for this

purpose. Parent had been consulting his own taxation advisors in regard to

concerns raised by the CRA respecting IPPs, and he sought further advice about

the earnings issue. After receiving this advice, he concluded that the second

concern of the CRA was misplaced for three reasons. First, in his view, the federal

Crown was a participating employer because it was the Crown, and not a trustee,

that paid the transfer amount into the Loba pension plan. Secondly, even if the

Crown were not considered a participating employer, as long as the Loba pension

plan created a defined benefit plan for pensionable service at Loba, an individual’s

earnings while at Loba could be annualized for the purpose of calculating the

earnings factor in a defined benefit formula. Thirdly, the Loba pension plan could

be amended at any time to convert the defined contribution to a defined benefit

provision. Minimizing the significance of Godwin’s letter was an error in

judgment on Parent’s part.

[276]

Godwin testified that he contacted Parent prior to September 23, 2000

to discuss the CRA’s concerns about the Loba pension plan. Parent has no

memory of this, and there is no reference in any of the documentary evidence to

any such conversation. Parent acknowledged that after he received Godwin’s

September 15, 2000 letter, there were ongoing discussions between Parent’s legal

advisors and Godwin. I find it more likely that any conversations between Godwin

and Parent or his advisors occurred after Parent received the September 15^thletter.

[277]

On October 11, 2000, Parent received a copy of Godwin’s September

7, 2000 letter to Gravelle from a prospective Loba employee, Eric Shipley

(“Shipley”).²⁴²

[278]

Parent did not share either of Godwin’s letters with any of the

Plaintiffs or with Dufour.

Communications from Non-Government Sources

- 101 -

[279]

In August, 2000, Parent sought an opinion from a taxation lawyer,

Marcel Théroux (“Théroux”), regarding the extent to which the concerns in regard

to IPPs raised by the Registered Plans Division of the CRA, as expressed in FAQ

11, would also apply to the Loba pension plan. Théroux advised:

The RPD position is stated as a reply to question 11 of its Frequently Asked

Questions currently posted at the CRA web site. This position was first stated in a

letter to various plan administrators in the middle part of 2000.

The letter deals with transfers from group registered pension plans (RPPs) to

individual RPPs (IPPs). It is likely that the policy in this letter would also apply

to other transfers.

The letter deals with paragraph 8502(a) of the Income Tax Regulations which

states that, as a condition of registration, the primary purpose of the plan must be

to “provide periodic payments to individuals after retirement and until death in

respect of their service as employees.”

In the view of the Division, the primary purpose would not be satisfied if one of

two conditions were not met. The first is that there must be a bona fide employer-

employee relationship between the individual on whose behalf monies are

transferred to an RPP and the sponsor of the RPP. This is the position that has

always been taken with respect to transfers to the Loba RPP.

The second condition is that the transferring employee receive more than nominal

earnings from the new employer. In an IPP context, nominal earnings would

result in a large surplus, the existence of which would indicate that the primary

purpose was the avoidance of the transfer rules in the Income Tax Act.

Presumably, nominal earnings would also tend to undermine the bona fide nature

of the employment relationship. In any event, it is likely that this “nominal

earnings” test would be maintained in respect of transfers to group RPPs, as well.

This second condition is perhaps defensible in the context of IPP transfers. It is

much less so, however, in transfers to group RPPs. Nevertheless, nominal

earnings with the new employer should be avoided. If fairly substantial earnings

are paid by the new employer, the RPD’s policy will be fully satisfied.

[280]

On August 31, 2000, Parent summarized his understanding of the

concerns of CRA regarding the Loba RTA as follows:

1.

There has to be a bona fide employee-employer relationship. i.e. If an

individual is willing to join Loba and accepts the fact that Loba will profit from

his/her effort to provide services, the individual is in fact working for Loba.

- 102 -

2.

As we have always mentioned, earnings must be closely correlated to

earnings prior to joining Loba. For this purpose, what is material is the rate of

pay at which services are performed, not the total earnings. For instance if an

individual works for Loba half the time during a year, total compensation from

Loba should relate to half a year compensation prior to joining Loba.

[281]

As a result of the questions raised by the CRA auditors to Zeithammel

and the concerns raised in Godwin’s letter to Parent dated September 15, 2000,

Loba obtained a formal legal opinion from Charles Rotenberg (“Rotenberg”), a

taxation expert. In a letter dated October 4, 2000, Rotenberg provided the

following opinion after having reviewed the Loba RTA, pension plan and

employment agreement:²⁴³

1.

the [Loba RTA] is a valid agreement and allows an employee of Loba to

cause his or her pension entitlement, upon leaving the Federal public service, to

be transferred to the Loba Pension Plan;

2.

upon the execution of the Employment Agreement and the fulfilment of

the obligations set out therein, the Employee will be considered to be a

commission employee of Loba for the purposes of the Loba Pension Plan; and

3.

upon execution of the Employment Agreement … and the fulfilment of

the obligations set out therein, the Employee will be considered to be a

commission employee of Loba for the purposes of the Income Tax Act.

[282]

[283]

Rotenberg also advised:

It is necessary for the purposes of the Loba Pension Plan and the [Loba RTA] that

the Employees truly be considered to be employees. For income tax purposes,

there are a number of tests which the courts will look at, none of which,

individually, are sufficient to determine the status of an individual. The courts

will look at all of the circumstances on an overall basis. The Canada Customs and

Revenue Agency (“Revenue Canada”) has a strong bias toward the finding of the

tax status of an individual to be that of “employee”.

Zeithammel had attended the meeting on behalf of Loba.

Unfortunately, he did not provide Rotenberg with the September 15, 2000 letter

from Godwin setting out the concerns of the CRA.

[284]

In summary, as of October 15, 2000, Parent had two legal opinions

which supported the conclusion that the Loba RTA was a valid agreement that was

legally binding on the federal Crown, that Loba workers would be considered

employees for purposes of the Income Tax Act and the Loba pension plan, and that,

- 103 -

as long as Loba employees were receiving fairly substantial earnings, the primary

purpose test under the Income Tax Act should be met.

- 104 -

Communications from RCMP

Before February 1, 2001, Parent was unaware that the RCMP was

[285]

investigating AMB, Zeithammel, Cryptic Web, MacGillivray, Loba and himself in

regard to allegations of fraud. Nevertheless, by February 2001, Parent was aware

that the RCMP was asking questions about WBP and that it possibly could be

looking into Loba. I accept the evidence of Parent, Zeithammel and Jemus that,

when they were recruiting public servants to join Loba in the summer and fall of

2000, they honestly believed that the Loba arrangement was a legitimate business

opportunity. They had no reason to believe that anything they were doing was

fraudulent or unlawful.

Information Provided to the Plaintiffs by Parent Prior to October 15, 2000

Standard Presentation

[286]

Parent’s evidence was that, during the AMB and Cryptic Web

recruiting campaigns, he developed a standard presentation for interested

individuals. According to Parent, by the time of the Loba recruitment campaign,

the standard presentation included: (1) a history of RTAs; (2) an analysis of the

individual’s figures; and (3) a discussion of the employment relationship the

individual would have with Loba. Parent acknowledged that each presentation was

slightly different, but all would have covered these three topics. Parent was

confident that he told all individuals not to quit their job with the federal public

service to join Loba unless they were already planning to leave the public service

or retire in the near future.²⁴⁴Burnside testified that, at the five meetings she

attended with Parent and prospective Loba workers, Parent covered these topics. I

note that Burnside did not recall meeting with any of the Plaintiffs.

[287]

According to Parent, he told all individuals about the need for them to

have an employment relationship with Loba and that the existence of such a

relationship was subject to verification. More specifically, he testified that,

starting in the summer of 2000, he told each prospective employee that the

Treasury Board would not transfer any funds in regard to that individual until it

had assured itself that a valid employer/employee relationship existed with Loba.

To this end, the individual was advised to expect a letter from the Superannuation

Directorate seeking confirmation of employment. Parent’s evidence was that he

warned all individuals that they would have to find their own contract work; there

would be no guaranteed income when they were working for Loba.

- 105 -

[288]

Parent and Burnside both testified that Parent’s standard practice was

to provide each individual with a package of documents which normally included

copies of the following: (1) Citizen article dated July 11, 1995 entitled “PS pension

option packs big payoff”; (2) Citizen article dated July 11, 1995 entitled “Ignoring

the pension parachute”; (3) Citizen article dated September 30, 1997 written by

Parent entitled “Leaving the public service? There are new options to consider”;

(4) October 3, 1997 letter from Hamilton to Parent; (5) October 20, 1997 letter

from Parent to Hamilton; (6) SAM Special Bulletin: 1999-002 regarding the

cancellation of six RTAs; and, after August 22, 2000, (7) the August 22, 2000 e-

mail from Gravelle to Parent.²⁴⁵Parent had no recollection as to whether he

provided each of these documents to each Plaintiff. More will be said shortly

about each Plaintiff’s recollection of the package he or she received.

[289]

Zeithammel testified that at the meetings he attended between Parent

and prospective employees of Loba, certain topics were regularly discussed. The

individuals were told that they had to be employees of Loba. They would do the

work, Loba would be paid for the work and Loba would then pay the individual a

salary and benefits. Parent presented on a white board the individual’s options

under the PSSA and under the Loba pension plan and how money would be

transferred from one to the other if the individual joined Loba. Zeithammel

recalled that most prospective employees left the meeting with a print-out from the

white board, a sample employment agreement and, after August 22, 2000, a copy

of Gravelle’s e-mail saying that transfers were being processed.

[290]

The RCMP, with the assistance and cooperation of the Treasury

Board and the Superannuation Directorate,²⁴⁶arranged for two undercover officers

to present themselves as public servants who might be interested in joining Loba.

Initially, both undercover officers contacted Zeithammel through Komokoa. For

each, Zeithammel arranged an interview with himself and Parent on October 10,

2000 at the offices of Loba and WBP. Unbeknownst to Parent and Zeithammel,

both undercover officers taped their interviews pursuant to a wiretap authorization.

The audiotapes from the wiretaps were admitted into evidence to prove the

existence and nature of a standard presentation Parent gave to prospective

employees of Loba.²⁴⁷The Defendant asked the Court to infer that Parent provided

the same information and documentation to each of the Plaintiffs that he provided

to the two undercover officers during their interviews. Parent’s evidence was that

the information and documentation provided to the two undercover officers during

- 106 -

separate interviews with him on October 10, 2000 represented the standard

presentation he gave to public servants interested in the Loba arrangement.²⁴⁸

[291]

In his interviews with the undercover officers, Parent identified

himself as being the President of Loba, the actuary at WBP who had set up the

RTA, the head of WBP, and Loba’s actuary. Although he said that he was Loba,

he stopped short of saying who currently owned Loba. He explained the

individual’s pension options under the PSSA if he or she left employment before or

after October 15, 2000, and he reviewed his calculations in this regard. He

highlighted that a transfer under the Loba RTA could amount to two times

contributions plus interest, but the transfer could take six to eighteen months. He

emphasized that the individual had to resign from the public service before

October 15, 2000 to take advantage of the Loba RTA. He reviewed the process

that had to be followed in terms of the paperwork and communications between the

individual, Loba, WBP and the government. He described the pension benefits to

which the individual would be entitled under the Loba pension plan, including the

92.5% guaranteed return. Parent reviewed the history of RTAs, and more

particularly those of AMB, Cryptic Web and Loba. He mentioned that the

Treasury Board had had concerns about these three RTAs – particularly in regard

to the existence of a bona fide employer/employee relationship. He recounted to

the female officer how the Treasury Board had placed a hold on transfers and to

the male officer how Treasury Board had placed transfers under review while the

Treasury Board conducted an investigation into the employment relationship.

Parent ended his brief discussion of Treasury Board concerns by showing both

officers Gravelle’s August 22^nde-mail saying that transfers would be processed

upon receipt of confirmation of employment.

[292]

Parent emphasized that the key to the whole arrangement was an

employment relationship between Loba and its workers. He warned that each

employee was responsible to find his or her own work, that payment for that work

would be made to Loba, and Loba would then pay the employee 80% of what he or

she brought into the firm as revenues. He recommended that the individual find as

much work as possible and put all of that work through Loba to support the

existence of an employment relationship. Parent reminded the undercover officers

that working as a commissioned employee was not for everyone; many preferred

the security of full-time work with the public service. He also said very clearly

that no one should leave his or her public service job to take advantage of the Loba

RTA unless the individual was considering leaving in any event. Parent

- 107 -

specifically advised the female undercover officer: “… it is not my intention to

encourage you to leave the public service. So that’s not the point. I don’t want

you to leave. But if you were leaving anyway, or kind of leaning that way anyway

… there may be a difference between leaving before the 15^thas opposed to after

the 15^th.” He said virtually the same thing to the male undercover officer.

[293]

Both undercover officers received copies of the following documents

during their interview with Parent and Zeithammel: (1) three Citizen articles, (2)

October 3, 1997 letter from Hamilton to Parent, (3) October 27, 1997 letter from

Parent to Hamilton, (4) SAM Special Bulletin 1999-002, (5) August 22, 2000 e-

mail from Gravelle to Parent, (6) white board calculations, (7) draft employment

agreement, (8) Transfer Adjustment Calculator, (9) Employment Recruitment

Incentive Program offer, (10) Pension Transfer Administration Agreement, (11)

draft invoice, (12) Application for Employment, (13) Appendix B, (14)

Application for Membership in the Loba pension plan, (15) Reciprocal Pension

Transfer Agreement, and (16) the Loba RTA.²⁴⁹

[294]

The Defendant submits that the evidence of Parent, Zeithammel and

Burnside, coupled with the audiotapes of the two undercover officers’ interviews,

should carry more weight than that of the individual Plaintiffs regarding what

Parent told the Plaintiffs and what documentation the Plaintiffs were provided.

The Defendant points to inconsistencies within each Plaintiff’s testimony,

contradictions between the evidence of the Plaintiffs and the Third Parties, and the

self-serving nature of the Plaintiffs’ testimony as reasons to prefer the evidence of

the Third Parties to that of the Plaintiffs.

[295]

In terms of the self-serving nature of the evidence, that can be said as

much of the Third Parties’ evidence as it can of the Plaintiffs’ evidence. As to who

would likely recall what information and documentation was provided during a

Plaintiff’s meeting with Parent, I consider it more likely that the Plaintiff would be

more attuned to what he or she was provided than Parent. The Plaintiff was

acutely interested in getting sufficient information to make an informed decision.

Parent saw 12 to 15 people a day, and readily admitted he could not remember the

specifics of any meetings. He had no specific recollection of the meetings he

conducted with the Plaintiffs and made no notes of those meetings. Parent

deferred to the Plaintiffs’ recollection of the meetings. Zeithammel did not deal

with any of the Plaintiffs, and Burnside could not recall meeting with any of them.

- 108 -

[296]

For several reasons, the audiotapes of the undercover officers’

interviews with Parent are of limited probative value in establishing the

information and documentation that was provided to the Plaintiffs prior to their

joining Loba. None of the Plaintiffs was recruited through Zeithammel or

Komokoa. As far as Zeithammel recalled, he had never had any contact

whatsoever with any of the Plaintiffs. Zeithammel played a significant role in the

interviews conducted with the undercover officers and therefore impacted on the

tone and content of those interviews. The role-playing of the officers also

impacted significantly on how the interviews unfolded, with the male undercover

officer being particularly pushy and the female undercover officer interrupting

Parent continually. The purpose of the undercover officers’ interviews, from their

perspective, was to gather evidence for a criminal prosecution against Parent,

Zeithammel and others. The purpose of the Plaintiffs’ interviews with Parent,

from their perspective, was to collect relevant information for their decision

whether or not to join Loba. The undercover assignment was the first one

involving commercial crime that either undercover officer had done. The quality

of the audiotapes is poor. Many words or phrases are indecipherable. The

undercover officers were not certain who was speaking at certain points. It is not

clear from the evidence the extent to which Parent was actively participating in

certain aspects of the interviews.

[297]

I find that, although usually certain core topics were discussed in the

meetings with prospective Loba employees and Parent, no two meetings were

exactly the same. Differences were created due to the background of the

individuals, their financial knowledge, their work history, their individual

personalities and style, the questions asked, the reasons for their interest in Loba

and their goals for the future. Parent had limited time to see each prospective

employee; in the last few weeks before the deadline he was seeing 12 to 15

individuals a day. What he would cover would depend on how quickly he could

work through the material and how many questions the individual asked. I also

find that differences occurred depending on when the interview with Parent

occurred – whether it was earlier in the summer, or whether it was during the week

prior to October 15^th. It is clear from the evidence that the presentation and

provision of documentation was a work in progress that evolved over time.

[298]

Specific findings as to what Parent told each of the Plaintiffs will be

considered under their separate headings.

- 109 -

Parent’s Communication of Government Concerns

[299]

Parent told some of the Plaintiffs about the concerns which the TBS

had about aspects of the Loba arrangements – generally through providing them

with copies of his correspondence with Hamilton. However, he did not fully

explain to all of the Plaintiffs the history of communications between himself and

Hamilton or Gravelle in which the TBS’s concerns were explained and debated.

For example, Parent did not tell the Plaintiffs that the TBS had a problem with the

combination of defined benefit and defined contribution features in the Loba

pension plan.²⁵⁰

[300]

Parent’s evidence was that, when he was conducting interviews with

the Plaintiffs prior to October 15, 2000, he believed that: (1) Loba had a valid RTA

with the Treasury Board; (2) the Loba pension plan was a validly registered

pension plan under the Income Tax Act; and (3) the arrangements that he had put

into effect incorporating the Loba RTA, the Loba pension plan and the Loba

employment agreement with Loba employees was a legitimate arrangement. He

fully expected the transfers to proceed under the Loba RTA. This was the message

that he intended to convey to the Plaintiffs.

[301]

Parent’s evidence was inconsistent as to whether between June 15,

2000 and August 22, 2000 he told potential Loba workers about the hold on

transfers imposed by the TBS. Parent stated that he was not surprised when he

received Gravelle’s June 15, 2000 letter advising that all payments under the Loba

RTA were on hold because the Treasury Board had done the same thing with AMB

and Cryptic Web. Nevertheless, initially he had not warned the early applicants,

Todd, McGee or St. Arnaud, that there might be a suspension. At one point Parent

testified that between June 15^thand August 22^ndhe would have told individuals,

such as Nobert and Dufour, that payments under the Loba RTA were on hold

pending further discussions with the Treasury Board but that due to his experience

with AMB and Cryptic Web he expected the hold would be lifted.²⁵¹At another

point, Parent testified that he definitely did disclose this information to the public

servants to whom he spoke between June 15^thand August 22^nd. Elsewhere, Parent

acknowledged that he could not recall specifically advising individuals about the

hold. He stated that he was confident that the hold would be lifted, as earlier holds

relating to AMB and Cryptic Web had been, and he wanted to give departing

public servants a level of comfort with the arrangements. I am unable to find that

between June 15, 2000 and August 22, 2000, Parent systematically told

- 110 -

prospective Loba employees that payments to the Loba pension plan under the

Loba RTA were on hold.

[302]

Although Parent knew that it was not standard practice for the

Superannuation Directorate to seek verification of employment for all departing

public servants making use of an RTA, Parent did not advise any of the prospective

Loba workers of this. Instead he let them believe that it was done in the normal

course.²⁵²

[303]

Parent was clear that he did not provide prospective Loba employees

with a copy of the package from Godwin dated September 15, 2000 setting out the

concerns of the CRA, nor did he systematically disclose to them the contents of

that package. If individuals were already aware of the concerns raised by Godwin,

Parent would discuss those concerns; however, he would not initiate any

conversation in their regard. I find that he did not provide a copy of these

documents to any of the Plaintiffs, nor did he pass on to any of the Plaintiffs the

CRA’s concerns as expressed in those documents.

Events After October 15, 2000

Chronology from October 15, 2000 to November 16, 2000

[304]

On October 18, 2000, Nouvet questioned Charko about the Treasury

Board’s liability if a company with which it had an RTA turned out to be a sham,

how Treasury Board could better protect the integrity of the system and how

former public servants would be affected if a company lost its registered status.²⁵³

The fact that these matters were being discussed at the highest levels within the

TBS only three days after the October 15^thdeadline indicates that by this time

Macpherson, Gravelle, Charko and Nouvet were already linking Loba with a sham

operation, were contemplating that the Loba pension plan could be de-registered,

were concerned about the impact on former public servants if that were to occur,

and were considering their exposure to negative comments or actions if they were

to let any transfers to the Loba pension plan occur.

[305]

Following October 15, 2000, Loba started to send communications to

those who had joined Loba to advise them of various administrative matters, such

as the appointment of Desrochers as General Manager, the creation of e-mail

addresses for all Loba personnel, discounts for Loba employees for computer

acquisitions, direct deposit payroll services, billing and invoice procedures,

- 111 -

health/dental insurance, security clearance checks, errors and omissions insurance

and contracting matters.²⁵⁴One topic regularly dealt with was information from

the Superannuation Directorate regarding the timing of processing the RTA

applications. In November, Loba advised its employees that there was an eight

month backlog.²⁵⁵

[306]

Upon receipt of the Appendix B forms, the Superannuation

Directorate wrote to Loba and to all departing public servants joining Loba seeking

confirmation of their employment relationship.²⁵⁶Loba provided its workers with

a template to use when responding, and encouraged the workers to review their

responses with Desrochers before submitting them.²⁵⁷Parent knew that the

employment relationship was the single most important aspect of the Loba

arrangements, and he wanted to make sure that the responses Loba workers sent to

the Superannuation Directorate did not “create confusion” with respect to this

“sensitive issue”.

[307]

Shortly after October 15, 2000, Desnoyers reviewed the audiotapes

and transcripts from the undercover operation. On November 10, 2000, Desnoyers

received the result of the Privacy Act request. Those results indicated that, by that

date, 29 individuals had joined Cryptic Web and 13 had joined AMB. By

comparing the amount that was transferred under the Cryptic Web and AMB RTAs

to the transfer values to which the departing public servants would otherwise have

been entitled, Desnoyers concluded that the loss to the federal Crown was $3.5

million. Desnoyers also determined that these companies retained $893,249

(7.5%) when their workers subsequently terminated their participation in the

companies’ pension plans.

[308]

At some point between October 15^thand November 14^th, Desnoyers

first called and then met with Gravelle to provide her with information about the

undercover operation. According to Gravelle, he divulged information which she

believed had not previously been known by the Superannuation Directorate or the

Pensions Division. That information included that Loba workers did not have to

do any actual work, or did not have to work very much or would work only until

transfers were received under the Loba RTA.

[309]

On November 14, 2000, Gravelle sent the following e-mail to Eugene

Leger (“Leger”), the Director of the Superannuation Directorate:²⁵⁸

Pension Transfer Agreements

- 112 -

I believe you are aware of continuing difficulties with certain of our RTAs.

These difficulties arise specifically with the AMB Ltd., Cryptic Web and Loba

Ltd. agreements.

A particular source of concern is the existence of an employee/employer

relationship given that this relationship is crucial in determining the eligibility of

individuals to participate under an agreement. We have asked the Directorate to

document the employee/employer relationship, in each and every case, of

individuals wishing to transfer under one of these agreements.

On a broader level, this issue is of interest beyond TBS and PWGSC and there

may well be developments in the next while around this issue. In the meantime, I

am asking for your cooperation in ensuring that no payments are issued under any

of the three agreements noted above. However, and due to the extreme sensitivity

of this matter, the other parties are not to be told that payments are being

withheld. Rather, any delays should be attributed to ongoing workload, such as

that caused by the withdrawals of EDC and FCC and the continuing efforts

surrounding CPC.

[310]

The Pensions Division did not advise Loba, or any of the affected

parties, about the hold. At this stage, the Pensions Division was embarking on a

conscious policy of misleading Parent, WBP, Loba and all of the former public

servants and PSSP plan members, including the Plaintiffs, who had applied to

transfer their pension entitlements under the Loba RTA. The Pensions Division

did this to be supportive of the RCMP in its investigation; however, in doing so, it

ignored the legitimate interests of other affected parties.

November 16, 2000 Meeting

[311]

On November 16, 2000, a meeting occurred at the TBS so that

Desnoyers could advise the Pensions Division and the CRA of the results to date of

the RCMP investigation of Loba, WBP, Parent and others. Desnoyers considered

both the Treasury Board and the CRA victims of the fraud being perpetrated or

about to be perpetrated by Loba, WBP, Parent and the other targets of the

investigation. Gravelle, Macpherson, and Paul Royer (“Royer”) (TBS counsel),

were present on behalf of the TBS. Godwin, O’Meara (Director of the Compliance

Division), and Leslie White (“White”) (Special Investigations Unit) represented

the CRA. The Special Investigations Unit interfaced directly with the RCMP. By

this time, Desnoyers had advised White or one of her colleagues that he believed

that the CRA had been lied to by Parent, Zeithammel and MacGillivray, and he

considered the CRA a possible victim. White invited Godwin to attend the

meeting to offer technical assistance regarding the registration of pension plans.

- 113 -

[312]

At the meeting, Desnoyers summarized the information gleaned from

the undercover operation and read portions of the transcripts from both undercover

interviews relating to whether or not an employment relationship existed.

Desnoyers highlighted a statement to the effect that Loba workers had to find their

own work, as if this were new information to him. It was not new information to

Gravelle and Macpherson because in June 2000 they had reviewed a copy of

Loba’s standard form employment agreement that made it clear Loba workers were

expected to find their own contracts. In fact, Loba and the Loba workers had been

clear in all of their communications with the Superannuation Directorate and the

Pensions Division that it was the obligation of the Loba workers to find their own

work. None of Gravelle, Godwin and Desnoyers could recall whether Gravelle or

Macpherson told Desnoyers at the November 16^thmeeting that they had always

been aware of this fact. As well, Gravelle could not recall whether either she or

Macpherson had ever provided Desnoyers with a copy of the Loba employment

agreement. Desnoyers could not recall ever having received such a document.

[313]

Godwin recalled Desnoyers advising others at the meeting that the

undercover officers had been told that they would have to find their own work, the

contracts they found would be run through Loba, Loba would take a percentage of

the contract revenues as fees, and individuals could leave as soon as funds were

transferred under the Loba RTA. According to Godwin, all of these features of the

Loba arrangements were new to him. He concluded that, if the circumstances were

as Desnoyers had presented them, the primary purpose of the Loba pension plan

was not to provide a lifetime retirement benefit in respect of an employee’s

service, but instead was to act as a conduit to maximize payments out of the PSSP.

As such, the Loba pension plan would not meet the primary purpose test of the

Income Tax Act and it risked being de-registered.

[314]

I find that, prior to the November 16, 2000 meeting, neither Gravelle

nor Macpherson had ever told Desnoyers or Godwin that Loba workers had to find

their own work. I find that when Desnoyers focused on this fact at the November

16^thmeeting, neither Gravelle nor Macpherson advised him and the others that

Loba had advised them of this when initially asked to confirm the employment

relationship. I find that prior to the November 16^thmeeting, neither Gravelle nor

Macpherson had ever provided Desnoyers or Godwin with a copy of the standard

Loba employment agreement, even though they had been in possession of a copy

of that document since June 2000.

- 114 -

[315]

Two disclosures made by Desnoyers galvanized the group against

Parent and the others involved with Loba. First, in response to repeated leading

questions by both the female and male undercover officers, Zeithammel stated that

technically they only had to work for one day for Loba and the day money was

transferred from the PSSP to the Loba pension plan on their behalf, they would

likely quit employment with Loba and access the pension monies. Secondly, in

response to the male undercover officer’s repeated referrals to various stressors in

his life, Zeithammel stated that he might be able to get a medical certificate saying

that he should not work. Then, even though he was on Loba’s books as one of its

employees, he would not actually have to work during the period of his disability.

Focusing on these excerpts alone was misleading in that there were many more

references in both undercover officers’ interviews when both Parent and

Zeithammel emphasized the need for a bona fide employment relationship, warned

the public servant not to leave the public service simply to access the Loba RTA,

warned the public servant that they would have to find their own work to create

their own income, and emphasized that the public servant would be expected to do

contract work full-time through Loba so as to reinforce the legitimacy of the

employment relationship. Furthermore, the comment about getting a medical

certificate was relayed out of context and then generalized to imply that the

message Parent was giving prospective Loba employees was that they would not

have to do any work for Loba. This was a misleading presentation of what Parent

said to the two undercover officers.

[316]

Gravelle was left with the impression that what Parent and

Zeithammel had said to the undercover officers was significantly different from the

information that he and the Loba employees had provided the Superannuation

Directorate about the existence of an employment relationship. She concluded that

Parent, Loba, and the Loba employees had misled or had lied to the

Superannuation Directorate when responding to questions concerning an

employment relationship. She concluded that neither Parent nor the Loba

employees were trying to create an employment relationship; they were simply

trying to present the appearance of an employment relationship so that they could

get their pension dollars transferred from the PSSA into their hands.

[317]

I reject the evidence of Gravelle, Godwin and Desnoyers to the effect

that no hard opinions were formed at the November 16, 2000 meeting. I find that

at the conclusion of the meeting, the representatives from the TBS, the CRA and

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the RCMP had come to the conclusion that no employment relationship existed

between Loba and its workers.

[318]

White, from the Special Investigations Unit of the CRA, was

presented as having some knowledge regarding employer/employee relationships.

She showed the meeting’s participants a copy of a brochure published by the CRA

explaining the difference between an employee and a self-employed person.²⁵⁹

Gravelle, Godwin and Desnoyers testified that White told the others at the meeting

that it was clear to her that there was no employer/employee relationship between

Loba and its workers. Gravelle testified that White undertook to get confirmation

of this from the Rulings Division. Desnoyers had no recollection of White

undertaking to do this. Godwin recalled that one of the CRA officials committed

to putting the RCMP in touch with someone from the Rulings Division of the

Registered Plans Division in regard to pensions and someone from the CPP/EI

Eligibility Rulings Section in regard to employment relationships.

[319]

Gravelle’s notes from the meeting state: “Leslie White – no er/ee

relationship … she would get confirmation from Rulings Division, but it looks

clear to her”.²⁶⁰Gravelle’s notes are capable of different interpretations. I find

that the message conveyed by White was that it was clear that there was no

employer/employee relationship at Loba and that “to paper the file” she would

obtain a formal opinion confirming this from the Rulings Section of the CRA. No

evidence was adduced that White ever proceeded to get any ruling about the

employment status of Loba workers. White was not called as a witness at trial.

[320]

Desnoyers recorded that O’Meara, Gravelle and Royer advised others

at the meeting that they were satisfied that no employment relationship existed at

law and that Parent had misrepresented the facts.²⁶¹From this point forward, the

Pensions Division, the Registered Plans Division and the RCMP all conducted

themselves on the basis of there being no employment relationship between Loba

and its workers. I note that it was only in October 2002 – almost a year after the

criminal charges were laid – that Desnoyers contacted Paul Rémillard

(“Rémillard”), Director, CPP/EI Eligibility Rulings Section of CRA, for the

purpose of identifying an expert who could review the RCMP files against the

accused and provide an opinion at trial regarding the existence of an employment

relationship.²⁶²This opinion was being sought not as an investigative aid but

simply to provide evidence at the criminal trial and to support the CRA’s goal of

- 116 -

revoking registration of the Loba pension plan. It was not sought in a timely

fashion as an investigative tool.

[321]

Interestingly, no one at the November 16^thmeeting could be

considered an expert on the question of what entailed an employment relationship,

and none of the participants had previously sought an opinion about the Loba

situation from any such expert. Despite that, the participants concluded that there

was no employment relationship between Loba and its workers and moved forward

with this conclusion informing how they dealt with Loba and its workers.

[322]

There was conflicting evidence as to whether any decision was taken

at the November 16^thmeeting regarding the revocation of registration of the Loba

pension plan under the Income Tax Act. Gravelle, Godwin and Desnoyers all

testified that no such decision was taken at the meeting.

[323]

Gravelle’s evidence was that O’Meara committed to reviewing the

Cryptic Web, AMB and Loba pension plans to determine whether they should be

de-registered from their date of inception. This came as no surprise to Gravelle

who realized at the time that an employment relationship was critical for the

ongoing registration of the Loba pension plan. O’Meara undertook to keep the

Pensions Division informed in this regard, recognizing the potential for very

serious ramifications for former public servants moving to Loba if the Loba

pension plan were de-registered. According to Gravelle, all parties present at the

November 16^thmeeting agreed to work cooperatively as the CRA considered

whether to de-register the Loba pension plan. Immediately following the meeting,

and as a result of the information that had been forthcoming during the meeting,

Gravelle took steps to suspend any transfers to the Loba pension plan due to her

understanding at the time that there was not a true employment relationship.

[324]

Desnoyers’ evidence was that the CRA representatives stated that if

their investigation confirmed what Desnoyers, Gravelle and Macpherson had

learned, the CRA would need to take some steps, possibly de-registering the

pension plan. Under cross-examination, Desnoyers testified that the message he

took from the meeting was that there was a real possibility that the CRA would

revoke the registration of the Loba pension plan if there was a criminal conviction

involving Parent or Loba.

[325]

In his note of the meeting written on the same day,²⁶³Desnoyers

stated:

- 117 -

O’MEARA, GODWIN and WHITE advised that they would make some

verifications and will take steps to deregister the pension plans in question,

retroactively to the date of inception. Treasury Board will delay the transfer of

any more pension funds for administrative reasons and once the pension

deregistration become official, they will permanently halt the pension fund

transfers.

[326]

This is a clear, unambiguous statement. It fits with White’s clearly-

stated conclusion that no employment relationship existed, everyone being aware

that an employment relationship was a central requirement for continued

registration of the pension plan. It fits with the belief that all participants at the

meeting shared; namely, that Parent, Zeithammel, Loba and WBP were engaged in

fraudulent activities. It also fits with the strongly held belief of Gravelle,

Macpherson and Desnoyers that the public servants seeking to take advantage of

the Loba RTA were not entitled to the extra amount made available to them

through use of the RTA. Minimal concern was felt for public servants seeking to

get “more than they deserved”.

[327]

Godwin testified that the Registered Plans Division did not form any

opinion at or immediately following the November 16^thmeeting regarding the de-

registration of the Loba pension plan because they did not have any concrete

information to rely on regarding the Loba arrangements. Godwin’s evidence was

that the CRA did not commence any investigation of Loba at that time because

they feared it might jeopardize the RCMP investigation. Initially Godwin stated

that following the November 16^thmeeting, the CRA had no plan either to

investigate Loba or to move in the direction of de-registering the Loba pension

plan. Under cross-examination, Godwin agreed with Desnoyers’ note, referred to

above,²⁶⁴with the caveat that the CRA would do an investigation and, if it

confirmed what the RCMP was saying, it would take steps to de-register the Loba

pension plan. Godwin confirmed that the CRA officials told the others at the

November 16^thmeeting that, if what Desnoyers was saying was true, these were

the types of things that the CRA would audit and investigate. If those things

existed, the CRA would de-register the Loba pension plan, and they would do that

retroactively to the date of inception.

[328]

The documentary evidence persuades me that the go-forward position

of the CRA was firmer than what was expressed orally by Gravelle, Godwin and

Desnoyers at trial. I find that, although the CRA did not take the position at the

November 16, 2000 meeting that de-registration of the Loba pension plan was a

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certainty, everyone left the meeting of the view that de-registration of the plan was

very likely.

[329]

I find that on November 16, 2000, Gravelle and Macpherson made a

commitment to both the RCMP and the CRA that they would not divulge to Parent,

Loba, WBP or any former public servants who had joined Loba the existence of

either the RCMP investigation or the upcoming CRA investigation. As well, the

TBS, the CRA and the RCMP agreed on a cone of silence in terms of advising

Parent, Loba, WBP or Loba workers of the likelihood that (1) the Loba pension

plan would not maintain its registration under the Income Tax Act; and (2) the

transfers from the Superannuation Account to the Loba pension plan would not

occur. I find that from November 16^thforward, no players at the Pensions

Division, the Registered Plans Division or the RCMP had an open mind on

whether there was an employer/employee relationship between Loba and its

workers. Their working assumption was that no such relationship existed. As well

I find that their working assumption was that Parent, Loba, WBP, Zeithammel and

others had committed a fraud against the federal Crown. In fact, at this stage, the

CRA was planning to look into other compliance issues regarding Parent, such as

tax evasion. I find that Desnoyers made it clear to the other participants at the

November 16^thmeeting that the RCMP was close to laying criminal charges

against Parent and others, and this information fuelled the scepticism of both the

Pensions Division and the Registered Plans Division regarding the Loba

arrangements. I find that the go-forward position for the Pensions Division, the

Registered Plans Division, and the RCMP was that all would work collectively and

cooperatively to put an end to what they all viewed as a fraudulent scheme.

Chronology from November 16, 2000 to December 21, 2001

[330]

On November 20, 2000, Gravelle advised Leger, Director of the

Superannuation Directorate, that the CRA may have concerns about the

genuineness of the employer/employee relationship in regard to the Cryptic Web,

AMB and Loba pension plans and would be taking steps to investigate. Gravelle

requested that payments under the three RTAs cease until the CRA had been able

to deal directly with the plan administrators on this issue. She asked that the

requests for transfer be processed up to the point of payment.²⁶⁵This instruction to

the Superannuation Directorate was the direct result of the information Gravelle

learned from the RCMP during the November 16^thmeeting and the comments

made by White on that occasion.

- 119 -

[331]

D’Aurelio, the Director of the Registered Plans Division stated in a

December 4, 2000 memorandum to McCloskey, the Assistant Commissioner of

CRA:²⁶⁶

…Based on the evidence gathered by the RCMP, our original concerns regarding

the employer/employee relationship appear to have been justified. The evidence

presented at the meeting also prompted Treasury Board to put all further transfers

to these private plans on hold.

Action Taken

Officials from RPD met on November 24, 2000 with a representative of the

CRA Investigations Division to discuss next steps. The Investigations Division

has agreed to provide RPD with copies of the employment contract offered by the

RPP promoter as well as with transcripts of the undercover interviews. [The next

section was redacted] …

The ultimate outcome may be the de-registration of the RPP in question. The

de-registration can have significant impact on those members who have already

completed their transfers.

[332]

Godwin was involved in drafting this memo and approved its

contents. The reference to the Investigations Division was a reference to White.

This same memo was forwarded to the Commissioner of the CRA by the Assistant

Commissioner, with a copy sent to Brian Darling (“Darling”) of the Income Tax

Rulings Division.²⁶⁷Following the November 16^thmeeting, the CRA obtained

access to the documents gathered during the criminal proceedings.

[333]

I reject the evidence of Charko that, at this point, the Pensions

Division was of the belief that the Loba arrangements were probably still valid and

that a CRA investigation would confirm that. I also reject Charko’s evidence that

there was no direct information or confirmation that would cause the TBS to think

that there would be specific problems with regard to the Cryptic Web, AMB and

Loba pension plans. I find that by November 16, 2000, all participants at the

meeting were of the firm belief that there was no valid employment relationship

between Loba and its workers. It followed from this that there was a strong

likelihood that the Loba pension plan would not retain its registration and the

Treasury Board would not make transfers under the Loba RTA.

[334]

These findings are supported by the November 23, 2000

memorandum regarding the Loba RTA sent by Nouvet to Claydon, the Secretary

of the Treasury Board, reminding him of the concerns that both the TBS and the

- 120 -

CRA had about the existence of an employer/employee relationship between Loba

and its workers.²⁶⁸In regard to the meeting of November 16^th, Nouvet stated:

The RCMP’s report on their investigation to date indicates that both parties’

grounds for concern are well founded. From our perspective, we have to question

the appropriateness of issuing any payments under the agreement into the Loba

pension fund. From CCRA’s perspective, they are indeed questioning the

continuing registration of the Loba plan.

[335]

Nouvet advised that the CRA would be investigating the continuing

registration of the Loba pension plan, the TBS had directed the Superannuation

Directorate to withhold any payments until the registration issue was resolved, and

the RCMP would be continuing with its investigation – keeping the Treasury

Board informed as a complainant. Nouvet confirmed that Loba was not aware of

either the RCMP or the CRA investigation and that the Pensions Division had

assured both organizations that it would not tell Parent or Loba about either

investigation.

[336]

Again, this confirms that there was an agreement between TBS and

CRA officials to keep Loba and Loba employees in the dark about events

unfolding within the government that impacted on the Loba RTA and pension plan

and the employees’ rights under both. This was the case even though the Pensions

Division and the CRA officials realized that the revocation of a pension plan’s

registered status would have “draconian” repercussions on the plan members from

an income tax point of view.

[337]

On November 16, 2000, a number of Loba workers who had formerly

worked for Environment Canada (the “EC Group”)²⁶⁹asked Parent for a meeting to

clarify various issues, including how much work should be contracted under the

Loba umbrella versus how much could be contracted under the worker’s own name

or under another company’s name.²⁷⁰After the November 16, 2000 meeting, the

EC Group sent an e-mail to Parent, Burnside and Desrochers²⁷¹inquiring, amongst

other things, about the merits of contracting exclusively through Loba and about

how long the employees should stay with Loba. Parent replied:²⁷²

Concerning the work that should be put through Loba, I want to reiterate that it is

important to strengthen the employee/employer relationship. As such, you should

put as much work as possible, i.e. the more the better. There are no precise

answer to your question of how much and how long. At the end of the day, we

cannot say how one can judge that issue. This is why we suggest as much as

- 121 -

possible for as long as possible, i.e. at least until pension assets have been

transferred.

[338]

Starting in January 2001, Desnoyers arranged for Commercial Crime

investigators to interview as many of the Cryptic Web and AMB workers as

possible. He did not have Loba workers interviewed because he assumed that as

soon as one was approached, word would get back to Parent. In any event, on

February 1, 2001, Parent learned from Zeithammel that the RCMP was

investigating the AMB transfers and were questioning its employees.²⁷³Shortly

thereafter, Parent learned from Lepine that Cryptic Web employees were also

being interviewed by the RCMP.

[339]

By this time, Parent realized that the RCMP could be looking into

Loba as well, since the Loba arrangement was virtually the same as the AMB and

Cryptic Web arrangements. Also, he realized that WBP and himself personally

could be implicated as the consulting actuaries who established all three RTAs and

pension plans. Despite realizing as early as February 2001 that Loba could be

drawn into the RCMP investigation, in the regular newsletters that Loba started to

send to its workers, Parent did not alert Loba employees about the RCMP

investigation.²⁷⁴Parent’s evidence was that he did not want to trouble Loba

employees with news of an RCMP investigation of Loba activities until he knew

that Loba was a subject of the investigation. That knowledge came only in

December 2001. Until then, the RCMP had not contacted Parent or any Loba

employee, aside from Martin; and Desnoyers had never actually interviewed

Martin.

[340]

Meanwhile on January 9, 2001, Burnside learned from Doris Pellerin

(“Pellerin”) of the Superannuation Directorate that in November 2000, the

Treasury Board had instructed the Superannuation Directorate to put on hold

transfers under the Cryptic Web RTA pending an investigation by the CRA into

the employment relationship. Pellerin advised Burnside that it was her

understanding that the CRA was to contact Cryptic Web concerning this matter.

As far as Burnside knew at the time, no one had contacted either Cryptic Web or

WBP.²⁷⁵At some point between January 9^thand February 27, 2001, Parent learned

that transfers under the AMB and Loba RTAs had also been put on hold.

[341]

On February 27, 2001, Parent wrote Gravelle to express his concern

that neither WBP, nor the plan sponsors, had been contacted directly by the TBS or

the CRA in regard to the holds. He expressed their eagerness to address the

- 122 -

concerns of the CRA and asked for the appropriate contact person.²⁷⁶Gravelle

provided Parent with Godwin’s name, but otherwise did not explain why the

Treasury Board had instructed the Superannuation Directorate to withhold

payments.²⁷⁷According to Gravelle, there would have been no logical way to

explain why payments were being withheld when she could not divulge the

existence of the RCMP and CRA investigations. Loba’s legal advisor contacted

Godwin. Parent was led to believe that Loba was not under any specific

investigation at that time. Parent chose not to advise any of the Loba employees

about the hold; his explanation was that he did not want to alarm them. He

testified that he was confident that the hold would be lifted, just as all previous

holds relating to AMB, Cryptic Web and Loba had been.

[342]

In an e-mail to Parent from Gravelle dated March 6, 2001, she

stated:²⁷⁸

Information available to us (from websites, etc.) suggests to us that this might

well be a situation in which CCRA would have concerns about the on-going

registration of the affected plans. Until we have confirmation that CCRA has no

outstanding registration issues, I am proposing to err on the side of caution, by

requesting that the Superannuation Directorate withhold payments.

Parent did not share this information with Loba employees.

[343]

Meanwhile, by March 12, 2001, White had been provided with the

name of Claude Paquette (“Paquette”) of the CPP/EI Eligibility Rulings Section as

the contact person who could field questions regarding whether an employment

relationship existed between Loba and its workers.²⁷⁹O’Meara and others from the

CRA met with Paquette in March 2001 and explained the Loba scenario to him

without naming names. The meeting was not considered helpful or productive.²⁸⁰

The Registered Plans Division did not follow-up with the CPP/EI Eligibility

Rulings Section until November 2001.

[344]

On April 9, 2001, Pellerin advised Burnside that the Superannuation

Directorate was currently working on transfer requests received in May 2000 and

that those of Todd, St. Arnaud and Magee, all submitted that month, should soon

be reached. The file would be reviewed for outstanding items, calculations of the

amount available would be prepared, Loba would be asked for the amount

required, and once the calculations were done and the amount was ready to be

- 123 -

paid, the file would be put on hold pending further instructions from the Treasury

Board.

[345]

In April 2001, Burnside, on behalf of Loba, advised Vic Shantora

(“Shantora”), who was a member of the EC Group, that Loba had been advised by

the Superannuation Directorate to expect details for Loba employees hired in April

2000 by the end of May 2001. No mention was made of the Treasury Board hold,

though the e-mail did say that the Treasury Board had indicated that it would

require confirmation from the CRA that registration of the Loba pension plan

continued.²⁸¹It was Parent’s understanding at the time that Shantora would share

this information with the EC Group, though there is no evidence that he did so.

[346]

In April 2001 and again in May 2001, Burnside, on behalf of WBP,

unsuccessfully sought information from the RCMP under the Access to

Information Act.²⁸²regarding its investigation of AMB and Cryptic Web. On June

6, 2001, Parent was advised that all of the information he requested qualified for

exemption under the Privacy Act and the Access to Information Act.²⁸³On July 4,

2001, Parent was advised that Desnoyers wanted to meet with Martin to discuss

Loba. Martin had been on holidays at the time and never did speak with

Desnoyers. Neither Desnoyers nor Parent contacted the other for an interview.²⁸⁴

Parent did not share this information with Loba employees. Parent did not seek

legal advice.²⁸⁵

[347]

Meanwhile on May 16, 2001, Gravelle initiated a meeting with

Macpherson, Patricia Spice (“Spice”), O’Meara, Godwin, Desnoyers, Yvonne

Milosevic (“Milosevic”) (a lawyer) and Anne Turley (“Turley”) (the Defendant’s

counsel). Gravelle relayed that there was a threat of civil litigation against the

Treasury Board for failure to make a transfer payment to a Cryptic Web worker.

Gravelle advised that Parent and the principals of the other companies, together

with some participants in the companies, had been putting pressure on the Treasury

Board to make the transfers under the RTAs. According to Gravelle, Desnoyers

indicated that a decision regarding laying criminal charges would be taken within

six months to one year. The CRA would not confirm whether there was a CRA

investigation underway.

O’Meara confirmed that if there was no

employer/employee relationship, the CRA could revoke a pension plan – this was

within the Minister’s discretion.

- 124 -

[348]

On May 22, 2001, Gravelle, Desnoyers, Milosevic, Turley and others

met to discuss the RCMP investigation of Cryptic Web. The RCMP was

reiterating that, pursuant to standard RCMP policy, the TBS could not provide

information to anyone concerning the RCMP investigation. To divulge the

existence of an investigation might jeopardize the investigation and could be

contrary to the Privacy Act. At the meeting a concern was expressed that, because

other transfer payments under RTAs were proceeding, if the Pensions Division

could not disclose the fact of the RCMP investigation, it might appear capricious

that the Treasury Board was not proceeding with the Loba, Cryptic Web and AMB

transfers.

[349]

On May 23, 2001, Burnside inquired of the Superannuation

Directorate about the status of three files on which transfers to Loba had been

sought: Todd (May 10, 2000), St. Arnaud (May 4, 2000) and Magee (May 15,

2000). On May 24, 2001, Pellerin advised Burnside that requests for salary and

service records had been made for Todd and Magee in May 2001 and that the

Treasury Board “hold” was still in place, preventing the actual cutting of cheques

with respect to Loba, AMB and Cryptic Web employees. In Loba’s May 25, 2001

newsletter to Loba employees, Burnside provided the following update, leaving out

any reference to the Treasury Board hold:²⁸⁶

Processing Delays

[The Superannuation Directorate] are currently working on files that were

received in May 2000. It is reasonable to expect their processing delays to

continue to be at least one year. This will enable you to forecast approximately

when your file is expected to reach the top of the pile. Please keep in mind that

sheer volumes in September and October of 2000 will add additional delays for

the files submitted in those months.

This update was intentionally misleading. Parent’s evidence was that he chose not

to tell the Loba employees about the hold on transfers under the Loba RTA so as

not to distress them. He was hopeful that he would be able to get the issue

resolved without the individuals ever knowing that a hold had been in place.²⁸⁷

[350]

On June 21, 2001, Parent, as President and actuary at WBP, wrote to

Gravelle, copying Godwin, objecting in very strong terms to the hold that the

Treasury Board had placed on Cryptic Web, AMB and Loba transfers, ostensibly

because the CRA might have registration issues with the companies’ pension

plans.²⁸⁸Parent reviewed the concerns that had been expressed in Godwin’s letter

- 125 -

to him of September 15, 2000.²⁸⁹He noted that the companies had forwarded to

the Superannuation Directorate full information regarding the employment status

of each person who had applied for a transfer to one of the companies under its

RTA. He also noted that the CPP/EI Eligibility Rulings Section of the CRA had

ruled that an employer/employee relationship existed in regard to one participant in

one of the companies. Parent advised that he had consulted legal counsel who

confirmed the view previously expressed by Gravelle herself that the Treasury

Board had fiduciary responsibilities to the members of the PSSP. He also posited

that the CRA had fiduciary responsibilities as well, due to its administrative

oversight of pension plans. Parent stated that he and the employees had cooperated

fully with the Pensions Division, the Superannuation Directorate and the CRA and

had provided them with all relevant information and documentation. He asked

what further information the Pensions Division could possibly require. He

reminded the government of its legal obligations under the RTAs. He noted that

Godwin was still taking the position that the pension plans in question continued to

be registered under the Income Tax Act. Finally he advised in so many words that

if the Treasury Board did not rescind its directive to the Superannuation

Directorate to withhold payments, legal action could ensue.

[351]

Godwin never responded to this letter. Gravelle acknowledged the

letter on June 27, 2001.²⁹⁰On September 6, 2001, Macpherson sought Godwin’s

approval for the wording in a letter being sent by Gravelle to Parent responding to

his June 21, 2001 letter.²⁹¹It is clear from Macpherson’s e-mail that the Pensions

Division was trying not to say “a whole lot” as to why transfers under the Cryptic

Web, AMB and Loba RTAs remained suspended. The Pensions Division was

trying to keep Parent in the dark regarding the RCMP and CRA investigations.

[352]

On September 12, 2001, Gravelle sent a letter to Parent stating:²⁹²

The existence of an employee/employer relationship is a condition of our pension

transfer agreements. Although the Canada Customs and Revenue Agency

(CCRA) is not in a position to comment on the status of these plans without the

written authorization of the Plan Administrator, the CCRA’s website outlines its

position on the importance of the employee/employer relationship. As such, we

have reason to believe that the CCRA may have concerns about the AMB, Cryptic

Web and Loba Limited pension plans. Until we can be assured that no such

concerns exist, payments under these agreements will continue to be suspended.

- 126 -

[353]

This less than helpful or informative letter was intended to hold Parent

off while the RCMP and the CCRA completed their investigations. No suggestion

was given to Parent as to how matters could be moved forward in a constructive

fashion so as to address any concerns the CRA might have had concerning the

company pension plans. No specific request was made to Parent, WBP or the

companies concerned to provide additional information or documentation relevant

to any such concerns. Effectively Parent was told that he would have to wait to see

what developments would unfold. He was not given any indication as to any

concerns that the government might have aside from the basic question of whether

the company workers were employees. Parent did not advise Loba workers that

payments continued to be suspended.

[354]

On September 11, 2001, a Loba worker and member of the EC Group

e-mailed Burnside, Desrochers and Parent indicating that he was seeking certain

information for the purpose of a meeting the EC Group would be having on

October 16, 2001.²⁹³One question he asked was whether there were any serious

unresolved issues with the TBS regarding the Loba RTA. There is no doubt that

Parent realized that the EC Group wanted to be kept informed of any such issues.

Despite this, Parent did not tell Loba employees about the Treasury Board hold, the

CRA concerns or the RCMP investigation.

[355]

At this time, the CPP/EI Eligibility Rulings Section of the CRA was

the only division within the CRA which rendered rulings on employment status.

The CRA encouraged employers to obtain a ruling from this Section if they were

in any doubt as to whether they had an employer/employee relationship with their

workers.²⁹⁴On September 19, 2001, Loba submitted a request for ruling in regard

to a representative employee of Loba and provided a list of all Loba employees at

the time.²⁹⁵On September 20, 2001, Loba informed all of its employees that it had

submitted a request to the CRA to provide a ruling regarding the status of

employment of all Loba workers and had provided the CRA with: (1) a sample

employment contract; (2) confirmation of work being done by Loba employees; (3)

a sample contract; (4) confirmation that Loba is paid in respect of the services

performed under the contract and that the employee is then paid by Loba in

accordance with the employment agreement; (5) confirmation that the employees

were not responsible for any losses, expenses or damages that the employees may

cause in the exercise of work performed for a client of Loba; and (6) confirmation

that Loba reviewed and approved all contracts entered with clients for the

employees’ services. The employees were advised that the CRA would be

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choosing a sample group, and they could expect to be contacted by a CRA official

shortly.²⁹⁶Loba employees were not advised by Parent that the ruling was being

sought because payments were on hold. He simply advised that the Treasury

Board needed to be assured that the CRA had no concerns about the employment

relationship.

[356]

The CPP/EI Eligibility Rulings Section interviewed a random sample

of 13 Loba employees, including two of the Plaintiffs, Ault and Collier. Ault was

the first Loba worker to be interviewed. She immediately circulated to the EC

group a list of the questions she had been asked and the answers she had provided

to give them a heads up. When asked how they should answer the questions,

Parent consistently told all Loba employees to answer as per the facts of their

relationship with Loba. At no time did he suggest that anyone be less than honest

and forthright.²⁹⁷Parent was also interviewed and showed the CRA interviewer

invoices and payroll records. He advised that there was no exclusivity agreement

between Loba and its employees, and therefore some did work for third parties that

did not flow through Loba.

[357]

On October 19, 2001, the CPP/EI Eligibility Rulings Section at the

Ottawa Tax Services office issued rulings in regard to the Loba workers.²⁹⁸In all

instances, the CRA ruled that the workers were employees under a contract of

service. The reasons given were that: (1) Loba exercised control over the worker

and his/her work because the worker had to perform the services personally, he/she

could not hire others to complete the work, and Loba established his/her clientele;

(2) the worker was eligible to participate in a registered pension plan; and (3) the

terms of employment did not allow the worker to gain a profit and it did not expose

him/her to a risk of loss, because he/she did not have to buy materials used to

complete the work.

[358]

On October 24, 2001, Loba informed its workers of the CRA ruling

that an employment relationship existed.²⁹⁹In an e-mail, Parent stated:³⁰⁰

As you know, the existence of a bona fide employee/employer relationship is key

to the success of each Reciprocal Transfer Agreement application. Both Canada

Customs and Revenue Agency’s (CCRA) Registered Plans Division and Treasury

Board have been adamant about this requirement. We had previously received a

legal opinion that the terms of each employment agreement did constitute a true

employee/employer relationship. However, we have taken the initiative to request

an official ruling from CCRA on the nature of the relationship between Loba and

it’s employees. CCRA has responded by providing a written ruling on a sample

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group of 13 employees, whose situations are reflective of the relationships of all

other Loba Employees. In every case, CCRA has confirmed that the relationship

does constitute an employee/employer relationship, and that Loba’s employees

are eligible to participate in the Loba’s registered pension plan.

We are pleased to have this written ruling from CCRA to further support the

previous legal opinion. Any concerns that CCRA or Treasury Board may have

had about the employment relationship should be addressed by this ruling.

[359]

An attachment outlined the procedure that would be followed to effect

a transfer under the Loba RTA. It stated that funds would be sent to WBP within

usually four to twelve weeks of request, once the Superannuation Directorate had

confirmed the final amount of the payment. No reference was made in the update

to the Treasury Board hold or to the RCMP investigation. There was no reason

why the Plaintiffs should have realized from any of Loba’s updates/newsletters to

date that the Treasury Board had imposed a hold on transfers effective November

16, 2000.

[360]

On October 24, 2001, Parent, on behalf of Loba, wrote Gravelle

advising of the 13 CRA rulings and enclosing one example.³⁰¹He ended by saying

that he expected the above would address the Treasury Board’s final concerns and

that payment under the Loba arrangement would resume without further delays.

He asked for confirmation that the direction to the Superannuation Directorate to

withhold payments had been rescinded.

[361]

When Gravelle received the rulings, she thought that Parent was

probably trying to do an “end run” around the Registered Pensions Division at the

CRA. She assumed that Parent and the Loba workers had not been truthful about

the relationship between Loba and the workers when they responded to questions.

She could not contemplate Loba receiving the rulings it did unless Loba and its

workers had been dishonest. Gravelle took no steps to inquire about the

information that had been provided to the CPP/EI Rulings Section officer before

concluding that it must have been misleading, inaccurate, incomplete or untruthful.

I find that at this time, Gravelle had a mindset that Parent, Loba and the Loba

workers were being dishonest and deceptive in their dealings with the government.

This attitude informed how she handled the Loba file.

[362]

Gravelle responded to Parent on October 26, 2001 advising that she

would be more reassured with a CRA ruling given in the context of pension plan

registration. She stated: “Once you provide us with a similar opinion from the

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Registered Plans Directorate of CCRA, we will certainly be prepared to revisit the

status of payments under the pension transfer agreement between Loba Limited

and the federal government.”³⁰²Despite the transfers being put on hold by the

Treasury Board for almost one year, this was the first time that Gravelle had told

Parent that the payments would continue to be suspended until Parent had obtained

an “opinion” from the Registered Plans Division of the CRA, presumably as to

whether the relationship between Loba and its workers constituted an employment

relationship.

[363]

This response from Gravelle was disingenuous and was a clear

delaying tactic pending completion of the criminal investigation. As Godwin

stated at trial, the Registered Plans Division of the CRA did not provide rulings or

issue opinions as to whether an employment relationship existed. The only section

at the CRA that did that was the CPP/EI Eligibility Rulings Section. In order to

inform its decisions regarding the registration or continuing registration of pension

plans, the Registered Plans Division relied heavily on the CPP/EI Eligibility

Rulings Section.

[364]

Macpherson forwarded the rulings to Godwin on October 25, 2001.³⁰³

Godwin provided copies to the Compliance Division of the Registered Plans

Division. Godwin did not contact the CPP/EI Eligibility Rulings Section to see

what information they had on their files. He did not contact Parent for permission

to get this information from the CPP/EI Eligibility Rulings Section. He simply

assumed, as did Gravelle and Macpherson, that Parent and the Loba workers must

have misled the CPP/EI Eligibility Rulings investigator.

[365]

Macpherson forwarded Parent’s October 24^thletter, and a copy of one

ruling, to Desnoyers sometime between October 24, 2001 and December 10, 2001.

The receipt of this letter did not cause Desnoyers a moment’s pause. In essence he

ignored this new information and stayed the course of pursuing Parent, Loba and

others for fraudulent misrepresentation of the nature of the employment

relationship between Loba and its workers. He testified that he had to pick a point

in time to end his active investigation, and he chose to do that at the end of the

undercover operations.

[366]

At trial, Gravelle could not remember if she sent the CPP/ EI rulings

to the Defendant’s lawyers who were advising the Treasury Board, the CRA and/or

the RCMP regarding the Loba files. If Gravelle was dealing with Parent, Loba and

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the Loba employees in an unbiased fashion, one would have thought that, at the

very least, she would have discussed the rulings with a legal advisor and with

Desnoyers.

[367]

On October 30, 2001, Parent, on behalf of Loba, wrote Nouvet, Chief

Human Resources Officer, TBS, asking that he immediately act to remove an

unwarranted and unlawful blockage of transfer payments under the Loba RTA.³⁰⁴

At the end of a strongly-worded letter outlining the interactions that had occurred

with the TBS over the previous five months, Parent threatened legal action if the

matter was not resolved by November 1, 2001.

[368]

Nouvet responded on November 9, 2001 with the following

misleadingly solicitous note:

At the outset, let me say that I share your concerns and that I too would

like to see the situation surrounding the transfer of funds resolved as quickly as

possible. Given the issues that have been so central to the discussions you have

had with the Pensions Division over the past many months, it does not seem

unreasonable to request a ruling concerning the employment status of Loba

workers from the Registered Plans Directorate of the Canada Customs and

Revenue Agency (CCRA).

Accordingly, in the interest of moving this file along, the Pensions

Division has written to the appropriate Branch within the CCRA asking them to

provide any assistance to you that might be appropriate. Although I recognize

that you would prefer this matter be settled immediately, I hope you can see we

are making every effort to resolve this issue in as expeditious a manner as

possible.

That last clause was far from the truth. No arm of the federal Crown had taken any

constructive steps over the previous year to deal with the Loba situation. On the

contrary, it had put Loba, and the lives of the Plaintiffs and other public servants

who had joined Loba, on hold.

[369]

This inaction was confirmed by a letter sent on the same day,

November 9^th, from Charko, Assistant Secretary of the Pensions Division at the

TBS to McCloskey, Assistant Commissioner, Policy and Legislation Branch,

CRA:³⁰⁵

My purpose in writing to you today is to apprise you of the latest

developments surrounding a situation that has, for the past year or so, involved

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officials from our two organizations. I believe you are aware that members of the

Pensions Division have had significant concerns with the “employee/employer”

relationship with a number of organizations with which the federal government

has entered into reciprocal pension transfer agreements. However, you may not

be aware that these concerns have led to the suspension of transfers of funds

under the agreements in question for almost a year.

Mr. Sylvain Parent, the President of Loba Limited, one of the affected

organizations, recently received advice from the Ottawa Tax Services Office that

an employee/employer relationship does exist and wrote to the Pension Division

requesting that payments be reinstated. We indicated that, considering the

concerns we had raised over many months, similar advice from the Registered

Plans Directorate would be helpful. Mr. Parent wrote to voice his displeasure and

to suggest that he may take legal action against the Pensions Division’s actions.

By this letter I am asking you to provide any assistance to Mr. Parent that you

might consider appropriate.

I am pleased to offer any assistance that the Pensions Division may be

able to provide.

Of interest in this letter is the portrayal of the concerns regarding the

employer/employee relationship being those of the Pensions Division of the

Treasury Board, whereas when writing to Parent after October 15, 2000, Gravelle

always portrayed the concerns regarding employment status as being a concern of

the CRA. A copy of this letter was sent to Parent.

[370]

On November 22, 2001, Parent, who by this time had a copy of

Charko’s letter to McCloskey, asked McCloskey to confirm to the Pensions

Division that the Registered Plans Division of the CRA does not provide advice on

the employer/employee relationship and that the rulings that previously had been

issued by the Ottawa Tax Services Office addressed the matter.³⁰⁶

[371]

On November 30, 2001, Loba’s lawyers wrote to the President of the

Treasury Board, seeking her intervention with the bureaucrats in the Pensions

Division so that the terms of the Loba RTA would be respected and the suspension

of transfers revoked, and warning that a legal action in the Federal Court against

the Treasury Board would be brought if nothing was done.

[372]

On December 20, 2001, Loba commenced an action against the

federal Crown for breach of contract through its failure to honour the Loba RTA.³⁰⁷

- 132 -

[373]

In November 2001, when the issue of CPP/EI rulings regarding Loba

was being discussed in e-mails circulating between O’Meara, Spice, Godwin and

others, Spice wondered why in March 2001, the CPP/EI Eligibility Rulings Section

looking into the Loba situation had not been warned about a “scam” and “potential

fraud artists” who might request a ruling. O’Meara reminded her that they had

been sworn to secrecy by the RCMP and the Investigations Division of the CRA

with respect to information about Loba.³⁰⁸

Criminal Charges – December 2001

[374]

Meanwhile during October 2001, Burnside had called Desnoyers in an

effort to ascertain what was happening in regard to the RCMP investigation.

Desnoyers rebuffed her, saying that the RCMP never commented on the status of

an investigation.

[375]

On December 5, 2001, Desnoyers, in a conversation with Gravelle,

learned that Loba had threatened legal action against the Treasury Board as a result

of the hold that the Treasury Board had placed on transfers under the Loba RTA. I

find that the threat of a lawsuit against the Crown acted as an impetus for the

RCMP to move forward with criminal charges.

[376]

On December 10, 2001, Desnoyers swore an Information to Obtain

Search Warrant which ultimately was granted by Fraser J.³⁰⁹In the various quotes

which Desnoyers included from the transcripts of the undercover officers

interviews, there were many references to the fact that the undercover officers were

advised that they would have to obtain their own work and their own contracts.

These quotes were included to support the conclusion that Parent, Zeithammel and

MacGillivray had misrepresented the nature of the workers’ relationship with

Loba, AMB and Cryptic Web respectively. The reality was, however, that in the

May and June of 2000, the Superannuation Directorate, Gravelle and Macpherson

had received copies of the Loba standard form employment agreement which

clearly stated that it was the responsibility of the Loba workers to solicit new

consulting assignments and to perform the duties required by such assignment on

behalf of Loba.³¹⁰Both Parent and the Loba workers in question had provided

copies of the employment agreement to the Superannuation Directorate, and it, in

turn, had provided a copy to the Pensions Division. This aspect of the relationship

between Loba and its workers was never misrepresented to the government. There

is no evidence, however, that prior to the November 16, 2000 meeting, either

- 133 -

Gravelle or Macpherson ever provided Desnoyers with a copy of the Loba standard

form employment agreement, ever advised him of its existence or ever told him

that they had always known that this was an aspect of the arrangements Loba had

with its workers. They never disabused him of the belief that Parent and Loba had

misrepresented this issue to the TBS.

[377]

In paragraph 100 of the Information to Obtain Search Warrant,

although Desnoyers mentioned the existence of a CRA ruling to the effect that the

Loba workers were considered employees, he immediately dismissed this as

irrelevant and voiced his belief that the “presentation the suspects made to

Treasury Board Canada were false and that the presentations made to Revenue

Canada regarding the registration and maintenance of the suspect companies’

pension plans are also false”. No persuasive evidence was adduced at this trial that

would support either assertion in regard to Loba workers.

[378]

On December 12, 2001, without any warning, the RCMP executed a

search warrant at the premises of WBP and Loba, seizing thousands of documents,

accounting records, electronic folders and directories relating to AMB, Cryptic

Web and Loba.

[379]

On December 19, 2001, Parent, on behalf of Loba, sent an update to

Loba workers about the Loba RTA setting out all of the steps Loba had taken over

the preceding year in an effort to get the government to process transfer payments

under the Loba RTA. The letter ended by informing Loba workers of the search

warrant that had been executed on December 12, 2001 and of Loba’s anticipation

that criminal charges were imminent.³¹¹

[380]

On December 20, 2001, Parent, Zeithammel, MacGillivray, Loba,

AMB, Cryptic Web and WBP were charged with defrauding PWGSC and/or the

Treasury Board of funds exceeding $5,000 through deceit, falsehood or other

means through misrepresenting the employment status of former federal

government employees; conspiring to commit fraud; and obtaining money

exceeding $5,000 from the PSSP by false pretence through the medium of a

contract from PWGSC and the Treasury Board. Parent, Zeithammel, Loba and

WBP were also charged with attempting to defraud PWGSC and/or the Treasury

Board.³¹²

[381]

On December 21, 2001, the RCMP issued a news release entitled

“RCMP lays charges in pension fraud”. Desnoyers had briefed the author of the

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news release. The accused were identified by name with a synopsis of the alleged

fraud.³¹³

[382]

Both Parent and Burnside testified that, prior to execution of the

search warrant, neither knew that Loba was the subject of a criminal investigation.

In February 2001, they had understood that both AMB and Cryptic Web were

being investigated. In July 2001, when they learned that Martin had been

contacted, they assumed that WBP also might be under suspicion due to its

involvement with AMB and Cryptic Web, but they did not consider Loba to be the

subject of an investigation because no Loba workers had been contacted whereas

numerous AMB and Cryptic Web workers had been. Although I accept that

neither Parent nor Burnside had any concrete information to the effect that they

were being investigated by the RCMP, I find that both suspected that they might be

under investigation since Cryptic Web, AMB and their principals were under

investigation. There would be no reason to assume that Loba would escape from

RCMP scrutiny if these other companies were being investigated.

Chronology from December 2001 forward

[383]

Godwin’s evidence was that the CRA had decided not to commence a

formal investigation of Cryptic Web, AMB and Loba regarding employment issues

until after the RCMP completed its investigation and charges were laid for fear of

jeopardizing the criminal investigation. This is borne out by events. On December

21, 2001, O’Meara, the Director of the Compliance Division at the CRA, wrote to

Loba advising that the Registered Plans Division of the CRA was conducting a

review of the Loba pension plan and seeking information and documentation,

much of which was in the possession of the RCMP at the time.³¹⁴Loba cooperated

to supply all requested information.

[384]

Early in January, Ault and Nobert independently obtained copies of

the Information to Obtain Search Warrant filed by Desnoyers. On January 3, 2002,

at an EC Group meeting, the Information to Obtain Search Warrant was reviewed.

The next week, the group retained counsel.

[385]

On January 23, 2002, Fred O’Riordan (“O’Riordan”), the Director

General of the Registered Plans Division asked Charko for complete details of all

transfers of pension benefits under the Cryptic Web, AMB and Loba pension plans

from 1996 to date for the purpose of a review being conducted by the CRA.³¹⁵

This information was provided. According to Gravelle, this was the first clear

- 135 -

statement she had from the CRA that it was investigating the AMB, Cryptic Web

and Loba pension plans. Although I accept that this was the first formal

notification in writing, I find that Gravelle, Macpherson, Godwin and Desnoyers

had kept in contact since the November 2000 meeting, and Gravelle was well

aware of everyone’s game plan in regard to Loba.

[386]

On October 3, 2002, O’Meara advised Godwin and others in the

Technical Services Division and Compliance Division of the Registered Plans

Division that Pat Lychak (“Lychak”), of the CPP/EI Eligibility Rulings Section

had advised him that, based on the evidence in the Loba file, he did not feel that

the opinion of CPP/EI Eligibility Rulings Section that no employment relationship

existed could be very strong.³¹⁶From the three exclamation marks O’Meara placed

after this statement, I conclude that O’Meara was surprised and concerned. He

went on to say: “I stressed that we should talk before a written response goes out

so that we can think corporately on this very important and precedent setting

matter”. Lychak stated that he would call one of the auditors in the Compliance

Division or O’Meara for a verbal discussion before he sent a response to

O’Meara’s letter to Rémillard, the Director of Rulings, CPP/EI Eligibility Rulings

Section seeking an opinion of whether an employment relationship existed at Loba.

[387]

On October 28, 2002, Desnoyers met with Rémillard and asked for

one of his senior staff to act as a witness in his criminal investigation.³¹⁷The staff

member was to be asked to review the RCMP file and provide a written opinion on

the status of the employer/employee relationship between Loba and its workers.

This request came almost a year after criminal charges had been laid against

Parent, Loba and others.

[388]

On May 7, 2003, Richardson, the Director of the Registration

Division, e-mailed the Director General of the Registered Plans Division and

others in the Division with an update on the Loba file. The Division’s legal

counsel was concerned that the Loba file might not be receiving the attention it

required. At that time, the Compliance Division was doing a review of the Loba

files. The Compliance Division was in the process of “negotiating for a new E.I.

opinion to strengthen [its] case on the lack of an employee/employer relationship,

which, if substantiated would place the plans in a revocable position”.³¹⁸The

impression left is that the CRA was working hard at coming up with sufficient

“evidence” to justify its taking the decision it wished to take; namely, to revoke

registration of the Loba pension plan.

- 136 -

[389]

On July 16, 2003, O’Riordan wrote Parent as President of Loba to

advise that the CRA was considering whether to revoke the registration of Loba’s

pension plan under subsection 147.1(11) of the Income Tax Act effective January

1, 1996. More specifically he stated:³¹⁹

It appears that the Plan does not comply with the prescribed conditions for

registration set out in subsection 8501(1) of the Income Tax Regulations (ITR).

Specifically, it is a condition of registration that the Plan comply with paragraph

8502(a) of the ITR. The wording in paragraph 8502(a) of the ITR is quite clear

that the primary purpose of the plan must be to provide retirement benefits in

respect of service as an employee. Therefore, a pension plan will only qualify for

registration by having the provision of pension benefits in respect of service as an

employee as the plan’s clear primary purpose.

Based on our review of the Plan, it is open to us to conclude that there is

no employer/employee relationship between the plan members and Loba Limited.

In addition, we requested, as part of the audit process, an opinion from the CPP/EI

Eligibility Division of the CCRA as to the validity of the employer/employee

relationship. The opinion, that we received recently, supports the view that there

is no employer/employee relationship.

Even if bona fide employer/employee relationships did exist for all plan

members, based on the fact that the benefits transferred in far exceed those

accrued within the plan and that membership routinely terminated shortly after the

transfer was effected, it is open to us to conclude that the primary purpose of the

plan was to effect the transfers from the members’ prior plan and not to provide

retirement benefits in respect of services rendered to Loba Limited. This would

not satisfy the primary purpose test in paragraph 8502(a) of the ITR and places the

pension plan in a revocable position as of the original effective date.

In addition, we understand that when requested by the individual’s prior

plan administrator to provide a “PA Transfer Amount” for purposes of calculating

the individual’s pension adjustment reversal (PAR), the amount provided was

“nil” or an extremely low figure. The explanation provided has been that only

pre-1990 service or limited post-1989 service is being recognized by the Plan,

resulting in a nil or low PA Transfer Amount. Therefore, the Plan is requesting

and accepting a transfer of the full value of the individual’s previously accrued

benefit for all years of service, but providing a benefit for only a fraction of that

service. This situation further suggests that the Plan was established mainly to act

as a conduit for commuted pension funds and thus fails to satisfy the primary

purpose rule. Please note that it would be inappropriate for any individual to have

received a PAR as a result of this manipulation of the PA, PSPA and PAR rules.

…

[390]

On July 29, 2003, Parent sought a copy of the opinion of the CPP/EI

Eligibility Rulings Section requested by the Registered Plans Division, and copies

- 137 -

of any materials submitted to the CPP/EI Eligibility Rulings Section. That was

provided to him on August 14, 2003.³²⁰The documents on which the Registered

Plans Division relied when making its decision that there was no

employer/employee relationship between Loba and its workers were:

• A copy of the AMB Inc. RTA;

• A copy of the Information sworn by Desnoyers dated December 10,

2001;

• A letter from Burnside to O’Meara dated May 1, 2002 enclosing pension

plan information required by O’Meara in a December 21, 2001 letter;

• A letter from O’Meara to Rémillard dated August 26, 2002 enclosing

documents relating to the audit of the Loba pension plan;

• An opinion letter from Lychak to Richardson (Gillespie) dated August

14, 2003; and

• An opinion letter from Lychak to Richardson (Gillespie) dated July 2,

2004.

Interestingly, before arriving at its decision that no employment relationship

existed, no one from the Compliance Division interviewed Parent or any of the

Loba workers, reviewed the 13 CPP/EI rulings previously issued, or obtained a

copy of the investigator’s notes to review the information she had received from

Parent and the Loba workers.

[391]

After receipt of O’Riordan’s letter and accompanying documentation,

Parent forwarded to the CRA copies of the 13 rulings he had received earlier from

the CPP/EI Eligibility Rulings Section, the ruling officer’s notes, and all of the

documentation that had been submitted to support a summary judgment motion in

the contract action Loba was pursuing against the Crown. Parent also made further

written submissions on behalf of Loba.

[392]

On September 11, 2003, Robusky wrote to Gravelle concerning the

administration of the PSSP pursuant to the terms of the PSSA and the Income Tax

Act.. That letter was not made an exhibit at trial.³²¹In response, on October 24,

2003, Charko wrote to Richardson (Gillespie), then Acting Director General of the

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Registered Plans Directorate at the CRA, to summarize the actions taken by the

TBS with respect to the AMB, Cryptic Web and Loba RTAs. He advised that the

TBS would continue to suspend transfers under the AMB and Cryptic Web and

Loba RTAs until it learned of the CRA’s decision as to whether or not it would be

revoking the registration of those companies’ pension plans. If registration was

revoked, then the TBS could not process any further transfers. If registration was

not revoked, then the TBS would have to determine whether or not it should lift its

suspension of transfers.

[393]

Meanwhile on October 16, 2003, the CRA issued a Notice of Intent to

Revoke Loba’s pension plan effective April 1, 2000.³²²The letter from Richardson

(Gillespie) notifying Parent stated her conclusion that there was no

employer/employee relationship between Loba and the former members of the

PSSP who attempted to transfer funds from the PSSP to the Loba pension plan.

Through her comments, she suggested that Loba and the former public servants

who joined Loba had attempted to deceive the government and had been involved

in subterfuge, though she did not directly state that. She stated that the rulings that

Loba had obtained from CPP/EI Eligibility Rulings Section were irrelevant for

purposes of the CRA’s administration of the Income Tax Act with respect to

registered pension plans and applicants for such registered status. She provided the

following as the reason why the Minister intended to revoke the Loba pension

plan’s registration effective April 1, 2000:

It appears the Plan does not comply with the prescribed conditions for registration

set out in subsection 8501(1) of the Income Tax Regulations (the “Regulations”).

Specifically, it is a condition of registration that the Plan complies with paragraph

8502(a) of the Regulations. The wording in paragraph 8502(a) of the Regulations

is quite clear in that the primary purpose of the Plan must be to provide retirement

benefits in respect of service as an employee. Therefore, a pension plan will only

qualify for registration by having the provision of pension benefits in respect of

service as an employee as the plan’s clear primary purpose.

[394]

On November 12, 2003, Loba filed a Notice of Appeal in the Federal

Court of Appeal from the Notice of Intent to Revoke. In a brief oral decision on

October 13, 2004, Richard C.J. stated:³²³

We can detect no error of law in the decision of the Minister to issue to

Loba Limited a Notice of Intent to revoke the registration of its pension plan,

effective April 1, 2000, pursuant to paragraph 147.1(11)(a) of the Income Tax Act

and to paragraph 8502(a) of the Income Tax Regulations, which require that “the

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primary purpose of the plan is to provide periodic payments to individuals after

retirement and until death in respect of their service as employees”.

The determination as to whether the plan met the conditions in Regulation

8502(a) is essentially a question of fact and it was reasonable for the Minister, on

the basis of the evidence before him, to conclude that the conditions were not met

as of the date of intended revocation.

[395]

It was on the eve of a motion for summary judgment in Loba’s

contract action against the Crown that Loba had learned that the CRA was

considering the revocation of the Loba pension plan. Loba and the Crown agreed

to adjourn the summary judgment motion pending the outcome of Loba’s appeal to

the Federal Court of Appeal from the Notice of Intent to Revoke Loba’s pension

plan. When Loba lost that appeal, it settled the motion for summary judgment

because there was no registered pension plan into which monies could be

transferred.

[396]

Subsequently, audits were performed on Loba by the Financial

Services Commission of Ontario and the corporate tax and GST divisions of the

CRA.

[397]

On February 26, 2004, all criminal charges against all of the accused

were withdrawn by the Crown after a judicial pre-trial in the Ontario Court of

Justice, and prior to any preliminary inquiry.³²⁴It is reasonable to infer from this

development that neither the judge presiding at the pre-trial nor the Crown counsel

believed that there was sufficient evidence of criminal wrongdoing on the part of

any of the accused to warrant the continuation of the criminal proceedings even to

the stage of a preliminary inquiry.

[398]

Despite this, in a December 13, 2005 Memorandum from the

Commissioner of the CRA to the Minister of National Revenue, language was used

that suggested Parent, the public servants who left to join Loba and those involved

in Cryptic Web and AMB had fraudulently misrepresented facts.³²⁵The current

underlying this Memorandum was that Parent and the Loba workers had done

something illegal; unfortunately, they did not get caught, but no one should feel

sorry for the negative ramifications they suffered when the Loba pension plan was

de-registered. Godwin admitted that the position of the CRA at the time was that it

did not believe Parent and the administrators of the Loba pension plan. The CRA

also believed that individual public servants who had joined Loba had acted in a

devious fashion and had knowingly misled the government.

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[399]

This Memorandum is cogent proof of the deep level of distrust and

negative animus certain public servants held toward Parent, and I would add Loba

workers like the Plaintiffs, starting in 1999 and continuing until the trial of this

action. This attitude marred the judgment of people like Charko, Gravelle,

Macpherson, Desnoyers, O’Meara and Godwin. It jeopardized the even-

handedness with which they should have approached their duties. It blinded them

to the legitimate interests that people like the Plaintiffs had regarding their

pensions. It positioned them as an adversary of Parent and, once they had resigned

from the public service, the Plaintiffs. All of this facilitated Gravelle, Macpherson,

and Swan being negligent in not getting relevant and necessary information to the

Plaintiffs in a timely fashion so that they could make informed decisions about

Loba. At the same time, this attitude facilitated Gravelle, Macpherson, Desnoyers,

O’Meara and Godwin keeping Parent in the dark about the real nature of the

government’s concerns about Loba. I will come back to this point when dealing

with the apportionment of damages.

[400]

In December 2005, Parent attempted to once again have the Loba

pension plan registered under the Income Tax Act. In a letter to him dated

February 13, 2006, the Director General of the Registered Plans Directorate stated

that the Minister had previously revoked the Loba pension plan effective April 1,

2000 because the CRA was satisfied that there was no employer/employee

relationship between Loba and the former plan members.³²⁶The CRA was not

changing its position.

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Outcome for Individual Public Servants

[401]

Once registration of the Loba pension plan was cancelled, several

Loba workers revoked their request for a transfer under the Loba RTA and have

subsequently been able to access their pensions under the PSSA. Others have not

yet revoked their request and are waiting to see the outcome of Parent’s application

to re-register the Loba pension plan.

Individual Actions

[402]

Up to this point, I have dealt globally with the background and facts

relating to all of the actions heard at the trial. I will now review the background

and facts relating specifically to individual Plaintiffs and actions.

Richard Findlay (action no. 05-CV-031616)

[403]

Richard Findlay (“Findlay”), a chemical engineer, was born on

August 4, 1948. He joined the federal public service in 1977 and spent his entire

career with the public service at Environment Canada. Commencing August 1,

1998, Findlay became the Ottawa Bureau Director of Pollution Probe pursuant to a

three-year Interchange Canada Agreement between Pollution Probe and

Environment Canada. The agreement provided that Findlay would receive the

same salary and benefits as those to which he was entitled under the collective

agreement applicable to his public service group and level. Environment Canada

continued to pay Findlay’s salary, and was reimbursed by Pollution Probe.³²⁷

Upon the termination of that Agreement, Findlay was entitled to return to

Environment Canada.

[404]

When Findlay entered the Interchange program, he was 50 years old.

I find that he went to Pollution Probe in part due to the work atmosphere at

Environment Canada. Environment Canada was one of the departments hardest hit

by the program review and downsizing happening in the federal public service at

that time. Heavy workloads and excessive stress were ongoing factors at

Environment Canada and contributed to Findlay’s desire for a change. Findlay’s

stated intention was to return to Environment Canada upon completion of the

Interchange agreement and work until a planned retirement at age 60. At that time,

Findlay would have been entitled to an unreduced pension under the PSSA together

with his CPP annuity.

- 142 -

[405]

Findlay first heard of Loba through the former Assistant Deputy

Minister of Environment Canada, Tony Clark (“Clark”), who at the time was on

assignment at another federal agency. Clark advised Findlay that a number of

Environment Canada employees were investigating the Loba RTA. Findlay spoke

to two of them, Shantora and Ron Shimizu (“Shimizu”). Both were good friends,

were more senior in the department than Findlay, and were respected by Findlay.

Shantora had hired Findlay in 1977. Both were very interested in the Loba RTA

and were likely going to join Loba.

[406]

Findlay was aware that some pension portability mechanism existed

to facilitate mobility in and out of the public service; otherwise, he had no

knowledge of RTAs. At some point he read the August 2000 APEX Bulletin,³²⁸

and he understood from it that an RTA was an opportunity only available until

October 15, 2000. Findlay saw Loba’s advertisement in the Hill Times regarding

the Loba RTA, and he submitted a request for information to WBP on September

26, 2000.³²⁹Burnside responded with a list of the information WBP would require

in order to determine the impact of the Loba RTA as it related to Findlay’s

situation.³³⁰

[407]

Findlay met with his compensation advisor at Environment Canada,

Lise Plourde (“Plourde”). He understood that she was the person within the

department that he was supposed to consult for advice regarding anything to do

with pay and benefits and his compensation history. Findlay asked Plourde about

the Loba RTA, how it worked and the procedure to follow if he resigned from

Environment Canada to join Loba. Plourde was familiar with the Loba RTA.

Findlay specifically asked Plourde if the Loba RTA was valid and whether there

were any problems with it. Plourde assured Findlay that it was valid and there

were no problems. Plourde provided Findlay with a blank Appendix B on which

she wrote “RTA”.

[408]

On September 29, 2000, Plourde faxed Findlay a document entitled

“Pension Transfer Agreements. Notice to Employees” which included the

following statement:³³¹

Eligibility

In the past, pension funds were transferred under the terms of a Reciprocal

Transfer Agreement (RTA). Most existing RTAs will expire on October 15,

2000. If the agreement is one which will expire on October 15, 2000, as long as

you request the transfer by signing the necessary document prior to that date and

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forward it within the time specified in that agreement, the transfer will be

completed.

…

Important Factors to consider before making a decision

The existence of an agreement between employers does not necessarily mean that

a transfer of your pension credits will be an advantage for you. It is important to

compare the pension benefits available under both employer’s plans, as well as

the cost to pay for any unpurchased balance. We also encourage you to obtain

counselling from a financial advisor before making a decision.

We also suggest that you contact your Compensation Advisor in order to obtain

all the necessary details with regards to the administrative requirements.

[409]

In the same fax, Plourde enclosed Findlay’s compensation history on

which she had made certain handwritten notations relating to his years of service.

Findlay immediately faxed this documentation to Burnside at WBP.³³²On October

2, 2000, Burnside e-mailed Findlay to advise that at least $588,000 would be

available to him subsequent to the RTA.³³³

[410]

On October 9, 2000, Findlay met with Parent for approximately one

hour at WBP’s offices. Findlay never met Zeithammel and does not know him.

During the meeting, Parent provided Findlay with copies of the following

documents: (1) Citizen article entitled “PS pension option packs big payoff”; (2)

Citizen article entitled “Surviving the Cuts. Ignoring the pension parachute”; (3)

article by Parent entitled “Leaving the Public Service”; (4) article by Parent

entitled “Leaving the public service? There are new options to consider”; (5)

October 3, 1997 letter from Hamilton to Parent; (6) October 20, 1997 letter from

Parent to Hamilton; (7) February 4, 1999 SAM Special Bulletin: 1999-002 entitled

“Cancellation of Certain Reciprocal Transfer Agreements”; (8) August 22, 2000 e-

mail from Gravelle to Parent,³³⁴and (9) a copy of the Loba RTA.³³⁵Parent did not

provide Findlay with a copy of his June 20, 2000 letter to Gravelle, and Findlay

acknowledged that it would have been helpful if Parent had done so. Findlay did

not make any inquiries to find out why the Loba RTA had not been cancelled when

other RTAs that Parent had negotiated had been cancelled.

[411]

Parent stated that the Treasury Board was “not that happy” with the

Loba RTA, as evidenced by the letter from Hamilton; however, this was a few

years earlier, and the Loba RTA was still valid, as evidenced by Gravelle’s e-mail.

Most of the meeting with Parent was devoted to financial analysis. Parent

provided Findlay with a copy of a whiteboard presentation he made during the

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meeting, summarizing the options available to Findlay if he transferred his pension

entitlement from the PSSP to the Loba pension plan pursuant to the Loba RTA

when compared to what he could expect to receive otherwise.³³⁶Parent also

provided Findlay with various calculations that had been prepared for him prior to

the meeting showing: (1) the deferred annuity to which Findlay would be entitled

under the PSSA assuming retirement ages of 52.91,³³⁷53.83³³⁸and 52.99³³⁹years;

(2) the deferred annuity and cash payment to which Findlay would be entitled if he

used the Loba RTA, assuming a retirement age of 54.49 (2003); and (3) the

transfer values associated with these options. Parent advised that $636,365 should

be available for transfer from the PSSP to the Loba pension plan under the Loba

RTA, and that Findlay was guaranteed to receive 92.5% of the amount transferred.

This compared favourably with the transfer values which Parent advised would

otherwise be payable on behalf of Findlay under the terms of the PSSA if he

terminated membership in the PSSP on the various retirement dates assumed in the

three calculations. Other features of these two basic options were explored, such

as the survivor benefits and excess cash payments available under each option.

[412]

Findlay understood that from the contract income he generated, Loba

would retain $2,800 as a one-time retainer fee; anything over and above that

amount not being used to fund benefits for Findlay would go back into the Loba

pension plan for Findlay’s benefit. Findlay realized that any money retained by

Loba, over and above the $2,800, would come from pension monies transferred

into the Loba pension plan from the PSSP.

[413]

During the October 9^thmeeting, Parent did not provide Findlay with

a copy of Godwin’s September 15, 2000 letter to Parent and attachment. Parent

told Findlay clearly that he was expected to be an employee of Loba, he would be a

consultant, and he would be expected to find his own consulting work. Parent did

not tell Findlay that the CRA had concerns about the existence of an employment

relationship between Loba and the public servants joining Loba. Findlay was not

worried about getting consulting work. He had two decades of experience working

with the federal public service, he had experience negotiating the Kyoto Protocol,

and he believed he could continue working as a consultant with Pollution Probe.

[414]

Findlay decided to get a second opinion about the financial

implications of joining Loba. On October 10, 2000, he faxed Jemus asking if the

RTA opportunity with Loba that expired on October 15, 2000 was a good idea for

him. He provided Jemus with the calculations he had received from Plourde and

- 145 -

Parent. Findlay chose to consult Jemus because he was provided his name by

Shimizu, and he recognized Jemus from a 1997 pre-retirement course that had been

sponsored by the public service. Findlay had met Jemus following the course to

discuss his individual situation. On October 11, 2000, Findlay met with Jemus to

review his calculations. The calculations confirmed Parent’s conclusion that

financially Findlay would benefit from the Loba RTA.³⁴⁰Findlay’s understanding

from Jemus was that the Loba RTA was a valid arrangement, and it made sense for

Findlay to seriously consider it. Following his meeting with Jemus, Findlay

decided to join Loba. The key factor persuading Findlay to leave the public

service to join Loba was the financial benefit under the Loba RTA, including the

fact that the money transferred to him would remain part of his estate.

[415]

On October 11, 2000, Findlay attended the offices of WBP/Loba and

signed the following documentation: (1) employment agreement;³⁴¹(2) Pension

Plan for Employees of Loba Limited. Schedule B (commissioned) Employees.

Application for Membership;³⁴²(3) Application for Employment;³⁴³and (4)

Pension Transfer Administration Agreement.³⁴⁴On that date or shortly thereafter,

Findlay signed his Appendix B requesting the Treasury Board to transfer the value

of his pension entitlement from the PSSP to the Loba pension plan.³⁴⁵This was

forwarded by Burnside to the Superannuation Directorate on October 14, 2000.

[416]

On October 12, 2000, Findlay submitted his letter of resignation to

François Lalonde (“Lalonde”), his supervisor at Environment Canada, and to

Pollution Probe, indicating that he would be seeking a position with a private

company and would be applying for a transfer of his pension to the company’s

plan under an RTA. Prior to submitting his letter, Findlay had verbally advised

Lalonde that he was contemplating leaving the public service, joining Loba, and

transferring his pension entitlements from the PSSP to the Loba pension plan under

the Loba RTA. Lalonde said nothing to Findlay about Loba or the Loba RTA.

Lalonde indicated that Findlay was an important member of Environment Canada

and he would be missed.

[417]

On October 13, 2000, Findlay met with Plourde and signed a form

completed by her indicating that he was terminating his employment with the

public service and was choosing an RTA as his choice of benefit.³⁴⁶During the

meeting, Findlay told Plourde that he was leaving to join Loba and would be taking

advantage of the Loba RTA. At no time did Plourde indicate to him that there

might be a problem with the Loba RTA and pension plan.

- 146 -

[418]

On October 23, 2000, Plourde forwarded to Findlay a document

entitled “Richard Alan Findlay Various Benefits Upon Termination of

Employment”, a Tax Deduction Waiver for a Direct Transfer of an Eligible

Retiring Allowance, and a copy of the Notice of Termination and Option for

Benefit which Findlay had already signed with Plourde on October 13, 2000.³⁴⁷

[419]

On November 10, 2000, Desrochers, the General Manager of Loba at

the time, and Ken Ogilvie, Executive Director of Pollution Probe, signed a six

month Service Agreement between Loba and Pollution Probe whereby Findlay

would direct and manage Pollution Probe’s Ottawa office and water program.³⁴⁸

The contract was limited to six months, as Findlay intended to work with Loba

only until such time as his pension money was transferred from the PSSP.

Thereafter he intended to work on contract directly with Pollution Probe. The

agreement between Loba and Pollution Probe was extended to September 2002 by

subsequent contracts, as Findlay waited for the transfer of his pension money.³⁴⁹

Over the term of the contracts, Loba sent invoices to Pollution Probe, Pollution

Probe paid Loba and Loba paid Findlay. Findlay received between 77% and 85%

of the amount Loba billed Pollution Probe.

[420]

I find that, at least commencing in November 2000, Findlay

understood that the Superannuation Directorate would be investigating whether

there was a legitimate employer/employee relationship between Loba and its

workers and, if it concluded that no such relationship existed, the transfer of his

pension monies under the Loba RTA would be in jeopardy. I find that this

knowledge did not worry Findlay at the time because he was confident that he

could put all of his work with Pollution Probe through Loba and, as far as he

understood, these arrangements meant that he was employed by Loba.

[421]

Findlay’s evidence was that, when he received a December 14, 2000

letter from Soucoup stating that the existence of an employer/employee

relationship was a critical pre-condition to transferring funds under a pension

transfer agreement and asking for confirmation of his employment relationship

with Loba, he thought that this was a routine requirement to verify his status prior

to his pension money being transferred.³⁵⁰Although I accept Findlay’s evidence

that he thought this was a standard form letter sent out by the Superannuation

Directorate to all those applying for transfers under an RTA, I also find that

Findlay was aware that the existence of an employment relationship between Loba

and its workers was a key factor for the legitimacy of the Loba RTA. Findlay

- 147 -

assumed that his working relationship with Loba would be short-term and was in

place solely so that he could make use of the Loba RTA. He realized that the

employment aspects of his relationship with Loba had to be emphasized over any

features of that relationship that might detract from a finding that he was an

employee of Loba. Therefore he intended to draft his response to the

Superannuation Directorate in a thoughtful fashion. For this reason, Findlay

consulted Desrochers who directed him to the Loba website for employees where a

standard response was suggested. Findlay submitted his response to Soucoup on

January 7, 2001.³⁵¹He received no follow-up questions from Soucoup. He

assumed that his response had been accepted and was deemed satisfactory. There

is nothing in the evidence which leads me to conclude that anything said by

Findlay in his letter to Soucoup was inaccurate or misleading or that any of the

Third Parties ever encouraged Findlay to lie or misrepresent the nature of his

relationship with Loba.

[422]

During the spring and summer of 2001, questions were being raised

by the EC group as to why the transfers were not happening. They were told by

Parent and Burnside that the Superannuation Directorate blamed the delays on

excessive workloads. By September 2001, Findlay was concerned about the delay.

He was aware by this time that both the Treasury Board and the CRA were looking

into the employment issue at Loba. When Findlay learned from Loba in October

2001 that the CPP/EI Eligibility Rulings Section had determined that Loba workers

were employees, he was reassured that things were on the right track. In

November 2001, Findlay asked Parent to create an IPP for him in anticipation of

the eventual transfer of his funds from the PSSP.

[423]

Until December 2001 when he learned of the RCMP search at the

offices of WBP and Loba, Findlay had been unaware that the Treasury Board had

such serious concerns with the Loba RTA and pension plan that a hold had been

placed on transfers and a criminal investigation was underway. He was shocked

by this turn of events and immediately contacted counsel. Findlay’s evidence was

that, had he known in September/October 2000 that the RCMP was investigating

Loba and Parent, he would have asked his managers at Environment Canada for

advice. He would not have joined Loba without first investigating matters further.

[424]

After the criminal charges were laid against Parent and the other

accused, Parent continued to reassure Findlay and other Loba workers that the

criminal charges would not amount to anything and the transfers would eventually

- 148 -

occur. By this time, Loba had sued the federal Crown and, as far as Findlay

understood, Parent was optimistic about the outcome of that litigation. Findlay

was willing to wait out the litigation; he was not prepared to change the course of

action. In September 2002, Findlay started working on contract directly with

Pollution Probe, as by then he saw no benefit continuing to work through Loba.

He continued to work at Pollution Probe as of the date of trial. On December 2,

2004, after the Federal Court of Appeal had denied Loba’s appeal of the revocation

of the registration of its pension plan, Findlay revoked his request to have his PSSA

pension entitlements transferred to the Loba pension plan under the Loba RTA.³⁵²

He did so because, by this time, he had lost faith that a transfer under the Loba

RTA was ever going to happen.

[425]

On January 3, 2006, Findlay officially terminated his employment

with Loba. Despite all of the difficulties Findlay experienced through his

involvement with Parent and Loba, he still sought Parent’s advice as to his options

for transferring his entitlements under the Loba pension plan and his IPP. As well,

he thanked Parent for all of his efforts on behalf of Loba employees.

Margaret Ault (action no. 04-CV-026378)

[426]

Margaret Ault (“Ault”) was born on December 5, 1942. She has a

B.A. and M.A. in geography and one year of law school. She joined the Public

Service in 1982, initially with the Canada Oil and Gas Lands Administration. In

1985, she moved to Environment Canada in Edmonton, returning to Ottawa in

1991. In January 1994, she became the Manager of Intergovernmental

Harmonization for Environment Canada. She remained in this position until her

resignation from the public service in October 2000. At that time, she worked for

the Environmental Protection Service (“EPS”) and had a PC-5 designation. From

1999 to 2000, Ault reported to Cynthia Wright (“Wright”), the Director-General of

the Planning and Priorities Directorate of EPS.

[427]

Ault initially heard about Loba near the end of August 2000 when e-

mails announced the departure of some of her colleagues at Environment Canada.

She spoke with Wayne Draper (“Draper”), who explained the essence of the Loba

RTA and advised her that it would terminate on October 15, 2000. Within a few

days of speaking with Draper, Ault read the APEX Bulletin regarding RTAs.³⁵³

Ault understood from this article that RTAs were terminating on October 15, 2000

- 149 -

to be replaced by PTAs. At some point, Ault also saw the Retirement Planning

Institute’s notice about the October 15^thdeadline.

[428]

Draper and another Environment Canada employee advised Ault to

speak to Jemus if she was interested in Loba. At this time, Ault advised Wright

that she was looking into the Loba option. Wright suggested that she speak with

John Buccini (“Buccini”), an Environment Canada employee who was resigning to

join Loba. Eventually, Ault became aware that 18 to 20 Environment Canada

employees were considering joining Loba. Only one of those decided against

doing so.

[429]

On September 11, 2000, Ault e-mailed her pay and benefits officer

asking, among other things, if there were any internal deadlines at Environment

Canada for activating the RTA option.³⁵⁴She received a response only on October

3, 2000 at which time she was simply reminded of the October 15^thdeadline for

RTAs.³⁵⁵In an exchange of e-mails between Ault, Louise Morin-Girouard

(“Morin-Girouard”) from pay and benefits and Wright, Morin-Girouard stated:

We gave Margaret all the information we could to enable her to take a decision.

This is the type of information we gave to all other employees interested by the

option. She may now want to see a financial counsellor (like the others did)

before she decides whether she wants to resign or not. If she decides to resign, as

soon as we receive her letter of resignation, her Compensation Advisor, Johanne

Carrière, will sit down with her to complete the necessary paperwork.

[430]

On September 11, 2000, Ault e-mailed Jemus at Pension Positive

inquiring if he could provide her with a financial analysis that would assist her in

deciding whether to pursue the Loba option.³⁵⁶Ault had met Jemus at a pre-

retirement course in the fall of 1996 and as a follow-up to that course had asked

him to do a financial analysis to see if she could consider early retirement either

under the Early Retirement Incentive program or the Early Departure Incentive

program then being offered by the federal government. After seeing Jemus’

analysis, Ault had decided early retirement was not a viable option. ³⁵⁷

[431]

On September 12, 2000, Ault asked Judith Farley (“Farley”), the head

of Human Resources for the EPS, and Ginette Patry (“Patry”) for the data Jemus

had indicated he required in order to do an analysis. They in turn forwarded Ault’s

request to Johanne Carrière (“Carrière”), the compensation advisor responsible for

Ault’s section. On September 13, 2000 Ault e-mailed questions to Carrière about

- 150 -

timing issues related to applying for a transfer under a RTA.³⁵⁸By this time, she

had read the Notice to Employees distributed by the Human Resources Corporate

branch of PWGSC on September 12, 2000, which stated that, as long as she

submitted the transfer request prior to October 15, 2000, the transfer would be

completed.³⁵⁹

[432]

Ault also saw the September 13, 2000 Information Bulletin sent to all

heads of Human Resources entitled “Pension Transfers: Old rules give way to

new”.³⁶⁰She forwarded this bulletin to a friend for input on the difference between

an actuarial valuation of pension benefits and twice contributions plus interest and

on the advantages and disadvantages of a public service pension versus a privately-

managed pension.³⁶¹

[433]

Ault sought out Buccini for information about the Loba option. He

explained certain aspects of the Loba arrangements which he had gleaned through

his earlier discussions with Parent, Jemus and Gravelle. Buccini reported that he

was satisfied after his discussions with Gravelle that the Loba RTA option was

legitimate. Ault respected Buccini and valued his opinion. When Parent later

discussed Loba’s Incentive Recruitment program with her, Ault named Buccini as

the person who had referred her to Loba, thereby guaranteeing Buccini $1,000.

[434]

Ault forwarded to Jemus the information received from her Human

Resources department, some of which was initially incorrect. In fact, on

September 18, 2000, she e-mailed Wright to complain about the incompetence of

the pay and benefits section providing numbers to her and others, and to keep

Wright informed as to her thinking regarding Loba.³⁶²There were numerous e-

mails between Ault, Wright and personnel in pay and benefits that made it very

clear to everyone that Ault was considering applying for a transfer under an RTA.

By this time, Wright knew that Vic Buxton (“Buxton”), Draper and Buccini had

resigned to join Loba, and Ault and two others were considering this option.

[435]

On September 19, 2000, Ault met with Parent. He explained the

history of the Loba RTA, the pension transfer process, the pension management

options, her numbers and the working relationship that she would have with Loba.

She understood that six of the other RTAs that Parent had negotiated had ended.

Parent told her that Loba was left because it had not been active. She understood

that she would work as a commissioned employee of Loba. She would have to

seek her own contracts. Loba would be responsible for entering into the contracts.

- 151 -

Loba would invoice the clients and would then pay Ault 77% of the revenue

generated under the contract. Ault left the meeting with Parent with a form entitled

“Reciprocal Pension Transfer Agreement. Termination/Retirement Option

Statement Estimate” and one entitled “Public Service Superannuation Act

Reciprocal Transfer Agreement Estimate”.³⁶³Ault never met Zeithammel and

never had any dealings with Zeithammel while she was working with Loba.

[436]

Following the meeting with Parent, Ault was interested in the Loba

RTA. She had some comfort knowing that funds would be transferred to Clarica

and that she would have time to consider management options for her pension.

Although there would be administration fees involved, she felt they were

reasonable in the circumstances. What she needed to assist in her decision-making

was the financial analysis to be done by Jemus. Ault knew that four of her

colleagues had consulted Jemus. In late September, Ault met with Jemus, who

explained the calculations he had done comparing the value of her pension

entitlement under the PSSA and under the Loba RTA. She concluded that,

although the Loba option produced the higher value ($427,505), it was not

significantly greater than the transfer value under the PSSA ($415,813).³⁶⁴

[437]

On approximately October 7, 2000, Ault decided to leave the public

service to join Loba. The factors which impacted on her decision were: (1) being

able to work more on projects and less on managing money and people within the

bureaucracy; (2) being able to leave the value of her pension to her estate; (3) the

protection of her pension within Clarica; (4) her ability to manage the assets within

her pension; (5) the understanding she had from her meetings with senior

management that the Loba option was legitimate and did not present any concerns;

(6) the solid analysis done by some of her colleagues; and (7) the assurance given

in government publications that the transfer would be effected. It was important

for Ault to be able to leave the value of her pension to her estate because Ault had

been a widow since 1991 and had three grown children, one of whom was

particularly dependent on her.

[438]

On October 9, 2000, Ault had a second meeting with Parent, at which

time he did a presentation on a white board comparing the PSSA option with an

IPP option under the Loba RTA.³⁶⁵Ault understood at that time that, from a

process perspective, once she had signed all necessary documents, and provided it

was confirmed that she was an employee of Loba, the transfer would happen. Ault

understood that the TBS had some concerns about the Loba arrangements, one

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being that Parent would benefit financially from the arrangements. She did not

understand that the concerns related to a possible cash payment to her. Ault did

not call the TBS, the Superannuation Directorate or the CRA for any feedback

concerning the Loba arrangements; nor did she seek the advice of a lawyer.

[439]

On October 10, 2000, Ault submitted her letter of resignation to

Wright.³⁶⁶On October 11, 2000, she signed the Notice of Termination and Option

for Benefit with Carrière, who added a box showing the option Ault was taking

was an RTA.³⁶⁷On October 12, 2000, Ault submitted an Application for

Employment with Loba³⁶⁸and signed Loba’s standard form employment

agreement,³⁶⁹Application for Membership in Loba’s pension plan,³⁷⁰Pension

Transfer Administration Agreement,³⁷¹and her Appendix B³⁷²(dated October 13,

2000).

[440]

Although she did not have any contracts lined up before she left the

public service, Ault was confident that she would be able to earn $86,000, the

amount she had been earning with the public service. Her first contract was

arranged through Wright, who wished Ault to complete some work for

Environment Canada. From October 2000 until Ault’s retirement in June 2007,

she had 33 contracts for a variety of clients. Of these, four early ones were done

through Loba, nine were done through Margaret Ault Consulting, and the balance

were done through Regulatory Consulting Group Inc.³⁷³In regard to the work Ault

did through Loba, she received a direct deposit into her account by Loba. Her

earnings were subject to deductions for CPP, employment insurance, income tax

and the Loba pension plan.

[441]

Ault received the December 18, 2000 Superannuation Directorate

letter seeking confirmation of her employment status with Loba.³⁷⁴She had been

told by Parent to expect this letter. Parent had also advised the EC group in his

November 24, 2000 e-mail that there was a standard response to that letter that

Loba had prepared. He asked the members of the EC Group to fax Loba a copy of

the letter they received from the Superannuation Directorate so that Loba could

prepare a draft reply for their review and signature. I find that Ault assumed that

this letter was not sent to people in the normal course; it was an unusual response

from the government to the unusual situation of 120 public servants leaving at the

same time to join a private consulting firm. Ault responded on January 9, 2001,³⁷⁵

after having provided Desrochers with a draft response,³⁷⁶as requested. The

communications between Ault and Loba about this letter suggest that Ault

- 153 -

recognized the sensitivity of the issue of her employment with Loba. I find that

Ault answered Soucoup’s questions honestly and accurately, and at no time did

Parent, WBP or Loba ask her to lie regarding her employment status with Loba. I

find that Ault was confident that she would be considered an employee of Loba

because she planned to work full-time and put all of her work through Loba.

[442]

Ault was aware that, by the spring of 2001, certain members of the EC

Group were becoming concerned with the delay in the transfers. She believed that

in the spring of 2001, Shantora shared with the EC Group feedback he received

from Parent in April 2001 to the effect that the Treasury Board had indicated that

they would require confirmation from the CRA that registration of the Loba

pension plan continued, and that Loba was having its lawyer prepare a submission

in this regard.³⁷⁷I accept Ault’s evidence that, at that point, she did not appreciate

the different roles being played by the Treasury Board, the Superannuation

Directorate and the CRA in regard to the Loba arrangements. She did not fully

appreciate the seriousness of the CRA having concerns about Loba and the

possibility that those concerns could result in the Loba pension plan losing its

registration. I do find, however, that by the summer of 2001, there would have

been enough conversations amongst the EC Group members about the CRA’s

concerns that Ault would have been aware of the potential seriousness of the

situation. Nevertheless, there is no evidence to suggest that by this time she feared

that the Loba transfer would not proceed as planned.

[443]

Ault received the September 20, 2001 letter from Loba advising of

its request to the CRA to provide a ruling in respect of the status of employment of

all Loba workers, and warning that certain workers would be contacted for an

interview.³⁷⁸On October 9, 2001, Ault had a telephone interview with the CPP/EI

Eligibility Rulings interviewer. She immediately notified the EC Group, including

Armstrong, Findlay and Shepherd, of the questions that had been put to her.

When, during the course of litigation, Ault had access to the interviewer’s

typewritten report,³⁷⁹she discovered two errors: first, that she had medical and

dental coverage as a former public servant [her coverage being available to her as

the widow of a public servant], and secondly, that she was not registered as a

business [Ault had told the interviewer that she was registered as Margaret Ault

Consulting and the interviewer had recorded that in her notes.³⁸⁰] There is no

evidence that Ault lied or misrepresented her status with Loba when she answered

the interviewer’s questions, or that Parent or anyone associated with Loba asked

her to lie or misrepresent her employment relationship with Loba.

- 154 -

[444]

Ault received a letter from the Ottawa Tax Services Office of the

CRA dated October 19, 2001 stating that she was an employee under a contract of

service with Loba, one of the reasons being that Loba established her clientele.³⁸¹

Ault did not understand this rationale in that she had not told the interviewer

anything that should have led her to conclude that Loba was obtaining clients for

Ault. I find that both Ault and Parent accurately described to the CRA

representative how Ault obtained work; their answers in this regard did not get

accurately reflected in the final report prepared by the CRA.

[445]

Meanwhile on October 16, 2001, Ault had attended a meeting with

Parent and other EC Group members, the focus of which was to discuss how to

manage pension funds once they were received from the PSSP.³⁸²Parent explained

how the monies transferred from the Superannuation Account would initially be

placed in the Money Market account at Clarica to the credit of the Loba pension

plan. Individuals could access their portion either by terminating their

employment with Loba and receiving a transfer value from the Loba pension plan,

or by establishing an IPP. Fletcher explained the investment options if an IPP were

created. By November 2001, Ault was aware of the favourable ruling from the

CRA regarding her employment status.³⁸³She arranged a meeting with Parent and

Fletcher to discuss the creation of an IPP.³⁸⁴At that time Parent provided her with

an updated Loba Transfer Adjustment Calculator that provided her with additional

information as to the funds that would be added to her Loba pension entitlement as

a result of surplus revenues from her contracts over and above payroll deductions

and the $2,800 overhead retainer.

[446]

I accept Ault’s evidence that, by this time, certain members of the EC

Group were particularly concerned with the delay in transfers because some of

them required access to their pension funds. Ault did not. She had contract work

and anticipated continuing with that work into the indefinite future. In 2001, Ault

was putting as much contract work as possible through Loba. However, by the

winter of 2001, although Environment Canada in Montreal and other government

departments would still contract with Loba, Environment Canada in Ottawa did not

want any further contracts with Loba. For that reason, Ault created Margaret Ault

Consulting. Starting in October 2003, virtually all of Ault’s contracts were done

through another company, Regulatory Consulting Group.

[447]

Ault was shocked when she received the December 19, 2001 update

from Loba advising of the criminal investigation and likely charges.³⁸⁵It was the

- 155 -

first time she had heard of an RCMP investigation. She immediately contacted the

media spokesperson at the RCMP because she wanted to see all of the information

that had been presented to the court in order for the RCMP to obtain a search

warrant. Early in the new year, Ault obtained a copy of the Information to Obtain

Search Warrant from the court.³⁸⁶What she read horrified her. She learned that

the RCMP had started its investigation and that the Treasury Board had had serious

concerns about the Loba RTA long before she had taken her decision to join Loba.

During the first week of January, 2002, Ault retained counsel.

[448]

On September 10, 2002, Ault wrote to the President of the Treasury

Board, to revoke her request for a transfer under the Loba RTA.³⁸⁷On September

19, 2002, Macpherson responded that, due to the civil action Loba had brought

against the Crown in the Federal Court, the Crown would only accept a revocation

if a Release and an Indemnification Agreement were executed.³⁸⁸Ault or her

lawyer was invited to contact Turley for details regarding the agreement. The

Release and Indemnification Agreement that Ault was asked to sign was

exceedingly onerous. Understandably, Ault refused to sign it.³⁸⁹Instead she

brought an application for judicial review in the Federal Court that resulted in a

decision to the effect that she was not required to sign the Release and

Indemnification Agreement before revoking her request for the transfer.³⁹⁰On

November 18, 2003, Ault renewed her revocation, and this time it proceeded

without condition.³⁹¹

[449]

In 2004, Ault started to receive her pension under the PSSA effective

December 5, 2002, her 60^thbirthday. She received a lump sum payment for the

period up to the commencement of the payments.

Rodney Shepherd (action no. 04-CV-028197)

[450]

Rodney Shepherd (“Shepherd”) was born on June 7, 1949. He joined

the federal public service as a financial clerk in 1972, after having obtained his

Commerce degree. Shepherd was promoted to a financial manager and by 1984

was in the Executive category at Environment Canada. In 1997, Shepherd was

assigned to the National Capital Region (“NCR”) Joint Career Transition

Committee (“JCTC”), which had been set up during the program review period in

the mid-1990s to help employees who were transitioning due to the downsizing of

the public service. His assignment kept getting extended from year to year, and he

was still at the JCTC in the summer of 2000. The understanding was that, when

- 156 -

this assignment finally ended, Shepherd would be given another assignment at

Environment Canada, his home department.

[451]

Shepherd first heard of Loba during a casual conversation on

September 29, 2000, with Buxton, who had just resigned from the public service to

join Loba. Buxton explained to Shepherd some of the advantages under the Loba

RTA, such as the transfer amount being calculated as twice contributions plus

interest. Shepherd learned of the October 15^thdeadline. He learned that one

became a consultant or commissioned employee working for Loba, one had to find

his or her own contracts, and Loba took a percentage of the contract amount. Prior

to this conversation, Shepherd knew that RTAs existed due to notices published by

Environment Canada and PWGSC; however, he was unfamiliar with the Loba

RTA. Buxton advised Shepherd to get figures from Human Resources at

Environment Canada and to ask Jemus at Pension Positive to do relevant

calculations so that Shepherd would understand his options.

[452]

Shepherd researched Loba on the federal government Intranet. He

discovered the Treasury Board’s September 7, 2000 Information Bulletin “Pension

Transfers: Old rules give way to new”,³⁹²the August 2000 APEX Bulletin

summarizing the same information,³⁹³and the SAM list of companies with whom

the Treasury Board had RTAs. Loba was on the list. The Treasury Board and

APEX bulletins directed interested persons to their compensation advisors to find

out if a particular employer had an RTA with the Treasury Board. Shepherd also

saw the PWGSC Notice to Employees.³⁹⁴

[453]

On October 2, 2000, Shepherd met with Carole Langlois (“Langlois”),

the Director of the Executive Group at Environment Canada. He told her that he

was looking at transferring to Loba. She indicated that she was aware of several

employees looking at the Loba option, and that it was available only until October

15^th.³⁹⁵Shepherd advised her that he would show his numbers to Jemus at Pension

Positive. Langlois stated that she knew him from earlier programs at the public

service, and she anticipated that he would provide Shepherd with a very quick and

good response. Langlois referred Shepherd to Carrière, who would provide

Shepherd with his salary and service records, and Patry, his compensation advisor,

with whom he would sign the necessary paperwork if he chose to resign from the

public service.

- 157 -

[454]

Shepherd immediately contacted Carrière, indicating he needed the

same set of numbers that others who were considering joining Loba had asked for.

Carrière provided the numbers to Shepherd on October 3^{rd 396}and he faxed them to

Jeremiah Prentice (“Prentice”) at Pension Positive on the same day.³⁹⁷Within a

couple of days, Pension Positive had sent Shepherd various calculations relating to

his PSSP benefits and the Loba option. Shepherd met with Jemus at Pension

Positive on October 6^thto review Jemus’ calculations. Shepherd understood that

the Loba RTA was a legitimate opportunity, sanctioned by the government, which

he was free to pursue if it were to his advantage. Jemus confirmed to Shepherd

that the Loba RTA would be financially advantageous to him. Jemus advised

Shepherd to speak to Parent if he wanted to pursue a transfer under the Loba RTA.

[455]

Shepherd met with Parent and Burnside on October 11, 2000.

Shepherd wanted Parent to provide him with advice regarding his pension

entitlement. As well, he had specific questions for Parent: (1) what did it take to

become an employee of Loba; (2) how did an IPP get established; (3) who received

the 7.5% of the transferred amount that Shepherd would not receive; and (4) what

was that payment for. Parent and Shepherd did not have adequate time to fully

canvass the last two questions.

[456]

Parent confirmed that Shepherd would actually have to work for

Loba. If Shepherd continued to work for the JCTC through an Interchange

Agreement between Loba and JCTC, that would be sufficient evidence that

Shepherd was employed by Loba. Parent advised Shepherd that Prosource was an

agency that would help Shepherd obtain contracts once his contract with JCTC

ended. Parent advised that the Superannuation Directorate would send Shepherd a

letter to confirm that he was a Loba employee, and he suggested that Shepherd

discuss that letter with Parent before responding to it.

[457]

Parent explained calculations he had done on Shepherd’s behalf

comparing his entitlement under the PSSA with what he could receive under the

Loba RTA.³⁹⁸Shepherd understood that $845,219 was available to be transferred

under the Loba RTA, and Shepherd was guaranteed to receive 92.5% or $781,828.

Shepherd understood that if he were to receive a transfer value in April 2001,

instead of making use of the Loba RTA, he would receive the total value of

$712,759. Shepherd understood that the commuted value of his PSSA pension as

of October 15, 2000 was approximately $560,000. Shepherd understood that Loba

would keep 20% of the contract revenue generated by Shepherd to cover

- 158 -

deductions. Any amount not needed for deductions, up to a maximum of $2,800,

would be retained by Loba, with the balance of any excess being transferred to

Shepherd’s IPP once the pension monies had been received from the PSSP.

[458]

Shepherd’s evidence, which I accept, was that Parent did not give him

copies of any of the documents which Parent and Burnside identified as being their

standard hand-outs to interested individuals.³⁹⁹Shepherd testified that, at some

point after October 2000, he received a copy of Gravelle’s August 22, 2000 e-mail

to Parent;⁴⁰⁰however, that may have been in October 2001 when he and Collier

met Parent to discuss the delay in the transfers. When Parent provided Shepherd

with a copy of this e-mail, it was in the context of his saying that once the

Superannuation Directorate had all necessary information, the transfers would

proceed.

[459]

Shepherd did not recall Parent telling him during their October 11,

2000 interview not to resign from the public service just because of the Loba RTA.

Although this exact language may not have been used, I find that both Parent and

Jemus would have conveyed to Shepherd that use of the Loba RTA made sense

when a public servant was near retirement from the public service; it was not an

arrangement that would be used for mid-career changes.

[460]

After meeting with Parent, Shepherd concluded that joining Loba

would be advantageous to him. He understood that if he stayed with the public

service and started to receive a pension on April 1, 2001, he would receive about

$40,000 annually; whereas, if he joined Loba and then retired on the same date, his

annual pension could be $60,000.

[461]

On October 13, 2000, Shepherd met with Burnside and signed: (1) the

standard form Loba employment agreement;⁴⁰¹(2) Pension Plan for Employees of

Loba Limited. Schedule B (commissioned) Employees. Application for

Membership;⁴⁰²(3) Pension Transfer Administration Agreement;⁴⁰³and (4) his

Appendix B.⁴⁰⁴Burnside gave him a sample letter from Soucoup to a Loba worker

asking for confirmation of employment status.⁴⁰⁵On the same day, Shepherd met

with Patry to sign the Notice of Termination and Option for Benefit form⁴⁰⁶which

Patry completed. At that time, Shepherd told Patry that he was joining Loba.

Patry wrote on Shepherd’s form that he was choosing an RTA option. Patry

provided no feedback to Shepherd about Loba.

- 159 -

[462]

On October 12, 2000, Shepherd’s superior, Graeme Goodlet

(“Goodlet”), Management Co-Chair, NCR JCTC Director, Corporate Human

Resources Services, INAC advised Shepherd that it would be possible for Loba to

enter an Interchange Canada Agreement whereby Shepherd would continue to

work for the NCR JCTC for a year to help Goodlet find Shepherd’s replacement.

At that time, Goodlet did not express any concerns or reservations about Loba. On

November 16, 2000, Desrochers and Goodlet signed a one-year Interchange

Canada Agreement whereby, starting October 30, 2000, Shepherd would continue

to work as the Management Coordinator for the NCR JCTC, at an annual salary of

$87,400 plus benefits to be paid by Loba, with NCR JCTC reimbursing Loba

$87,400 plus 20% for benefits.⁴⁰⁷This Interchange Agreement was extended on a

number of occasions,⁴⁰⁸and Shepherd worked continuously for the NCR JCTC

from October 15, 2000 until April 26, 2004. During this period, Loba deposited

Shepherd’s salary into his bank account and matched his contributions to the Loba

pension plan. Loba did not provide any medical, dental or life insurance benefits.

[463]

Shepherd received a November 15, 2000 letter from Desrochers that

dealt with a variety of topics of interest to Loba workers.⁴⁰⁹Desrochers advised

that Loba had been contacted by the Superannuation Directorate regarding calls

they had received from several Loba employees. According to Desrochers, the

Superannuation Directorate had asked Loba to advise employees that there was

currently an eight month backlog regarding reciprocal transfer files. As such, aside

from the automatic sending of the employment confirmation letter, nothing would

be happening for several months on any of the files. According to Desrochers, the

Superannuation Directorate had asked Loba to discourage its employees from

making telephone calls to the Superannuation Directorate for news relating to the

transfers.

[464]

Shepherd received a December 14, 2000 standard form letter from

Soucoup asking for confirmation of his employment status with Loba,⁴¹⁰and he

responded on December 22, 2000⁴¹¹after he had sought the approval of

Desrochers. I accept his evidence that no one associated with Loba suggested that

he lie or provide any misleading information to the Superannuation Directorate

about his employment status, and he never did that. Shepherd received no further

communications from the Superannuation Directorate in regard to the employment

issue.

- 160 -

[465]

After October 15, 2000, Shepherd had no continuing contact with

Buxton. Shepherd was aware that some former employees of Environment Canada

who had joined Loba were getting together periodically; however, he did not go to

any meetings until the fall of 2001.

[466]

Shepherd was aware that Collier followed-up regularly with Parent

and the Superannuation Directorate in regard to the delay in the Loba transfers. He

and Collier spoke every week. I find that in March 2001, Collier advised Shepherd

that he had been advised by the Superannuation Directorate that it was waiting to

get the go-ahead from the CRA before transferring any funds under the Loba RTA.

Collier had been advised that the CRA wanted to confirm the existence of an

employment relationship. In May 2001, Shepherd would have been aware from an

exchange of e-mails between Collier and Parent, which Collier relayed to

Shepherd, that the TBS was requiring confirmation from the CRA that registration

of the Loba pension plan continued and that Loba’s lawyer was preparing a

submission to CRA seeking that confirmation.⁴¹²

[467]

Shepherd had assumed that a transfer of his monies would be made

within six months to one year. In a May 25, 2001 update from Burnside,⁴¹³he was

advised that the Superannuation Directorate was currently working on files where

the applications had been submitted in May 2000; therefore, the processing times

were at least one year. Burnside advised that additional delays were being caused

where the former employee’s home department had not provided accurate salary

and service records. To avoid any delays on his file, on June 8, 2001, Shepherd e-

mailed Langlois and Patry asking that they confirm that all necessary records had

been sent to the Superannuation Directorate. Denise Briand (“Briand”), a

compensation or pay and benefits advisor to whom the request had been referred,

expressed surprise that Shepherd’s transfer had not yet occurred. She reviewed his

numbers, made one minor correction, and forwarded the amended calculations to

the Superannuation Directorate.

[468]

Through the September 2001 update from Loba, Shepherd learned

that Loba was seeking a ruling from the CPP/EI Eligibility Rulings Section

regarding an employment relationship between Loba and its workers. The

importance of the employment relationship had sunk in by this time. Shepherd

realized that if the CRA was not satisfied that an employment relationship existed,

that would create a problem for the ongoing registration of the Loba pension plan.

- 161 -

[469]

By October 2001, when no transfer had yet occurred, Shepherd was

becoming concerned. He and Collier met with Parent to discuss the delays. Parent

reported that the delays related to the employer/employee relationship and that the

Treasury Board was reluctant to make the transfer. At this point, Shepherd became

a member of the EC Group. I find he would have shared this information with the

EC Group.

[470]

On October 16, 2001, the EC Group met with Parent. Collier was not

a member of the group at this time, but became a member in February 2002. At

the meeting, various topics were discussed, including the status of Loba’s request

for a ruling from the CRA regarding the employment status of Loba workers.

[471]

Shepherd learned of the RCMP investigation when he received the

December 19, 2001 update from Loba⁴¹⁴informing Loba workers of the execution

of the search warrant at WBP/Loba’s offices and the pending criminal charges. He

was shocked. In January 2002, the EC Group retained a lawyer.

[472]

In approximately May 2002, Shepherd learned that the CRA was

doing an audit of the Loba pension plan and that this could result in the plan being

de-registered. By July 2002, he knew that the Financial Services Commission of

Ontario was also conducting an investigation.

[473]

In October 2002, Shepherd and Collier met with Parent to discuss

what could be done to free up money. By then they realized that the likelihood of

the transfer proceeding was minimal without litigation ensuing. Shepherd was

concerned about accessing funds only once his work with the NCR JCTC ended.

[474]

In January 2004, the National JCTC Management Co-Chair, Assistant

Deputy Minister, Corporate Services Sector, Natural Resources Canada wrote to

Goodlet at the NCR JCTC advising that it was inappropriate for Shepherd to

continue his functions as the Management Coordinator for the NCR JCTC because

he was not a federal public servant but a resource provided to INAC by an outside

provider. Shepherd was given 30 days notice of the termination of the Interchange

Agreement.⁴¹⁵It is clear from the April 13, 2004 letter of termination sent to

Shepherd by Goodlet, that the termination was not something that anyone at NCR

JCTC wanted; the direction had come from the National JCTC Management Co-

Chair, and efforts by the NCR JCTC to keep Shepherd working with them had

been unsuccessful.

- 162 -

[475]

Once his work with the NCR JCTC ended in April 2004, Shepherd

considered various options in order to generate income: apply for employment

insurance, pursue contract work or follow his long-term plan to retire fully in June

2004. He chose the latter option.

[476]

On May 31, 2004, Shepherd advised Macpherson that he was

cancelling his request for transfer under the Loba RTA and he wished a PSSP

annuity to commence immediately.⁴¹⁶

Robert Collier (action no. 04-CV-026588)

[477]

Robert Collier (“Collier”) was born on October 10, 1949. After

obtaining a B.A. in 1971, he started working for the federal public service in 1973,

initially as an accounts payable clerk. He progressed through the ranks in the

accounting and financial field. By 1984, he had obtained his designation as a

certified management accountant. Collier then held various auditing positions in a

number of government departments before joining Consulting and Audit Canada

(“CAC”) as an auditor in 1989. He continued in this capacity until he left the

public service in October 2000 while on assignment at Health Canada.

[478]

Collier first learned of Loba late in September 2000 through his good

friend Shepherd. Shepherd explained that Loba had an RTA with the federal

government that was scheduled to expire on October 15, 2000, and that the formula

for transferring the value of pension entitlements under the Loba RTA was highly

advantageous. Collier had not previously heard of an RTA. He contacted his own

Human Resources personnel at CAC for information about RTAs. He was directed

to look in the SAM where he confirmed that Loba had an RTA with the

government. He made use of the Intranet to discover more information about

RTAs. He found an article entitled “Reciprocal Transfer Agreements Expiring”

posted on September 26, 2000 which stated:⁴¹⁷

If an employee wishes to take advantage of an RTA, the employee must sign the

necessary appendix forms prior to October 15, 2000 and forward the forms to

each employer within the time specified in that agreement to ensure that the

transfer will take place. The appendix forms may be obtained from the regional

Compensation and Benefits Unit.

- 163 -

This publication was issued by the Corporate Services Branch of the Human

Resources Directorate at Health Canada and was available to all Health Canada

employees who had access to circulations.

[479]

Shepherd showed Collier the August 2000 APEX bulletin⁴¹⁸which

discussed the October 15, 2000 deadline for RTAs, and which directed interested

persons to contact their compensation advisor in their department or agency for a

listing of employers having an RTA. Early in October, Collier met with his

compensation advisor, Nora Ann McKibbon (“McKibbon”), and sought her advice

about the advantages that could be gained by joining Loba. She did not tell him

anything specifically about Loba and the Loba RTA. She explained the forms and

procedure that would be followed if he chose to join Loba. Collier was left with

the impression that the Loba RTA was a legal agreement. He proceeded to discuss

this option with his family and Shepherd. After considering the matter for a few

days, Collier asked McKibbon for his service and salary records which he faxed to

Jemus on October 7, 2000.⁴¹⁹

[480]

Collier did not know Jemus prior to this time. He was referred to him

by Shepherd. Collier met with Jemus on October 9^that which time Jemus

explained the pension entitlements that could be transferred from the PSSP to the

Loba pension plan under the Loba RTA.⁴²⁰I find that Jemus provided Collier with

the form entitled “Reciprocal Pension Transfer Agreement Termination/Retirement

Option Statement Estimate” that had been faxed to Pension Positive by WBP on

October 9, 2000,⁴²¹calculations regarding Collier’s entitlement under the PSSA,⁴²²

and calculations regarding Collier’s potential entitlement under an IPP.⁴²³Jemus

advised Collier that if he wished to pursue the Loba RTA further, he should consult

Parent.

[481]

Collier met with Parent on October 12, 2000. He was seeking advice

about the advantages and disadvantages of the Loba RTA when compared with the

PSSA pension. Shepherd attended the meeting which took place at the offices of

WBP/Loba and lasted approximately one hour. Parent showed Collier a copy of

the Loba RTA. Parent explained that, if Collier joined Loba as a commissioned

employee, he would be responsible for securing his own contracts. Parent advised

that the transfer under the Loba RTA could take approximately twelve months. He

presented several options as to how the pension funds could be managed after they

were received in the Loba pension plan.

- 164 -

[482]

Parent made a presentation on a white board and reviewed with

Collier the calculations in the Reciprocal Pension Transfer Agreement

Termination/Retirement Option Statement Estimate⁴²⁴and the Transfer Adjustment

Calculator. I accept Collier’s evidence that he did not ask Parent to use an

employment termination date of July 1, 2001. Parent had chosen this without any

consultation with Collier. I accept Collier’s evidence that he did not intend to stop

working in July 2001. Collier understood from Parent that $609,994 was the

amount that would be transferred to the Loba pension plan under the Loba RTA

and that he was guaranteed to receive 92.5% or $564,244. He also understood that

he would receive 77% of the contract income he generated with a vacation

entitlement of 4%. From the remaining income, Loba would retain $2,800 as a

one-time fee, and the balance would be refunded to him through his pension,

provided the RTA transfer went through.⁴²⁵

[483]

Collier’s evidence, which I accept, was that Parent did not give him

copies of any of the documents which Parent testified comprised his standard

hand-outs.⁴²⁶Collier did not recall Parent telling him not to quit his employment

with the public service just to take advantage of the Loba RTA. Although this

exact language may not have been used, I find that both Parent and Jemus would

have conveyed to Collier that use of the Loba RTA made sense when a public

servant was near retirement from the public service; it was not an arrangement that

would be used for mid-career changes.

[484]

Collier did not recall whether Parent provided him with a copy of the

standard form employment confirmation letter that was sent to all Loba workers by

the Superannuation Directorate, though Parent did advise him that he could expect

to receive such a letter. Collier’s evidence was that he did not understand before

joining Loba that an employment relationship was a critical pre-condition to

transferring funds under the Loba RTA or that his eligibility to have his pension

entitlement transferred under the Loba RTA was dependent on the outcome of an

inquiry about his status as employee. I am confident that Parent did explain to

Collier that central to the Loba arrangements was the requirement that Collier be

an employee of Loba. I am also satisfied that Collier understood that, before the

transfer under the Loba RTA would occur, the Superannuation Directorate would

be confirming that Collier was an employee of Loba.

[485]

Collier never met Zeithammel and never had any dealings with

Zeithammel while he was working with Loba.

- 165 -

[486]

On October 13, 2000, Collier resigned from the public service⁴²⁷and

submitted to Loba an application for employment in the field of audit, accounting

and assurance services.⁴²⁸He thought that the prospects of his finding contract

work in these fields was excellent, and he anticipated having more than enough

work to keep him busy. Collier considered that there was virtually no risk of his

not finding work through Loba. On October 13, 2000, Collier signed: (1) Loba

standard form employment agreement;⁴²⁹(2) Pension Transfer Administration

Agreement;⁴³⁰and (3) Appendix B.⁴³¹On October 13, 2000, McKibbon and

Collier signed the Notice of Termination and Option for Benefit form on which

had been added a box with RTA, showing this as the option that Collier had

chosen.⁴³²

[487]

Collier received the standard form December 21, 2000 letter from

Soucoup seeking confirmation of his employment status with Loba.⁴³³Collier sent

his reply on January 2, 2001,⁴³⁴after first having shown a draft to Desrochers.⁴³⁵

Collier never received a response from the Superannuation Directorate. He was

never contacted by the RCMP regarding his employment relationship with Loba. I

accept Collier’s evidence that he answered Soucoup’s questions honestly and

accurately and that at no time did anyone at Loba ask him to lie about or

misrepresent his relationship with Loba.

[488]

From October 23, 2000 to December 31, 2002, Collier had numerous

contracts or Interchange Canada Agreements with Health Canada, the Public

Service Commission or CAC which he put through Loba. His practice was to

negotiate contracts, sign them as Loba’s agent and only advise Loba afterward.

Health Canada drafted his Interchange Canada Agreements and Loba’s general

manager signed them. Throughout the period Collier was working through Loba,

he was paid through direct deposit by Loba, and Loba withheld money for CPP,

employment insurance, income taxes and pension contributions.

[489]

Collier initially assumed that the transfer under the Loba RTA would

take six months to a year; however, by November 24, 2000, he was aware through

Parent that the delay would likely be 18 months.⁴³⁶Nevertheless, he adopted a

practice of contacting the Superannuation Directorate and Parent approximately

every two months for an update. On March 6, 2001, Collier contacted Simone

Arsenault (“Arsenault”), who was handling some Loba files, to inquire of the

status of his transfer. On March 8, 2001, Arsenault advised Collier that the

Superannuation Directorate was waiting for the “OK” from Revenue Canada to

- 166 -

continue working on the Loba files. The problem was establishing an

employer/employee relationship. Arsenault advised that the normal processing

time for these cases could take as long as two years but could be as quick as six

months.⁴³⁷Therefore, as early as March 2001, Collier appreciated that the CRA

had concerns about whether a true employment relationship existed between Loba

and its workers and, as a result, the ongoing registration of the Loba pension plan

was put into question. I find that Collier shared this information with Shepherd.

[490]

Despite Collier’s evidence that he did not discuss this feedback with

Parent, I find that he did. That is clear from Collier’s e-mail to Parent on May 7,

2001 when he referred to their earlier conversation two months previously and

specifically asked Parent if anything had been accomplished yet on getting the

approval from the CRA.⁴³⁸Parent responded that Loba’s lawyer was currently

preparing a submission to the CRA seeking confirmation that the Loba pension

plan continued to be registered so as to satisfy the Treasury Board.⁴³⁹

[491]

On May 23, 2001, Collier once again contacted Arsenault at the

Superannuation Directorate for a progress report on his transfer.⁴⁴⁰Arsenault

responded that his file was currently in the processing unit, that there were a lot of

applications received prior to the October 15^thdeadline resulting in a backlog, that

the processing unit was currently working on applications received in the spring of

2000, and that once they started on his file, he would be notified. She also advised

him that his service and salary records were incomplete. Collier understood from

Arsenault’s message that the Superannuation Directorate was no longer waiting for

approval from the CRA because they were processing applications. Up to this

point, no one had informed Collier that the Loba transfers had been put on hold.

[492]

On July 25, 2001, Collier again asked Parent for an update, and Parent

responded that Burnside was following up every few weeks with the

Superannuation Directorate and was always told that the files were being processed

on a first come, first served basis. On August 9, 2000, Burnside added that the

Superannuation Directorate were still working on files they received in May 2000,

and she estimated that the likely delay for the September/October 2000

applications would be 18 months.⁴⁴¹Collier personally called Arsenault at the

Superannuation Directorate on August 1, 2001 and was advised that there would be

a minimum of eight months before he could anticipate a transfer. He also learned

that his salary and service records were still not accurate, and he took steps to get

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the correct ones to the Superannuation Directorate. During this conversation,

Arsenault told Collier to stop calling her directly.⁴⁴²

[493]

Collier received the September 20, 2001 letter from Parent advising

that Loba had submitted a request to the CRA to provide a ruling in respect of the

status of employment of every Loba worker and warning that he might be

contacted by the CRA for an interview.⁴⁴³In October 2001, Shepherd forwarded to

Collier an e-mail from Ault summarizing the questions she had been asked during

her CRA interview. Subsequently, Collier was interviewed over the phone by a

CRA interviewer. He did not discuss his answers with anyone at Loba, and at no

time did anyone at Loba ask him to lie or misrepresent the facts when he responded

to the CRA questions. I accept Collier’s evidence that certain entries that the CRA

interviewer made in her notes did not accurately reflect the information that Collier

had provided.⁴⁴⁴Those entries included the following:

• that Collier’s work included doing information technology consulting,

drafting proposals, ordering products and working in developing

networks on behalf of Loba;

• that Loba’s clients provided Collier with all the tools he needed [Collier

provided his own laptop];

• that on occasion Collier worked from Loba’s offices.

I accept Collier’s evidence that what he told the CRA was accurate.

[494]

Collier received a letter from the Ottawa Tax Services Office of CRA

dated October 19, 2001 stating that he was an employee under a contract of service

with Loba for the same reasons as those given Ault.⁴⁴⁵Collier acknowledged that

the statement in the letter: “Loba established his clientele” was incorrect. Collier

found his own contracts and signed those contracts, albeit as Loba’s agent. I find

that both Collier and Parent accurately described to the CRA interviewer how

Collier obtained work; their answers did not get accurately reflected in the final

report prepared by the CRA. Throughout the time Collier worked with Loba, he

paid employment insurance premiums and CPP premiums as an employee and was

never asked by the CRA to contribute as a sole proprietor or independent

contractor.

- 168 -

[495]

When Collier received the December 19, 2001 update from Loba,⁴⁴⁶

he was initially shocked and subsequently angry. Despite his repeated requests for

updates from the Superannuation Directorate and from Loba, he had never been

informed of any hold or suspension of Loba transfers or of the RCMP

investigation. He felt deceived. He was also very concerned at this point as to

whether the transfer of his pension entitlement under the Loba RTA was ever

going to happen. He was aware that Loba had commenced a civil action against

the federal Crown to force the Treasury Board to process the Loba transfers. He

had serious reservations as to the likelihood of success of that action. On January

14, 2002, Collier e-mailed Parent with numerous questions, and Burnside

responded on February 4, 2002.⁴⁴⁷Despite Collier’s statement in his e-mail that,

by this time, he had retained a lawyer who was sceptical of Loba’s likely success

in the civil action, I accept Collier’s evidence at trial that this was not a truthful

statement. He had not consulted a lawyer by this time. What he was referring to

was feedback that he had heard second-hand, probably from Shepherd, regarding

what one or more other members of the EC Group had been told by a lawyer.

[496]

Collier’s evidence was that, once he had read the criminal charges and

the Information to Obtain Search Warrant, he came to the opinion that the criminal

charges would not succeed. After some consideration, and despite his concerns

about the eventual outcome of Loba’s civil action against the federal Crown, he

decided to have Parent create an IPP for him. His reasoning for doing so at that

time was unclear.

[497]

On October 31, 2003, Collier wrote Macpherson to request the

revocation of his application to transfer his pension entitlement under the Loba

RTA. He asked for an immediate annuity under the PSSA effective October 11,

2002.⁴⁴⁸Collier exercised this option at that time because Snider J. of the Federal

Court had released his ruling of October 6, 2003 to the effect that Loba workers

seeking to revoke their requests for transfer did not have to sign the onerous

Release and Indemnification Agreements being demanded by the Department of

Justice.⁴⁴⁹As a result of Collier’s years of service to October 2000 being less than

30, he was subject to a years-of-service penalty of 11%.

Robert Temple (action no. 04-CV-026986)

[498]

Robert Temple (“Temple”), born May 3, 1941, joined the federal

public service in 1968 and worked there continuously in the Human Resources

- 169 -

field until his resignation in the fall of 2000. Temple has his Masters in Public

Administration. He also completed one year of law school and one year of

teacher’s college. In the fall of 2000, Temple was Fisheries and Oceans Canada’s

Senior Staff Relations Advisor, a position in the Personnel Administration Group

(“PE-4”). From 1970 to 1995, he had worked for Transport Canada. Although

Temple’s career was in the field of Human Resources, he had never worked as a

pay and benefits officer and had never worked in the superannuation area.

[499]

Temple first heard about Loba and the Loba RTA at a social event on

August 20, 2000. He discussed the Loba RTA with his wife, Yvonne Temple

(“YTemple”), who was a certified financial planner. Both were interested in the

possibility under the Loba RTA to leave the entire value of Temple’s pension

entitlements to YTemple upon his death. Both assumed that through investing the

monies that would be available to Temple under the Loba RTA, he could generate

more pension income than would be available to him under the PSSA. YTemple

followed up by contacting Burnside at WBP for more information. On August 23,

2000, Temple signed an authorization allowing WBP to obtain information from

the Superannuation Directorate about his pension entitlements.⁴⁵⁰

[500]

On August 25, 2000, Burnside advised Temple that, according to

WBP’s estimate, at least $674,000 could be available to be transferred under the

Loba RTA.⁴⁵¹As Temple was occupied with collective bargaining and with his

ailing father at this time, on September 7, 2000, YTemple met with Parent to get

more information about Loba. YTemple understood that Parent was the Loba

pension plan actuary. She was not consulting him for pension advice per se but in

order to get the relevant numbers for Temple under the Loba RTA. Parent

explained the options available to Temple under the Loba RTA and provided

YTemple with a copy of his whiteboard notes,⁴⁵²the Reciprocal Pension Transfer

Agreement,⁴⁵³and the Loba Transfer Adjustment Calculator.⁴⁵⁴At the end of that

meeting, Parent provided YTemple with copies of Gravelle’s August 22, 2000 e-

mail to Parent and two Citizen articles, “PS pension option packs big payoff” and

“Ignoring the pension parachute”.⁴⁵⁵According to YTemple, Parent did not

provide her with a copy of the SAM Special Bulletin regarding the cancellation of

RTAs or with copies of the exchange of letters between Parent and Hamilton.⁴⁵⁶

[501]

YTemple reported back to Temple about the options Parent had

explained were available if Temple were to utilize the Loba RTA.⁴⁵⁷She advised

that the transfer could take up to 18 months. Temple wondered why it would take

- 170 -

so long to effect the transfer. Temple considered Gravelle’s e-mail reassuring. He

assumed that transfers would proceed as a matter of course once the individual

concerned confirmed his or her employment status with Loba. He did not

associate the length of time for the transfers to be processed with government

concerns about the arrangements. YTemple showed Temple the documents that

Parent had provided to her at their meeting.

[502]

YTemple sought financial advice from the head of the estate planning

and taxation department at Trimark and from her own branch manager and another

colleague at Cartier Planners. All advised her that the Loba RTA option sounded

very good.⁴⁵⁸

[503]

On September 15, 2000, Temple and his wife met with Parent for over

an hour. They discussed the process to be followed whereby Temple would enter

an employment agreement with Loba, join the Loba pension plan, resign from the

public service, seek contract work and put the contracts through Loba. Parent

provided Temple with a copy of the Loba RTA⁴⁵⁹and the Loba Transfer

Adjustment Calculator,⁴⁶⁰which it is clear Temple did not fully understand. Parent

explained the Reciprocal Pension Transfer Agreement calculations that he had

prepared for his meeting with YTemple.⁴⁶¹Temple advised Parent that he wanted

to work for three more years. He did not ask Parent to do any calculations

regarding his PSSA entitlement after October 15, 2000. Neither Temple nor

YTemple recalled Parent advising Temple not to leave the public service just to

take advantage of the Loba RTA.

[504]

During the meeting, Parent made it clear that Temple would have to

find his own contracts. At the time, Temple was confident that he would be able to

land consulting contracts in the Human Resources field with various federal

government departments. During this meeting, Parent did not advise Temple that

the Superannuation Directorate had concerns about the Loba arrangements.

[505]

On September 22, 2000, Temple resigned from the public service

effective October 12, 2000.⁴⁶²On September 26, 2000, Burnside forwarded to

Temple a package of documents for his signature,⁴⁶³including his Appendix B,⁴⁶⁴a

letter regarding the Employee Recruitment Incentive Program, Loba’s standard

form employment agreement,⁴⁶⁵the Pension Transfer Administration

Agreement,⁴⁶⁶and an application for membership in Loba’s pension plan,⁴⁶⁷

together with the plan summary, a sample invoice, business cards, and payroll

- 171 -

documentation.

Temple signed the forms and returned them to Loba.

Subsequently, in May 2001, he signed a more elaborate employment agreement.⁴⁶⁸

[506]

Temple received a letter dated October 1, 2000 from Danielle Bisson

(“Bisson”), his compensation advisor, setting out his pension options upon

resignation.⁴⁶⁹On October 4, 2000, Temple met with Bisson and signed the Notice

of Termination and Option for Benefit. He added the box to the form indicating

RTA. He discussed with Bisson how he was resigning from the public service on

October 12, 2000 and would be joining Loba on October 13, 2000. Temple did not

pose any specific questions to Bisson about the Loba RTA because he thought he

understood what his pension entitlements were. Bisson did not discuss the Loba

RTA with Temple. Bisson raised no concerns about Loba or about the Loba RTA.

Temple assumed that his request to transfer his pension entitlements under the

Loba RTA was a standard request.

[507]

On October 5, 2000, Bisson forwarded to Temple two broadcast

messages she had received regarding the upcoming deadline for RTAs.⁴⁷⁰Temple

assumed that these bulletins had gone to the pay and benefits section at Fisheries

and Oceans Canada; they confirmed the information he had received from Parent.

[508]

On approximately October 5, 2000, Temple received a notice to

employees entitled “Pension Transfer Agreements” which noted that RTAs were

going to expire on October 15, 2000, and indicating that as long as the public

servant requested the transfer by signing the necessary document prior to October

15, 2000 and forwarding it within the time specified in the agreement, the transfer

would be completed.⁴⁷¹Again, this provided Temple with reassurance about the

Loba RTA.

[509]

On October 13, 2000, Bisson sent a memorandum to the

Superannuation Directorate advising that Temple had resigned and “had opted for

an RTA with Loba”.⁴⁷²

[510]

On September 16, 2000, Temple’s father died. As executor of his

estate, Temple was required to spend considerable time in Port Hope. This

resulted in Temple not seeking any contract work over the fall of 2000;

nevertheless, during this period, he considered himself an employee of Loba.

Temple received the Superannuation Directorate’s standard employment

confirmation letter dated December 14, 2000.⁴⁷³He inquired of Desrochers as to

whether this was a standard letter being sent to all Loba employees and was

- 172 -

advised that it was.⁴⁷⁴Temple responded on January 5, 2001 advising that his

employment contract with Loba was in effect, that he was currently in the process

of soliciting clients and consulting assignments and that he would be paid by Loba

on the completion of those.⁴⁷⁵At that time, he had not started his consulting work.

No one from the Superannuation Directorate ever contacted him about his

response. At no time did Parent or anyone at Loba or WBP advise Temple to lie

about or misrepresent his employment status at Loba, and he did not do so.

[511]

Temple’s first contract was in January 2001 with the Coast Guard.

His second contract was with Joubert Management Consulting Services in March

2001.⁴⁷⁶His third contract was with Fisheries and Oceans Canada from July to

December 2001.⁴⁷⁷At this point, Temple learned from his former boss, Janet

Leduc (“Leduc”), Chief of Staff Relations, that there would be no more

discretionary spending for Human Resource consultants at Fisheries and Oceans

Canada, as had been available in the past. Temple’s next contract was with the

Coast Guard during February/March 2002.⁴⁷⁸Finally between July 2002 and

January 2003, Temple worked intermittently on contract for Health Canada. For

all of these contracts which Temple put through Loba, the contract was negotiated

in Loba’s name, Temple submitted the invoice to the third party on Loba’s behalf,

the third party paid Loba, and Loba paid Temple by way of cheque, after

withholding income tax, CPP contributions, employment insurance premiums and

Loba pension plan contributions. At the end of February 2003, Temple accepted

an offer of casual employment with Fisheries and Oceans Canada to work in the

position of Director, Staff Relations.⁴⁷⁹He remained in this position until

December 2003.

[512]

During 2001, Temple made inquiries of Burnside as to when his

pension monies would be transferred and was advised that the Superannuation

Directorate was backlogged. Early in January 2002, Temple saw a newspaper

article about the criminal charges laid against Parent, Loba and WBP.⁴⁸⁰He was

very upset and worried. In February 2002, Temple asked Parent when the

litigation involving Loba was likely to be completed. Parent responded that the

civil action should be heard within a few months but there could be an appeal

thereafter.⁴⁸¹By February, Temple had decided to rescind his application for a

transfer under the Loba RTA and he looked to Burnside for guidance.⁴⁸²He gave

WBP authorization to contact the Superannuation Directorate on his behalf for

information regarding the process.⁴⁸³Superannuation responded that his notice

should be sent to the Treasury Board.⁴⁸⁴

- 173 -

[513]

On March 27, 2002, Temple submitted to Gravelle his formal request

to rescind his application for a transfer under the Loba RTA and sought payment of

an immediate annuity.⁴⁸⁵Temple received a letter from Turley dated April 10,

2002 advising that a Release and Indemnification Agreement would have to be

signed by Temple before the Treasury Board would accept his revocation.⁴⁸⁶

Temple refused to sign the Agreement as drafted by Turley. On September 17,

2002, Temple advised the President of the Treasury Board of his revocation.⁴⁸⁷

Macpherson responded that the revocation would not be processed until the

Release and Indemnification Agreement was signed.⁴⁸⁸After the Federal Court

decision in Ault v. Attorney General of Canada,⁴⁸⁹on October 30, 2003 Temple

wrote to Macpherson requesting the rescission of his Pension Transfer

Agreement.⁴⁹⁰On January 15, 2004, Temple formally resigned from Loba.⁴⁹¹He

started receiving his PSSA pension retroactive to October 2000.

Bryan Armstrong (action no. 07-CV-037377)

[514]

Bryan Armstrong (“Armstrong”), a professional engineer, was born

on May 2, 1950. He joined the federal public service in 1978 and spent his entire

career with Environment Canada in the Edmonton office until he resigned in

October 2000 to join Loba. By 1991, Armstrong had obtained his Masters in

Business Administration. In the summer of 2000, Armstrong was the Regional

Environmental Industries Advisor and was designated at the CO-2 level. His

duties were to help small to medium sized environmental companies to promote

technologies domestically and abroad.

[515]

On June 22, 2000, Armstrong was notified that the role of Regional

Environmental Industries Advisor was no longer required and he would be placed

on surplus status.⁴⁹²Armstrong was advised that he would maintain his surplus

status until he received a reasonable job offer normally at an equivalent level but

possibly at a lower level; however, he would be subject to lay-off if: (1) he refused

a reasonable job offer; (2) he refused to be referred to a position which could lead

to a job offer; (3) he restricted his mobility thereby precluding redeployment; or (4)

he was unsuccessful at being retrained. If he was laid off, he would be given one

month’s notice prior to that date. If this occurred, he would not be laid off before

December 22, 2000. Armstrong was advised that, where practicable, efforts would

be taken to provide Armstrong a job in the Edmonton area.

- 174 -

[516]

Armstrong first heard about Loba at the end of September 2000 when

he was attending a meeting with an Ottawa colleague. He was advised that several

people in Environment Canada’s Technology Development Branch were

contemplating joining Loba under an RTA. On September 29, 2000, Armstrong

spoke with Buxton who provided him with information about the Loba

arrangements and recommended he speak with Jemus at Pension Positive.

Armstrong had not previously heard of Jemus or Pension Positive.

[517]

Armstrong spoke with Prentice at Pension Positive who advised him

to get service and salary records from his Human Resources department. While

still in Calgary, Armstrong contacted Sandra Duncan (“Duncan”), his

compensation advisor, and she undertook to fax the relevant numbers to Pension

Positive. On October 2, 2000, once Armstrong was back in Edmonton, he met

with Duncan and told her he was seeking the requested information because he was

considering the Loba RTA. Duncan did not have much information or knowledge

about Loba or about RTAs. Armstrong asked Duncan to check what he would

need to have in place to take advantage of the Loba opportunity. Duncan

subsequently responded that there was a Loba RTA available, and she would need

to fill out certain papers. It was the first time anyone in the Edmonton office had

taken advantage of an RTA, and therefore Duncan needed to investigate the

procedure.

[518]

On October 2, 2000, Armstrong received a fax from Pension Positive

with various calculations.⁴⁹³On October 3, 2000, Armstrong spoke with Jemus.

Jemus explained that if Armstrong joined Loba, he would be a contractor or

commissioned employee who would be expected to find his own consulting jobs.

The federal government would transfer to the Loba pension plan two times

Armstrong’s contributions under the PSSA plus interest. These monies would go

to Clarica, as trustee of the Loba pension plan, and WBP would be the

administrator of the plan. Jemus advised Armstrong that he would be getting a

finder’s fee if Armstrong joined Loba; he also hoped for additional business from

Armstrong. Jemus did not tell Armstrong that he would be receiving a portion of

the pension funds being received by Loba.

[519]

On October 3, 2000, Armstrong faxed Bill Shea (“Shea”), his

insurance and investment advisor at Clarica, all of the documents he had been

provided by Duncan and by Jemus.⁴⁹⁴He advised Shea about Jemus’ financial

interest in the Loba arrangement. He told Shea that what he was looking at doing

- 175 -

was “working somewhere else for 5-8-10 years” and letting the amount transferred

to him under the Loba RTA grow until he was ready to use it. He described Loba

as an employment agency with an RTA with the federal government. He advised

how the Loba pension plan would be administered by WBP with the pension

monies held by Clarica. Armstrong asked Shea for both information and advice.

Subsequently, Shea met with Armstrong and his wife. He felt that the interest rates

being used by Jemus in his calculations were a bit high; but overall, he thought the

Loba option was a good arrangement. He had nothing negative to say about Loba.

[520]

After talking with his wife about the Loba option, Armstrong posed

specific questions to Jemus during a second conversation. Additional information

he gleaned at that time was that Loba would be Armstrong’s employer and 7.5% of

the pension monies transferred to the Loba pension plan would be retained as a fee.

He was told that 50% or more of Environment Canada executives had already

joined Loba or were considering joining Loba. Armstrong found that somewhat

reassuring.

[521]

On October 3, 2000, Armstrong also spoke with Buxton who advised

Armstrong that if he died, his wife would be entitled to everything left in his

pension fund. Armstrong considered that an attractive feature of the Loba RTA.

Buxton advised that he had done some research into Loba and the Loba RTA, and

it had passed “the stink test”. At some point, Armstrong became aware that

Buxton was getting a referral fee from Loba. Armstrong relied to a certain extent

on the information he received from Buxton in arriving at his decision.

[522]

On October 3, 2000, Armstrong also spoke to David Hutchison

(“Hutchison”), an Environment Canada colleague in Ottawa with whom he had

contact through his work. Hutchison advised Armstrong that he was not joining

Loba for personal reasons. He understood that the Loba RTA was the last

available one. He advised that many people at Environment Canada were joining

Loba, and as far as Hutchison was aware, the Loba arrangement was “okay”.

[523]

On October 4, 2000, Armstrong had a conversation with Parent that

lasted only five to ten minutes. Armstrong advised that he was contemplating

joining Loba but needed more information about what it would mean to be a Loba

employee and what he could expect under the Loba RTA. Parent advised that

there was a requirement for Armstrong to work with Loba for him to be able to use

the Loba RTA. The work could be a minimum of one day. Loba was not

- 176 -

organized to help find work for Armstrong; however, another company, Komokoa,

might be able to help in that regard. Parent did not ask for Armstrong’s resumé or

for references. Parent advised Armstrong that he would be asked by the

government for confirmation of the work he was doing for Loba, how long he was

working with Loba, etc.

[524]

On October 5, 2000, Parent faxed Armstrong the following

documents: (1) Loba Limited Individual Pension Plan information sheet; (2) Loba

Application for Employment; (3) Appendix B; (4) Application for Membership in

the Loba pension plan; (5) Employee Recruitment Incentive Program letter; (6)

standard form employment agreement with Loba; (7) Pension Transfer

Administration Agreement; (8) sample invoice; (9) August 22, 2000 e-mail from

Gravelle to Parent; and (10) Loba Transfer Adjustment Calculator.⁴⁹⁵Gravelle’s e-

mail did not cause Armstrong concern. He understood that the requirement to

confirm employment status was a routine process to go through when one was

making using of an RTA.

[525]

Armstrong never met Zeithammel and never had any dealings with

Zeithammel while he was working with Loba.

[526]

On October 6, 2000, Armstrong spoke again with Jemus about the

numbers Jemus had provided. He wanted confirmation that the numbers were

accurate. Jemus advised that there could be a 2% error in numbers. He provided

Armstrong with the names of two individuals for whom he had done calculations

earlier. Armstrong contacted one and was advised that Jemus’ numbers had been

accurate within a few hundred dollars.

[527]

On October 6, 2000, Armstrong contacted C.J. Woods (“Woods”), a

First Vice President Investment Advisor at CIBC Wood Gundy. He provided

Woods with the same package that had been sent to Shea. Armstrong and his wife

met with Woods to discuss the numbers. Woods could not see anything wrong

with the calculations. He advised that the fees that would be charged to Armstrong

were not unusual; they were part of this type of business. Woods thought the Loba

option was a good arrangement for Armstrong. Armstrong particularly relied on

this information; it likely was the advice which tipped Armstrong to decide to join

Loba.

[528]

On October 6, 2000, Armstrong spoke again with Burnside to review

a number of issues, including the length of time it would take for the transfer to be

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processed, the interest rate to be applied to the value of his pension entitlement

before it was transferred and the pension options available through Loba.

Armstrong understood that, although Loba would provide advice regarding billing

rates, invoicing and business cards, it would provide minimum help in terms of

getting contracts. That was not a significant concern of Armstrong at that time.

He had confidence in his knowledge, skills and abilities. Through his position at

Environment Canada, he had numerous contacts in the private sector. He was

confident that he would get consulting work.

[529]

Duncan showed Armstrong a draft letter from Human Resources at

Environment Canada setting out Armstrong’s benefits on resignation.⁴⁹⁶The letter

highlighted Armstrong’s options regarding his pension, including:

OPTION D – Reciprocal Transfer Agreement (RTA) If you have accepted, or

will accept, a position with another employer following your termination of

employer (sic) you may want to consider transferring your pension credits to your

new employer. This can be done if a RTA exists between the new employer and

Treasury Board (certain deadlines and restrictions apply).

The letter concluded by stating: “Should you have any further questions regarding

this matter, please feel free to contact me at…” and was signed by Duncan as

compensation advisor. Duncan reviewed the contents of this letter with

Armstrong.

[530]

Armstrong understood from the Loba Transfer Adjustment

Calculator⁴⁹⁷that, from the contract income Armstrong generated for Loba, Loba

would retain 20%. From this, deductions would be paid. Loba would keep a one-

time only overhead retainer of $2,800. Any surplus above that would be refunded

to Armstrong through his pension plan.

[531]

On October 10, 2000, Armstrong received and signed all of the

documentation that had been forwarded to him by Burnside⁴⁹⁸and returned it to

her.⁴⁹⁹I find that, through this letter, Armstrong was alerted of the significance of

the employment relationship he was to have with Loba. He was told that the

employment issue was a sensitive one, and the wording of his reply to the

Superannuation Directorate about his employment status was important. It was for

that reason that Burnside asked him to forward to Loba a copy of any

correspondence from the Superannuation Directorate and his draft response to such

correspondence.

- 178 -

[532]

On October 12, 2000, Armstrong tendered his resignation from the

public service effective October 13, 2000. Duncan provided Armstrong with the

necessary paperwork to process a transfer under the Loba RTA, including the

Notice of Termination and Option for Benefit, on which Duncan had specifically

noted that Armstrong had chosen a reciprocal transfer to Loba.⁵⁰⁰Duncan also

provided Armstrong with a Record of Employment on which she had written:

“Resigned to work for Loba Limited. Pension to transfer over under Reciprocal

Transfer”.⁵⁰¹

[533]

Immediately following his resignation from the public service,

Armstrong started looking for contract work. From November 17, 2000 to

February 2002, Armstrong had contracts through Loba with the Environmental

Services Association of Alberta⁵⁰²and Cleanit Greenit Composting System Inc.⁵⁰³

He sent copies of these contracts in advance to Desrochers for his review, approval

and signature. With all of these contracts, Armstrong invoiced the company

through Loba, the company paid Loba, Loba did the paperwork and Loba paid

Armstrong through direct deposit.

[534]

Armstrong received Soucoup’s standard employment confirmation

letter dated December 18, 2000.⁵⁰⁴He sent a draft reply to Loba, based on the

Loba template, and then forwarded his response to Soucoup on January 4, 2001.⁵⁰⁵

Armstrong was never contacted again by anyone from the Superannuation

Directorate. I find that Armstrong answered Soucoup’s questions honestly and

accurately. I accept his evidence that at no time did anyone at Loba ask him to lie

or misrepresent the facts to the Superannuation Directorate. In May 2001,

Armstrong signed a new, expanded, employment contract prepared by Loba.⁵⁰⁶

I

find that, until Armstrong learned of the criminal investigation, he always intended

to have a long-term relationship with Loba.

[535]

When Armstrong joined Loba in October 2000, he thought the

transfer under the Loba RTA would take anywhere from six to eighteen months.

He did not contact anyone directly within the federal government to inquire about

the timing of the transfers. He received regular updates from Loba, and he was on

the mailing list for the EC Group. He had some communications with Ault,

Shepherd, Buccini and Shantora. In the spring or summer of 2001, Armstrong was

led to believe from both Loba and the EC Group that the transfers were delayed

due to the volume of work at the Superannuation Directorate. No one told

Armstrong in the summer of 2001 that there was a possibility that the CRA would

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revoke the registration of the Loba pension plan; nevertheless, I find that by this

time he realized that one reason for the delay was the government’s concern about

the existence of an employment relationship. In September 2001, Parent told

Armstrong that he would be getting a ruling on the employment status of Loba

workers⁵⁰⁷and Armstrong realized that this was to allay any government concerns

regarding this issue so that the transfers could proceed. I accept Armstrong’s

evidence that he did not know at this time all of the government departments or

agencies involved with the Loba file, and he did not know that the Treasury Board

had placed a hold on transfers. Had he known this, it would have raised concerns

and questions.

[536]

When Armstrong received the December 19, 2001 update from Parent

referencing the criminal investigation and the hold on Loba transfers, he was

shocked. He decided to complete the Loba contract with Cleanit Greenit but from

February 2002 forward to put any new contracts under Armstrong Engineering.

He considered that the safest way to proceed, not knowing where things were

going with Loba. Subsequently, Armstrong Engineering had contracts with

Cleanit Greenit, K-C Environmental, and EBA Engineering. Armstrong then

obtained employment with Wiebe Environmental Services, where he continued to

work at the time of trial.

[537]

In a July 22, 2005 letter from the Superannuation, Pension Transition

and Client Services Sector of PWGSC, Armstrong was advised of his options

regarding his PSSA pension.⁵⁰⁸He selected a deferred annuity commencing at age

60.

David Luck (action no. 05-CV-031747)

[538]

David Luck (“Luck”), who was born on December 11, 1939,

graduated from university in 1963 with a Business Administration degree, worked

in the accounting field in the private sector and then joined the federal public

service in 1978. He spent his entire career with INAC. By the summer of 2000,

his job title was Senior Financial Analyst, a unionized position. As part of his

duties, he was a member of a project team working on an integrated financial

system. He reported to Henry Murphy (“Murphy”), a consultant with Systematix

IT Solutions Inc. (“Systematix”).

[539]

Murphy introduced Luck to the concept of RTAs and to Loba. Luck

learned that RTAs were terminating on October 15, 2000. Murphy encouraged

- 180 -

Luck to contact Loba for more information. Luck spoke with Burnside the first

week of October 2000 and was advised that he needed salary and service

information. He obtained the necessary information from his Human Resources

department and forwarded it to Burnside on October 10^{th 509}and October 11^th.⁵¹⁰

Luck could not remember whether he told Human Resources representative that he

was contemplating joining Loba; though he did tell her that he was contemplating

using an RTA.

[540]

Luck discussed the Loba option with Walter Draper (“WDraper”), the

Director of Financial Operations and Accounting Systems, and Michael Ivanski

(“Ivanski”), the Director General of the Financial Group at INAC. Both WDraper

and Ivanski advised Luck that, like him, they were considering the Loba option

because it offered significant monetary rewards. Neither individual joined Loba

and Luck never found out why.

[541]

On October 6, 2000, Luck read a Personnel Bulletin dated October

2000 entitled “Pension Transfer. Old rules give way to new. Reciprocal Transfer

Agreements (RTAs)”.⁵¹¹This bulletin spoke of the difference between RTAs and

PTAs and the impending deadline for RTAs. It referred interested public servants

to their regional compensation advisor or to a government website. It did not

mention that, even if a company was listed as having an RTA, a transfer may not

be effected. Luck looked at the website and determined that Loba had an RTA

with the federal government.

[542]

On October 12, 2000, Luck and his wife met with Parent for about

one-half hour. Luck understood that Parent was an actuary and that he would be

giving him information and advice about his pension options. Parent provided

Luck with: (1) a copy of his whiteboard explanation;⁵¹²(2) the July 11, 1995

Citizen article entitled “PS pension option packs big payoff”;⁵¹³(3) Loba’s RTA;⁵¹⁴

(4) Parent’s article “Leaving the public service? There are new options to

consider”;⁵¹⁵(5) Hamilton’s October 3, 1997 letter to Parent;⁵¹⁶(6) Parent’s

October 20, 1997 letter to Hamilton;⁵¹⁷(7) SAM Special Bulletin 1999-002;⁵¹⁸and

(8) Gravelle’s August 22, 2000 e-mail to Parent.⁵¹⁹These documents were

presented as a package. Parent went through the documents quickly, pointing out

Hamilton’s concerns with the Loba RTA, Parent’s response, and the fact that the

Loba RTA had not been cancelled. After reading the Gravelle e-mail, Luck was

left with the impression that everything was fine and the RTA would be honoured

if the necessary information was provided to the Treasury Board. From a financial

- 181 -

point of view, Luck understood that his pension would be increased by about

$15,000 per year if he had a Loba pension, instead of a pension under the PSSA.

[543]

Luck did not recall Parent advising him that he had negotiated six

other RTAs with the federal government that had been cancelled; however, he did

have the SAM bulletin that spoke of the cancellation of those agreements and two

listed were Welton Beauchamp Nixon Inc. and Cryptic Web.

[544]

Luck did not recall Parent advising him not to leave the public service

to join Loba unless he was planning to leave the public service in any event in the

near future. I find that Parent did not emphasize this to Luck, as he did during his

interviews with the undercover officers two days earlier. Luck and his wife met

with Parent for only one-half hour. Parent would not have been able to complete

his full presentation during that time. His comments about employment normally

came at the end of his presentation. Luck was almost 61 at the time of the

interview. His stated intended retirement date was in April 2003, once he had 25

years of service. In that his intended retirement date was only two and a half years

away, the timeframe met Parent’s warning that one should not leave the public

service for Loba unless the person was thinking of retiring at least in the near

future.

[545]

On October 12, 2000, after meeting with Parent, Luck signed: (1) an

application for employment with Loba;⁵²⁰(2) an application for membership in the

Loba Pension Plan;⁵²¹(3) his Appendix B;⁵²²and (4) Loba’s standard form

employment agreement.⁵²³On the same day, Luck resigned from the public

service effective October 13, 2000.⁵²⁴On October 14, 2000, he signed the Pension

Transfer Administration Agreement with Loba.⁵²⁵On October 17, 2000, Luck

signed the Notice of Termination and Option for Benefit with Jenny Lee Gauthier

(“Gauthier”), his compensation advisor, and she marked on the form that he was

taking the RTA option.⁵²⁶Subsequently Luck received a letter from Gauthier dated

October 27, 2000 explaining his options under the PSSA.⁵²⁷

[546]

Luck understood that he would be receiving 92.5% of the value of his

PSSA pension being transferred to the Loba pension plan, and he understood that

Loba would be retaining the balance. Luck did not understand from his discussion

with Parent that Loba would retain a one-time only fee of $2,800 and the balance

of the commission it was taking from Luck’s contract income would be added to

the value of his Loba pension.

- 182 -

[547]

Luck understood that Loba would be his employer, he would be

required to solicit contracts that he would perform on Loba’s behalf, and Loba

would receive a commission on his work. When Luck resigned from the public

service, he was optimistic that he would be able to obtain consulting contracts. He

had specific knowledge of the financial software being used in four to five other

government departments of the same size as INAC, and he thought his talents

would be in demand. Immediately upon leaving the public service, Luck

negotiated a contract between Loba and Systematix pursuant to which Luck would

provide services to INAC from October 16, 2000 to March 31, 2001, with the

possibility of extensions.⁵²⁸The work Luck did at INAC through Systematix

simply continued the work he had been doing previously. Luck was unsuccessful

in getting any other contracts.

[548]

Luck received the Superannuation Directorate’s standard employment

confirmation letter dated December 15, 2000.⁵²⁹His evidence was that this was the

first time that he had seen reference to an employment relationship; however, his

evidence was that this did not cause him any particular concern. I find that during

the meeting that Parent had with Luck, Parent would have explained to Luck the

requirement of his being an employee of Loba. At Loba’s request, Luck forwarded

the letter and his draft reply to Loba.⁵³⁰Desrochers recommended that Luck

provide less detail about the work he was doing under the contract, and he

modified his response accordingly.⁵³¹Luck found it a bit puzzling that Desrochers

was drafting responses for Loba workers, but he did not ask Desrochers why he

was doing that. Luck was not contacted subsequently by anyone from the

Superannuation Directorate for any further information or clarification. At no time

did any of the Third Parties suggest to Luck that he should misrepresent or lie

about his circumstances to the Superannuation Directorate or any other federal

government department, and at no time did he do so.

[549]

When working on contract with Systematix, Luck was paid through

direct deposit to his bank account by Loba, and Loba withheld employment

insurance premiums, CPP premiums, income tax and contributions to the Loba

pension plan.

[550]

On September 14, 2001, Luck met with Parent and Desrochers.

Parent introduced him to Komokoa and explained that it might be able to assist

him in getting contracts. Luck followed up with Zeithammel and put his name on

different data bases. During the meeting with Parent, Luck inquired as to when the

- 183 -

transfers would be processed and was advised that, due to bureaucratic delays, it

would not happen before the end of 2001.

[551]

By December 2001, Luck’s financial circumstances were becoming

desperate since he could not find contract work and he did not have access to his

pension monies. The first Luck heard of the RCMP investigation and the hold on

Loba transfers was upon receipt of the December 19, 2001 Loba newsletter.⁵³²He

was shocked. Despite receiving this information, Luck did not make any further

inquiries to the Treasury Board, the CRA or the Superannuation Directorate. Luck

did not hire a lawyer at this time because he did not have the financial resources to

do so. He tried to speak to former colleagues at INAC, but his impression was that

they were avoiding him.

[552]

On March 8, 2002, Luck wrote to Pellerin at the Superannuation

Directorate giving Parent and Burnside authorization to make inquiries on his

behalf.⁵³³On April 29, 2002, he again wrote to Pellerin seeking information and an

advance on his pension transfer.⁵³⁴Although his letter was acknowledged, he

received no further information from the Superannuation Directorate.⁵³⁵Finally,

on October 21, 2004, Luck notified Parent that he was rescinding his request for a

transfer under the Loba RTA.⁵³⁶He did so on October 26, 2004.⁵³⁷On November

9, 2004, Macpherson advised Luck of his options under the PSSA.⁵³⁸Luck chose

to receive his pension commencing when he left the public service in 2000. As a

result he received a significant back payment when his pension started to flow in

2004.

Lucie Nobert (action no. 06-CV-034480)

[553]

Lucie Nobert (“Nobert”), born September 23, 1950, joined the federal

public service in 1972. She completed a B.A. in 1974. She took a leave of

absence from 1982-1983, left the public service for two years, returned in 1985,

and then started to buy-back her pension for the earlier period. From 1982 to 1985,

Nobert was on a sailing trip with her husband. From 1995 to 2000, Nobert was a

Senior Analyst at the Office of Learning Technologies at Human Resources

Development Canada (“HRDC”). From 1998 to 2000, she was the Manager, New

Practices in Learning Technologies and Research.

[554]

In June 1999, Nobert took a pre-retirement course sponsored by

HRDC and provided by the Retirement Planning Institute. Nobert received the

July 2000 newsletter published by the Retirement Planning Institute describing

- 184 -

RTAs, of which she knew very little, and referring interested persons to the

www.october-15.com website.⁵³⁹

On July 5, 2000, Nobert made an on-line

request for more information.⁵⁴⁰She realized that the request was being made to

WBP – the actuaries who had given financial advice during the pre-retirement

course. On July 6, 2000, Nobert e-mailed her compensation advisor, Nathalie

Crete (“Crete”), with specific questions concerning her pension entitlement and the

options available to her.⁵⁴¹One question related to the pension to which she would

be entitled as of September 2000 or September 2002. In the e-mail, she

specifically mentioned that one option she was considering was transferring her

pension entitlement pursuant to an RTA; however, she did not specifically name

Loba. She asked if there was any counselling service available for employees with

this type of question. Nobert did not receive any response from Crete in this

regard.

[555]

Nobert contacted Parent, who advised her of the information he

required to provide her with calculations relating to the RTA.⁵⁴²Nobert obtained

her salary and service records from her compensation advisor,⁵⁴³and forwarded

them to Parent.⁵⁴⁴

[556]

Nobert and her husband met with Parent on July 19, 2000 for over an

hour. At the time, Nobert understood that Parent was the President of WBP, an

actuary and the administrator of the Loba pension plan. Parent provided them with

a package of material, including: (1) the Citizen article entitled “PS pension option

packs big payoff”;⁵⁴⁵(2) the Citizen article entitled “Leaving the public service?

There are new options to consider”;⁵⁴⁶(3) Hamilton’s October 3, 1997 letter to

Parent;⁵⁴⁷(4) Parent’s October 20, 1997 response to Hamilton;⁵⁴⁸(5) SAM Special

Bulletin: 1999-002 regarding the cancellation of certain RTAs;⁵⁴⁹and (6) the Loba

RTA.⁵⁵⁰

[557]

Nobert advised Parent that she was planning to retire in the fall of

2004 and her husband was planning to retire early in 2005 (something he

ultimately did). Nobert’s husband had a small pension, so it was important to

maximize Nobert’s pension. Nobert was particularly interested in the option under

the Loba RTA of leaving more to her husband than she would otherwise be able to

leave under the PSSA. Nobert did not remember Parent specifically stating that she

should not leave the public service simply to take advantage of the Loba RTA;

however, she felt no pressure to join Loba.

- 185 -

[558]

Parent advised Nobert that, due to her buyback of her pension, he

required further information from the government before he could provide her with

an accurate estimate of the funds available to her under the Loba RTA. Nobert

requested the additional information from her compensation advisor, but to no

avail. Eventually she signed a release form authorizing WBP to get the additional

information.⁵⁵¹

[559]

Nobert understood that she would be guaranteed 92.5% of the value of

her pension entitlements being transferred to the Loba pension plan. She was not

entirely sure what happened to the remaining 7.5%, though she anticipated some

would remain in the plan and some would be used for administrative costs. She

realized that she would have some options as to what to do with the pension

monies transferred, including a locked-in RRSP, an RRSP, a pension in lieu of a

cash payment, and an IPP. She was most interested in the establishment of an IPP.

Nobert understood that $2,800 was an annual retainer fee for Loba; she only found

out once she started working for Loba that this was a once-only fee.

[560]

I accept Nobert’s evidence that her husband specifically asked Parent

if transfers had been made for anyone joining Loba and Parent responded

affirmatively. Parent had no specific memory of what he would have said to

Nobert and her husband regarding transfers under the Loba RTA, and whether he

told them at the time of their interview that the transfers were on hold. Parent

confirmed that, if Nobert and her husband had asked him whether transfers had

gone through under the Loba RTA, he would have said that they had, and in

reporting that would have been referring to the transfers for Martin and Grimes, the

first hire after Martin.

[561]

Following her meeting with Parent, Nobert spoke with her sister,

Louise Plouffe (“Plouffe”), a team leader of the Compensation and Benefit Group

at PWGSC. She spoke with a friend, Nicole Gareau (“Gareau”), who trained the

Compensation and Benefit Group. Neither had heard of Loba, but both were aware

that if Nobert wanted to take advantage of an RTA, she had to apply before

October 15, 2000. Nobert did not consult further with her own compensation

advisor because the Compensation and Benefits Group at HRDC was undergoing

restructuring and it was hard to get any response from Crete. The two individuals

she spoke to were senior to Crete, and Nobert had confidence in their advice.

Nobert’s husband checked on the Internet and found Loba on the list of companies

with a valid RTA.

- 186 -

[562]

Nobert’s husband spoke to a certified management accountant and

friend, Chris Brown (“Brown”). Brown advised that he thought the Loba option

was a really good deal, that his wife had joined Loba and that the 7.5% amount to

be retained by Loba was not unusual. Nobert spoke to her Director, Daniel Richer

(“Richer”), primarily to determine if contract work might be available for her if she

went to Loba. She was advised that the Office of Learning Technologies had a

small staff but a large operational budget and did a lot of work through consultants.

However, there was no guarantee Nobert would get contract work; she would have

to submit proposals like all other consultants. Richer also advised that he had gone

to see Parent himself, he found the Loba option interesting, but he was too close to

retirement for him to take that option. Neither Brown nor Richer expressed any

concerns about Loba. Nobert did not seek legal advice about the possibility of

joining Loba.

[563]

On August 30, 2000, Nobert met with Parent to sign various

documents, including: (1) Loba’s standard form employment agreement;⁵⁵²(2) a

Pension Transfer Administration Agreement;⁵⁵³and (3) an application for

membership in the Loba pension plan.⁵⁵⁴At this meeting, Parent provided Nobert

with a copy of Gravelle’s e-mail of August 22, 2000.⁵⁵⁵Nobert could not recall

any discussion about this e-mail. She did not ask any questions about it. In regard

to the Superannuation Directorate contacting each individual to confirm

employment status, Nobert assumed this was a standard procedure to ensure that

the individual was actually working for the company to which the pension monies

were being transferred. On September 1, 2000, Nobert submitted her resignation

from the public service effective September 29, 2000.⁵⁵⁶During the month of

September, Nobert received an e-mail notice about RTAs that would have been

one of the Information Bulletins or Personnel Bulletins issued by the Treasury

Board or PWGSC. The document raised no concerns.

[564]

On December 22, 2000, Nobert attended with Crete to sign a Notice

of Termination and Option for Benefit form on which she had noted that she was

choosing an RTA.⁵⁵⁷

[565]

Nobert understood that she would be responsible for finding contract

work, that Loba would enter the contract with the third party, that Nobert would

invoice the third party on behalf of Loba, that the third party would pay Loba and

that Loba would pay her. She was confident that she would be able to find contract

- 187 -

work, though she had not done any research in this regard before resigning from

the public service.

[566]

Between October 2000 and March 2001, Nobert worked on contract

with the Office of Learning Technologies.⁵⁵⁸This was followed by a gap in

Nobert’s contracts, with her making minimal efforts to find contract work. From

September 2001 to May 2002, Nobert became a casual worker for the Office for

Disability Issues. In addition, she worked on contract through Loba with the

Office of Learning Technologies from December 2001 to February 2002.⁵⁵⁹At

some point, her Assistant Deputy Minister advised her that it would be better for

her not to do any further work for the Office of Learning Technologies while she

was working for the Office for Disability Issues, and she stopped doing so. From

May 15, 2002 to September 30, 2004, Loba had an Interchange Canada Agreement

with the Office for Disability Issues for Nobert’s services;⁵⁶⁰however, from

November 20, 2003 to April 30, 2004, Nobert was on an extended leave so that she

could travel with her husband.⁵⁶¹From November 2001 to September 2004, when

Nobert was working for the Office for Disability Issues, she was working a four-

day week. Nobert retired from Loba on September 30, 2004.⁵⁶²In regard to

contract work done through Loba, Loba paid Nobert through direct deposit, after

withholding amounts for income taxes, CPP, employment insurance and

contributions to the Loba pension plan.

[567]

Nobert never received a letter from the Superannuation Directorate

seeking to confirm her employment status with Loba. At no time did Parent ever

ask Nobert to lie about or misrepresent her relationship with Loba. At no time did

she do so.

[568]

When Nobert joined Loba, she understood that it would take 12 to 15

months to have her pension entitlement transferred to the Loba pension. Nobert

received Burnside’s update of May 25, 2001 advising that there were processing

delays at the Superannuation Directorate and that transfers requested in May 2000

were then being worked on by the Directorate.⁵⁶³Burnside did not advise Nobert

that a hold on transfers had been put into effect. Nobert was aware in September

2001 that Parent was seeking a ruling from the CRA regarding the employment

status of Loba workers. She received the October 24, 2001 update from Loba

advising that the CRA had ruled that the workers were employees.⁵⁶⁴Her

understanding at this point was that the concerns of the Treasury Board and the

CRA had been addressed. When Nobert received the December 19, 2001 update

- 188 -

from Loba,⁵⁶⁵she was in shock and was very concerned about what was going on.

In January 2002, she reviewed the Information to Obtain Search Warrant sworn by

Desnoyers.⁵⁶⁶At this point, Nobert consulted a lawyer. She decided to continue

working for Loba until the legal procedures were over. Turley sent Nobert a letter

dated June 6, 2002 asking if she would be willing to speak to Justice lawyers who

were representing the federal government in Loba’s action against the Crown for

breach of contract.⁵⁶⁷Nobert did not agree to be interviewed.

[569]

On June 30, 2002, Nobert e-mailed Pellerin for information

concerning the status of the transfer of her pension entitlements under the Loba

RTA and concerning pension options available to her, other than the RTA.⁵⁶⁸On

October 24, 2002, Macpherson eventually responded to Nobert’s inquiries.⁵⁶⁹She

was unable to advise Nobert of the funds that potentially could be transferred under

the Loba RTA. She advised that since the transfer had not yet taken place, the

Crown would accept a revocation of her direction to transfer, but only if Nobert

signed a Release and Indemnification Agreement drafted by Turley. She advised

of the immediate allowance to which Nobert would be entitled under the PSSA or,

alternatively, the deferred allowance to which she would be entitled at age 60.

Nobert was unwilling to sign the Release and Indemnification Agreement.

[570]

On February 12, 2005, after the registration of the Loba pension plan

had been revoked, Nobert inquired from Macpherson of her options, should she

revoke her transfer request.⁵⁷⁰Macpherson’s response, dated April 4, 2005, spoke

of two options: a deferred annuity at age 60 unreduced due to age, and an

allowance commencing earlier, reduced due to age.⁵⁷¹Nobert revoked the transfer

to the Loba pension plan in September 2005. She opted to commence receiving an

allowance on September 30, 2000. This resulted in her receiving a lump sum

payment of $143,611.59 for the period from September 30, 2000 to October 31,

2005, which, after deductions for income tax, resulted in a net payment of

$80,121.07.⁵⁷²

[571]

Meanwhile in 2003, Nobert had established an IPP through Loba to

house pension contributions she and Loba made while she was on the Interchange

Canada Agreement.⁵⁷³Nobert’s IPP still exists and is managed by RocheBanyan

with investments made by Fletcher. The CRA has not revoked the registration of

Nobert’s IPP.

- 189 -

Marie-France Dufour (action no. 07-CV-037376)

[572]

Marie-France Dufour (“Dufour”), born June 1, 1952, had joined the

federal public service in 1975. In June 2000, she was classified at a PC-4 level and

was earning $77,039 as a physical scientist with Energy, Mines and Resources.

[573]

Early in 2000, Dufour had sent her resumé to two other potential

employers. As well, in January 2000, Dufour received an e-mail from the Chief

Scientist at the Illinois State Geological Survey asking if she knew of anyone who

might be interested in a position at his organization. She initially forwarded her

own resumé and then on February 17, 2000 followed up with an application for the

position.

[574]

At approximately the same time, Dufour consulted Jemus for financial

advice relating to retirement. She had obtained Jemus’ name from a colleague

when attending a pre-retirement course offered through the federal public service.

During her initial meeting with Jemus, he mentioned that if Dufour was

considering retiring but working as a consultant subsequently, there was a

company, Loba, to which she could transfer her PSSA pension under an RTA. This

was the first time she had heard of RTAs. She understood that Loba would

administer her pension for as long as she worked for it as a consultant to other

companies. At the time, Dufour was not considering consulting work outside the

public service, though she was thinking about leaving the public service for

employment elsewhere such as with the Illinois State Geological Survey.

Nevertheless, Loba was of interest to her. She was under 50. The amount that she

could transfer to Loba was about twice what she otherwise could transfer out of the

PSSP. Through the Loba RTA, she would be able to get a larger amount to invest

for her pension and she would be able to manage her own investments.

[575]

Dufour met with Jemus approximately six times. He offered to set up

a meeting with Parent in the early spring of 2000, and he attended that first

meeting. Dufour had approximately four or five meetings with Parent. At their

first meeting, Parent explained the nature of RTAs, how they functioned and the

financial advantages they offered. He provided her with some newspaper articles

about RTAs. Parent did not give her any advice at that meeting. They agreed to

meet again so that Dufour could gain a better understanding. That meeting

occurred in April. At this time, Dufour understood that Parent was the CEO of

Loba and an actuary with WBP.

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[576]

Dufour was interested in the Loba option and proceeded to get her

salary and service information from her Human Resources department.⁵⁷⁴At some

point, Dufour reviewed this financial information with Jemus. Dufour again met

with Parent on May 16^thto review the Reciprocal Pension Transfer Agreement

(Termination/Retirement Option Statement Estimate).⁵⁷⁵At the end of this

meeting, Dufour concluded that it would be highly beneficial for her to join Loba

and transfer her pension entitlement under the Loba RTA.

[577]

Parent met with Dufour on a number of occasions in April, May and

June 2000. He did not recall if he told her about the hold on transfers under the

Loba RTA once it came to his attention. Dufour had no recollection of Parent

telling her about the hold, and I accept her evidence.

[578]

On May 26, 2000, Dufour resigned effective June 9, 2000 from

Energy, Mines and Resources,⁵⁷⁶where she was a highly respected employee.⁵⁷⁷

On June 13, 2000, Dufour instructed her compensation advisor that she wished to

opt for the Loba RTA. The compensation advisor raised no concerns about that

choice. Dufour’s plan, which she followed, was to attend the Sydney Olympics, to

work full-time for the Illinois State Geological Survey starting in October 2000,

and to independently work on some contracts through Loba. On June 13, 2000,

Dufour signed Loba’s standard form employment agreement,⁵⁷⁸and her Appendix

B.⁵⁷⁹

[579]

Dufour received the Superannuation Directorate’s standard

employment confirmation letter dated October 3, 2000⁵⁸⁰to which she responded

on November 10, 2000.⁵⁸¹Parent never asked her to lie or misrepresent her

relationship with Loba and she did not do so. In regard to the contracts Dufour did

on behalf of Loba, she was paid by Loba, who withheld amounts for the Loba

pension plan, CPP, employment insurance and income tax.

[580]

After October 15, 2000, Dufour was advised by Loba that the transfer

process was a lengthy one and would take six months to a year. Before she had

become concerned about the delay, she received an update from Loba early in

2001 explaining that there was some concern on the government’s part and

procedures were being undertaken to get matters resolved. Then in December

2001, Dufour received Parent’s December 19, 2001 letter about the RCMP

investigation,⁵⁸²of which she had not been aware.

- 191 -

[581]

Dufour did not recall seeing Hamilton’s October 3, 1997 letter to

Parent⁵⁸³or Parent’s October 20, 1997 response,⁵⁸⁴though it was possible that she

had seen both letters. Parent did provide Dufour with a copy of the SAM Special

Bulletin: 1999-002⁵⁸⁵regarding the cancellation of certain RTAs. Dufour

understood that Parent had been involved with these RTAs. Parent told Dufour

that she should not leave the public service to join Loba simply because of the

Loba RTA; she should be planning to leave the public service in any event. Parent

explained to Dufour that she would be responsible to find her own work, that her

consulting contracts would be put through Loba, and that it was important that she

be employed by Loba.

[582]

Had Dufour been provided with information prior to October 15, 2000

that would have raised concerns about her transferring her pension entitlement to

the Loba pension plan, she probably could not have gotten her position back, but

she probably could have obtained another position with the federal public service,

though possibly not at her previous salary level.

Negligent Misrepresentation

[583]

The Plaintiffs submit that the Defendant is liable for damages for

negligent misrepresentation for its failure to advise the Plaintiffs of the significant

concerns of the Treasury Board and the CRA regarding the legitimacy of the Loba

arrangements, and more particularly, for its failure to advise the Plaintiffs of the

significant, identifiable risk that registration of the Loba pension plan would be

revoked by the CRA resulting in no transfers being made under the Loba RTA.

[584]

The Defendant argues that, to the extent that the Plaintiffs suffered

any losses that are recoverable under the law, Parent, Loba, WBP and/or Jemus are

responsible for such losses due to their failure to provide the Plaintiffs with

relevant, accurate and complete information pertaining to their pension

entitlements under the Loba pension plan. The parties agree that Loba and WBP

are vicariously liable for any actions or omissions of Burnside found to be

negligent misrepresentations.

Lifting the Corporate Veil

[585]

The Defendant is seeking to have Parent and Jemus in their personal

capacities found liable for contribution and indemnity as a result of their negligent

misrepresentations to the Plaintiffs (and in Parent’s case to the Defendant), even

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though both Parent and Jemus were acting for corporations at the time the alleged

misrepresentations were made.

(a) Parent

[586]

Parent submits that he should not be found personally liable for the

negligent acts of Loba and WBP because at all times he was acting in his capacity

as officer/director of both Loba and WBP and was acting in the best interests of

both companies.

[587]

There is no doubt that Loba and WBP are separate legal entities from

Parent.⁵⁸⁶That, however, does not mean that Parent is automatically absolved

from liability to third parties for his conduct while carrying out his functions as an

officer of Loba or WBP. As Iacobucci J. writing for the majority stated in London

Drugs Ltd. v. Kuehne & Nagel International Ltd.:⁵⁸⁷

… There is no general rule in Canada to the effect that an employee acting

in the course of his or her employment and performing the "very essence" of his

or her employer's contractual obligations with a customer does not owe a duty of

care, whether one labels it "independent" or otherwise, to the employer's

customer. Our law of negligence has long since moved away from a category

approach when dealing with duties of care. It is now well established that the

question of whether a duty of care arises will depend on the circumstances of each

particular case, not on pre-determined categories and blanket rules as to who is,

and who is not, under a duty to exercise reasonable care. There may well be cases

where, having regard to the particular circumstances involved, an employee will

not owe a duty of care to his or her employer's customer. … However, this does

not mean that this is the necessary result in all factual situations. … The mere

fact that the employee is performing the "very essence" of a contract between the

plaintiff and his or her employer does not, in itself, necessarily preclude a

conclusion that a duty of care was present.

[588]

It was held in ScotiaMcLeod Inc. v. Peoples Jewellers Ltd.⁵⁸⁸that

“officers or employees of limited companies are protected from personal liability

unless it can be shown that their actions are themselves tortious or exhibit a

separate identity or interest from that of the company so as to make the act or

conduct complained of their own.⁵⁸⁹

[589]

In Alper Development Inc. v. Harrowston Corp.,⁵⁹⁰Goudge J.A.

allowed a pleading that the vice-president of a corporate defendant was negligent

in discharging his duties to the plaintiff in a case where the plaintiff was also suing

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the corporate defendant for breach of contract with the plaintiff by failing to obtain

appropriate insurance coverage. In ADGA Systems International Ltd. v. Valcom

Ltd.,⁵⁹¹McCarthy J.A. concluded that there was no principled basis for protecting

the director and employees of a company from liability for their alleged conduct on

the basis that such conduct was in pursuance of the interests of the corporation in

circumstances where the alleged conduct was intentional.

[590]

Here the allegation is that Parent himself was negligent in the

representations he made to the Plaintiffs in that he failed to provide certain

information to the Plaintiffs. There is also the allegation that Parent intentionally

withheld information from the Defendant or misled the Defendant in regard to the

Loba arrangements. The Defendant also relies on the fact that not only Loba and

WBP stood to gain as a result of Parent’s actions, but also Parent personally stood

to gain through his ownership interest in those companies’ parent company,

Syglam, and possibly through his being a member of the Loba pension plan.

Finally, the Defendant relies on Parent’s status as a professional actuary to support

his personal liability. I find that for all of these reasons, this is an appropriate case

in which to allow the third party claim for contribution and indemnity to proceed

against Parent personally as well as against the corporations for which he was

acting.

(b) Jemus

[591]

The Defendant did not add Pension Positive as a Third Party in this

litigation. Instead, the Defendant submits that Jemus should be held liable for any

losses suffered by the Plaintiffs due to his negligent misrepresentation of his

relationship with Loba, WBP and Parent. Jemus responds that at all times when he

was interacting with the Plaintiffs, he was acting within the normal course of his

duties as the senior employee of Pension Positive and was acting in the interests of

Pensive Positive. Therefore no personal liability should attach to him.

[592]

I accept that Pension Positive is a separate legal entity from Jemus.

Ault, Collier and Dufour testified that they knew Pension Positive was a company.

The evidence falls short of persuading me that Findlay, Shepherd and Armstrong

knew that Pension Positive was a limited company.

[593]

The telephone number the Plaintiffs called was answered “Pension

Positive”. Jemus’ business card had Pension Positive in big lettering on it. The

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fax sheets Jemus used did not have his name, but had Pension Positive at the top.

None of the tendered documentation that contained the name Pension Positive

indicated that Pension Positive was a limited company. It could just as easily have

been the business name under which Jemus was operating a sole proprietorship. In

fact, this was the term Findlay used, and he, Shepherd and Armstrong only

acknowledged that they knew they were dealing with “Pension Positive”, not that

they were dealing with a limited company. In circumstances where a corporation

does not make it clear to its customers that it is a limited company, its principals

cannot hide behind the corporate veil. This argument suffices to allow the

Defendant to seek a finding of liability against Jemus personally in regard to the

actions involving Findlay, Shepherd and Armstrong.

[594]

More factors must be considered in regard to the actions involving

Ault, Collier and Dufour.

[595]

I find that at all times, Jemus was acting within the normal course of

his functions as the senior employee of Pension Positive and was acting bona fide

for the benefit of Pension Positive and not for any personal benefit to himself,

though of course as a shareholder of Pension Positive, what was advantageous to

the company was advantageous to him. This is not a case involving fraud, deceit,

dishonesty or want of authority on Jemus’ part. It is not a case where the corporate

structure was a sham from the outset or was an afterthought. This is not a case

where the corporate veil should be lifted for any of those reasons.⁵⁹²As will be

apparent shortly, I do not consider this a case where Jemus intentionally withheld

information from the Plaintiffs which he realized or should have realized was

material to the service he was providing to them, and was necessary for them to

make an informed decision.

[596]

That being said, there is a further argument that persuades me that, in

regard to all of the Plaintiffs, it would be appropriate to allow the third party action

against Jemus personally to proceed. The Plaintiffs were referred to Pension

Positive so that they could benefit from the expertise of Jemus, and Jemus was

aware of that. Jemus held himself out as being a financial advisor with special

knowledge and expertise in pensions. The financial analysis prepared by Jemus for

each Plaintiff had his name and telephone number on the top; there was no

reference to Pension Positive. Although Jemus does not fall under any

professional designation regulated by a code of professional conduct; nevertheless,

his emphasis on his own personal expertise in the field of financial analysis

- 195 -

involving pensions created an expectation that he personally would stand behind

the representations he made during the course of providing service to the Plaintiffs.

In this regard, counsel for Jemus, in both his written and oral submissions,

conceded that Jemus owed a duty of care to the Plaintiffs. If a duty of care exists,

then an action must lie to enforce that duty, assuming the other elements of

negligent misrepresentation can be proven.

Overview

[597]

that the requisite elements of the tort of negligent misrepresentation are:

In Queen v Cognos Inc,⁵⁹³the Supreme Court of Canada confirmed

(1)

a duty of care based on a “special relationship” between the representor

and the representee;

(2)

(3)

(4)

a representation that was untrue, inaccurate or misleading;

the representor must have acted negligently in making the representation;

the representee must have relied, in a reasonable manner, on the negligent

misrepresentation; and

(5)

the reliance must have been detrimental to the representee in the sense that

damages resulted.

Duty of Care

(a) Jurisprudence

[598]

Lord Wilberforce in Anns v. Merton London Borough Council⁵⁹⁴set

out the two-staged test to determine if a duty of care exists in a particular situation:

…First, one has to ask whether, as between the alleged wrongdoer and the person

who has suffered damage there is a sufficient relationship of proximity or

neighbourhood such that, in the reasonable contemplation of the former,

carelessness on his part may be likely to cause damage to the latter, in which case

a prima facie duty of care arises. Secondly, if the first question is answered

affirmatively, it is necessary to consider whether there are any considerations

which ought to negative, or to reduce or limit the scope of the duty or the class of

person to whom it is owed or the damages to which a breach of it may give rise …

This was confirmed as the applicable test in Canada in Kamloops (City) v.

Nielsen,⁵⁹⁵and reconfirmed in Ingles v. Tutkaluk Construction Ltd.,⁵⁹⁶Cooper v.

Hobart,⁵⁹⁷Odhavji Estate v. Woodhouse,⁵⁹⁸Childs v. Desormeaux,⁵⁹⁹and

Premakumaran v. Canada.⁶⁰⁰

- 196 -

[599]

At the first stage of the Anns test, the first question is whether the

harm that occurred was the reasonably foreseeable consequence of the defendant’s

act. The second question is whether there is a sufficient degree of proximity

between the parties that a prima facie duty of care should be recognized, or are

there reasons, notwithstanding the proximity between the parties, that tort liability

should not be recognized. Thus the proximity analysis focuses on factors arising

from the relationship between the plaintiff and the defendant and includes some

policy considerations relating to that relationship. What this means is that the

“reasonable foreseeability of the harm” must be supplemented by “proximity”

before a prima facie duty of care will arise. The courts have developed categories

of proximate relationships in which a duty of care to guard against reasonably

foreseeable harm exists. These categories of relationships are not closed; new

categories of negligence may be introduced.⁶⁰¹Negligent misstatement is a

category in which proximity has been recognized.⁶⁰²

[600]

At the second stage of the Anns test, the question arises that, even if

foreseeability and proximity are established, are there broader, residual policy

considerations outside of the relationship between the parties that militate against

the imposition of a duty of care?⁶⁰³Once the plaintiff establishes a prima facie

duty of care, the evidentiary burden of showing countervailing policy

considerations shifts to the defendant.⁶⁰⁴

[601]

In Hercules Managements Ltd. v. Ernst & Young,⁶⁰⁵the Supreme

Court of Canada set out the analytical approach to be used in determining whether

a duty of care exists in a case of negligent misrepresentation. In regard to the first

stage of the Anns test, a prima facie duty of care exists where there is a relationship

of “proximity”:

The label “proximity”, as it was used by Lord Wilberforce in Anns, supra, was

clearly intended to connote that the circumstances of the relationship inhering

between the plaintiff and the defendant are of such a nature that the defendant

may be said to be under an obligation to be mindful of the plaintiff’s legitimate

interests in conducting his or her affairs.

… In cases of negligent

misrepresentation, the relationship between the plaintiff and the defendant arises

through reliance by the plaintiff on the defendant’s words. Thus, if “proximity” is

meant to distinguish the cases where the defendant has a responsibility to take

reasonable care of the plaintiff from those where he or she has no such

responsibility, then in negligent misrepresentation cases, it must pertain to some

aspect of the relationship of reliance. To my mind, proximity can be seen to

inhere between a defendant-representor and a plaintiff-representee when two

- 197 -

criteria relating to reliance may be said to exist on the facts: (a) the defendant

ought reasonably to foresee that the plaintiff will rely on his or her representation;

and (b) reliance by the plaintiff would, in the particular circumstances of the case,

be reasonable. To use the terms employed by my colleague, Iacobucci J. in

Cognos, supra at p. 110, the plaintiff and the defendant can be said to be in a

“special relationship” whenever these two factors inhere. (para 24).

…

As I have already tried to explain, determining whether “proximity” exists on a

given set of facts consists in an attempt to discern whether, as a matter of simple

justice, the defendant may be said to have had an obligation to be mindful of the

plaintiff’s interests in going about his or her business. (para 28).

[602]

At the second stage of the Anns test, a prima facie duty of care based

on the analysis of “proximity” may be negated due to policy considerations. These

policy considerations are not concerned with the relationship between the parties,

but with the effect of recognizing a duty of care on other legal obligations, the

legal system and society more generally.⁶⁰⁶One such policy consideration is the

possibility that the defendant would be exposed to liability in an indeterminate

amount for an indeterminate time to an indeterminate class.⁶⁰⁷However, “in cases

where the defendant knows the identity of … a class of plaintiffs, and where the

defendant’s statements are used for the specific purpose or transaction for which

they were made, policy considerations surrounding indeterminate liability will not

be of any concern since the scope of liability can readily be circumscribed.”⁶⁰⁸

[603]

Another policy consideration relates to the extent to which a

government should be liable for its decisions. In this regard, a distinction is drawn

between government policy and the execution of policy. For policy reasons,

government actors are not liable in negligence for policy decisions which reflect

the prerogative of elected representatives. However, government actors may be

liable for operational decisions taken while implementing policy.⁶⁰⁹In the case at

hand, what are under consideration are the operational decisions taken by

government representatives, not the underlying policies implicated in the

circumstances.

[604]

Normally the second stage of the Anns analysis does not come into

play if a duty of care asserted falls within a recognized category of recovery. In

this regard, it is well-established that an employer owes a duty of care to an

employee⁶¹⁰and a pension plan administrator owes a duty of care to members of

the pension plan.⁶¹¹As stated by the Court of Appeal in Hembruff v. Ontario

Municipal Employees Retirement Board:⁶¹²

- 198 -

…It seems beyond dispute that the Board has an obligation to be mindful of the

members’ interests when going about its business of administering the pension

plan. It also seems beyond dispute that the Board would reasonably foresee that

plan members would rely upon the pension information that it gives them and

that, in the circumstances, such reliance is reasonable.

[605]

In Spinks v. Canada,⁶¹³Spinks, a new AECL employee with several

years of employment with the Australian Atomic Energy Commission (“AAEC”),

attended a sign-on interview at AECL, the purpose of which was to inform new

employees about matters pertaining to their employment, including the AECL

pension plan and the options employees might have in regard to it. At the time of

the interview, Spinks was provided with a booklet summarizing the provisions in

the PSSA and was asked to complete a pension administration screening form. Of

particular significance to Spinks would have been his ability to have his years at

AAEC considered years of pensionable service under the PSSA. The staffing

officer conducting the interview did not advise Spinks of this option. The booklet

and form Spinks was given did not make this option apparent. The Federal Court

of Appeal held that the federal government owed Spinks a duty of care in these

circumstances, stating:⁶¹⁴

A duty of care clearly was owed to the appellant in the present circumstances.

Mr. Spinks was in a position of complete reliance upon his employer for the

pension information he needed. He was a new employee. He needed information

about his pension rights before he could choose his options wisely. The employer

realized or should have realized this. He did not have the information and his

employer did. In these circumstances, he relied on his employer, this reliance was

reasonable, his employer foresaw or should have foreseen this, and, therefore a

duty of care arose.

[606]

In establishing a duty of care in these circumstances, Spinks did not

have to demonstrate “knowledge of the risk of economic loss” on the part of the

staffing officer; he only had to establish “reasonable foresight of economic loss” –

something that was clearly present. As well, he did not have to prove any

“voluntary assumption of responsibilities” by the staffing officer. The staffing

officer had the responsibility to advise competently and to take care in providing

that advice, whether or not there was a request for advice.

[607]

Factors which supported a finding that the federal government owed a

duty of care to Spinks were:

- 199 -

• Spinks was an employee of AECL and required from AECL certain

information needed by him as a new employee. The key question is

whether Spinks reasonably relied on the employer for the information in

question, and whether that could be reasonably foreseen.

• The obligation to convey relevant information regarding Spinks’ pension

options was undertaken as government policy.

The personnel

management manual written for the administration of the PSSA clearly

stated that government departments were charged with the responsibility

of “providing a counselling service to employees on all superannuation

matters, with particular reference to elections”.

• One of the purposes of the sign-on interview was to inform new

employees of the pension options available to them. Anyone could

foretell that poor advice given at that time could result in negative

financial consequences for Spinks.

• The information relevant to Spink’s circumstances was uniquely in the

possession of the staffing officer, and not readily available to Spinks.

• The PSSA booklet suggested that a duty of care existed.

• The screening form instructed the staffing officer to ensure that the

information on the form was accurate and complete.

[608]

Spinks, supra is of particular relevance in this case due to the

similarity of factors.

(b) Did the Defendant owe a duty of care to the Plaintiffs?

[609]

The Plaintiffs take the position that the Defendant owed a duty of care

to the Plaintiffs under the test in Hercules Management Ltd. v. Ernst & Young,

supra, because the Treasury Board was in the dual role of employer and pension

plan administrator for the Plaintiffs, both are relationships of proximity, and both

have been recognized in the case law as creating a duty of care.

[610]

The Defendant acknowledges that an employer has a duty to advise

employees of their options regarding their pension entitlements under that

employer’s pension plan, including options available to them upon termination of

- 200 -

employment. However, the Defendant takes the position that the duty of care the

Plaintiffs seek to impose goes beyond this type of information and would impose a

duty on an employer to provide specific advice about an employee’s prospective

new employer and provide advice regarding the potential risks associated with

seeking a transfer of pension funds to that new employer’s pension plan. The

Defendant asserts that imposing a duty of care in these circumstances would

extend the duty of care of employers and pension plan administrators beyond

anything recognized in the jurisprudence to date. In my view, the issue raised by

the Defendant speaks to the question of the standard of care to be expected of

employers and pension plan administrators – not to the question of whether a duty

of care exists in these relationships.

[611]

Public servants such as Charko, Gravelle and Macpherson working at

the Pensions Division, Soucoup and Swan working at the Superannuation

Directorate and the compensation advisors working in the employing departments

and agencies, ought reasonably to have foreseen that public servants, such as the

Plaintiffs, considering exercising their right as members of the PSSP to take

advantage of an RTA would rely on their representations regarding the existence,

legality and accessibility of that RTA. I also find that reliance on those

representations by public servants in the Plaintiffs’ position, in the particular

circumstances of these cases, was reasonable. I conclude that Charko, Gravelle,

Macpherson, Soucoup, Swan, the compensation advisors in the departments and

agencies, and those to whom all of these individuals reported, had an obligation to

be mindful of the Plaintiffs’ interests in going about their responsibilities as the

Plaintiffs’ employer and as administrator of the Plaintiffs’ pension plan. The

following evidence supports the finding of such a duty of care:

• Reciprocal transfer agreements were a benefit afforded the Plaintiffs

under the PSSA as an incident of their employment and resulting

membership in the PSSP.

• The Treasury Board was tasked with negotiating, monitoring and

cancelling RTAs. The Pensions Division of the TBS was tasked with the

ongoing management of these responsibilities.

• The Superannuation Directorate at PWGSC was responsible to manage

the day-to-day operations of the PSSP, including all aspects of the

procedures by which transfers were made under RTAs.

- 201 -

• The Directorate of the Compensation Sector at PWGSC was responsible

for disseminating to the compensation advisors in the employing

departments and agencies relevant information, directions and guidelines

relating to the administration of the PSSA.

• The compensation advisors were tasked with providing a counselling

service to employees of all superannuation matters, with particular

reference, amongst other things, to RTAs.

• Through general publications to public servants, the Plaintiffs were

specifically advised to consult their compensation advisors if they had

questions concerning their rights under the PSSA.

• Prior to October 15, 2000, the option of an RTA was specifically referred

to in a standard-form letter sent to public servants who were leaving the

federal government.⁶¹⁵

• In the period leading up to October 15, 2000, the Defendant advertised to

public servants in the position of the Plaintiffs the existence of RTAs and

warned public servants that they only had to October 15^thto take

advantage of this opportunity. In these notices, the Defendant

highlighted the potential financial advantage to public servants of an

RTA when compared with a PTA.⁶¹⁶

• Public servants were told that if they wanted a listing of employers with

whom the Treasury Board had RTAs, they should consult their

compensation advisors.

• Both Gravelle and Charko acknowledged that it was the role of the

Treasury Board to provide information to its employees about the

benefits and the programs that it offered, that pension benefits were very

important to individual public servants, and that it was important that

individual public servants be properly informed before they made choices

relating to their pensions.⁶¹⁷Charko is on record as stating publicly that a

goal of the Treasury Board is to ensure that members of the PSSP have

“the most easily accessible, relevant, complete, and timely pension

information – information to help them better understand their Plan, thus

allowing them to make the most advantageous decisions at various life

- 202 -

stages”.⁶¹⁸One of the options available to public servants prior to

October 15, 2000 was transferring the value of their pension entitlement

under the Loba RTA.

• Gravelle acknowledged that employing departments and agencies were

expected to provide information to employees regarding their

entitlements as members of the PSSP, including their entitlements under

RTAs. She admitted that it was a government objective to make sure that

officials in departments and agencies who were advising public servants

about their pension entitlements had the resources available to them to

provide accurate and up-to-date information.⁶¹⁹

• Charko acknowledged that the PSSP is a very complex pension plan, and

one of the responsibilities of the plan administrator is to provide plan

members with information about the terms of the plan and the options

available to them. He agreed that plan members are entitled to clear and

effective communication on those issues. It was reasonably foreseeable

that public servants would look to other public servants tasked with

providing them with information about their rights under the PSSP to

obtain the information necessary for them to make decisions affecting

their entitlements under the PSSP.

• The Treasury Board and compensation advisors realized that for long-

service public servants, their accrued benefits under the PSSA would

often be one of their most significant assets. Charko realized how

distressing it would be for a public servant if there was uncertainty

surrounding the treatment of his or her accrued benefits under the

PSSP.⁶²⁰Charko realized that valid information about anything that

would jeopardize the security of an employee’s pension asset would

certainly be considered relevant to the employee.

• The Treasury Board was in the position to control the ongoing existence

of the Loba RTA through its ability to cancel RTAs that it determined did

not meet ongoing requirements of a policy or legal nature.

• The Treasury Board was in the position to instruct the Superannuation

Directorate to delay or suspend transfers under the Loba RTA.

- 203 -

• In the circumstances of this case, the Pensions Division of the TBS was

also positioned to know of the concerns of both the RCMP and the CRA

concerning the legitimacy and legality of the Loba RTA and pension

plan, to know of the investigations they were undertaking or would be

undertaking, and to know that a negative outcome of either of those

investigations would result in no transfers occurring under the Loba

RTA.

[612]

The Defendant argues that it was not reasonably foreseeable to any

public servant that the Plaintiffs “were using the Loba RTA option for a lucrative

pension payout rather than legitimate employment”. This argument misses the

point. There has been no finding by any court that there was no legitimate

employment relationship between Loba and the Plaintiffs. The Superannuation

Directorate at PWGSC was satisfied, based on the employment confirmation letters

it received from the Plaintiffs and Loba, that an employment relationship existed.

In October 2001, the CPP/EI Eligibility Rulings Section provided a ruling that an

employment relationship existed in regard to 13 Loba workers, including Ault and

Collier. During this trial, no evidence was tendered that persuades me that any of

the Plaintiffs or anyone on behalf of Loba lied or knowingly misled or

misrepresented the relationship between Loba and the Plaintiffs when presenting

information or documentation to the Superannuation Directorate or to the CPP/EI

Eligibility Rulings investigator regarding the Plaintiffs’ relationship with Loba. In

my view, the subsequent CPP/EI opinion obtained in August 2003 is seriously

tainted by the pressure put on the CPP/EI Eligibility Rulings Section to come up

with an opinion that would support the Registered Plans Division’s revocation of

registration of the Loba pension plan, and by the reliance placed on Desnoyers’

investigation notes, which leave out certain important facts.

[613]

The decision of the Federal Court of Appeal on October 13, 2004,⁶²¹

dismissing Loba’s appeal from the revocation of registration of the Loba pension

plan, cannot be relied on as establishing that no employment relationship existed,

that the Loba pension plan failed to meet the primary purpose test under the

Income Tax Act, or that Parent or the Plaintiffs were guilty of any wrongdoing.

The decision stands for two simple propositions: (1) the CRA had the legal right to

revoke registration of the Loba pension plan on the grounds that it was not meeting

the primary purpose test, as long as it acted reasonably in doing so; and (2) on the

basis of the evidence before him, it was reasonable for the Minister of Revenue to

conclude that the conditions for registration of the Loba pension plan were not met

- 204 -

as of the date of the intended revocation. It is theoretically possible that, had the

Minister not revoked registration of the Loba pension plan, a court could determine

that, based on the evidence available at the time, such a decision would also have

been reasonable.

[614]

In considering what was reasonably foreseeable, one must consider

the information available to the Defendant’s representatives, such as Gravelle and

Macpherson, in the period leading up to October 15, 2000; namely:

• Gravelle and Macpherson believed that the Plaintiffs were using the Loba

RTA option for a lucrative pension payout rather than legitimate

employment.

• The Treasury Board had cancelled six other RTAs for this reason and

would have cancelled the Loba agreement had the six month notice

period not expired after October 15^th.

• Gravelle and Macpherson had notified the RCMP of their concerns and

had undertaken to cooperate fully with the RCMP in its investigations.

Gravelle and Macpherson had advised the RCMP that they considered

the Treasury Board the victim of a fraud being committed by those

involved with Loba.

• Gravelle and Macpherson knew that the RCMP considered the Treasury

Board and the Canadian taxpayer victims of a fraud being committed by

those involved with Loba and was in the process of collecting evidence to

support criminal charges for fraud.

• Gravelle had initiated contact with Godwin of the Registered Plans

Division of the CRA in regard to the Loba pension plan, had shared with

Godwin her concerns about Loba, had passed on information about Loba,

and had in essence put Loba on the radar of the Compliance Division of

the Registered Plans Division.

• Gravelle and Macpherson knew that since a red flag had been raised at

the CRA by the TBS, this likely would lead to an investigation of the

Loba pension plan by the CRA. Godwin had advised Gravelle that the

CRA would de-register a pension plan that, in its view, did not meet the

primary purpose test under the Income Tax Act.

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• Gravelle understood that the Loba pension plan could not meet the

primary purpose test because, as far as she knew, the plan existed simply

as a conduit for pension monies. Gravelle understood that if the CRA

accepted the description of the Loba arrangements as she and Desnoyers

understood them to be, the CRA would be of the opinion that the Loba

pension plan did not meet the primary purpose test.

• The TBS and the RCMP were working together to put an end to a fraud

that they believed was being committed against the Defendant. Both

were seeking the assistance of the CRA in this regard.

[615]

The Plaintiffs’ pension losses arose because they resigned from the

public service earlier than they had intended prior to deciding to join Loba, and no

transfers were made from the PSSP to the Loba pension plan due to the revocation

of registration of the Loba plan. The Defendants submit that it was only in April

2005 that the CRA retroactively revoked registration of the Loba pension plan, and

this was not reasonably foreseeable in October 2000. Again, in my view, this

misses the point.

[616]

Based on the information available to Gravelle and Macpherson prior

to October 2000, they realized that there was a real – as distinct from a

hypothetical – risk that the CRA would revoke the registration of the Loba pension

plan due to the concerns that Godwin had expressed verbally to Gravelle during

their numerous telephone conversations during the summer of 2000. Gravelle

acknowledged that, when the Pensions Division authorized the payment for Todd

and Magee in August 2000, she was concerned that it might be authorizing

payment to a pension plan which ultimately could lose its tax-sheltered status.⁶²²

This was before Gravelle received Godwin’s letter of September 7, 2000 in which

he formally set out the CRA’s concerns about pension plans like Loba’s. Gravelle

understood when she read Godwin’s letter that it captured the arrangement that

was being advertised by Loba. She understood that what Godwin explained in his

letter, in terms of the primary purpose rule, applied to the Loba pension plan.⁶²³

Neither she nor Macpherson believed that the Loba pension plan met the primary

purpose test. It was clear to her that Godwin felt so strongly about the

shortcomings of the Loba arrangements that he had put those concerns in writing to

so they could be passed on to anyone contemplating joining Loba.

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[617]

In this context, it was reasonably foreseeable to Gravelle and

Macpherson that an individual leaving the public service to join Loba and transfer

his or her pension entitlement to the Loba pension plan would suffer financial harm

if the Loba pension plan were de-registered – whether or not the pension monies

had been transferred prior to the revocation of registration. Based on all of the

information available to Gravelle and Macpherson from the Superannuation

Directorate, the CRA and the RCMP, it was reasonably foreseeable to Gravelle and

Macpherson that the de-registration of the Loba pension plan was a significant risk.

[618]

Finally, it was reasonably foreseeable to Gravelle and Macpherson

that, considering the reliance that public servants reasonably placed on the

information they were provided by the Treasury Board about their entitlements

under the PSSA, if the Treasury Board did not share their knowledge of this risk

with public servants who were considering joining Loba, those public servants

would assume that the Treasury Board was not aware of any such serious risk

specifically relating to the Loba pension plan. It was reasonably foreseeable that,

all other things being equal, the absence of any warning from the Treasury Board

about the risk of de-registration of pension plans like Loba’s, would increase the

likelihood that the public servant would choose the Loba option and thereby

expose himself or herself to risk of financial loss.

[619]

I am mindful of the statement of McLachlin C. J. in Resurfice Corp. v.

Hanke,⁶²⁴to the effect that “foreseeability depends on what a reasonable person

would anticipate, not on the seriousness of the plaintiff’s injuries … or the depth of

the defendant’s pockets …”. I find that a reasonable person would expect the

Defendant to share with its employees and pension plan members the existence of

a significant, identifiable risk of which the Defendant was aware and to which

those public servants would be exposed if they chose a particular option available

to them under the PSSP. A reasonable person would expect the Plaintiffs to rely

on the representations made by the Defendant in regard to the existence, legality

and accessibility of the Loba RTA as a pension portability option available to them

when resigning from the public service – an option negotiated, monitored,

advertised and investigated by the federal government.

[620]

The Defendant further submits that no duty of care should be

recognized in these circumstances because what is at question is an alleged failure

to act, rather than an overt act, on the part of the Defendant.

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[621]

In Childs v. Desormeaux,⁶²⁵McLachlin J. added a note of caution

regarding founding a negligence action on nonfeasance rather than misfeasance.

[W]here the conduct alleged against the defendant is a failure to act,

foreseeability alone may not establish a duty of care. In the absence of an overt

act on the part of the defendant, the nature of the relationship must be examined to

determine whether there is a nexus between the parties. Although there is no

doubt that an omission may be negligent, as a general principle, the common law

is a jealous guardian of individual autonomy. Duties to take positive action in the

face of risk or danger are not free-standing. Generally, the mere fact that a person

faces danger, or has become a danger to others, does not itself impose any kind of

duty on those in a position to become involved.

…

A positive duty of care may exist if foreseeability of harm is present and if

other aspects of the relationship between the plaintiff and the defendant establish

a special link or proximity. Three such situations have been identified by the

courts. They function not as strict legal categories, but rather to elucidate factors

that can lead to positive duties to act. These factors, or features of the

relationship, bring parties who would otherwise be legal strangers into proximity

and impose positive duties on defendants that would not otherwise exist.

[622]

McLachlin J. identified the three situations where a duty of care has

been recognized where a defendant has failed to act as being the following: (1)

where a defendant intentionally attracts and invites third parties to an inherent and

obvious risk that he or she has created or controls; (2) where a defendant is in a

paternalistic relationship with the plaintiff of supervision or control, such as exists

with parents/children and teachers/students; and (3) where a defendant either

exercises a public function or engages in a commercial enterprise that includes

implied responsibilities to the public at large. Common to these situations is the

defendant’s “material implication in the creation of risk or his or her control of a

risk to which others have been invited”.⁶²⁶The Defendant argues that the

Defendant was not involved in attracting or inviting the Plaintiffs to “an inherent

and obvious risk” that the federal government either created or controlled.

[623]

Childs v. Desormeaux can be distinguished from the cases at hand.

First, Childs v. Desormeaux raised the question of whether social hosts owed a

duty of care to someone injured in an accident caused by one of their guests

driving while intoxicated after having left the hosts’ party. The Supreme Court

held that imposing a duty of care in these circumstances would amount to the

creation of a new duty of care, not previously recognized under the law. That is

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not the case here: negligent misrepresentation is a recognized category of recovery,

and both employers and pension plan administrators have been recognized in the

jurisprudence as owing a duty of care to employees and pension plan members

respectively in the context of negligent misrepresentation.

[624]

Secondly, as will be explored in the next section, failure to provide

information can found an action for negligent misrepresentation, without any

requirement that the representor be somehow implicated in the subject-matter of

the information in question – aside from having it in his or her possession.

[625]

Thirdly, and in any event, the information about the risk of de-

registration of Loba’s pension plan was something over which the Defendant had

ultimate control. The decision to revoke registration rested with the Minister of

Revenue.

[626]

The Defendant also submits that it would not be fair or just to impose

liability on the Defendant in this particular case. It submits that the compensation

advisors are the primary point of contact between the Defendant and the PSSP plan

members. To impose a duty on compensation advisors to inform a departing

public servant of the potential consequences of seeking a transfer of pension

entitlements to a new employer’s pension plan would be manifestly unfair as it

would extend the role of a compensation advisor beyond the areas for which they

receive training and beyond the knowledge that they possess. Again, this

submission misses the point.

[627]

No one is suggesting that compensation advisors should possess

detailed information concerning the employment arrangements or pension plan of a

new employer that a public servant is considering joining. What is being

suggested is that, where the Pensions Division, that is charged with overseeing the

RTAs entered into by the Treasury Board for the benefit of PSSP members, has

specific knowledge of a significant risk associated with a category of such RTAs,

the Treasury Board owes a duty of care to public servants whom it knows to be

considering an RTA to advise them of the existence of that risk. As will be

reviewed shortly, Charko, Gravelle and Godwin all acknowledged the importance

of this information being conveyed to interested PSSP members.

[628]

Finally, the Defendant submits that, even if a prima facie duty of care

exists under the first branch of the Anns test, for overriding policy considerations,

such a duty should be negated under the second branch of the test. The Defendant

- 209 -

argues that recognizing such a duty would impose an obligation on the federal

government to police its pension portability agreements with outside employers

and to ensure that such employers are operating within the confines of the law.

The Defendant relies on the following considerations. First, the Treasury Board

does not have the authority to undertake this task; it is the CRA that provides the

regulatory oversight of an employer’s pension plan. Secondly, there is no system

in place to monitor those employers with whom the Treasury Board had RTAs or

now has PTAs. Thirdly, the cost of having any such monitoring system would be

exorbitant. Fourthly, the spectre of indeterminate liability on the part of

compensation advisors to public servants raises its head. Fifthly, it is unnecessary

to recognize a duty of care on the part of the federal government because the

Plaintiffs could have sued Parent, Loba and/or WBP for negligent

misrepresentation or for breach of fiduciary duty. Sixthly, extending the law of

negligence in this way would result in a chilling effect on the service level and

advice presently provided by compensation advisors.

[629]

I reject these policy arguments. First, normally the second stage of

the Anns test does not come into play if the purported duty of care falls within a

recognized category of recovery. That is the case here. Secondly, in its

submissions, the Defendant has framed the duty of care the Plaintiffs seek to have

recognized as being much broader than what the Plaintiffs are advocating. No one

is arguing that the Treasury Board needs to police outside employers to ensure that

they are operating within the confines of the law. What is being posited is that

where the Treasury Board, as administrator of the PSSP, has concrete information

about a particular employer or category of employers with whom it has signed an

RTA which makes it reasonably foreseeable that a public servant choosing to

transfer his or her pension entitlement under the PSSP to that employer’s pension

plan is exposing himself or herself to a significant, identifiable risk, the duty of

care on the Treasury Board as the PSSP plan administrator includes the duty to

advise such a public servant of the existence of that risk.

[630]

There was a finite number of employers with whom the Treasury

Board had RTAs – approximately 300. In the summer and fall of 2000, there was

a finite number of public servants seeking salary and service records from their

compensation advisors for the purpose of considering their options under an RTA,

and this was an easily identifiable group. A system existed whereby the Treasury

Board could easily disseminate relevant information to interested public servants.

PWGSC had a quick and efficient system of distributing Information Sheets, e-

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mails and broadcast sheets to the Compensation Community in the government’s

departments and agencies. Public servants knew to consult their compensation

advisors for information concerning their pension entitlements. Imposing a duty of

care on the Treasury Board to disseminate information about a known risk in these

circumstances would not impose an unreasonable burden on the Defendant.

[631]

A duty of care on the part of the Treasury Board and the

compensation advisors in the various government departments and agencies

existed in the circumstances of this case.

- 211 -

(c) Did Parent, Loba and WBP owe a duty of care to the Plaintiffs?

When Parent dealt with each of the Plaintiffs, he was functioning in

[632]

different capacities. Prior to a Plaintiff joining Loba, Parent was representing: (1)

Loba as the prospective employer of the Plaintiff; (2) Loba as the sponsor and plan

administrator of the Loba pension plan; (3) WBP as the third party administrator of

the Loba pension plan; (4) WBP as the consulting actuary for the Loba pension

plan; and (5) WBP as the consulting actuary to the Plaintiffs. After a Plaintiff

joined Loba, Parent continued in the first four roles.

[633]

There is no dispute that Parent, in his capacity as a consulting actuary

for the Plaintiffs, owed a duty of care to the Plaintiffs. Actuaries practising in

Ontario are subject to the professional and ethical standards in the Rules of

Professional Conduct of the CIA.⁶²⁷A number of those rules are relevant:

PROFESSIONAL INTEGRITY

Rule 1

A member shall act honestly, with integrity and

competence, and in a manner to fulfil the profession’s responsibility to the public

and to uphold the reputation of the actuarial profession.

Annotation 1-1

and care.

A member shall perform professional services with skill

Annotation 1-2

It is the professional responsibility of the member not to be

associated with anything which the member knows or should know is false or

misleading.

Annotation 1-3

A member shall not engage in any professional conduct

involving dishonesty, fraud, deceit or misrepresentation or commit any act that

reflects adversely on the actuarial profession.

…

DISCLOSURE

Rule 4

A member shall make full and timely disclosure to a client

or employer of the sources of all direct and indirect compensation that the

member or the member’s firm has received or may receive in relation to an

assignment for which the member provides professional services to that client or

employer.

Annotation 4-1

“Full and timely disclosure” means disclosure of all

material facts concerning direct or indirect compensation that may be relevant to a

client’s or employer’s decision, and in sufficient time for the client or employer to

make an informed and independent decision. Such disclosure should be made in

writing.

Annotation 4-2

A member who is not financially and organizationally

independent concerning any matter related to the performance of professional

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services should disclose to the client or employer any pertinent relationship which

is not apparent in a full and timely manner.

…

CONFLICT OF INTEREST

Rule 5

A member shall not perform professional services

involving an actual or potential conflict of interest unless:

(a)

(b)

the member’s ability to act fairly is unimpaired,

there has been full and timely disclosure of the conflict to all known

present and prospective direct users, and

(c) all known present and prospective direct users have expressly agreed to

the performance of the services by the member.

Annotation 5-1

“Full and timely disclosure” means disclosure of all

material facts concerning the conflict (including the nature of the influence or

relationship and the nature and extent of the interest) that may be relevant to a

direct user’s decision, and in sufficient time for the direct user to make an

informed and independent decision. Such disclosure should be made in writing.

[634]

For the purpose of the rules:

“direct user: a client or employer or any other person retaining the member’s

services who has had the opportunity to select the member and is in a position to

communicate directly with the member about qualifications, work and

recommendations.”

“indirect compensation: any material consideration received from any source in

relation to an assignment for which the member provides professional services

(examples of which may include volume bonuses, finder’s fees and commissions),

other than direct remuneration for those services.”

“professional services: the rendering of advice, recommendations or opinions

based upon actuarial considerations, including other services provided from time

to time by a member to a client or employer.”

[635]

During his interactions with the Plaintiffs, Parent was acting in the

capacity of a consulting actuary when he advised them about their entitlement

under the PSSP, their potential entitlement under the Loba pension plan, and the

options available to the Plaintiffs to realize that value after it arrived in the Loba

pension plan. WBP, as the actuarial firm for whom Parent worked, owed the same

duty of care to the Plaintiffs.

[636]

As well, there is no dispute that employers owe a duty of care to

prospective employees not to negligently misrepresent the nature or terms of the

employment being proposed.⁶²⁸One term of employment is the availability of

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membership in a company-sponsored pension plan. When Parent was explaining

employment opportunities at Loba to each Plaintiff, he knew the Plaintiff’s age,

years of service with the public service, position, income level and retirement

plans. He knew that each Plaintiff considered the PSSP one of his or her most

significant assets and would not want to jeopardize it in any respect. He knew that

each Plaintiff had been attracted to Loba for the primary reason that it offered the

Plaintiff a way to maximize the value of his or her entitlement under the PSSP. He

knew that each Plaintiff was aware that Parent was an actuary with WBP and

therefore had professional knowledge on the subject of pensions. Without doubt,

Parent knew that each Plaintiff would be relying heavily on what he told them

about Loba, the Loba pension plan and the Loba RTA in deciding whether to leave

the public service and join Loba.

[637]

Finally, there is no dispute that as the plan administrator, Loba (and

Parent who actually assumed this role) owed a duty of care to the Plaintiffs as plan

members, and WBP (and Parent who again actually assumed this role) owed a duty

of care to the Plaintiffs as third party plan administrators. Section 22(1) of the

Pension Benefits Act stipulates that the administrator of a pension plan shall

exercise the care, diligence and skill in the administration and investment of the

pension fund that a person of ordinary prudence would exercise in dealing with the

property of another person. By virtue of s. 22(8), a third party administrator is

subject to the same duty and standard of care.

[638]

Reliance by the Plaintiffs on Parent’s representations made in the

context of his being their consulting actuary, their prospective employer and the

administrator or third party administrator of their pension plan was reasonable in

the circumstances.

[639]

The Plaintiffs understood that Parent was an actuary with specialized

knowledge about pensions and that he worked with the actuarial firm of WBP.

Parent was actively marketing Loba to public servants like the Plaintiffs. Parent

identified himself as being the President of Loba, Loba’s consulting actuary and

the administrator of the Loba pension plan – clearly someone with extensive

knowledge of Loba and the Loba pension plan and someone with professional

knowledge of pensions generally. Government sources had identified Loba as

having a valid RTA with the Treasury Board. There was no obvious reason why

the Plaintiffs should not have relied on Parent’s representations as an actuary, the

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representative of a prospective employer, and eventually their pension plan

administrator or third party administrator.

[640]

For the same reasons as apply to Parent personally, I conclude that

both Loba and WBP owed a duty of care to the Plaintiffs.

(d) Did Jemus owe a duty of care to the Plaintiffs?

[641]

Jemus concedes that he owed a duty of care to the Plaintiffs to provide

them with an accurate financial analysis comparing the benefits they could receive

under the PSSP and the Loba RTA. Jemus held himself out as a pension advisor.

The Plaintiffs consulted him as a pension advisor. Jemus knew that was why they

were consulting him. Jemus knew that the Plaintiffs would rely on the financial

analysis he did on their behalf when making their decision whether to join Loba.

Such reliance on their part was reasonable. It was foreseeable that, if that financial

analysis was inaccurate or incomplete in any way, the Plaintiffs could suffer

damages.

[642]

The Plaintiffs did not consult Jemus for general information about

pension law, employment law, employer/employee relationships, income tax law,

Loba as a company or an employer, WBP or Parent. The Plaintiffs consulted

Jemus for a very particular purpose – to obtain a comparative financial analysis

based on the terms of the PSSP and the Loba RTA. That is the narrow context in

which Jemus owed the Plaintiffs a duty of care.

Untrue, Inaccurate or Misleading Representation

(a) Jurisprudence

[643]

In order to be actionable, a representation must be untrue, inaccurate

or misleading. Such a representation may be express or implied. It can also result

from an omission to provide information.

[644]

In Queen v. Cognos,⁶²⁹Iacobucci J. stated:

…there is no compelling reason in principle, authority, or policy for the

proposition that, as a general rule, an implied representation cannot under any

circumstance give rise to actionable negligence…in appropriate circumstances,

implied misrepresentations can, and often do, give rise to actionable negligence;

…

- 215 -

[645]

In Queen v. Cognos, during the course of an interview with a

prospective employee, a company representative made a number of representations

about the role the successful candidate would play in a particular project being

undertaken by the company to develop certain products. The trial judge found that,

in addition to various express representations, there was an implied representation

that the company’s management had made a firm budgetary commitment to the

development of products in addition to those then under development. The

Supreme Court concluded that a reasonable person in the position of the

prospective employee would have drawn this inference from what was being said

during the interview. In these circumstances, the implied representation could be

the basis for an action in negligent misrepresentation.

[646]

In Spinks v. Canada,⁶³⁰Linden J.A. stated:

A person may be “misled” by a failure to divulge as much as by advice that is

inaccurate or untrue. In the same way that absent information can be “erroneous”,

as discussed above, missing information can be misleading. … Consequently, the

duty [of care] may be breached not only by positive misstatements but also by

omissions, for they may be just as misleading.

[647]

This was reiterated in Hembruff v. Ontario Municipal Employees

Retirement Board:⁶³¹“Failure to disclose accurate and complete information

regarding a pension plan’s existing terms and options can amount to an untrue,

inaccurate or misleading representation.”⁶³²The negligent omission to provide

material information has also been found actionable in the insurance⁶³³and

banking⁶³⁴fields.

[648]

There is authority for the proposition that only representations relating

to existing facts can give rise to actionable negligence, and that representations as

to future occurrences, intentions, promises and the like cannot found an action in

negligent misrepresentation. Although noting this authority,⁶³⁵the Supreme Court

in Cognos, supra declined to settle this question. Nevertheless, it noted that in

many situations, representations about future conduct and events can be

inextricably tied to implied representations about existing facts.⁶³⁶For example,

representations about the role and responsibilities that a prospective employee will

play within a company contain the implied representation that the company has

decided to fund the employee’s position and that funding is available.

- 216 -

[649]

In Hembruff v. Ontario Municipal Employees Retirement Board,⁶³⁷

eight plaintiffs resigned from the Toronto Police Services Board and withdrew the

commuted values of their pensions from the OMERS pension plan. At the time,

unbeknownst to the plaintiffs, OMERS was considering benefit enhancements to

deal with excess surplus, but had not yet decided on this course of action. Shortly

thereafter benefit enhancements were introduced into the OMERS plan, but the

plaintiffs were not entitled to benefit from the enhancements because they were no

longer members of the plan. The Court of Appeal concluded that the failure of a

pension plan administrator to tell a plan member of a potential plan change did not

amount to negligent misrepresentation through omission. Gillese J.A. stated at

para. 76:

… information on what a pension plan’s terms potentially might be is not highly

relevant. Because such information is a forecast as to the future, it is speculative

in nature and, therefore, not information on which it would be reasonable to rely.

That a representation must be a matter of ascertainable fact, as distinguished from

an opinion or expectation, was explained in Hinchey v. Gonda, [1955] O.W.N.

125 (H.C.) at p. 128:

It is, of course, well settled that a representation, to be of effect in law,

should be in respect of an ascertainable fact as distinguished from a mere

matter of opinion. A representation which amounts merely to a statement

of opinion, judgment, probability or expectation, or is vague and indefinite

in its nature and terms, or is merely a loose, conjectural or exaggerated

statement, goes for nothing, though it may not be true, for a man is not

justified in placing reliance on it.

It follows that if the making of statements of forecasts about the future cannot

sustain an action in negligent misrepresentation, the omission to make the same

kind of statement cannot sustain such an action. …

[650]

In the context of assessing the extent of the Board’s fiduciary duties,

the Court of Appeal concluded that there were strong policy reasons not to impose

a disclosure obligation in respect of pension plan changes that are under

consideration. Such an obligation could result in an unmanageable burden being

placed on a pension plan administrator. The plan administrator could be put in the

invidious position of having disgruntled plan members if the contemplated plan

changes did not come to pass and the members counted on them coming into

effect.

- 217 -

[651]

In Nuxoll v. Inco Ltd.,⁶³⁸Nuxoll retired on full pension on April 1,

1995 after 30 years of service with Inco, but before his mandatory retirement age.

On May 4, 1995, Inco announced an early retirement incentive to employees who

were then eligible to retire on a full pension but had not yet elected to do so. This

would have represented an additional payment to Nuxoll of approximately

$30,000; however, he did not qualify for the incentive because he had already

retired. The Court found that Nuxoll had not been told by any representative of

Inco that there would never be an early retirement incentive available to him. The

Court found that, prior to Nuxoll’s retirement, it had been recommended to the

company’s executive that an early retirement incentive be offered to employees at

the facility where Nuxoll worked; however, the final decision to offer the incentive

was made only on May 4, 1995. In denying Nuxoll’s claim for damages for

negligent misrepresentation based on Inco’s failure to reveal highly relevant

information, Cavarzan J. found that Nuxoll was trying to hold Inco to a standard of

full disclosure – something rejected by the Supreme Court in Cognos, supra.

Cavarzan J. accepted the argument of Inco that there were as many risks associated

with Inco informing Nuxoll that early retirement incentives were being considered

as with it not informing Nuxoll of the possibility they would be introduced.

[652]

Hembruff and Nuxoll can be distinguished from the cases at hand. In

both, the Plaintiffs were complaining that they had not been informed about

specific plan improvements that were being contemplated but had not yet been

decided upon. In the cases at hand, the Plaintiffs are not claiming that the

Defendant should have advised them that the CRA was contemplating de-

registering the Loba pension plan. They are arguing that they should have been

advised of the contents of Godwin’s letters and Information Sheets to the CRA

Compensation Community, Gravelle and Parent. Those communications set out

facts. They highlighted: (1) the importance of the employment relationship for

purpose of registration of a pension plan; (2) the existence of the primary purpose

rule; (3) the interrelationship between the employment requirement and the

primary purpose rule; (4) the uncertainty as to whether certain contractual

arrangements would be considered employment relationships by the CRA; and (5)

the impact of earnings on a finding that the primary purpose rule had been met.

Communication of these facts was necessary to enable the Plaintiffs to appreciate

the existence of a risk which was not made at all apparent through the various

government notices advertising the existence of RTA opportunities.

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(b) Did the Defendant make an untrue, inaccurate or misleading

representation to the Plaintiffs?

[653]

The Plaintiffs argue that, in regard to the Loba RTA, both the written

material made available to them by the Defendant and the information provided to

them orally by their compensation advisors was incomplete, inaccurate and

misleading. The Defendant argues that any information that the Defendant omitted

to provide the Plaintiffs regarding the Loba RTA amounted to hypothetical

concerns on its part that are not actionable as negligent misrepresentations. Any

information that the Defendant withheld from the Plaintiffs was in the nature of an

opinion, an expectation or a probability, too indefinite, conjectural or speculative

to equal an actionable misrepresentation.

[654]

In the months leading up to the October 15, 2000 deadline, the written

material disseminated by the Defendant in regard to RTAs for reference by its

compensation advisors and individual public servants stated baldly that, as long as

an application for transfer to the pension plan of an approved employer was

submitted before October 15, 2000, a transfer of funds would occur.

[655]

Under SAM 3.7.4 dealing with “Reciprocal Transfer Agreements -

Transfers out of the Public Service”, compensation advisors within the different

government departments and agencies were instructed:

Approved employers for Reciprocal Transfer Agreements (as listed in Section

3.8.1) change frequently. Prior to advising an employee that he may transfer

funds from the PSSA to his new employer, Compensation Specialists are to

confirm with their Client Service Center whether an agreement with the new

employer currently exists.⁶³⁹

Loba Limited was on the list of approved employers right up until October 15,

2000. This was information available to the compensation advisors and any other

public servants who accessed the document on-line. Shepherd, Collier, Luck and

Nobert did so and learned that Loba was an approved employer. Use of the word

“approved” implied that the government had vetted the employer and the employer

qualified to receive a transfer under an RTA.

[656]

Special Bulletin 1999-002 dated February 4, 1999 and entitled

“Cancellation of Certain Reciprocal Transfer Agreements”⁶⁴⁰advised the

Compensation Community of the cancellation of the AMB, Cryptic Web, Lafleur,

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Aubin, Terrapro and WBN RTAs. It stated that each RTA would remain in force

and effect only until such time as payments described in the agreement were made

in respect of any individual who signed an Appendix B no later than May 19, 1999.

The Compensation Community was advised that “given the opportunity for

individuals to participate under the agreement is limited, it is of utmost importance

that those individuals be advised of the deadline.” The message conveyed in this

Bulletin was that, even though these RTAs were being cancelled, whatever had led

to the cancellation was not so serious as to have resulted in an immediate

suspension of payments under the agreements. The agreements were still being

held out as valid choices for public servants to pursue – as long as they did so

before their expiry date.

[657]

On April 3, 2000, Special Bulletin 2000-002 under the SAM entitled

“New Pension Transfer Agreements” was circulated to compensation advisors in

the different government departments.⁶⁴¹It stated:

2

Policy

…

2.3

Most existing RTAs will expire on October 15, 2000, unless they are

cancelled or replaced prior to that date. Discussions, concerning new agreements,

between the Federal Government and other employers began in the fall of 1998.

2.4

If the agreement is one which will terminate on October 15, 2000,

employees should be assured that, so long as they request the transfer by signing

the necessary appendix prior to that date and forwarding it within the time

specified in that agreement, the transfer will be completed.

[658]

This was the information concerning the Loba RTA that continued to

be available to compensation advisors right up to October 15, 2000. The

significance of this Bulletin is that it instructed compensation advisors to assure

public servants seeking to exercise their rights under an RTA that, as long as they

did so before the deadline, the transfer would be completed. No qualifiers,

conditions or additional prerequisites were included in this Bulletin. There is

nothing in this message which would suggest to any compensation advisor or

interested public servant that the federal government had any concerns with RTAs.

There is nothing in this Bulletin that would have put any of the Plaintiffs, or their

compensation advisors, on guard.

[659]

The APEX Bulletin of August 2000 (Vol. 16, No. 5,6),⁶⁴²entitled

“Pension Transfers: Old rules give way to new”, was stated as being a message

from the Pensions Division, Human Resources Branch, Treasury Board Secretariat.

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After advising that approximately 300 existing RTAs would be expiring on

October 15, 2000, the Bulletin went on to state: “Executives are further advised to

bring this situation to the attention of any staff who may be in a position to take

advantage of existing agreements.” The Bulletin closed by stating that for a listing

of employers having RTAs with the federal government, an interested individual

should contact the compensation advisor in that person’s department or agency.

[660]

Gravelle acknowledged that employees who were aware of the

valuation methodology under RTAs would certainly have seen RTAs as more

attractive than any other option, such as PTAs or transfer values. She

acknowledged that when this Bulletin was published by APEX, she was aware that

a number of people who would read this article would be considering moving to

Loba. She was aware that this article did not raise any concerns about the Loba

RTA or pension plan, or more generally about a move to Loba. She agreed that, at

that time, the compensation advisors to whom the readers of this Bulletin were

referred, were not aware of the government’s concerns about arrangements like

Loba’s.⁶⁴³

[661]

The significance of the APEX Bulletin was that: (1) it contained

information from the Pensions Division of the TBS; (2) it alerted government

executives to the existence of RTAs; (3) it highlighted the financial benefits of

RTAs; (4) executives were specifically tasked with bringing the RTA option to the

attention of any staff member who might be in a position to take advantage of an

RTA; (5) interested public servants were instructed to contact their compensation

advisors immediately; (6) no warnings were given or concerns raised; and (7) no

recommendation was made for interested public servants to seek outside advice.

Findlay, Ault, Shepherd and Collier saw the APEX Bulletin before joining Loba.

[662]

On August 31, 2000⁶⁴⁴and September 7, 2000,⁶⁴⁵Nouvet, as Chief

Human Resources Officer at the TBS distributed to the Heads of Human Resources

in the different government departments and agencies an Information Bulletin,

entitled “Pension Transfers: Old rules give way to new”, attached to which was a

Backgrounder on Pension Transfer Agreements. It advised that compensation

advisors had access to a listing of the outside employers involved in RTAs and

could provide such information on request and it stated:

By October 15^th, it will be too late to take advantage of the older agreements.

Employees wishing to transfer pension credits after that date will, in any case,

have to wait until new agreements are negotiated. In some cases, where an

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employer and the government decide not to conclude a new agreement, the

opportunity for pension transfer may no longer be available.

[663]

On September 13, 2000,⁶⁴⁶PWGSC distributed to Heads of Human

Resources at various government agencies and Crown corporations a document

entitled “Pension Transfers: Old rules give way to new” plus a Backgrounder

attachment with details concerning pension transfer agreements. This document

was the same as that distributed on September 7, 2000, though it was not in the

format of a TBS Information Bulletin.

[664]

These documents warned that the method of calculating the amounts

to be transferred under new pension transfer agreements would no longer be two

times contributions plus interest. In essence, these documents encouraged those

for whom an RTA might be advantageous to act prior to October 15^th. No

cautionary note was added to this message. Ault, Shepherd, Collier and Luck saw

one of the versions of this document before joining Loba.

[665]

On September 12, 2000, PWGSC distributed to government

departments for general distribution to employees an information sheet entitled

“Pension Transfer Agreements – Notice to Employees” which included the

following statement:

Eligibility

In the past, pension funds were transferred under the terms of a Reciprocal

Transfer Agreement (RTA). Most existing RTAs will expire on October 15,

2000. If the agreement is one which will expire on October 15, 2000, as long as

you request the transfer by signing the necessary document prior to that date and

forward it within the time specified in that agreement, the transfer will be

completed.⁶⁴⁷

This notice for general distribution again reassured public servants that, as long as

they applied under a RTA prior to the October 15^thdeadline, the transfer would be

completed. No cautionary words were included. Charko acknowledged that

employees are entitled to expect that a notice of this nature be fairly complete.

This notice informed the work of compensation advisors right up to October 15,

2000. It was also seen by Findlay, Ault, Shepherd and Temple before they joined

Loba. Nobert saw either this notice or one of the Treasury Board or PWGSC

Bulletins.

- 222 -

[666]

In summary, right up until October 15, 2000, the only written

information regarding the Loba RTA available to the compensation advisors in the

different departments and agencies, and available to the Plaintiffs directly, was that

Loba was an approved employer with an RTA with the Treasury Board and, as

long as a public servant applied for a transfer prior to October 15, 2000, the

transfer would be completed. The implied representation inherent in all of these

documents was that, in regard to all of the companies listed as “approved

employers”, the government had satisfied itself that they were legitimate

employers with registered pension plans to which pension monies could be

transferred from the PSSP. A further implied representation was that the

government was unaware of any circumstances that raised serious doubts as to

whether a transfer would be made under a particular approved employer’s RTA.

Such serious doubts would be raised if the government was aware of circumstances

that made it reasonably foreseeable that registration of the company’s pension plan

would be revoked.

[667]

At no time were compensation advisors, public servants generally or

the Plaintiffs specifically advised that, from time to time, transfers under RTAs

could be suspended or put on hold by the Treasury Board due to concerns about

particular “approved employers”. At no time were they advised that, prior to

applying for a transfer, it would be prudent for a public servant, or his or her

compensation advisor, to check with the Treasury Board to see if there were any

concerns about a particular “approved employer”, or any hold under that

employer’s RTA. At no time were they told of the hold on transfer payments

under the Loba RTA from mid-May to mid-August 2000. At no time were they

told of the concerns of the TBS regarding Loba-type arrangements. The Defendant

admits that none of the compensation advisors who dealt with the Plaintiffs were

aware of any concerns about the legitimacy of the Loba RTA.⁶⁴⁸

[668]

In cross-examination, Charko acknowledged that he expected that the

information provided to the Plaintiffs by compensation advisors would be

“complete”. All of the compensation advisors who dealt with the Plaintiffs were

operating on the incorrect premise that the Loba RTA was a routine arrangement

and transfer payments would occur in the normal course under the Loba RTA.

Since they were unaware that the Treasury Board had previously put the Loba

transfers on hold and that the Treasury Board was in possession of information that

could result in its again putting the transfers on hold or suspending them

indefinitely, the compensation advisors were not in a position to advise the

- 223 -

Plaintiffs of the existence of these risks. In essence, they were not in a position to

provide the Plaintiffs with the relevant information they needed in order to make

an informed decision relating to their pension options. Had the compensation

advisors been aware of the existence of Treasury Board concerns and of the earlier

hold on transfers, at the very least, they could have advised the Plaintiffs to make

further inquiries of the Treasury Board before submitting their resignations from

the public service. That was not done.

[669]

The Plaintiffs interactions with their compensation advisors can be

summarized as follows:

• Findlay was told by his compensation advisor, Plourde, that the Loba

RTA was valid and there were no problems with it.

• Ault dealt with several compensation advisors to obtain accurate pension

information so she could make a decision before October 15^th. One of

the compensation advisors, Morin-Girourd, indicated that “we gave

Margaret all the information we could to enable her to take a decision”.⁶⁴⁹

• When Shepherd told his compensation advisor, Langlois, that he was

looking into the Loba RTA, she simply confirmed that it existed and

referred him to another officer, Carrière, to obtain pension estimates.

When he signed his Option for Benefit form, he met with another

compensation advisor, Patry, who indicated only that it would take up to

six months for the transfer to the Loba plan to occur.

• Collier contacted his compensation advisor, McKibbon, for information

about leaving the government and transferring his pension to Loba under

the Loba RTA. McKibbon explained the procedure and the paperwork

that would have to be completed to initiate a transfer of his pension under

the Loba RTA.

• Temple’s compensation advisor, Bisson, indicated that the RTA option

was available and forwarded to him a copy of the PWGSC Notice to

Employees, which assured him that payments would be made under

expiring RTAs as long as the request was made before October 15^th. She

also forwarded a copy of the Broadcast Message sent to pay and benefits

staff by PWGSC reminding that employees had to terminate employment

before October 15^th.

- 224 -

• Armstrong approached his compensation advisor, Duncan, and told her

that he was looking at the Loba RTA. She informed him that she did not

have any information or knowledge about the Loba RTA or the

procedures for exercising the RTA option and would need to do some

checking. She subsequently confirmed to Armstrong that there was a

Loba RTA that was available and she assured him she would ensure that

all the necessary procedures were followed so that he could take the Loba

RTA option.

• Luck dealt with his compensation advisor, Gauthier, to obtain pension

estimates. He told her that he needed the estimates quickly as he was

facing an October 15^thdeadline. She appeared to understand exactly the

purpose of the request and the urgency and did not indicate any problems

or concerns.

• Nobert asked her compensation advisor, Crete, if there was anyone in pay

and benefits who could provide information and advice on transferring

her pension. When she did not receive an answer, she turned to her

sister, Plouffe, who was a team leader within the Compensation and

Benefits group at PWGSC. Plouffe had no information about Loba and

suggested that Nobert check to make sure that Loba was on the list of

companies with valid agreements. Nobert also spoke to a friend, Gareau,

a trainer in the Compensation and Benefits group. She too was aware of

no information about the Loba RTA and reminded Nobert about the

October 15^thdeadline.

[670]

None of the Plaintiffs’ compensation advisors were called to testify at

trial. I draw the inference that their evidence would not have been helpful to the

Defendant.

[671]

I accept the Defendant’s assertion that “the failure to share

unsubstantiated or hypothetical information cannot found a negligent

misrepresentation claim”. The Defendant submits that there was nothing that the

TBS could have told the Plaintiffs with certainty about concerns with the Loba

pension plan prior to October 15, 2000, and that anything that it could have said

would have been speculative opinion about future events – something that is not

considered a “representation” under the law of negligent misrepresentation. I

- 225 -

disagree. The TBS could have told the Plaintiffs the following facts that were

known to it prior to the October 15^thdeadline:

• Transfers under the Loba RTA had been put on hold from May to August

2000.

• Transfers under the Loba RTA could be put on hold again. The fact that

the hold had been lifted did not signify that the hold would not be re-

imposed at a later date or that payments under the Loba RTA would not

be indefinitely suspended.

• Reasons why a hold might be imposed included: (1) a concern on the part

of the TBS that a company did not have a valid employer/employee

relationship with its workers, (2) a concern on the part of the TBS that

the company pension plan did not meet the registration requirements for

pension plans under the Income Tax Act.

• Reasons why transfers under an RTA might be suspended indefinitely

included the CRA’s revocation of registration of the company pension

plan under the Income Tax Act.

• The CRA takes the position that working on a contract basis may call

into question the existence of an employer/employee relationship.

• The CRA takes the position that in order to obtain and maintain the

registration of a pension plan under the Income Tax Act, there must be a

legitimate employer/employee relationship, and the pension plan must

have as its primary purpose the provision of lifetime retirement benefits

to individuals in respect of their service as employees.

• Where the CRA believes that even one member of a pension plan does

not have a legitimate employer/employee relationship, registration of the

Plan can be revoked.

• The CRA takes the position that the earnings which may be used in the

formula to calculate a defined benefit under a pension plan must be

earnings received from an employer who participates in the plan from

which the benefit will actually be paid. The CRA takes the position that

the federal public service is not a participating employer in a private

- 226 -

registered pension plan. Only the private sector corporation is the

participating employer. If private sector earnings are lower than public

service earnings, the benefit for all of the years of service will be

calculated using lower earnings. This could lead to the employee not

getting the benefit of the higher value transferred into private plan. This

could also bring into question whether the primary purpose rule was met.

[672]

There is nothing hypothetical or speculative about this information.

Gravelle and Macpherson were in possession of all of this information (with the

possible exception of the last bulleted item) during the summer of 2000 and had all

of it in writing as of September 21, 2000 when Gravelle received Godwin’s

September 7^thletter. This information would have identified to the Plaintiffs the

existence of risks associated with their resigning from the public service and

applying to have their pension monies transferred under an RTA. The Plaintiffs,

either alone or with further information or advice from legal or financial advisors

or those at the TBS or the CRA, would have been able to combine this information

with the information they had about Loba to gauge the significance of these risks

and their willingness to assume them.

[673]

This same type of information regarding IPPs had been relayed to the

public on the CRA website and had been sent by the CRA to compensation

advisors and to individuals establishing IPPs. The same type of information

regarding RTAs had been relayed to the compensation advisors within the CRA.

[674]

The TBS directly or through the compensation advisors in the

departments and agencies would not have had to share with the Plaintiffs its

assessment as to what might happen to Loba and the Loba pension plan in the

future; such as, whether transfers under the Loba RTA would be processed,

whether the CRA would de-register the Loba pension plan or whether the RCMP

would lay criminal charges. This surmising, projecting or predicting would be too

speculative to be considered a “representation” that could found recovery for

negligent misrepresentation. Therefore the omission to share this type of

information cannot be the basis of an action against the Defendant. However,

information about existing, significant, identifiable risks inherent in a course of

action is a representation that can sustain an action for negligent misrepresentation.

Therefore, the failure to share this information can also be a form of representation

that can lead to recovery under this category of damages.

- 227 -

[675]

The Defendant submits that, since the de-registration of a pension

plan was considered a draconian measure, and since the CRA tries to resolve issues

with a pension plan administrator before moving to de-register a plan, it was purely

speculative that Loba’s pension plan would be de-registered. What was not

speculative prior to October 15, 2000, was that Gravelle, Macpherson and

Desnoyers considered the Loba arrangements a sham, and the product of

fraudulent activities on the part of Parent, Loba and WBP. Gravelle and

Macpherson were not of the view that, if the CRA determined there was no valid

employment relationship or if the primary purpose rule could not be met, there was

anything Loba could do to maintain registration of its pension plan. They were of

the view that the whole scheme was flawed. This understanding informed their

appreciation of the serious risk of de-registration of the Loba pension plan.

[676]

The Defendant submits that it was entirely reasonable that the

Treasury Board and the CRA, as identified victims of a potential crime, would not

share information with the Plaintiffs about the RCMP investigation for fear of

jeopardizing the investigation. I accept this. During their first meeting with

representatives of the RCMP in 1999, and in subsequent communications, Gravelle

and Macpherson were advised by the RCMP to keep “in the room” the fact of the

RCMP investigation into Cryptic Web, AMB and subsequently Loba. Gravelle’s

evidence was that, even though she realized by the spring of 2000 that many public

servants were considering a move to Loba, and she was concerned about their not

knowing about the criminal investigation, she did not feel that she was in the

position to do anything about that concern.⁶⁵⁰I accept that neither the Treasury

Board nor the CRA was under an obligation to disclose to individuals in the

position of the Plaintiffs the existence of the RCMP investigation.

[677]

That being said, the existence of the criminal investigation, and by

October 2000, the realization that the RCMP had sufficient evidence to get

authorization for an undercover operation, informed the assessment of Gravelle,

Macpherson and others at the TBS as to the risks associated with a public servant

resigning from the public service to join Loba. They realized that, if criminal

charges were laid, this would support any decision of the CRA to de-register the

Loba pension plan. They also knew that, if criminal charges were laid, the

Treasury Board would not transfer any monies under the Loba RTA pending a

final resolution of those charges. While the Pensions Division had determined that

the existence of the RCMP investigation in and of itself was an inadequate reason

to put a hold on transfers, at the same time, it realized that no transfers under the

- 228 -

Loba RTA would occur for up to 18 months. It assumed that this would be ample

time for the RCMP to have completed its investigation and lay any criminal

charges it considered supportable. In the meantime, although the preliminary

paperwork for the transfers might be processed, no actual transfers would have

occurred.

[678]

I conclude that the explicit, implied and omitted representations of

representatives of the federal Crown to the Plaintiffs regarding the availability of

the Loba RTA as a legitimate option for them to consider were misleading.

(c) Did Parent, Loba or WBP make an untrue, inaccurate or misleading

representation to the Plaintiffs?

[679]

The Defendant submits that Parent, Loba and WBP made the

following misrepresentations in the form of omissions:

• They did not advise the Plaintiffs and Dufour of the hold on transfers that

had been imposed by the Treasury Board between May and August 2000.

• They did not advise the Plaintiffs and Dufour that it was not routine or

usual for the Superannuation Directorate to contact individuals and

request employment information before proceeding with a transfer of

funds under an RTA.

• They did not advise the Plaintiffs that the CRA, as regulator of pension

plans, had expressed concerns about the Loba pension plan and whether

it met the requirements for registration under the Income Tax Act.⁶⁵¹

[680]

Some of the analysis just completed in regard to misrepresentations

made by the Defendant applies equally to Parent, Loba and WBP and leads me to

conclude that, in providing information and documentation to the Plaintiffs, Parent

made a number of misrepresentations.

[681]

It was misleading for Parent to provide some of the Plaintiffs with a

copy of Gravelle’s August 22, 2000 e-mail advising that transfers under the Loba

RTA would occur upon confirmation of employment status, without telling the

Plaintiffs that the Treasury Board had placed a hold on such transfers from May to

August 2000 and without explaining the stated reasons for that hold. It would have

been very simple for Parent to provide the Plaintiffs with a copy of Gravelle’s June

- 229 -

15, 2000 letter to Touchette setting out Treasury Board concerns and advising of

the hold.⁶⁵²

[682]

As well, it was misleading for Parent not to tell the Plaintiffs that the

transfers under the Loba RTA could be put on hold again. The fact that the hold

had been lifted did not signify that the hold would not be re-imposed at a later date

or that payments under the Loba RTA would not be indefinitely suspended. This

was knowledge that Parent had due to his experience with several holds being

placed on the AMB, Cryptic Web and Loba transfers. It was foreseeable that these

omissions would lead the Plaintiffs to conclude that the arrangements currently in

place for Loba satisfied government requirements, and there was no reason to

believe that the government would be imposing any other holds.

[683]

Inherent in Parent’s presentation to some of the Plaintiffs was the

implied representation that the letters that the Superannuation Directorate was

sending to Loba and to the Plaintiffs regarding their employment relationship were

standard in RTA situations and did not reflect long-held concerns on the part of the

TBS that arrangements such as those at AMB, Cryptic Web and Loba were not

bona fide employment relationships. In fact Loba explicitly made this

representation to some of the Plaintiffs.⁶⁵³This was a misrepresentation. Parent

knew that the Superannuation Directorate had not sent such a letter to Martin or

Grimes when they applied for a transfer under the Loba RTA, and it had not sent

such a letter in regard to any applications for transfer under any RTAs negotiated

by Parent for employers other than AMB, Cryptic Web and Loba.⁶⁵⁴

[684]

Also inherent in Parent’s presentation to the Plaintiffs was the implied

representation that Parent was not aware of any serious concerns on the part of the

CRA regarding the Loba arrangements that created a risk of the de-registration of

the Loba pension plan and the indefinite suspension of transfers under the Loba

RTA. When Parent was making his presentations to Findlay, Ault, Shepherd,

Collier, Temple, Armstrong, Luck and Nobert (second meeting), this implied

representation was inaccurate.

[685]

auditors had been communicating with Godwin to get feedback on the Loba

arrangements. Zeithammel reported that Godwin would be preparing a

On August 28, 2000, Zeithammel advised Parent that several CRA

communiqué which would be shared with Loba to the effect that the CRA had the

same concerns about the Loba arrangements as it did about IPPs in regard to the

- 230 -

primary purpose rule. Zeithammel referred Parent to the CRA website where those

concerns were expressed under FAQ 11.⁶⁵⁵Zeithammel asked:⁶⁵⁶

Are you sure that Loba RPP will pass the ‘primary purpose test’? The FAQ is

fairly strongly worded and weighed against us. [An auditor] essentially stressed

that we have to have a strong employer-employee relationship (which we know)

and must have the guys pay in line with their Government pay (which we know).

He did say that under the act they only can deal with problems by de-registering

the plan, however negotiations can take place (which you know).

[686]

Parent reviewed FAQ 11 with his legal advisor, Théroux. Théroux

advised that, assuming there is a bona fide employment relationship, as long as

fairly substantial earnings are paid by Loba to its employees, CRA’s policies

would be fully satisfied. Parent interpreted this as meaning that, as long as the rate

of pay at which services were performed closely correlated to the rate of pay the

employee had with the public service, the requirement would be met – even if the

employee only worked part of the time with Loba. Despite having this legal

advice, Parent’s failure to advise the Plaintiffs of the concerns raised in FAQ 11

was a misrepresentation of the position the government was taking regarding the

Loba RTA.

[687]

The Information Sheet attached to Godwin’s letter to Parent of

September 15, 2000⁶⁵⁷set out the CRA’s concerns about the existence of an

employment relationship in circumstances such as Loba’s and identified reasons

why Parent’s explanation to the Plaintiffs of the benefits they would be able to

receive under the Loba RTA might not be accurate. On October 11, 2000, Parent

received a copy of Godwin’s September 7, 2000 letter to Gravelle⁶⁵⁸which

reiterated the same CRA concerns about arrangements like Loba’s, and let Parent

know that Gravelle was fully apprised of those concerns. Parent’s failure to share

this important information about government concerns with the Plaintiffs was a

misrepresentation.

[688]

Finally, once the Plaintiffs were members of the Loba pension plan,

Parent and Burnside, as plan administrators or third party plan administrators,

failed to advise the Plaintiffs in a timely fashion that, as of November 2000, the

Treasury Board had put a hold on transfers under the Loba RTA. Parent and

Burnside became aware of this information in January 2001.⁶⁵⁹On March 6, 2001,

Gravelle confirmed that the transfers would remain on hold until the Treasury

Board had confirmation that the CRA had no outstanding registration issues

- 231 -

involving the Loba pension plan.⁶⁶⁰In the communications Burnside and Parent

had with the Plaintiffs, as members of the Loba pension plan, from March to

December 19, 2001, Burnside and Parent consciously omitted to provide this

information.⁶⁶¹This failure to provide important information to the Plaintiffs as

pension plan members was an omission amounting to a misrepresentation.

[689]

I am not prepared to find that Parent’s failure to share his suspicions

that the RCMP might be investigating WBP and Loba amounted to a

misrepresentation. Prior to December 2001, this was not a fact known to Parent.

In February 2001, he became aware that the RCMP had asked some questions

about WBP’s involvement with Cryptic Web and AMB.⁶⁶²On May 16, 2001,

Parent inquired through the Privacy Act and the Access to Information Act about

the information the RCMP had concerning himself.⁶⁶³His request for information

was denied. By July 2001, Parent knew that the RCMP had asked Martin for an

interview, though the interview never occurred and no further information was

forthcoming from Martin.⁶⁶⁴As far as Parent was aware, the RCMP had never

interviewed any Loba employees and had never sought an interview with himself

or anyone else at Loba or WBP.

(d) Did Jemus make an untrue, inaccurate or misleading representation to

the Plaintiffs?

[690]

The Defendant alleges that Jemus made an untrue, inaccurate or

misleading representation to Findlay, Ault, Shepherd, Collier, Armstrong and

Dufour by failing to advise them that: (1) he stood to gain financially from the

transfer of pension funds to Loba’s pension plan; (2) there were risks associated

with requesting a transfer of funds to Loba’s pension plan; (3) the TBS had

concerns about the Loba RTA and pension plan; and (4) the CRA had concerns

about the Loba pension plan.

[691]

In regard to the compensation agreement between Jemus and WBP,

this agreement only came into being on October 6, 2000. By this date, Jemus had

already met with Ault, Dufour and Shepherd. Although he had been in

negotiations with Parent about a possible commission prior to meeting these

Plaintiffs, nothing had been finalized. Between October 6^thand 15^th, Jemus met

with Findlay and Collier and had long-distance communications with Armstrong.

Armstrong’s evidence was that Jemus did tell him about his compensation

agreement with WBP. Therefore, the only two Plaintiffs for whom this argument

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is relevant in the context of negligent misrepresentation are Findlay and Collier.

Jemus’ evidence was that, although he did not tell either Findlay or Collier the

details of his compensation agreement with WBP, he told all of his Loba-related

clients that up to 7.5% of the monies transferred into the Loba pension plan from

the PSSP would be used to pay for the management of the plan and for his

commission. I do not accept Jemus’ evidence that he specifically referred to his

commission, though I do accept that he would have referred to commissions.

[692]

I accept Findlay’s evidence that he knew that 7.5% of transferred

monies would remain in the Loba pension plan to fund people who managed the

plan, but that Jemus did not tell him that a portion of this amount would be paid to

him as a commission. Collier did not recall Jemus advising him that he would get

a commission if Collier joined Loba, but he acknowledged that he really could not

remember everything that he and Jemus discussed because the interview had

occurred seven years earlier. In regard to Collier, the Defendant has not proven

that Jemus did not tell him that he would be financially compensated if Collier

joined Loba.

[693]

In regard to the second, third and fourth allegations that Jemus failed

to advise the Plaintiffs about the risks associated with their joining Loba and about

the concerns of the TBS and the CRA, I find that these subjects fell outside the

scope of material information that Jemus was under a duty of care to share with the

Plaintiffs. Therefore, they cannot be considered implied representations or

omissions amounting to misrepresentations. All of the Plaintiffs who saw Jemus

testified that all they were seeking from him was a financial analysis to show the

financial ramifications of their choosing different options. They did not seek

information from Jemus about Loba, WBP or Parent or about the government’s

response to Loba. Jemus did not purport to have any knowledge or information

about any of these topics. In fact, Jemus specifically told the individuals who were

consulting him that, if they wanted further information about the Loba option, they

should consult WBP.

[694]

The Defendant has failed to prove that Jemus made any

misrepresentations in regard to risks or concerns.

Negligence

(a) Jurisprudence

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[695]

For an untrue, inaccurate or misleading representation to be

actionable, it must be negligent. As explained by the Supreme Court of Canada in

Cognos:⁶⁶⁵

The applicable standard of care should be the one used in every negligence

case, namely the universally accepted, albeit hypothetical, “reasonable person”.

The standard of care required by a person making representations is an objective

one. It is a duty to exercise such reasonable care as the circumstances require to

ensure that representations made are accurate and not misleading. …Professor

Klar provides some useful insight on this issue (at p. 160.):⁶⁶⁶

An advisor does not guarantee the accuracy of the statement made, but

is only required to exercise reasonable care with respect to it. As with the

issue of standard of care in negligence in general, this is a question of fact

which must be determined according to the circumstances of the case.

Taking into account the nature of the occasion, the purpose for which the

statement was made, the foreseeable use of the statement, the probable

damage which will result from an inaccurate statement, the status of the

advisor and the level of competence generally observed by others similarly

placed, the trier of fact will determine whether the advisor was negligent.

[696]

It is not enough that the Defendant’s representatives were truthful or

that the Defendant’s representatives believed in the message they were conveying.

That standard is too low and simply reflects the common law duty of common

honesty. On the other hand, the standard of care is not so onerous as to require full

disclosure.⁶⁶⁷The standard is that the representor must exercise such reasonable

care as the circumstances require to ensure that the representations made are

accurate and not misleading.⁶⁶⁸A court must take into account all relevant

circumstances in deciding whether the representor’s conduct was negligent. In

some cases, this includes the failure to divulge highly pertinent information.⁶⁶⁹

[697]

In Rothwell v. The Queen⁶⁷⁰Strayer J. stated at 282:

This representation was clearly negligent because it was easily within the

competence of the defendant and his officers to state the situation clearly. It was

also foreseeable that a contributor would be confused by the information provided

to him. While the defendant contends that the onus was on the plaintiff to ask for

clarification, it appears to me that the meaning which the plaintiff attributed to

these communications was one which appeared sufficiently clear that it was not

unreasonable for him to assume he understood them.

[698]

This quote is highly applicable to the Plaintiffs’ circumstances vis-à-

vis the information they were receiving from the Defendant’s representatives.

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Before joining Loba, the Plaintiffs took that information at face value because it

appeared clear and unequivocal. It was not unreasonable for the Plaintiffs to

assume that there were no significant risks of which the TBS was aware but which

it had decided not to share with the Plaintiffs.

[699]

In Spinks, supra, the Federal Court of Appeal held that:⁶⁷¹

…where an advising person possesses or can easily obtain important and relevant

information, and where this advising person fails to divulge this information in

circumstances where economic loss is reasonably expected, the standard of care

will have been breached.

[700]

Numerous considerations can inform the issue of whether in the

circumstances of a particular case disclosure was reasonably required:

• Was the information of a sort that an average employee would be aware

of?

• Did the employee have a particular need for the information?

• Was the employer uniquely placed to appreciate the risks of not fully

informing the employee?

• Did the employer possess or could it easily obtain important and relevant

information?

• Was it reasonable to expect that economic loss might occur if the

information was not disclosed?

• Was the employee likely to misunderstand the situation if the information

was not disclosed to him?

• Was it within the competence of the employer to provide this

information?⁶⁷²

[701]

The case of Allison v. Noranda Inc.,⁶⁷³is of particular relevance to

this case. When terminating an employee, without cause, Noranda offered the

employee two severance options, one involving a lump sum payment and the

second involving instalment payments. What the employee was not told was that,

if he took the lump sum payment, his pension would be $302 monthly when he

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started to receive it at age 55. If he took the instalment option, his pension at the

same date would be $887 monthly. The employee’s manager had been given this

information but had omitted to pass it on to the employee. The employee chose the

lump sum option and only later learned of the serious impact this had on his

pension entitlement. He succeeded in a negligent misrepresentation action against

Noranda. The New Brunswick Court of Appeal found that Noranda was under an

obligation to make sufficient disclosure to enable an employee to make an

informed decision in cases where the employer asks an employee to make an

election regarding pension benefits. The Court focused on the specialized nature

of pension information, the fact that Noranda had the information in question and

could easily have passed it on to the Plaintiff, the significance of the pension asset

to the Plaintiff, and Noranda’s knowledge of the potential impact on the Plaintiff if

he made an election without the information in question.

[702]

The Court in deciding that Noranda could not avoid liability because

it gave the employee an express caution to seek independent legal advice, stated:⁶⁷⁴

… The opportunity to seek advice is only meaningful if one is armed with all

material facts. Where the person cautioning another to seek independent counsel

is the repository of such information, it makes no sense for the law to negate the

duty of disclosure by recognizing the defence of independent advice.

…

…a person who is under an obligation to disclose information to another, and fails

to do so, cannot avoid liability for negligent misrepresentation simply by arguing

that the latter was given the opportunity to seek advice from a third party. Either

there is a duty to disclose or there is not.

[703]

In another particularly pertinent case, Gauthier v. Canada (Attorney

General),⁶⁷⁵Gauthier, a member of the RCMP, sought advice from his

Compensation Branch as to the pension benefits to which he would be entitled if

he retired from the RCMP to take a position with Canada Customs. The

Compensation Branch’s calculation of Gauthier’s annual pension was flawed. It

had ignored a statutory requirement that Gauthier’s annuity be reduced by 5% per

year for the four years by which his service in the RCMP was less than 25 years.

Gauthier relied on the calculation he was provided, retired from the RCMP and

took up employment with Canada Customs. For eight years he received the

pension as he had been advised by his Compensation Branch. Then a routine audit

disclosed that he had been overpaid and the RCMP immediately reduced his

annuity by 20% and sought reimbursement for the earlier overpayment. Gauthier

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successfully sued for damages for negligent misrepresentation. Drapeau J.A.

stated:⁶⁷⁶

It is beyond debate that a “special relationship” existed between “J” Division’s

Compensation Branch and Mr. Gauthier when he sought and received its advice

in 1987. At the time, the relationship between the Compensation Branch and the

RCMP members was such that the latter could reasonably be expected to trust the

accuracy of the pension information provided by the Compensation Branch. One

of the core functions of the Compensation Branch was precisely the provision to

inquiring RCMP members of general and specific information about their

pension. The Compensation Branch held itself out as having the knowledge and

expertise required to provide accurate pension information and it provided that

information with the tacit understanding that the members could, without any

other inquiry or research, rely on it to plan their future. That is precisely what Mr.

Gauthier did. In the circumstances, the law did not obligate him to consider

whether the Compensation Branch’s advice conformed with the Act. The

respondent’s submission that Mr. Gauthier ought to have been cognizant of the

Act and, therefore, known that the Compensation Branch’s calculation of his

pension was erroneous is unrealistic and it must fail. …

The respondent’s representatives in “J” Division’s Compensation Branch were

required to exercise reasonable care and diligence to ensure that their

representations to Mr. Gauthier were accurate.

(b) Was the Defendant negligent regarding the misrepresentations made

to the Plaintiffs?

[704]

Several factors must be considered in deciding whether the Defendant

was negligent in advising public servants that if an application under an RTA with

an approved employer was made before the October 15^thdeadline the transfer

would be made, without qualifying this statement through reference to significant,

identifiable risks that, to the Defendant’s knowledge, existed in regard to a

particular category of RTAs that included the Loba RTA.

(i)

Nature of the occasion.

[705]

The representations were made by the Defendant to the Plaintiffs in

two contexts: (1) through materials published specifically to advise the Plaintiffs of

their options under the PSSP and more particularly of the availability of the

reciprocal transfer option until October 15^th; and (2) through advice provided by

the Plaintiffs’ compensation advisors when the Plaintiffs sought information

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related to the RTA option. In the first context, the Defendant was bringing an

opportunity to the attention of the Plaintiffs. In the second context, the

compensation advisors were acting in the course of their duty to advise public

servants of their entitlements under the PSSP.

(ii) Status of the advisor.

[706]

When the Treasury Board issued Information Bulletins or other

documents referring to RTAs, it was doing so as the Plaintiffs’ employer and

pension plan administrator. When the PWGSC issued Special Bulletins, notices

and other documents referring to RTAs, it was doing so pursuant to its

responsibilities to manage the day-to-day operations of the PSSP. When the

compensation advisors were providing information to public servants, they were

doing so as an aspect of their designated functions. The fact that the TBS and

PWGSC were fulfilling official roles in providing information to the Plaintiffs

increases the standard of care expected of them when making representations to the

Plaintiffs. Relevant information about a pension plan should be available to all

plan members on an equal basis and it is the plan administrator’s obligation to

advise plan members of the details of the plan.

(iii) Purpose for which the representation was made.

[707]

The Treasury Board, PWGSC, and the compensation advisors in the

various departments and agencies were providing information to public servants in

the position of the Plaintiffs to meet their obligations as administrators of the PSSP

but also to specifically bring to the attention of PSSP plan members the reciprocal

transfer option available to them and the pending deadline to exercise that option.

The information was provided to stimulate public servants to make a choice as to

whether or not to resign from the public service and seek a transfer under an RTA.

(iv) Knowledge of the average person about the subject-matter of

the representation.

[708]

During the late spring and summer of 2000, Gravelle and Godwin had

spoken of the importance of the existence of an employment relationship for the

purpose of registration of a pension plan. Although this fact was documented on

the CRA website in regard to IPPs, both Gravelle and Godwin realized that public

servants contemplating joining Loba would not necessarily check the CRA website

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and would not necessarily realize that what was posted in regard to IPPs applied

equally to the Loba RTA.

[709]

Both Gravelle and Godwin acknowledged that, despite their years

working in the area of public pensions, neither could be considered an expert as to

those circumstances in which a working relationship equalled an employment

relationship for purposes of the pension provisions under the Income Tax Act.

They needed to obtain an opinion in this regard from others with greater expertise.

More particularly, Godwin acknowledged that he was not familiar with the booklet

entitled “Employee or Self-Employed” published by the CRA and, although he had

heard of a four-point test for determining whether a person was an employee or

was self-employed, he did not know the factors that went into each element.

Gravelle acknowledged that, despite her lengthy years working in the field of

pension policy and administration at the TBS, she did not have a good grasp of the

primary purpose rule until it was explained to her by Godwin. Public servants

could not be expected to have any independent knowledge of these subjects.

[710]

Godwin acknowledged that the requirements for the registration of a

pension plan are outside the knowledge of most lay people, as are the serious

consequences that could flow to a plan member from a pension plan losing its

registered status under the Income Tax Act. This was why this was specifically

mentioned in the Information Bulletin that was sent to the CRA’s compensation

advisors to be passed on to those seeking calculations relating to RTA transfers.

[711]

For her part, Gravelle acknowledged that, prior to September 11,

2000, the Pensions Division believed that it was entirely possible that people

would be making decisions to leave the public service, join Loba and request a

transfer under the Loba RTA without having knowledge of the risks associated

with this step.⁶⁷⁷

[712]

In summary, I find that the average public servant would have known

very little about RTAs, and the Loba RTA in particular. The average public

servant would know very little about the legal requirements for registration of a

pension plan under the Income Tax Act, the CRA’s interpretation of what

constituted an employment relationship or the significance of the primary purpose

rule in regard to pension plan registrations. The average public servant would not

have been aware of the circumstances in which the CRA might retroactively de-

- 239 -

register a pension plan, or the circumstances in which the Treasury Board might

suspend payments under an RTA.

(v) Plaintiffs’ need for the information.

[713]

Leading up to October 15, 2000, public servants wanting more

information about their options under the PSSA and the Loba RTA in particular

were contacting departmental compensation advisors, the Superannuation

Directorate and the Pensions Division. Claydon, the Secretary of the Treasury

Board, was aware of this. On October 5, 2000 he sent a memorandum to the

President of the Treasury Board stating that, in the event that individuals or WBP

consulted his office seeking assistance in hastening the process of transferring

funds under the Loba RTA, they could be redirected to the Pensions Division.⁶⁷⁸

Thus the Treasury Board was aware that some interested public servants felt the

need for additional information regarding the Loba RTA, and it was taking steps to

ensure that those questions were being addressed to the Pensions Division.

[714]

Gravelle acknowledged that the information contained in Godwin’s

September 7^thletter to her was relevant information that public servants needed to

make an informed decision about Loba, and they should have had that information

before making a decision to leave the public service to join Loba. She shared that

information with some of the public servants who called her with questions about

Loba. Charko was aware that individuals looking at the Loba arrangement needed

to understand whether or not they had a valid employer/employee relationship with

Loba. He also believed that the more those individuals understood about the

requirements for registration of pension plans under the Income Tax Act, including

the primary purpose rule, the more helpful it would have been to their decision-

making process. Although Godwin was reluctant to admit it under cross-

examination, the substance of his evidence was that the information contained in

his September 7^thletter was important information that public servants

contemplating joining Loba needed to make an informed decision. He

acknowledged that this information would have helped them in arriving at a

decision.

[715]

Godwin testified that he sent the September 15, 2000 letter and

Information Sheet to AMB, Cryptic Web, Loba, Lafleur and WBP as one avenue

of getting important information to PSSP members who were considering transfers

under the companies’ RTAs without infringing s. 241 of the Income Tax Act. It

- 240 -

was unusual to send letters for pension plan members to the plan sponsor for

distribution; nevertheless, the senior management team at the Registered Plans

Division decided to do this recognizing that the more information pension plan

members have prior to making a decision affecting their pension entitlement, the

better position they are in to make an informed decision. Godwin believed that the

public servants considering joining Loba and requesting a transfer under the Loba

RTA needed the information contained in the Information Sheet in order to make

an informed decision.

[716]

There is no doubt that the Plaintiffs needed the information contained

in Godwin’s letters to Parent and Gravelle in order to make an informed decision

about Loba, and the Defendant’s representatives at the Pensions Division of the

TBS and the Registered Plans Division of the CRA realized this.

(vi) Foreseeable use to be made of the representation.

[717]

Prior to October 15^th, it was foreseeable to those within the TBS and

PWGSC who prepared the various Bulletins and other documents regarding RTAs

that public servants looking to those documents for guidance would rely on them

as being accurate, and not misleading. It was also foreseeable that those public

servants would assume that the TBS and PWGSC were providing them with the

information they had that obviously was required by the public servants to make an

informed decision regarding an RTA.

[718]

It was foreseeable to the Plaintiffs’ compensation advisors that the

Plaintiffs would rely on their representations (express, implied or omitted) about

Loba when making their decision whether or not to join Loba. The Plaintiffs were

specifically directed by the SAM to consult their compensation advisors for

information regarding the RTAs available to them, and more particularly, to find

out who were “approved employers” with RTAs. It was foreseeable that any

public servant told that the Treasury Board had an RTA with a named “approved

employer” would assume, in the absence of any voiced qualifiers or warnings, that

as far as the Treasury Board was concerned, the employer had a valid and

legitimate RTA that the public servant could access in the normal fashion.

(vii) Foreseeable damage resulting from the misrepresentation.

[719]

It was foreseeable that public servants could suffer a loss relating to

employment benefits if they left the public service to join Loba, applied to have

- 241 -

pension monies transferred to the Loba pension plan and were denied a transfer

due to the CRA’s de-registration of the Loba pension plan. Well prior to October

15, 2000, Gravelle was aware that a pension plan had to be registered in order for

money to move in and out of it on a tax-sheltered basis. She understood that if the

Loba pension plan did not meet the registration requirements under the Income Tax

Act and as a result was ultimately de-registered, all of its assets would become

taxable and this would be a devastating outcome for the participants.⁶⁷⁹Gravelle

acknowledged that she worried about this scenario as soon as the first requests for

transfer were received from Loba workers. On a number of occasions in the

summer of 2000 Gravelle and Godwin discussed the serious impact on Loba

pension plan members if the pension plan were de-registered.

[720]

By September 2000, Gravelle had been advised by Godwin that a

pension plan could be de-registered if even one member of the plan did not have a

valid employer/employee relationship. As a result of information Gravelle had

already received from the Superannuation Directorate and other sources, she had

serious reservations as to whether the arrangement Loba had with each of its

workers would satisfy the test for an employment relationship. Consequently,

Gravelle realized that the registration of the Loba pension plan could be tainted by

even one such relationship not being valid.⁶⁸⁰

[721]

Gravelle also realized that, if public servants resigned to join Loba

and transfers were indefinitely suspended under the Loba RTA, those public

servants risked incurring precisely the type of loss that the Plaintiffs incurred in

these cases. By resigning from the public service, the individuals would be giving

up their guaranteed salaries and other employment benefits for the uncertainty of

contract work, they would no longer be accumulating service credits under the

PSSA until the date they would have retired had they not joined Loba, and they

might suffer a penalty for having left the public service before a certain age or

other milestone under the PSSA had been achieved.

(viii) Defendant’s ability to appreciate the likelihood of damages

resulting from the misrepresentation.

[722]

The Pensions Division was uniquely placed to appreciate the strong

likelihood of damages resulting from a misrepresentation on its part regarding the

existence, legality and accessibility of the Loba RTA.

- 242 -

[723]

First, it realized that many public servants were considering leaving

the public service and taking reciprocal transfer payments to outside employers,

including Loba.⁶⁸¹As early as May 2000, Macpherson, Gravelle and Charko were

aware that Loba was aggressively recruiting public servants and that the Loba RTA

and Loba pension plan had features similar to the Cryptic Web and AMB RTAs

and pension plans. Gravelle, Macpherson and others were personally getting calls

from individuals specifically interested in the Loba RTA.⁶⁸²At the department and

agency level, compensation advisors were reporting to the Superannuation

Directorate that the volume of requests for information was so great, they were

having trouble processing all of them prior to the October 15^thdeadline. In short,

the TBS realized that numerous public servants could be affected by any

misrepresentation by the Defendant about the Loba RTA and pension plan.⁶⁸³

[724]

Secondly, as a result of the ongoing communications Gravelle and

Macpherson were having with Godwin and Desnoyers, the Pensions Division

realized that there was a significant risk that the Loba pension plan would be de-

registered by the CRA, the Loba transfers would not occur and public servants who

had chosen to join Loba would suffer losses as a result.

[725]

In May 2000, Macpherson had received a copy of Loba’s amended

pension plan that included features of a defined contribution plan. On June 15,

2000 Soucoup forwarded to Macpherson a copy of Touchette’s letter of June 2,

2000 enclosing copies of the employment agreements Loba had with Todd, St.

Arnaud, Magee and Keller.⁶⁸⁴By July 5, 2000, Macpherson had Todd’s letter

confirming his employment agreement with Loba.⁶⁸⁵With this documentation,

the Pensions Division was aware that:

• The public servant transferring to Loba would become a commissioned

resource of Loba.

• The individual would be representing Loba as a resource providing

consulting services to other employers and/or individuals on a contractual

basis.

• The individual had to solicit new consulting assignments.

[726]

On the basis of this information, Macpherson, Gravelle and Charko

had concerns about whether Loba had a valid employment relationship with its

workers. During the summer of 2000, Gravelle learned through Godwin that from

- 243 -

the CRA’s perspective, the fact that a Loba worker worked on contract for third

parties could bring into question whether a bona fide employment relationship

existed between Loba and its workers. The information that was readily apparent

from the Loba employment agreements was some of the information subsequently

relied on by the Treasury Board in refusing to make transfers under the Loba RTA,

by the CRA in revoking the registration of the Loba pension plan and by the

RCMP in charging Loba, Parent and WBP with fraud.

[727]

During discussions between Macpherson, Gravelle and Desnoyers, it

became clear that both the Pensions Division and Desnoyers held the view that

Parent, Loba and WBP were defrauding the federal government through use of the

Loba RTA and pension plan. In September, Gravelle and Macpherson learned that

the RCMP had received permission to conduct an undercover operation to collect

evidence to support criminal charges.

[728]

By September 21, 2000, Godwin had provided Gravelle with a written

summary of the CRA’s concerns regarding arrangements like Loba’s. Gravelle

knew that Godwin was of the belief that, if the Loba arrangements were as she

described them to him, the Loba pension plan would not satisfy the primary

purpose rule. By September 11, 2000, Macpherson, Gravelle, Charko and Claydon

knew that the CRA’s concerns were significant enough that it was taking the

unusual step of preparing a bulletin to distribute to its employees advising of its

concerns regarding RTAs such as Loba’s and warning of the possibility of the de-

registration of a pension plan where a true employment relationship did not exist

and/or the primary purpose test could not be met.

[729]

I reject Charko’s evidence that the Pensions Division, in the summer

and early fall of 2000 was doing some additional steps that it hoped would clarify

the legitimacy of the Loba arrangements and would allow the Treasury Board to

proceed with payments. I reject his evidence that at that time, despite their

concerns, the Pensions Division “assumed and presumed that there was nothing

incorrect with [Loba’s] arrangements and that [the Loba transfer payments] would

have been proceeded with pending additional information from, in some cases the

employee, in some cases from Loba”.

[730]

By May 17, 2000, Gravelle, on behalf of Treasury Board, had already

taken the position, and had advised Soucoup at PWGSC, that PWGSC’s clarifying

the employer/employee relationship through an examination of employment

- 244 -

contracts would likely not be sufficient justification for issuing payments under the

Loba RTA because the Pensions Division had a number of questions about the

Loba RTA and about Loba’s relationship with other employers whose RTAs had

been cancelled.⁶⁸⁶

[731]

It is clear from the internal communications within the TBS and

between the Treasury Board, PWGSC, the CRA and the RCMP, that it was

generally believed that the Loba arrangement was a scam, Parent was a fraud artist,

and the public servants seeking to join Loba were out to get more than that to

which they were rightfully entitled under the PSSA. The game plan within the TBS

was to find sufficient evidence to justify a refusal to transfer funds to the Loba

pension plan; it was not to find reassurance that an employer/employee relationship

existed or that the Loba arrangements were legitimate. For all of these reasons, the

Pensions Division was well able to appreciate the likelihood that those in the

Plaintiffs’ position would suffer losses if not advised of the known risks inherent in

the Loba RTA.

(ix) Defendant’s possession of important, relevant information.

[732]

As has just been reviewed, the Defendant possessed very important,

highly relevant information about the circumstances that had to exist for a transfer

to occur under the Loba RTA. That information involved much more than an

application being submitted prior to October 15, 2000. It included the requirement

that not only the Superannuation Directorate, but also the CRA, be satisfied that an

employment relationship existed for all members of the Loba pension plan and that

the Loba pension plan satisfy the primary purpose rule under the Income Tax Act.

These additional requirements were succinctly summarized in Godwin’s letter to

Gravelle of September 7, 2000.

(x) Defendant’s ability to provide the information to the Plaintiffs.

[733]

It would not have been difficult for the TBS to provide public servants

interested in joining Loba with information about the concerns of the Pensions

Division and the CRA.

[734]

First, by the summer and fall of 2000, the Loba and Horler RTAs

were the only agreements still being used in regard to which the federal

government had serious concerns. It was only in regard to these two plans that

PWGSC had been instructed to investigate in every case the existence of a valid

- 245 -

employer/employee relationship. Only about 118 public servants applied to

transfer their pension monies to Loba.

[735]

Secondly, as of June 28, 2000, Gravelle had the framework of what

needed to be said once she received Robusky’s letter with the Information Sheet

regarding the CRA’s concerns about IPPs. Godwin’s letter summarizing the same

concerns regarding RTAs and pension plans like Loba’s was prepared on

September 7^thand in Gravelle’s possession on September 21^st. Had she initiated

inquiries, no doubt it could have been in her possession earlier.

[736]

Thirdly, the Pensions Division could have pension information

disseminated very quickly to the Compensation Community through the assistance

of PWGSC, who had access to all of the front-line pay and benefits officers

throughout government departments and agencies. One of the most efficient

mechanisms was through a broadcast sheet. This technique was usually quicker

and more reliable than sending an Information Bulletin to the Heads of Personnel

at the various government departments and agencies to be filtered down to the

front-line workers.⁶⁸⁷Gravelle acknowledged that, had she wanted to get

information about a pension issue disseminated quickly to public servants, she

could have done so within a couple of weeks.⁶⁸⁸In this case, with the document

already prepared by the CRA, the distribution time should have been shorter.

[737]

Fourthly, the TBS realized that if a person was considering leaving the

public service to join Loba and transferring his or her pension under the Loba

RTA, that individual had to contact his or her compensation advisor and request a

form 2472 in order to obtain an estimate of the monies available for transfer.

PWGSC then had to generate the numbers for the individual. Once the individual

decided to join Loba and utilize the Loba RTA, the individual filed a copy of the

Appendix B attached to the Loba RTA. These were three separate points in time

when the Defendant could have accessed those individuals considering joining

Loba and provided them with information about the risks.⁶⁸⁹

[738]

Fifthly, another option would have been for the CRA to distribute the

content of Godwin’s September 7^thletter directly to members of the PSSP. The

CRA can communicate directly with members of a pension plan with the written

authorization of the pension plan administrator.⁶⁹⁰The plan administrator for the

PSSP is the Treasury Board. The Treasury Board could have asked the CRA, with

the assistance of PWGSC, to distribute Godwin’s information not only to the

- 246 -

Compensation Community within CRA but also to the Compensation Community

in other government departments and agencies. Another option would have been

for the CRA to include under its FAQ on its website a segment dealing with the

concerns raised in Godwin’s letter, and for compensation advisors in each

department or agency to be directed to advise those seeking information on RTAs

to review that FAQ.

[739]

Finally, what actually transpired was proof that the important

information contained in Godwin’s letter could easily have been distributed to

anyone asking for information regarding an RTA. On September 25, 2000,

Gravelle, with Charko’s blessing, had Godwin’s September 7^thletter forwarded to

Swan at the Superannuation Directorate. Swan was told that the CRA had given its

permission for this letter to be distributed to members of the federal public service

pension plans who are recruited to become consultants for a private corporation

and encouraged to transfer their entitlement to a private sector plan. As part of

PWGSC, the Superannuation Directorate had direct access to the compensation

advisors in the various government departments and agencies and could have

distributed this letter to those individuals to pass on to interested public servants.

[740]

PWGSC had already sent out a broadcast message to all compensation

advisors in the various departments and agencies instructing them to send requests

for information regarding RTAs to a particular address so that the requests could

be given priority due to the impending deadline. Compensation advisors could

easily have been instructed to make Godwin’s letter or Information Bulletin

available to any public servant seeking information for purposes of an RTA.

(xi) Indicators of the appropriate standard of care in the

circumstances

[741]

The steps taken by the Registered Plans Division of the CRA illustrate

the appropriate standard of care in the circumstances. The Registered Plans

Division was anxious to warn as many public servants as possible of the risk posed

by arrangements like those being marketed by Loba. At the beginning of

September, Godwin and Menard prepared an Information Bulletin to be sent to all

compensation offices within the CRA, and to all compensation offices throughout

the rest of the public service through the auspices of the TBS and the

Superannuation Directorate. The purpose of the Information Bulletin was to

enable the compensation advisors to inform interested parties that transferring their

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pension entitlements to private pension plans primarily established to accept a

transfer of funds from the PSSP was essentially a “buyer beware” situation.⁶⁹¹The

Information Bulletin was short, direct and informative. It stated:⁶⁹²

INFORMATION BULLETIN

Subject: Pension Plans Established Primarily to Accept a Transfer of Funds

from the Public Service Superannuation Plan

In recent weeks, e-mail messages and radio advertisements have been trumpeting

the possibility that federal public servants have the option of transferring their

Public Service Superannuation Plan contributions to a compatible pension plan

managed by one of several consulting firms. Specifically, the advertisements

claim that federal public servants can transfer their contributions to the

compatible pension plan through existing RTAs, which expire October 15, 2000

unless renegotiated with Public Works and Government Services Canada

(PWGSC).

There are a number of issues associated with these advertisements. First, the

offers target departing or retiring federal public servants with the temptation of

lucrative consulting opportunities and a continuation of uninterrupted pension

plan contributions. To further entice individuals, the consulting firms play up the

October 15, 2000 date as a time when there will be some great loss of benefit for

employees who fail to act.

CRA’s Registered Plans Division has been examining these advertisements and

has expressed concern about the existence of a true employee-employer

relationship where funds are transferred and the individual is retained as a

consultant. The concern that some of the pension arrangements being struck may

not meet the requirements for registration under the Income Tax Act.

Of particular concern when a plan does not meet the registration requirements is

the impact on participants. In this instance, the impact is that all assets would

become taxable. This outcome would be devastating for the participants.

CRA employees are encouraged to seek legal advice as to the soundness of the

employee-employer relationship being offered, specifically in the context of the

advertised pension plan’s ability to qualify under the Income Tax Act.

[742]

Godwin acknowledged that this Information Bulletin accurately

reflected the concerns of the Registered Plans Division of the CRA at the time

respecting the Loba arrangements arising out of the advertisements touting the

Loba RTA. In that the information provided in the Information Bulletin was

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general, and not specific to any taxpayer, Godwin was of the view that no

permission needed to be obtained from the Treasury Board, the administrator of the

PSSP, before this Bulletin was made available to PSSP members. As well, s. 241

of the Income Tax Act was not infringed vis-à-vis Loba because Loba was not

identified in the Bulletin. Godwin acknowledged that it was unusual for the CRA

to encourage PSSP members to get legal advice; this signalled the seriousness and

pressing nature of the CRA’s concerns regarding the Loba RTA and pension plan.

[743]

On September 19, 2000, Menard distributed an e-mail to Regional

Directors of Human Resources in the CRA advising that this Information Bulletin

should be provided to all compensation advisors to share with employees seeking

pension estimates related to the October 15, 2000 expiry date for RTAs.⁶⁹³This

was done. In doing this, the CRA was taking steps as an employer to share with its

employees relevant information it had about risks inherent in a choice being given

to the employees concerning termination of employment and transfer of pension

entitlements. Parent and Zeithammel had done three separate presentations to the

CRA auditors in Toronto. There was considerable interest in Loba within this

group. Parent testified that, despite Loba’s aggressive marketing campaign, only

one CRA employee joined Loba. This supports the proposition that the

information contained in the CRA Information Bulletin was highly relevant to

those considering the Loba option.

[744]

The CRA’s reservations and concerns were serious enough that it also

contacted the plan sponsors and the plan actuary for companies that could be

impacted as a result of CRA concerns, and it communicated the concerns to the

Pensions Division at the TBS because it was responsible for oversight of the PSSP

and the management of RTAs under the PSSA. All of these interventions on the

part of the CRA were unusual. They highlighted how concerned the CRA was on

behalf of public servants considering RTAs like Loba’s, the standard of care the

CRA felt obliged to meet vis-à-vis those public servants, and what the CRA

considered an appropriate intervention to meet that standard of care.

[745]

The Pensions Division, through aspects of its own action plan,

provided further confirmation as to what entailed an appropriate standard of care in

the circumstances.

[746]

Starting in the summer of 2000, Gravelle became concerned that

public servants were making decisions about their PSSA entitlements which they

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might not have made if they had known what Gravelle knew at the time regarding

the CRA’s concerns about the Loba RTA and pension plan. By August, Gravelle

and Godwin had agreed that, if Godwin provided Gravelle with something in

writing setting out the CRA concerns, the Pensions Division could make it

available to plan members, and others, who were inquiring about a transfer under

the Loba RTA.⁶⁹⁴I find that by this time, Charko, Gravelle and Macpherson

believed that the TBS, like the CRA, needed to warn any public servant making

inquiries to his or her compensation advisor about RTAs about the risks the CRA

had identified in regard to arrangements like Loba’s. I reject the evidence of

Charko and Gravelle that their intention upon receipt of Godwin’s September 7^th

letter was to share its contents only with individuals calling the Pensions Division

or the Superannuation Directorate with specific questions regarding Loba. I also

reject Godwin’s evidence that he intended his September 7^thletter to Gravelle to be

used in only this limited way. The contemporaneous communications within and

between the CRA, the TBS and the Superannuation Directorate defeat this

assertion, as does simple logic.

[747]

Godwin’s actions belie the suggestion that he expected the

information in his letter to be given only to those public servants calling the

Pensions Division or the Superannuation Directorate for information regarding the

Loba RTA. He had taken steps to send an Information Bulletin expressing the

CRA’s concerns to all compensation advisors within the CRA and to Cryptic Web,

AMB, Loba, Lafleur and WBP. He realized the importance of getting this

information to any public servant considering joining Loba. That is why he

offered to put the CRA’s concerns in writing for Gravelle. The best evidence of

his understanding at the time is contained in his August 31, 2000 e-mail to

D’Aurelio enclosing the draft Information Bulletin he planned to send to CRA

compensation advisors:⁶⁹⁵

I have also spoken with Anne Gravelle at Treasury Board. She has also agreed to

pass this information on to Shediac so that all of Public Works (and all civil

servants) will get this information when they request a quote. She was actually

very glad that we were willing to provide such information.

…

This document was admitted for the truth of its contents, and supports the

conclusion that Godwin and Gravelle intended his letter to be distributed to the

Compensation Community throughout the public service.

- 250 -

[748]

In a September 1, 2000 Memorandum from McCloskey, the Assistant

Commissioner, Policy and Legislation Branch, CRA to Rob Wright, Commissioner

of the CRA, the subject of which was “Reciprocal Transfer Agreement between

PSSA and Consulting Firms”,⁶⁹⁶McCloskey advised that the CRA would contact

PWGSC to arrange for information to be disseminated throughout the public

service regarding the CRA’s concerns about arrangements like Loba’s so that

public servants considering such an arrangement would be in a position to make an

informed decision.

[749]

In his September 11, 2000 Memorandum to Claydon, Charko stated as

a step to be taken to deal with concerns about Loba: “CCRA will be producing a

bulletin outlining their concerns about these small employers and we have agreed

to assist in its distribution to employees making enquiries.”⁶⁹⁷Gravelle confirmed

that the CRA did not provide her with any bulletin other than Godwin’s September

7, 2000 letter. I take this letter to be the bulletin referred to by Charko.

[750]

Despite this evidence to the contrary, Gravelle and at some points in

his evidence, Charko, testified that they never intended the document Godwin

promised to send Gravelle to be distributed widely to the Compensation

Community; they intended it to be used only by the Pensions Division and the

Superannuation Directorate in answering questions posed specifically to them by

interested public servants or questioning compensation advisors. The reasons

offered by Gravelle and Charko as to why this would have been their intention are

not convincing.

[751]

Gravelle’s evidence was that she considered the Godwin letter of only

limited assistance in that, although it put information about the CRA’s concerns in

one place, it did not mention Loba and did not definitively answer questions about

the validity of a Loba-type arrangement. She submitted that the letter would have

lacked context in that Loba’s name was not mentioned; that is why it was given

only to people who created the context by inquiring about Loba. I consider this an

assessment offered in hindsight during the course of litigation, and not an accurate

portrayal of Gravelle’s views of the usefulness of the letter at the time. I find that

anyone considering joining Loba, who read Godwin’s September 7^thletter, would

realize that the CRA was speaking of its concerns regarding a Loba-type

arrangement. As such, this letter could have been a valuable tool in alerting public

servants of the risks associated with leaving the public service to join Loba. I find

that this was apparent to Gravelle and Charko.

- 251 -

[752]

Gravelle also testified that the Godwin letter was not sent out to Heads

of Human Resources as the TBS had done with the September 7, 2000 Information

Bulletin, because it would have to have been reformatted, translated and approved

by layers of public servants before it could be distributed. Distributing Godwin’s

letter through a Treasury Board Information Bulletin was not the only way to get

the relevant information to compensation advisors. Gravelle acknowledged that a

broadcast message through PWGSC was a fast and efficient method of getting

information to the Compensation Community throughout the government.

[753]

Charko testified that the information in Godwin’s letter did not meet

the three criteria used by the TBS to determine whether to issue Information

Bulletins; namely, the information must be: (1) of general interest to all employees;

(2) of a non-technical nature; and (iii) about a change to the plan. Charko

considered Godwin’s letter a technical document in that it restated the criteria for

registration of a pension plan under the Income Tax Act; however, it did not signal

any changes to the legislation or the plan and therefore did not need to be

circulated to the Compensation Community. In this regard he implied that, since

the Superannuation Directorate knew about the importance of an employment

relationship and was examining each case closely, nothing would be served by

distributing a further bulletin. This argument misses the point that the distribution

of an Information Bulletin could have highlighted the seriousness of the risk of de-

registration of a pension plan in the particular circumstances of consulting

companies such as Loba so that compensation advisors could bring this to the

attention of inquiring public servants. In any event, the TBS was not restricted to

disseminating information through Information Bulletins.

[754]

Secondly, Charko said on the one hand that Godwin’s letter was

technical and therefore inappropriate for general distribution as an Information

Bulletin but, on the other hand, did not add any new information, suggesting that

the information contained in the letter was already known to those to whom it

would be distributed. The evidence was that the compensation advisors who dealt

with the Plaintiffs were unaware of the concerns raised in Godwin’s letter. As

well, there was no evidence that any of the Plaintiffs or other public servants who

were considering joining Loba pursuant to the Loba RTA would have known why

the employer/employee relationship was so central to the validity of the Loba

arrangements or exactly how much was at stake if either the Treasury Board or the

CRA determined that no valid employer/employee relationship existed in regard to

any Loba worker.

- 252 -

[755]

Thirdly, Charko noted that individuals seeking more information were

merely referred to the general inquiries line of the CRA. For the purpose of

determining whether the TBS should have taken steps to disseminate the

information contained in Godwin’s letter, this factor is irrelevant. The TBS could

have provided whatever help-line it wished.

[756]

Fourthly, Charko opined that a bulletin based on the information in the

Godwin letter could have been incorrectly construed as suggesting that there was

something illegal about the Loba relationship. That could dissuade public servants

from making a valid career choice to move to Loba. That could also lead to

complaints from Loba. Charko would have realized that this concern could have

been assuaged through careful drafting of any bulletin or notice. Charko did not

see this as an impediment to the distribution of this information to compensation

advisors by the CRA, nor did he see this as a reason not to provide this information

to individuals calling the Pensions Division or the Superannuation Directorate

directly.

[757]

I simply do not accept Charko’s evidence that the Pensions Division

did not intend to circulate the information in Godwin’s letter to all compensation

advisors because it did not meet the criteria of being a policy statement of interest

to a broad group, because it provided no new information, or because it might have

been misconstrued as implying some illegality was occurring. I consider all of

these to be reasons afforded as an afterthought to justify why a distribution of

Godwin’s letter to the Compensation Community did not in fact occur. Charko’s

explanations ignore the fact that he authorized Gravelle to send Godwin’s letter to

Swan at the Superannuation Directorate “for distribution to public servants who

were recruited to become consultants for a private corporation and encouraged to

transfer their pension entitlement to a private sector plan”.

[758]

The issue of Charko and Gravelle’s intention at the time must be

considered in the context of the evidence as a whole.

[759]

Gravelle acknowledged that, in the weeks leading up to the October

15^thdeadline, she and Macpherson fielded many inquiries about Loba from

interested public servants. Gravelle acknowledged that she had sent Godwin’s

letter of September 7, 2000 to some individuals who called or e-mailed to inquire

about the Loba RTA because she realized that it was another piece of information

that might be helpful to them in making their decision. She understood that the

- 253 -

letter achieved the objective of clarifying the nature of the CRA’s concern about

the Loba arrangements. She understood that knowledge of those concerns was

important information for prospective Loba workers. In some cases Gravelle

simply summarized the information contained in Godwin’s letter as she believed

that this was information that those inquiring should have had before making any

decision about joining Loba. Gravelle acknowledged that, in those situations

where she did not provide a copy of Godwin’s letter to those making inquiries, it

had been an oversight.

[760]

In the fall of 2000, Gravelle realized that public servants were

instructed to seek information from their compensation advisors regarding RTAs

and that this was one area in which compensation advisors were tasked to provide

counselling to public servants. Gravelle was seasoned enough to realize that there

was no guarantee that compensation advisors consulted by individual public

servants would think of contacting the Superannuation Directorate or the Pensions

Division to check things out on behalf of a public servant. In fact, compensation

advisors had been told not to contact the Superannuation Directorate in regard to

active plan members’ files.⁶⁹⁸Instead, they were to consult the SAM, Information

Bulletins and other written materials available to them, and if questions remained,

they were to call their regional offices for assistance.

[761]

Gravelle was aware in the fall of 2000 that, on the basis of the

information that was available to compensation advisors in the SAM and bulletins,

the compensation advisors would have had no understanding of the concerns of the

Pensions Division or the CRA relating to the Loba RTA unless they were

specifically told about those concerns. Gravelle realized that the CRA concerns

were not being brought to the attention of the compensation advisors through

anything that the Pensions Division was doing and that it would take a specific

communiqué to alert the compensation advisors of the concerns.⁶⁹⁹Therefore, if

the compensation advisors in those departments were not provided with a copy of

Godwin’s September 7, 2000 letter, it was unlikely that the contents of that letter

would come to the attention of the individuals seeking information about Loba.⁷⁰⁰

That might happen only in the unlikely event that an employee made a specific

inquiry to the Pensions Division or independently found FAQ 11 on the CRA

website.⁷⁰¹

[762]

Gravelle acknowledged that the information contained in Godwin’s

letter was relevant to people in the Plaintiffs’ position at the time they were

- 254 -

considering joining Loba to enable them to make an informed decision.⁷⁰²I find

that, through her conversations with Godwin, Gravelle was aware that the CRA

was handling this situation for its own compensation advisors by providing them

with an Information Bulletin specifically setting out the CRA’s concerns about

arrangements such as Loba’s. Gravelle knew that she had Godwin’s permission to

distribute the contents of his letter to compensation advisors throughout the

remaining government departments and agencies.

[763]

Gravelle was a responsible public servant who was intent on

preventing Parent from perpetrating what she considered to be a fraud on the

Treasury Board and the CRA. It is inconceivable to me that her intention would be

to limit dissemination of the contents of Godwin’s letter only to the small number

of public servants or compensation advisors calling the Pensions Division or the

Superannuation Directorate with specific questions, when she was aware that large

numbers of public servants throughout the public service were being enticed by the

Loba option.

[764]

I find, based on the weight of the evidence, that it was Gravelle’s

intention, supported by Charko, that the Superannuation Directorate immediately

send a copy of Godwin’s September 7^thletter to the Compensation Community

generally so that any compensation advisors fielding inquiries about transfers

under RTAs leading up to the October 15^thdeadline could provide a copy of the

letter to such individuals or could at least share with those individuals the

information contained in the letter.

[765]

The important point at this stage of the analysis is that, at least in

September 2000, Charko and Gravelle considered it part of the responsibility of the

Treasury Board, in its capacity either as an employer or pension plan administrator,

to get the information in Godwin’s letter to public servants interested in the Loba

option so that they could make an informed decision and appreciate at least one

significant risk associated with the Loba option.

(xii) Conclusion

[766]

All of these factors lead me to conclude that the Defendant was

negligent.

[767]

The Pensions Division was negligent in the summer of 2000 when,

although apprised of the CRA’s concerns about arrangements like Loba’s, it did

- 255 -

not immediately take steps to get this information out to the front line people who

were responsible for advising employees about their pensions and RTAs.⁷⁰³This

was especially so after Gravelle had received Robusky’s June 28, 2000 letter

outlining the CRA’s concerns about IPPs.⁷⁰⁴It would have been obvious to a

person with Gravelle’s expertise that the CRA would have the same concerns

about arrangements like Loba’s.

[768]

That being said, the key act of negligence relied on by the Plaintiffs

was the failure of the Pensions Division and the Superannuation Directorate to

distribute the information contained in Godwin’s September 7^thletter to all

compensation advisors in government departments and agencies with instructions

to provide that information to public servants seeking service and salary records

prior to October 15^thor seeking other information regarding an RTA. The

compensation advisors were the Defendant’s agents in disseminating information

about RTAs to interested public servants. In that the compensation advisors were

not advised of the risks associated with RTAs such as Loba’s, they could not

inform the Plaintiffs about those risks.

[769]

It is admitted that Godwin’s letter was not distributed by the

Superannuation Directorate to all compensation advisors in government

departments and agencies or to other officials in the Human Resources area in

government departments and agencies.⁷⁰⁵It is admitted that this letter was given to

some, but not all, individuals who contacted the Pensions Division for information

concerning RTAs. Gravelle could not confirm to whom the letter had in fact been

given. The only record produced was of a fax from Macpherson to Sylvie Joseph

(“Joseph”), a compensation advisor at Fisheries and Oceans Canada on October 12,

2000.⁷⁰⁶As well, there was evidence that the TBS had provided a copy of the

letter to Shipley, an interested public servant who called for information regarding

the Loba RTA.⁷⁰⁷It is admitted that none of the Plaintiffs and none of the

compensation advisors who dealt with the Plaintiffs was provided with a copy of

Godwin’s September 7^thletter at any time prior to October 15, 2000.⁷⁰⁸It is

admitted that, prior to October 15^th, none of the compensation advisors who dealt

with the Plaintiffs was aware of any concerns about the legitimacy of the Loba

RTA,⁷⁰⁹and none relayed any such concerns to the Plaintiffs.

[770]

Either Gravelle or Macpherson instructed Tremblay to forward

Godwin’s letter to the Superannuation Directorate and was ultimately responsible

- 256 -

for the wording in Tremblay’s fax of September 25, 2000 to Swan. That fax

read:⁷¹⁰

I am sending you the copy of a letter we have received from the Registered Plans

Division of Canada Customs and Revenue Agency. We have been told that this

letter can be sent to members of the federal public service pension plans who are

recruited to become <consultants> for a private corporation and encourage (sic) to

transfer their entitlement to a private sector plan.

It gives a general explanation of the registration criteria and also a phone number

where people can call to get more info.

We though (sic) that this could be of some help to you or people handling these

(sic) type of enquiry.

[771]

The instructions written by Tremblay were not clear. There is no

specific direction for the Superannuation Directorate to circulate the letter to the

Compensation Community generally with an instruction that the letter or the

information in the letter be provided to anyone inquiring about transfers under an

RTA. The closing line is vague.

[772]

If the intention of Charko, Gravelle and Macpherson was as I have

found, namely that Godwin’s letter would be sent to the Compensation Community

generally, the wording in the fax of Tremblay was inadequate to ensure that the

Superannuation Directorate would appreciate that this was the instruction that it

was being given. If as Gravelle and Charko testified the intention was to have the

Godwin letter used only by the Superannuation Directorate when fielding calls

from interested public servants or compensation advisors, then Charko, Gravelle

and Macpherson were negligent in not taking steps to circulate the letter generally.

If Godwin’s letter was used only as a resource for those at Shediac, it was clear

that its contents would not reach most of the public servants considering the Loba

option.

[773]

Neither Swan, to whom Tremblay’s fax was directed, nor Soucoup,

with whom she job-shared, was called to testify. No evidence was tendered as to

what either Swan or Soucoup did with Godwin’s letter. An adverse inference is

drawn against the Defendant in regard to the evidence these witnesses would have

provided. The two most obvious reasons why the Godwin letter was not

distributed to the Compensation Community are that either Swan (or Soucoup) did

not understand that such a distribution was expected by the Pensions Division and

she did not initiate it herself, or, someone dropped the ball at the Superannuation

- 257 -

Directorate and simply did not get around to making a general distribution to the

Compensation Community.

[774]

In either case, and independently of the negligence I have attributed to

those at the Pensions Division, I find that Swan was negligent in not doing

anything with the Godwin letter. She knew that Loba was engaged in an

aggressive marketing campaign. She knew that the compensation advisors in

various departments were being swamped with inquiries for salary and service

records for the purpose of transfers under RTAs, including Loba’s. She knew that

the October 15^thdeadline was rapidly approaching. She knew that the SAM and

other bulletins did not alert the compensation advisors of any problems with the

Loba RTA and pension plan. From reading Godwin’s letter, she would have been

aware of the serious concerns raised by the CRA. Swan would have realized that

these concerns would not come to the attention of most public servants considering

joining Loba and to most compensation advisors dealing with those public

servants. If Swan had any question about how widely to distribute Godwin’s letter,

she could have clarified the expectations of the TBS by contacting Gravelle or

someone else in her group. There is no evidence that she did that. The letter gave

her clear authority to distribute the letter to members of the PSSP and to

compensation advisors. In my view, it was negligent of Swan not to have taken

immediate steps to distribute Godwin’s letter to the Compensation Community in

the various departments and agencies. The Defendant acknowledges that no other

bulletin or document with information of the type provided in the Godwin letter

was provided to the Compensation Community in government departments.⁷¹¹

[775]

Finally, I find that Gravelle and/or Macpherson were negligent in

never following up with the Superannuation Directorate to ensure that Godwin’s

letter was distributed to the Compensation Community at large or even to

determine how, if at all, the Superannuation Directorate made use of the Godwin

letter. Gravelle explained the lack of follow-up as her walking a very fine line

between telling the Superannuation Directorate how to do its job and assuming that

if certain tools were put in their hands, they would use them and do their job

properly. Gravelle cannot rely on this explanation when: (1) the instructions given

were capable of more than one interpretation; (2) the information in Godwin’s

letter was critical; and (3) the possible ramifications for public servants who chose

to go to Loba without the benefit of the information in Godwin’s letter were very

serious.

- 258 -

[776]

The end result of the way the Pensions Division and the

Superannuation Directorate handled Godwin’s letter was that some public servants

had the advantage of the information in Godwin’s letter, but the vast majority did

not. The Treasury Board was the employer of the CRA employees for purpose of

the PSSA; therefore, the Treasury Board was in the same position regarding the

CRA employees who received Godwin’s Information Bulletin as it was to the

remaining public servants in the government departments and agencies, most of

whom did not receive this information. In essence individual public servants, both

as employees, and as pension plan members, were not treated equally.

[777]

In Issue 6, 2001 of the Canadian Government Executive, Charko and

a communications specialist, Fraser Likely, in an article entitled “Communicating

Pension Info” noted that, until a member of the PSSP actually receives a benefit

under the PSSA, “the only way he or she can appreciate the value of the plan is

through clear and effective communication”. In the spring of 2001, the Pensions

Division undertook a comprehensive program to improve communications to and

with plan members, pensioners and recipients of survivor benefits to ensure that

members had “the most easily accessible, relevant, complete, and timely pension

information – information to help them better understand their Plan, thus allowing

them to make the most advantageous decisions at various life stages”. The

Pensions Division undertook this program at that time because they knew they had

a communications problem. During the course of developing the program, the

Pensions Division determined that, although the PSSP’s written materials were

good, “the distribution system that disseminates these materials to active members

is a hit and miss affair”.

[778]

It was noted that the external communication program for the PSSP

was mostly a reactive, rather than proactive and systematic program, with

management of communication programs being dispersed among the Human

Resources Branch and Pensions Division at the TBS, the Compensation Sector at

PWGSC, and the individual department and agency Human Resources branches –

particularly their compensation advisors. It was realized that more coordination

and training were required to make the communication system more effective. The

authors noted: “Until a member retires and begins collecting his or her pension

benefits, clear and effective communication is the first and most important benefit

a pension plan’s member can receive”.⁷¹²

- 259 -

[779]

The Defendant argues that “it was reasonable and prudent for the

Defendant not to share unproven and speculative concerns about Loba. If the

Defendant had warned prospective Loba participants about the doubts it had about

the legitimacy of the proposed relationship and those doubts were found to be

unsubstantiated, the TBS would have been open to suit … by both the Third Parties

and the Plaintiffs”.⁷¹³I reject this assertion. Godwin’s letter does not provide

“unproven and speculative concerns about Loba”. It is a concise summary of

important legal concepts that apply to pension plans – including Loba’s. It

provides a heads-up to public servants contemplating joining a consulting company

and transferring pension monies pursuant to an RTA. It makes no allegations of

wrong-doing on the part of anyone. It simply provides public servants with

another piece of information that would have been very valuable as they grappled

with the choice of staying in the public service or joining Loba. The TBS would

not have opened itself up for any suit by either the Third Parties or the Plaintiffs

for having circulated this letter to compensation advisors with instructions to

provide a copy to anyone seeking information about an RTA.

[780]

At trial, and in its submissions, the Defendant focused on the

November 16, 2000 meeting attended by representatives of the TBS, the CRA and

the RCMP. Its position is that it was not until November 16^th, after the Loba RTA

had expired and the Plaintiffs had all resigned from their jobs, that TBS officials

were apprised of the results of the RCMP undercover officers’ meetings with

Parent and came to the conclusion that there was no employer/employee

relationship at Loba. Its position is that it was only at that meeting that the CRA

expressed a concern about the employment relationship at Loba and they indicated

they would be doing their own investigation. All that the CRA had concluded as

of that date was that the situation warranted further review because it sounded as if

there was no employment relationship and the Loba pension plan could not meet

the primary purpose rule.

[781]

In my view, for the purpose of this litigation, it is not particularly

significant when the CRA actually came to the decision to revoke the registration

of the Loba pension plan. What is significant is the point at which the TBS

realized that this was a significant risk in regard to the Loba arrangements. I find

that the Pensions Division at the TBS were of the opinion that this was a

significant risk during the summer of 2000, but certainly no later than September

21, 2000, when Gravelle received Godwin’s letter. November 16^thwas just one

date along a continuum in terms of the provision of information to the TBS. It was

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the date when it became clear that the CRA, the TBS and the RCMP would be

working together to close down what they perceived as a fraud on the government;

however, it was not the first date that the risk of de-registration had been identified

as significant and one of which public servants should be made aware to enable

them to make an informed decision about Loba.

(c) Was Parent, Loba or WBP negligent regarding the misrepresentation

made to the Plaintiffs?

[782]

Parent realized that: (1) the Plaintiffs were consulting him in his

capacity as an actuary and as a prospective employer; (2) the Plaintiffs would place

faith in what he was saying in great measure due to the duty of care he owed them

as an actuary and the high professional standards expected of actuaries; (3) as a

prospective employer, he owed a duty of care to the Plaintiffs not to mislead them

about the terms of any employment offer; (4) the Plaintiffs were looking to him for

clarification of what they could expect at Loba; (5) the Plaintiffs were being asked

to make a very significant decision about their future in a short time frame; (6) the

Plaintiffs had minimal opportunity to gather information relevant to that decision;

(7) if they joined Loba, the Plaintiffs would be resigning from long-term, secure,

financially-rewarding employment and would be leaving one of the most generous

pension plans in the country; (8) most public servants have minimal knowledge

concerning the legal requirements for an employment relationship; and (9) the

Plaintiffs would rely on what Parent would tell them regarding the requirements

for pension registration.

[783]

All of these factors meant that the standard of care expected of Parent,

Loba and WBP was high.

[784]

The failure of Parent, Loba and WBP to advise the Plaintiffs that

transfers under the Loba RTA had been on hold from May to August 2000 was

negligent. Parent should have realized that the fact that transfers under the Loba

pension plan had been recently placed on hold was a significant fact that would be

relevant to prospective Loba workers. It was obvious that individuals such as the

Plaintiffs would want to know why the hold had been put into place, why it was

lifted and whether it was likely to be re-imposed in the future.

[785]

In the same vein, Parent and Loba were negligent in not explicitly

advising the Plaintiffs that it was not routine for the Superannuation Directorate to

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contact each individual with a request for confirmation of employment before

proceeding with a transfer of funds under an RTA. This was important

information for the Plaintiffs to have in gauging the risks inherent in their decision

to join Loba. This would have helped to alert the Plaintiffs as to the seriousness of

the government’s concerns regarding the Loba arrangements.

[786]

It is important to note that, although ultimately inaccurate, Parent’s

implied representation to the Plaintiffs that the arrangements at Loba met the

government’s requirements for an employment relationship for all purposes

relevant to the Loba RTA and Loba pension plan was not negligent. Parent never

held himself out as an expert in employment law. He relied on what he had been

told by the lawyers he consulted and by the government. Loba had provided the

Superannuation Directorate with copies of its standard form employment

agreement, it had responded honestly to questions posed to it by the

Superannuation Directorate regarding Loba’s arrangements with workers such as

Todd and Magee and, as far as Parent knew, Todd and Magee had honestly

answered all questions put to them by the Superannuation Directorate regarding

their relationship with Loba. After this information had been provided to the

Superannuation Directorate and had been reviewed by the Pensions Division of the

TBS, Gravelle advised Parent that transfer payments would be reinstated. It was

reasonable for Parent to conclude that the Treasury Board’s requirements for an

employment relationship had been satisfied. Parent anticipated that the working

relationship for all future workers at Loba would be the same as Loba had with

Todd and Magee. It was neither inaccurate nor negligent for Parent to convey to

the Plaintiffs that, as far as he knew, the relationship they would have with Loba

would be considered an employment relationship by the Superannuation

Directorate and the Treasury Board.

[787]

That being said, I do find that Parent, Loba and WBP breached the

standard of care owed to the Plaintiffs when they did not share with them the

concerns of the CRA, as soon as they became aware of them. Parent learned of the

CRA’s concerns by August 28, 2000, when Zeithammel advised him that the CRA

had the same concerns about the Loba RTA that it had about the IPPs that were the

subject-matter of FAQ 11. Then on approximately September 23, 2000, Parent

received Godwin’s letter and Information Sheet of September 15^thexplicitly

outlining the CRA’s concerns about Loba-type arrangements. Finally, on October

11, 2000, Parent received a copy of Godwin’s September 7^thletter to Gravelle from

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Shipley, a prospective Loba employee.⁷¹⁴That letter set out in even greater detail

the CRA’s concerns.

[788]

Parent received Godwin’s September 15^thletter both as President of

Loba and as principal of WBP. Parent consciously took the decision not to share

this information with the Plaintiffs, regardless of what role he was in vis-à-vis the

Plaintiffs and regardless of what duty of care he owed to them. I find that he did so

in order to protect his “pension portability business”. He did not want the

Plaintiffs to become worried about the legitimacy of the Loba arrangements and to

decide not to participate.

[789]

Parent explained his reasons for not sharing Godwin’s letter with the

Plaintiffs as follows: (1) he was not required to do so; (2) he believed that the

employment relationship was no longer an issue due to Gravelle’s August 22^nde-

mail and Théroux’s legal opinion and, in any event, he explained to all prospective

Loba workers the importance of the employment relationship; (3) the earnings

level issue was highly technical and he was satisfied that it was not relevant; (4) he

was concerned that Godwin’s Information Sheet implied that the Loba

arrangements were not legal and that Parent was doing something that was not

legitimate; and (5) he did not understand from Godwin’s Information Sheet that the

CRA was concerned with the primary purpose test – in his mind, in that the CRA

had registered the Loba pension, the CRA had already considered the primary

purpose test and had decided that it had been met.

[790]

Parent’s stated reasons for not sharing with the Plaintiffs Godwin’s

Information Sheet are not convincing. First, although Gravelle may have indicated

that the Superannuation Directorate would be processing applications for transfers

under the Loba RTA, Parent realized that there was still a high level of scepticism

of the Loba arrangements at the TBS. As a result of his experience with AMB and

Cryptic Web, he realized that, just because the Treasury Board had lifted the hold

on transfers did not necessarily mean that it would not re-impose a hold at a later

date. As well, the Treasury Board’s decision did not necessarily mean that for

purposes of the Income Tax Act, the CRA was in agreement that a valid

employment relationship existed.

[791]

Secondly, even if Parent believed that the CRA had decided that the

primary purpose test had been met by the Loba pension plan at the point of

registration of the plan, what was significant about the Information Sheet was that

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it warned that the primary purpose test had to be met on an ongoing basis, and the

absence of a legitimate employment relationship between Loba and any of the

Loba pension plan members at any point could put into jeopardy the ongoing

registration of the Loba pension plan. In other words, the employment requirement

and primary purpose test were ongoing and were not satisfied through reference to

circumstances simply at the point of registration, or at August 22, 2000, when

Gravelle sent her e-mail to Parent. The Information Sheet made that clear to

Parent, even if previously he had not appreciated that.

[792]

Thirdly, in developing the AMB, Cryptic Web and Loba

arrangements, Parent had never contemplated that the Treasury Board was not a

“participating employer” for the purpose of calculating earnings under the defined

benefit provisions in the Loba pension plan. He was unfamiliar with the relevant

sections in the Income Tax Regulations and in the CRA’s Technical Manual and

newsletters relating to this subject. The statement in Godwin’s letter that the

federal public service was not a participating employer in the Loba pension plan

took Parent by surprise and caused him concern.

[793]

Parent acknowledged that in September and October 2000, he did not

know whether or not the federal government would be considered a “participating

employer” under the Income Tax Act. The Registered Plans Directorate Technical

Manual published by the CRA stated under paragraph 1.29 “Participating

Employer – 147.1(1)”:⁷¹⁵

A prior employer is not considered to participate under a provision solely because

funds have been transferred from that employer’s plan to the provision. For

example, if Employer A makes contributions to plan A to fund an employee’s

benefits and that employee then commutes those benefits and transfers them to

Plan B, that transfer does not make Employer A a participating employer under

Plan B.”

[794]

If the CRA position that the federal government was not a

participating employer in the Loba pension plan held, then the benefits to which

the Plaintiffs would have been entitled would have been significantly less than

what Parent had indicated to them. As well, the legitimacy of the Loba

arrangements could be brought into question. The Plaintiffs were entitled to be

given this information, even if Parent was confident that he could come up with

other arguments as a form of damage control on this issue.

- 264 -

[795]

Whether or not Parent, or his legal advisors, agreed with the legal

interpretations being advanced by the CRA is beside the point when determining

whether Parent, Loba and WBP were negligent in not sharing the contents of the

Godwin letter with the Plaintiffs. It was Parent’s knowledge of the existence of

those concerns, and his failure to share those with the Plaintiffs, that amounted to a

negligent misrepresentation.

[796]

Fourthly, Parent’s alternate argument that, even if the Treasury Board

could not be considered a participating employer the earnings level would be

adequate for Loba employees because earnings could be annualized, was just that –

an argument. It was not an interpretation of the legislation and regulations that the

CRA necessarily would accept. In the face of advice from Théroux that “nominal

earnings with the new employer should be avoided”, it was risky for Parent to

conclude that as long as an employee’s per diem rate of pay was similar to his or

her rate of pay while a public servant, no problem would exist. This reasoning ran

contrary to Théroux’s statement that the primary purpose test might not be met if

an individual received only nominal earnings at Loba. In short, the CRA’s

expressed concerns were worthy of serious consideration on Parent’s part. The

CRA was the regulator of Loba’s pension plan for purposes of registration. Absent

court intervention, the CRA’s interpretation of the legislation and regulations

trumped that of Parent, and Parent knew that.

[797]

I find that Parent appreciated that the entire arrangement he created

with the Loba RTA, the Loba pension plan and the Loba employment agreements

could be vulnerable to challenge as a result of the earnings level issue;

nevertheless, he did not share this information with prospective Loba employees,

including the Plaintiffs.

[798]

Finally, although it was understandable that Parent would not want to

share with the Plaintiffs official government documents hinting that the Loba

arrangement might not be legitimate, Parent realized that the Plaintiffs would be

interested in knowing about the CRA’s concerns before they made their decision to

join Loba. He did not have the right to put his own interests ahead of those of the

Plaintiffs to whom he owed a duty of care – both as an actuary and as a prospective

employer.

[799]

Godwin’s letters brought into clear relief the CRA’s serious concerns

regarding the Loba pension plan. Since the Loba pension plan was Parent’s

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brainchild, he knew better than anyone its terms and its susceptibility to de-

registration applying the standards outlined in Godwin’s letters. Since he had full

information about the Plaintiffs’ employment with the public service, their pension

entitlements and their plans for the future, he realized the serious impact each of

them would face if the Loba pension plan was de-registered. This reinforced the

need for him, both as an actuary and as a prospective employer, to exercise care in

his presentation of information to them. It was not open to him to omit highly

relevant information going to the heart of the arrangements he was marketing to

each of them.

[800]

Finally, I find that the failure of Parent and Burnside on behalf of

Loba and WBP to advise the Plaintiffs prior to December 2001 of the hold that had

been placed on Loba transfers as of November 2000 was negligent. As pension

plan administrator or third party administrator, Parent, Loba and WBP had a duty

to keep the Plaintiffs fully informed of all material facts impacting their rights

under the Loba pension plan, and the suspension of the transfer of their funds from

the PSSP – which was to represent the bulk of the value of their entitlement under

the Loba pension plan – was clearly information that the Plaintiffs would have

considered relevant and important. It was because Parent and Burnside did not

want to alarm the Plaintiffs that they did not share the information. That signals

their appreciation that it was important information for the Plaintiffs.

(d) Was Jemus negligent regarding the misrepresentation made to the

Plaintiffs?

[801]

Was Jemus negligent in not telling Findlay that he would benefit

financially if Findlay went to Loba? The Defendant has not persuaded me that

Jemus was negligent in not sharing this information with Findlay. Findlay had

already met with Parent before he consulted Jemus. Findlay e-mailed Jemus on

October 10^thwanting to know if the Loba RTA would be financially beneficial for

him – that was only five days prior to the deadline. Findlay attached Parent’s

financial analysis. Findlay was already considering the Loba option before he had

any input from Jemus, and he made that clear to Jemus. Jemus prepared Findlay’s

financial analysis the following day. This was not a situation where Jemus was

introducing to Findlay the concept of RTAs or more particularly the Loba RTA.

[802]

Findlay consulted Jemus strictly for financial information – not for a

recommendation as to what he should do. Jemus made no recommendation to

- 266 -

Findlay. He simply provided him with the relevant numbers and let Findlay draw

whatever conclusions he wished from those numbers. Considering amongst other

factors the narrow scope of Jemus’ mandate, the speed with which Findlay was

seeking feedback and the fact that Findlay had already seen Parent, I am not

persuaded that Jemus’ failure to specifically advise Findlay that he would receive a

commission from WBP if Findlay joined Loba was a breach of Jemus’ duty of care

to Findlay.

[803]

In regard to the Defendant’s allegations that Jemus was negligent in

failing to advise the Plaintiffs that there were risks associated with requesting a

transfer of funds to Loba’s pension plan and that the TBS and the CRA had

concerns about the Loba RTA and pension plan, I have already found that Jemus

made no untrue, inaccurate or misleading representation in this regard. Even if I

were to have found that he did, I would not have found negligence. I accept

Jemus’ evidence that, until well after October 15, 2000, he was unaware that: (1)

the Treasury Board had ever placed a hold on transfers under the Loba RTA; (2)

the Treasury Board had communicated to Parent significant concerns about the

Loba RTA; or (3) the CRA had communicated to Parent significant concerns about

the Loba pension plan. I accept his evidence that, although he had known about

holds that had been placed on transfers under the Cryptic Web RTA, those holds

had been lifted and the transfers had been effected. His wife was one of the former

public servants who, with his blessing, had made use of the Cryptic Web RTA. As

far as Jemus knew, the Loba RTA was a valid and legitimate opportunity for his

clients. Neither Parent nor anyone at the government ever gave him any reason to

believe otherwise. One cannot negligently misrepresent a fact about which one has

no knowledge or of which one cannot reasonably be expected to have knowledge.

Reasonable Reliance

(a) Jurisprudence

[804]

For a negligent misrepresentation to be actionable, there must be a

finding that the plaintiff relied on the negligent misrepresentation and it was

reasonable for the plaintiff to have done so.⁷¹⁶

[805]

Factors that may be relevant to a determination of the reasonableness

of the reliance include: (1) the expertise and knowledge of the defendant; (2)

whether the representation was made during the course of the defendant’s business,

- 267 -

profession or calling; (3) whether the representation was made deliberately; (4) the

seriousness of the occasion; (5) whether the information or advice was requested;

(6) whether the defendant received any direct or indirect financial benefit; (7) the

nature of the representation; and (8) the presence of any disclaimers.⁷¹⁷The fact

that a misrepresentation was implicit rather than explicit or resulted from an

omission to provide information could impact on the reasonableness of a plaintiff’s

reliance on it.⁷¹⁸

[806]

In a claim for negligent misrepresentation, the defendant has the

burden of proving that the plaintiff would have taken a step resulting in a loss even

in the absence of the negligent misrepresentation. In Rainbow Industrial Caterers

Ltd. V. Canadian National Railway Co.,⁷¹⁹the Supreme Court of Canada stated:

Although the legal burden generally rests with the plaintiff, it is not

immutable. … Valid policy reasons will be sufficient to reverse the ordinary

incidence of proof. In my opinion, there is good reason for such reversal in this

kind of case. The plaintiff is the innocent victim of a misrepresentation which has

induced a change of position. It is just that the plaintiff should be entitled to say

“but for the tortious conduct of the defendant, I would not have changed my

position”. A tortfeasor who says “Yes, but you would have assumed a position

other than the status quo ante”, and thereby asks a court to find a transaction

whose terms are hypothetical and speculative, should bear the burden of

displacing the plaintiff’s assertion of the status quo ante.

(b) Individual Plaintiffs

[807]

Prior to resigning from the public service, none of the Plaintiffs had

been aware of the hold that had been imposed on transfers from the Loba RTA

from May to August 2000. Prior to resigning, none of the Plaintiffs had seen the

September 7, 2000 letter from Godwin to Gravelle,⁷²⁰the September 15, 2000

package from Godwin to Parent,⁷²¹or the Information Bulletin that had been sent

to the CRA Compensation Community.⁷²²Nor had any of the Plaintiffs been

provided with any of the information contained in those documents warning that if

the CRA concluded that there was not a true employment relationship or that the

new company’s pension plan did not meet the primary purpose test, a company’s

pension plan could be de-registered and no transfers would occur under an RTA

with that company.

(i)

Findlay

- 268 -

[808]

Had Findlay been aware of the hold or of the contents in any of these

three documents, I find that he would have made further inquiries of his managers

at Environment Canada before resigning from the public service to join Loba.

Findlay was operating on the understanding that he would have an employment

relationship with Loba. He understood that he would be hired out as a consultant

and would have to find his own business. He was unaware that any of this was

inconsistent with his being considered an employee by the CRA. Learning of this

would have impacted on his decision. I am not satisfied that, had Findlay had any

of this information, he would have resigned from the public service in any event.

[809]

I accept Findlay’s evidence that he had been unaware that another

Environment Canada worker, Buccini, had a copy of Godwin’s September 7^thletter

to Gravelle. He only learned that during the course of the trial. I accept Findlay’s

evidence that, prior to joining Loba, all he had heard second-hand was that Buccini

had spoken to someone at the TBS about the Loba RTA and had been advised that

the Loba RTA was a legal agreement, though one which the TBS did not like.

[810]

I also accept Findlay’s evidence that, at no time prior to his joining

Loba, did he ever speak to another Environment Canada employee who had

contacted Gravelle directly to ask about the Loba RTA and who had decided not to

join Loba after learning that both the TBS and the CRA had concerns about the

Loba arrangements.

[811]

In September 2000, Findlay had seen the APEX Bulletin and the

PWGSC Notice to Employees – both of which highlighted the availability of RTAs

and directed Findlay to his compensation advisor for more information. Nothing in

these documents led Findlay to believe there were potential pitfalls with RTAs.

[812]

Findlay learned of the Loba RTA through Clark, Shantora and

Shimizu – three current or former colleagues at Environment Canada who were

more senior than himself and who were seriously considering joining Loba. None

indicated any awareness of concerns regarding the legitimacy of the Loba

arrangements. Findlay advised his supervisor, Lalonde, that he was leaving the

public service to join Loba. Lalonde expressed no concerns. Findlay specifically

asked Plourde, his compensation advisor, if the Loba RTA was valid and whether

there were any problems with it. Plourde assured Findlay that it was valid and

there were no problems. I find that Findlay relied on the absence of any expression

of concern regarding Loba on the part of his compensation advisor in not seeking

- 269 -

advice from a legal advisor regarding the Loba option. Nothing had been brought

to his attention that suggested that he needed legal advice.

[813]

In the context of no warnings or concerns having been raised in the

APEX Bulletin and PWGSC Notice and by his superiors at Environment Canada, I

find that Findlay’s reliance on the lack of any warnings of risks or any expressions

of concern on the part of his compensation advisor was reasonable.

[814]

During his meeting with Parent, Findlay received copies of the

correspondence between Hamilton and Parent in which Hamilton expressed the

concern that the Loba RTA was being used in a way not contemplated or condoned

by the Treasury Board, and a copy of the Special Bulletin advising of the

cancellation of six RTAs negotiated by Parent. Parent went on to provide Findlay

with Gravelle’s August 22^nde-mail indicating transfers under the Loba RTA would

proceed, as long as there was an employment relationship, and Parent advised

Findlay that, although the TBS had been unhappy with the Loba RTA, by August

2000, it had accepted the Loba arrangements as valid. In the context of many

senior Environment Canada public servants considering the Loba option, the

government issuing publications advising of the opportunity presented by RTAs,

and no warnings or qualifiers being disseminated by the government regarding

arrangements like Loba’s, Findlay’s reliance on Parent’s representation that the

government now accepted the validity of the Loba arrangements was reasonable.

(ii) Ault

[815]

Ault’s evidence was that, if she had been aware of the hold in the

summer of 2000, this would have given her enough of a concern that she would not

have joined Loba. If this were the only information about potential government

concerns, and if Ault were advised that the hold had been lifted, I am not

convinced that this information alone would have resulted in Ault not resigning

from the public service to join Loba. However, this information, coupled with that

contained in the September 7^thletter, the September 15^thpackage or the CRA

Information Bulletin, would have reinforced the seriousness of the government’s

concerns regarding Loba and its willingness to suspend transfer payments if its

concerns were not answered. In that context, I am satisfied that Ault would not

have joined Loba.

- 270 -

[816]

I accept Ault’s evidence that what would have stuck out from the

documents Godwin prepared was that working on a contract basis could call into

question the existence of an employer/employee relationship, and that, in turn,

could call into question the validity of the Loba pension plan. If Ault had been

aware that one member of the Loba pension plan not having a legitimate

employment relationship with Loba could affect everyone, she would not have

opted to join Loba. I accept this evidence.

[817]

Prior to joining Loba, Ault had spoken to several people at

Environment Canada about her interest in Loba: Draper (a colleague), Wright (her

Director-General), Farley (Head of Human Resources for Ault’s section), Patry (a

compensation advisor) and Carrière (another compensation advisor). Ault learned

that approximately 20 Environment Canada employees were considering joining

Loba. None of the individuals Ault consulted raised any concerns about the Loba

RTA or pension plan.

[818]

Ault had seen the APEX Bulletin, the PWGSC Notice to Employees

and the PWGSC Bulletin entitled “Pension Transfers: Old rules give way to new”

plus the attached Backgrounder. All led her reasonably to believe that, as long as

her request for transfer was submitted before October 15^th, the transfer would be

completed.

[819]

At Wright’s suggestion, Ault spoke to Buccini, an Environment

Canada colleague. He passed on information that he had obtained from Parent,

Jemus and Gravelle. He indicated that, after speaking with Gravelle, he was

satisfied that the Loba RTA was a legitimate option. Ault respected Buccini and

valued his opinion.

[820]

I find that Ault’s reliance on the lack of any warnings or expressions

of concern on the part of her compensation advisors, in the context of no warnings

or concerns having been raised in the Information Bulletins she saw and by her

superiors and Human Resources department at Environment Canada, was

reasonable.

[821]

On September 19^thand October 9^th, Ault met with Parent, at which

time he explained to her the history of the Loba RTA, the pension transfer process,

the pension management options, the working relationship she would have with

Loba, the financial arrangements between herself and Loba, and the benefits she

could achieve through Loba. I find that during one of these meetings, Parent

- 271 -

provided her with the same documentation that he had given Findlay. Although

Ault became aware of the other RTAs that had been cancelled, she was shown

Gravelle’s e-mail confirming that transfers under the Loba RTA would proceed on

proof of employment. There was nothing in what Parent told her or in the

documents that she saw that alerted her, or should have alerted her, to the existence

of a significant risk that the Loba pension plan could be de-registered by the CRA.

[822]

In the context of several senior Environment Canada public servants

having already left to join Loba and many others considering the Loba option, the

government issuing publications advising of the opportunity presented by RTAs,

and the government issuing no warnings or qualifiers regarding arrangements like

Loba’s, Ault’s reliance on Parent’s representation that the government now

accepted the validity of the Loba arrangements was reasonable.

(iii) Shepherd

[823]

Shepherd testified that, had he been made aware of the hold, he would

have made additional inquiries about the reasons for the hold. Had he seen any of

the documents prepared by Godwin, what would have stuck out was that working

on a contract basis could call into question the existence of an employer/employee

relationship and that, in turn, could call into question the validity of the Loba

pension plan. If Shepherd had been aware that one member of the Loba pension

plan not having a legitimate employment relationship with Loba could affect

everyone, he would not have opted to join Loba. I accept this evidence.

[824]

Shepherd was referred to Loba by Buxton. Previously he had seen an

Environment Canada publication referring to RTAs and the September 12^th

PWGSC Notice to Employees.⁷²³Shepherd researched Loba on the federal

government Intranet and discovered the APEX Bulletin,⁷²⁴the Treasury Board

Information Bulletin⁷²⁵and the SAM list of approved employers with RTAs.

Nothing in any of these documents led Shepherd to believe there were potential

pitfalls with RTAs. The Treasury Board Information Bulletin and the APEX

Bulletin directed him to speak with his compensation advisor.

[825]

Shepherd consulted Langlois, the Director of the Executive Group at

Environment Canada, who referred him to his compensation advisors, Carrière and

Patry. None raised any concerns or mentioned any risks associated with his going

to Loba. Langlois supported Shepherd’s decision to get financial advice from

Jemus. Langlois did not advise Shepherd to get legal advice. Jemus said nothing

- 272 -

to Shepherd that would have alerted Shepherd to any risk of Loba not being a

legitimate arrangement or of the Loba pension plan being at risk of de-registration.

Before resigning from the public service, Shepherd met with his supervisor,

Goodlet, who expressed no concerns about Loba.

[826]

I find that Shepherd relied on the absence of any expression of

concern regarding Loba both in the government publications he consulted and on

the part of Langlois, Carrière and Patry in deciding to resign from the public

service in October 2000. I find that this reliance was reasonable.

[827]

Parent acknowledged that he had no recollection of his meeting with

Shepherd and that he would defer to Shepherd in regard to what transpired at the

meeting. Burnside acknowledged that, although she generally had packages of

documents ready for Parent to hand out to the individuals he was interviewing,

sometimes they ran out. Shepherd’s evidence was that he and Parent ran out of

time during their interview and not all topics he wanted discussed were discussed.

Parent’s evidence was that he was seeing up to 15 people a day during the week

leading up to October 15^th. Although Parent saw the undercover officers on

October 10^thand Shepherd on October 11^thand again with Collier on October 12^th,

I accept Shepherd’s evidence that, during his meetings with Parent, he did not

receive the package of documents which Parent and Burnside testified was

routinely given to public servants considering joining Loba and which was given to

the undercover officers. Consequently, he did not have either the Hamilton/Parent

exchange of correspondence or the Gravelle e-mail to prompt any questions. I also

accept Shepherd’s evidence that, during his interviews with Parent, Parent did not

say anything that led Shepherd to believe the government had concerns with the

Loba arrangements or that there was a risk the Loba pension plan could be de-

registered in the future. Thus nothing that occurred in his meetings with Parent

challenged the understanding that he had gleaned from written and verbal

communications from the government regarding the Loba option.

[828]

In the context of many senior Environment Canada public servants

considering the Loba option, the government issuing publications advising of the

opportunity presented by RTAs, and no warnings or qualifiers being disseminated

by the government regarding arrangements like Loba’s, Shepherd’s reliance on the

implied representation of Parent that he was unaware of any significant concerns

about the Loba arrangements on the part of the government was reasonable.

- 273 -

(iv) Collier

In regard to the hold, Collier’s evidence was the same as Ault’s and

[829]

the same comments apply to that.

[830]

In regard to the Godwin documents, I accept Collier’s evidence that

the information in each of these documents would have impacted his decision to

join Loba. He would have realized that the CRA questioned the existence of an

employment relationship at Loba, and this could result in the Loba pension plan

being de-registered in the future. In view of this significant risk to the value of his

pension entitlement, he would not have joined Loba.

[831]

Collier learned of Loba through Shepherd. His Human Resources

department referred him to the SAM where he learned that the Loba RTA was an

approved employer with an RTA. Through the federal government Intranet,

Collier located an article posted by the Corporate Services Branch of the Human

Resources Directorate at Health Canada which reinforced that, if an application for

a transfer under a RTA was submitted by the deadline, the transfer would take

place. No cautions, warnings or qualifiers were added. Collier saw the APEX

Bulletin which referred him to his compensation advisor. Nothing in any of these

documents led Collier to believe there were potential pitfalls with RTAs. Collier

spoke with McKibbon who left him with the impression that the Loba RTA was a

legal agreement available to Collier.

[832]

Shepherd referred Collier to Jemus. Jemus provided Collier with

financial calculations. Jemus said nothing to Collier that would have alerted

Collier to any risk of Loba not being a legitimate arrangement or of the Loba

pension plan being at risk of de-registration. Jemus referred Collier to Parent for

specific information concerning Loba. I find that, although Collier placed

significant reliance on the financial numbers provided to him by Jemus, he did not

place significant reliance on Jemus’ silence about any government concerns

regarding the Loba arrangements. Where he did place significant reliance was on

the government’s silence about any concerns. I find that reliance reasonable in all

of the circumstances.

[833]

Parent acknowledged that he had no recollection of his meeting with

Collier and that he would defer to Collier in regard to what transpired at the

meeting. Collier’s evidence was that Parent did not provide him with what has

been referred to as the standard package of documents, such as that provided to

- 274 -

Findlay. I accept that evidence. Consequently, he did not have either the

Hamilton/Parent exchange of correspondence or the Gravelle e-mail to prompt any

questions. I also accept Collier’s evidence that, during his interviews with Parent,

Parent did not say anything that led Collier to believe the government had concerns

with the Loba arrangements or that there was a risk the Loba pension plan could be

de-registered in the future. Thus, nothing that occurred in his meetings with Parent

challenged the understanding that he had gleaned from written and verbal

communications from the government regarding the Loba option. Nothing had

previously alerted him that he should beware of what Parent was telling him, and

what Parent advised was consistent with what he had already understood from

government communications.

[834]

In the context of the government issuing publications advising of the

opportunity presented by RTAs and the government not adding any warnings or

qualifiers regarding arrangements like Loba’s, it was reasonable for Collier to rely

on Parent’s implied representation that he was unaware of any significant concerns

about the Loba arrangements on the part of the government.

(v) Temple

[835]

Prior to Temple resigning from the public service, at no time did

Parent advise him that he had been involved with the creation of six other RTAs

that had been cancelled. I accept Temple’s evidence that, had Parent advised him

of that, it would have triggered alarm bells. Temple understood from Parent that,

since 1996, individuals had been leaving the public service and transferring their

pension entitlement under the Loba RTA. Only later did he learn that only two

transfers had happened.

[836]

On October 12, 2000, Macpherson forwarded to Joseph at Fisheries

and Oceans Canada a copy of Godwin’s September 7, 2000 letter to Gravelle

setting out CRA’s concerns about the Loba arrangements. Joseph was the chief of

Compensation and was the functional head over the compensation advisors and

pay and benefits officers within the department. Temple knew Joseph personally.

Joseph was not a witness. I accept Temple’s evidence that neither Joseph nor

anyone else provided Temple with a copy of the Godwin letter or relayed to him

the information contained therein. I accept Temple’s evidence that, had he been

provided with any of Godwin’s documents or advised of their contents, in all

likelihood he would have changed his mind and not joined Loba. I accept his

- 275 -

evidence that, even if he had received these documents shortly after he had

submitted his resignation from the public service, in all likelihood he would have

been able to revoke his resignation and be reinstated because he was a valued

employee at Fisheries and Oceans Canada.

[837]

Before Temple decided to resign from the public service, he had seen

two Citizen articles and Gravelle’s August 22^nde-mail. He had not been shown the

SAM Special Bulletin 1999-002 or the Hamilton/Parent correspondence. He found

Gravelle’s e-mail reassuring. Temple also had the benefit of advice from two

financial advisors who considered the Loba RTA beneficial from a financial

perspective. Neither raised any concerns about the Loba arrangements.

[838]

On September 15, 2000, Temple and YTemple met with Parent who

reviewed the process to be followed for Temple to join Loba and transfer his

pension under the Loba RTA. The Temples thought Parent was providing advice

to them as the actuary for the Loba pension plan; they were unaware of Parent’s

ownership interest in Loba. Temple put faith in the fact that Loba was connected

with WBP, an actuarial firm which had been involved in providing pre-retirement

courses to public servants and which had a good reputation in the public service

community.

[839]

On September 22, 2000, Temple submitted his resignation effective

October 12, 2000, without first having spoken to his compensation advisor or

anyone else in his Human Resources department, and without having sought out

any government publications regarding RTAs. That being said, on October 4,

2000, Temple met with Bisson, his compensation advisor, and told her that he was

leaving the public service to join Loba. She raised no concerns about Loba or the

Loba RTA. Temple concluded that his request to transfer his pension entitlements

under the Loba RTA was a standard request. On October 5, 2000, Bisson

forwarded to Temple two broadcast messages⁷²⁶she had received about the

upcoming deadline for RTAs. On the same date, he received the PWGSC Notice

to Employees⁷²⁷advising of the October 15^thdeadline and stating that as long as

the public servant submitted the request for transfer before October 15^th, the

transfer would be completed. In none of these documents was any warning or

qualifier provided.

[840]

In Temple’s case, he first relied on the representations made by Parent

in submitting his letter of resignation. The representations in the form of

- 276 -

omissions on the part of the government were then added through the bulletins and

through Temple’s compensation advisor. Temple relied on those representations in

not withdrawing his letter of resignation. The order in which the representations

were made is not significant in that all representations were made before Temple’s

resignation became effective and, until it became effective, it could have been

reversed.

[841]

I find that Temple’s reliance on the information being provided to him

by Parent, and on Parent’s silence as to significant CRA concerns about the Loba

pension plan was reasonable in all of the circumstances. He knew Parent was a

professional actuary with professional responsibilities, and he knew the firm WBP

was an actuarial firm well-respected in the public service community. He had no

reason to suspect that Parent was not telling him what he needed to know to make

an informed decision about joining Loba. There was nothing in the written or

verbal communications from government representatives, such as his

compensation advisor, that should reasonably have alerted him to the possibility

that the Loba pension plan might be de-registered. It was reasonable for Temple, a

public servant who had worked in the Human Resources field for 32 years, to

assume that, if the Treasury Board as his employer and the administrator of his

pension plan knew of a significant risk that the Loba pension plan would be de-

registered and no transfers would occur, the Treasury Board would advise public

servants of this risk.

(vi) Armstrong

[842]

Armstrong’s evidence was that, had he known about the hold on

transfers or had he been aware of the contents of any of Godwin’s documents, it

would have caused him concern and he would have looked into the Loba

arrangements much more closely. He had been doing his best to investigate Loba

and none of his inquiries had produced any negative feedback. I find that, if

Armstrong had been aware that there was a significant risk of de-registration of the

Loba pension plan due to the CRA’s concerns, he would not have joined Loba.

[843]

Armstrong had three communications with Duncan, his compensation

advisor, during which he told her that he was considering joining Loba. She

undertook to look into this option and reported back to Armstrong that Loba had a

valid RTA with the Treasury Board. At the same time as he was receiving this

information from Duncan, Armstrong was learning from Buxton and Hutchison,

- 277 -

two Ottawa colleagues, that a number of Environment Canada public servants were

joining Loba. He also was interacting with Jemus, a respected pension advisor,

who was explaining how the Loba option would work. Jemus did not alert

Armstrong to any concerns about this option. Finally, Armstrong had the benefit

of advice from two financial advisors, whom he respected, that the calculations

prepared by Jemus appeared accurate and that the Loba option appeared to be a

good one for Armstrong. This was the context in which Armstrong then spoke to

Parent on October 4^th.

[844]

Armstrong had a very short conversation with Parent which focused

on what it would mean for Armstrong to be an employee of Loba. Parent advised

Armstrong that the Superannuation Directorate would seek confirmation of the

work Armstrong was doing for Loba. This would have been the perfect

opportunity for Parent to share with Armstrong the contents of Godwin’s letter;

however, he mentioned nothing about the CRA’s concerns regarding the existence

of a true employment relationship between Loba and its workers. The only

document from what Parent called his standard package of documents which

Parent sent Armstrong was Gravelle’s August 22^nde-mail. In the context of the

conversation Armstrong had had with Parent, he understood the requirement to

confirm employment status was a routine process. On October 6, 2000, Armstrong

had a further conversation with Burnside during which he sought further

information regarding the treatment of his pension. Burnside made no mention of

the CRA’s concerns. Again, this would have been a perfect opportunity for this

information to be conveyed to Armstrong.

[845]

I find that it was reasonable for Armstrong to rely on the silence of

Duncan regarding any government concerns about the Loba arrangements as an

implied representation that the government was not aware of any significant risk of

the Loba pension plan being de-registered and the transfers not occurring. It was

reasonable for him to assume that if the government had such knowledge, it would

take reasonable steps to bring that to the attention of those of its employees whom

it knew were considering a move to Loba. It was reasonable for him to assume

that the government would not leave the Loba RTA on the list of available RTAs

with no caveats noted when it knew that there was a significant risk that the Loba

pension plan would be de-registered.

[846]

In the context of the information that Armstrong had prior to speaking

with Parent and Burnside, it was also reasonable for Armstrong to rely on the

- 278 -

silence of Parent and Burnside regarding government concerns as meaning that

they were unaware of any serious government concerns that could result in the

registration of the Loba pension plan being revoked and transfers not occurring

under the Loba RTA. Armstrong knew Parent was an actuary and bound by

professional obligations. He understood Parent was providing information to him

as an actuary. He understood Burnside was providing information to him as

Parent’s assistant and an employee of an actuarial firm. No one to whom

Armstrong had spoken regarding Loba had raised any concerns about Parent, Loba

or WBP. It was reasonable for Armstrong to assume that, if Parent, Loba or WBP

had information concerning significant government concerns about the Loba

arrangements, they would share that with those consulting them about Loba,

recognizing the significance of their decision to join Loba.

(vii) Luck

[847]

Luck’s evidence was that, had he been aware of the hold on Loba

transfers, he would have wanted to do more research on Loba. As well, had he

been aware of the contents of Godwin’s letters to Gravelle and Parent, it would

have impacted his decision. He was unaware of the primary purpose rule. He was

unaware that his working on contract could put the employer/employee

relationship in jeopardy. He was unaware that contract work through Loba could

result in the revocation of the Loba pension plan. I accept Luck’s evidence that he

would not have proceeded with leaving the public service as he did had he known

about the concerns raised in these letters. Finally, I accept Luck’s evidence that,

had he seen Godwin’s Information Bulletin for CRA compensation advisors, and

especially its reference to the devastating outcome for individuals that would result

from a revocation of the registration of a pension plan like Loba’s, he would not

have left the public service to join Loba.

[848]

reported at INAC.

Luck had learned of the Loba RTA from the person to whom he

After speaking with Burnside, Luck instructed his

compensation advisor to forward his service and salary records to WBP. Luck

then saw the personnel bulletin distributed by PWGSC explaining the difference

between RTAs and PTAs and advising interested public servants to consult their

compensation advisors or consult a government website.⁷²⁸Luck looked at the

website and discovered that Loba had an RTA. Luck discussed Loba with

WDraper and Ivanski, two senior colleagues within his department who were

considering joining Loba. Neither told him about any concerns relating to Loba. I

- 279 -

find that Luck relied in part on the PWGSC personnel bulletin and on the listing of

Loba as an approved employer with an available RTA in making his decision to

leave the public service to join Loba.

[849]

In the absence of any indication in the personnel bulletin or on the

government website that the government had concerns about arrangements like

Loba’s or that it would be prudent for interested public servants to consult the

TBS, the CRA, some other government source, a lawyer or another professional

about the legitimacy of an RTA option, and in the absence of any warnings from

his compensation advisor, it was reasonable for Luck to rely on the silence of the

government as an indication that it was not aware of any significant CRA concerns

that foreseeably could result in the de-registration of the Loba pension plan and the

indefinite suspension of transfers under the Loba RTA.

[850]

Luck and his wife met with Parent for only one-half hour on October

12^th. Luck understood that Parent was an actuary and that he would be giving him

information and advice about his pension options. Parent provided Luck with what

he called the standard package of documents. Parent quickly went through the

documents, mentioning Hamilton’s concerns, Parent’s response and Gravelle’s e-

mail. Parent conveyed to Luck that the government’s concerns had been dealt with

and the Loba RTA would be honoured once the Superannuation Directorate

received confirmation of his employment with Loba.

[851]

I find that Luck relied on Parent’s silence to conclude that Parent was

unaware of significant CRA concerns about the legitimacy of the Loba

arrangements, concerns that could foreseeably result in the Loba pension plan

being de-registered and no transfers occurring under the Loba RTA. I find that

reliance in regard to this particular misrepresentation was reasonable. Parent was a

professional actuary and held himself out as being so. He did not make it clear to

Luck the extent to which he personally would gain from Luck joining Loba.

Parent realized how important Luck’s PPSA pension was to him and how

significant a decision Luck was making in joining Loba, and Luck realized that

Parent understood that. It was reasonable for Luck to assume that, had Parent been

in possession of a letter such as that sent by Godwin on September 15^th, Parent

would have brought it to the attention of public servants considering joining Loba.

Luck had no information from the government that would have put him on guard

in taking Parent at face value in this regard.

- 280 -

[852]

In regard to the issue of reliance, it is not a question of how long Luck

met with Parent. Admittedly, the interview was brief. The issue was more of

Parent’s professional obligations, the significance of Godwin’s letter and the

significance of the decision Luck was making.

[853]

Where I find Luck’s reliance on Parent’s representation was not

reasonable was in regard to whether the Loba option was favourable to Luck from

a financial perspective. It would not have been possible for Luck to fully

appreciate the significance to him of the Loba arrangements after only a half-hour

interview with Parent. More will be said of this under the section dealing with

contributory negligence. This is not relevant for the purpose of the analysis

regarding negligent misrepresentation because there was no evidence that the

representations made to Luck regarding the financial ramifications of the Loba

option were untrue, inaccurate or misleading.

(viii) Nobert

[854]

Nobert learned about RTAs in July 2000 from a Retirement Planning

Institute newsletter. Nobert e-mailed Crete, her compensation advisor, with

specific questions concerning the pension entitlement and options available to her.

She advised Crete that she was considering an RTA. Nobert never received any

response to her questions from Crete, though she did receive salary and service

records which she passed on to Parent. When Nobert and her husband met with

Parent on July 19, 2000, she had no indication from any source that the Loba

option was not a legitimate opportunity.

[855]

Parent provided Nobert with what he called the standard package of

documents, aside from Gravelle’s e-mail, which of course had not yet been written.

At the meeting between Nobert, her husband and Parent on July 19, 2000, Nobert

understood that the Treasury Board had concerns with what Parent was telling the

public at the time regarding the opportunity of using the Loba RTA. Nobert felt

reassured that, although other RTAs negotiated by Parent had been cancelled, the

Loba RTA had not been cancelled. Her husband asked Parent if individuals who

had applied for transfers under the other agreements, had had their pension

entitlement transferred, and Parent had reassured him that they had. Parent did not

tell Nobert that transfers under the other six agreements had been put on hold in the

past, or that there were some outstanding transfers. Nobert’s husband asked Parent

- 281 -

if transfers to Loba had been made and Parent answered affirmatively. Parent did

not tell Nobert that all Loba transfers had been put on hold.

[856]

During their second meeting on August 30^th, Patent provided Nobert

with Gravelle’s August 22 e-mail;⁷²⁹however, he did not provide her with a copy

of Gravelle’s June 15, 2000 letter to Touchette advising of the hold⁷³⁰or of his

June 20, 2000 letter to Gravelle.⁷³¹I accept Nobert’s evidence that, had Parent

provided her with copies of these letters and had he advised her of the suspension

of transfers to the Loba pension plan, she would not have joined Loba. The

transfer of her pension entitlement to the Loba pension plan had been presented as

a simple transfer from one employer to another. The hold indicated that there were

problems with this transaction.

[857]

Nobert was reassured by the PWGSC Bulletin or Notice to Personnel

that she reviewed that indicated that if an application for a transfer was submitted

by October 15, 2000, the transfer would occur. She also had confirmed that Loba

was on the list of approved employers published by the Treasury Board. She had

the further reassurance that her sister, who was a team leader of the Compensation

and Benefit Group at PWGSC, and her friend, who trained members of the

Compensation and Benefit Group, knew of no reasons why she should not consider

the Loba RTA a legitimate option to pursue.

[858]

I accept Nobert’s evidence that, had she seen Godwin’s letter to

Gravelle or his package to Parent prior to resigning from the public service, she

would have asked HRDC to revoke her resignation. These documents raised

concerns of which she had been unaware; namely, the risk that the Loba pension

plan’s registration could be revoked if even one member did not have a bona fide

employer/employee relationship with Loba.

[859]

Nobert tendered her resignation on September 1, 2000 effective

September 29, 2000. I find that in doing so, she relied on the silence of her

compensation advisor, the other members of the Compensation Community whom

she had consulted, and Parent as to any government concerns that could

foreseeably result in the de-registration of the Loba pension plan and the

suspension of transfers to Loba. In the absence of any warnings, cautions or

qualifiers being communicated to her during the entire time she was deciding on

whether to join Loba, I consider that reliance reasonable.

- 282 -

[860]

Nobert knew that Parent was a professional actuary with professional

responsibilities, and she knew the firm WBP was an actuarial firm well-respected

in the public service community. She had no reason to suspect that Parent was not

telling her what she needed to know to make an informed decision about joining

Loba. There was nothing in the written or verbal communications from

government representatives that should reasonably have alerted her to the

possibility that the Loba pension plan might be de-registered. It was reasonable for

Nobert to assume that, if the Treasury Board as her employer and the administrator

of her pension plan knew of a significant risk that the Loba pension plan would be

de-registered and no transfers would occur, the Treasury Board would advise

public servants of this risk.

(ix) Dufour

[861]

Dufour learned about the Loba RTA through Jemus, whom she

understood to be a financial advisor specializing in pensions who was assisting her

with retirement planning and with whom she had developed a trusting relationship.

It was reasonable for Dufour to assume that Jemus would not introduce her to the

Loba RTA unless he believed that it was a legitimate opportunity for her.

[862]

Dufour went on to meet with Parent on four or five occasions in an

effort to fully understand the Loba option. Dufour knew that Parent was the

President of Loba and that he was also an actuary working with WBP. Although

Parent provided her with a copy of the SAM Special Bulletin 1999-002 advising

that certain RTAs that Parent had negotiated had been cancelled,⁷³²this Bulletin

did indicate that transfers would still be made under these RTAs until their

termination date. The evidence falls short of enabling me to come to any

conclusion as to whether Dufour ever saw the 1997 exchange of correspondence

between Hamilton and Parent.

[863]

Parent never advised Dufour of the contents of Gravelle’s June 15,

2000 letter to Touchette advising of a hold on transfers under the Loba RTA⁷³³or

of the contents of his June 20, 2000 letter to Gravelle.⁷³⁴I accept Dufour’s

evidence that, had she been told of the hold on Loba transfers in the summer of

2000, she would not have joined Loba because it would have been too risky.

Parent did not provide Dufour with a copy of Gravelle’s August 22, 2000 e-mail to

him⁷³⁵or Godwin’s September 15, 2000 package to him.⁷³⁶Had this information

- 283 -

been provided to her prior to her leaving the public service to join Loba, she would

have changed her mind, as she is generally risk-adverse.

[864]

At no time prior to Dufour leaving the public service to join Loba did

anyone from the federal government advise Dufour of any concerns on the part of

the CRA, the Treasury Board or the RCMP regarding Loba or of the possibility of

the revocation of registration of Loba’s pension plan because there was no

legitimate employment relationship with Loba workers. I accept Dufour’s

evidence that, had she been advised of any of these concerns, she would not have

opted to join Loba and utilize the Loba RTA.

[865]

It was reasonable for Dufour to rely on the representations of the

Defendant, Parent and Jemus. Dufour had been meeting regularly with Jemus over

the winter and spring of 2000 to discuss various options relating to retirement and

her pension. He had come recommended to her through the pre-retirement course

offered to public servants. Jemus brought the concept of RTAs to her attention and

specifically mentioned Loba. Dufour then met several times with Parent to ensure

that she fully understood what would be involved if she joined Loba. The implied

representation that Dufour received from her compensation advisor, Jemus and

Parent was the same; namely, that the Loba RTA was a legitimate option for her to

consider. No one raised any issues or concerns that would have made her reliance

on the representation of any of them unreasonable.

(c) Reliance Placed on the Defendant’s Negligent Misrepresentations

[866]

The Defendant submits that the Plaintiffs cannot establish that: (1)

they actually relied on a material representation of the Defendant to their

detriment; and (2) that reliance was reasonable. I disagree in regard to both

submissions and will explain why I reject the various arguments advanced by the

Defendant in this regard.

[867]

As the following chart shows, prior to resigning from the public

service, each Plaintiff (aside from Armstrong) saw a government publication which

included the unqualified statement that, if an application for transfer was submitted

prior to October 15, 2000, a transfer would occur under an RTA with an approved

employer. Each Plaintiff was advised through reference to a government

publication or by the Plaintiff’s compensation advisor that Loba was an approved

employer with an RTA. Prior to actually leaving the public service, each Plaintiff

- 284 -

spoke to his or her compensation advisor or, in the case of Nobert someone in a

more senior position within the Compensation Community, and no warnings,

concerns or qualifiers of any sort were conveyed to the Plaintiff in regard to a

transfer under a RTA.

Plaintiff

Government Publications Seen

Interactions with Compensation Community

Findlay⁷³⁷

PWGSC Notice to Employees;

APEX Newsletter article

Advised compensation advisor he was

considering Loba; asked compensation

advisor if Loba was valid and if there

were any problems; advised that Loba was

valid and there were no problems

Ault⁷³⁸

PWGSC Notice to Employees;

Environment Canada HR Department knew

Treasury Board Notice on Pension many employees were considering Loba;

Transfer Agreements; APEX

Newsletter article

Shepherd⁷³⁹Treasury Board Notice on Pension Advised compensation advisor he was

Transfer Agreements; SAM list

of approved employers; APEX

Newsletter article; PWGSC

Notice to Employees

considering Loba

Collier⁷⁴⁰

Temple⁷⁴¹

Treasury Board Notice on Pension Advised compensation advisor he was

Transfer Agreements; SAM list

of approved employers; APEX

Newsletter article

considering Loba

PWGSC Notice to Employees;

Broadcast message from

Superannuation Directorate to

Compensation advisors

Advised compensation advisor pension

estimates were required before October 15

deadline

Armstrong⁷⁴²

Luck⁷⁴³

Advised compensation advisor he was

considering Loba

Treasury Board Notice on

Pension Transfer Agreements;

SAM list of approved employers

Advised compensation advisor pension

estimates were required before October 15

deadline

Nobert⁷⁴⁴

Either PWGSC Notice to

Employees or the Treasury

Advised senior compensation community

members she was considering joining Loba

- 285 -

Board Notice on Pension Transfer

Agreements; SAM list of approved

employers

[868]

The substance of the evidence of each Plaintiff was that he or she had

relied on the written and/or oral communications from government representatives

in concluding that a transfer of pension entitlements from the PSSP to the Loba

pension plan pursuant to the Loba RTA was a routine matter, assuming the

Plaintiff resigned from the public service, became employed with Loba and

submitted an Appendix B before October 15, 2000. I interpret the Plaintiffs’

evidence as being that they relied on the written and/or oral communications from

government representatives in concluding that the government was not aware of

circumstances that created a significant risk that the Loba pension plan would be

de-registered and transfers under the Loba RTA would never occur. I also accept

the evidence of all of them that, had they been made aware that a significant risk

existed that a transfer of their pension entitlement into the Loba pension plan might

not occur, this would have impacted their decision to leave the public service to

join Loba.

[869]

The Defendant takes the position that, in that each of the Plaintiffs

relied on representations from a number of sources, none of the Plaintiffs can

prove that there was actual reliance on the Defendant’s misrepresentations. The

Defendant relies on the “but for” test and submits that the Plaintiffs must prove on

a balance of probabilities that “but for” the Defendant’s failure to warn them about

concerns with the Loba plan, they would not have sustained the alleged loss. The

Plaintiffs can meet that test.

[870]

Each of the Plaintiffs has established that they resigned from the

public service when they did in order to become employed at Loba and transfer

their PSSP pension entitlements to the Loba pension plan. Unquestionably they

relied on the positive representations they received from Parent, Jemus, other

financial advisors and/or colleagues as to the financial advantages accruing to them

under the Loba option. They would not have left the public service to join Loba in

the absence of these positive representations. That, however, is beside the point.

There is no evidence that any of these positive representations were untrue,

inaccurate or misleading. None has been identified as amounting to a

misrepresentation.

- 286 -

[871]

In regard to each of the Plaintiffs, their pension was one of the most

significant, if not the most significant, asset he or she owned. None of them would

knowingly have placed any aspect of his or her pension at risk. All were counting

on their pensions for their financial security after retirement. It was the

Defendant’s implied misrepresentation that there were no significant identifiable

risks associated with the Loba RTA and pension plan, or the Defendant’s omission

to advise of those known risks, that led the Plaintiffs to believe that they had two

viable options: continue employment with the public service and membership in

the PSSP or join Loba and transfer pension entitlements to the Loba pension plan.

The information available to them – which has not been challenged – was that the

Loba option was financially more advantageous to them in terms of their pension.

Understandably – not knowing of any significant risk to their pension associated

with that option – they chose it.

[872]

There is a substantial connection between the pension loss suffered by

the Plaintiffs as a result of the Loba pension plan being de-registered and no

transfers occurring under the Loba RTA, and the Defendant’s misrepresentation

about this very likelihood. I find in regard to each of the Plaintiffs that, had he or

she been provided with the information in Godwin’s September 7^thletter to

Gravelle, Godwin’s September 15^thpackage to Parent or the Information Bulletin

circulated to the CRA Compensation Community, that Plaintiff would not have

decided to leave the public service to join Loba and therefore would not have

suffered any damages.

[873]

The fact that Parent, as well as the government, did not alert the

Plaintiffs to the existence of a risk of the government de-registering the Loba

pension plan and not transferring any monies under the Loba RTA, does not negate

the reliance the Plaintiffs placed on the government’s misrepresentation. It must

not be forgotten that the CRA, an arm of the federal Crown, had the jurisdiction

and discretion to decide whether it would revoke the registration of the Loba

pension plan.⁷⁴⁵It was the Treasury Board that had the discretion to suspend

transfers under the Loba RTA and the jurisdiction not to make a transfer to the

Loba pension plan once it was de-registered.⁷⁴⁶It was the RCMP, another arm of

the federal Crown, that had the discretion to lay criminal charges. The federal

Crown was in the driver’s seat. As such, it was in the best position to advise of

any concerns it had respecting Loba’s arrangements that could result in the Loba

pension plan being de-registered and transfers not occurring. This reality made its

representations particularly pertinent to the Plaintiffs.

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[874]

There is the further factor that the Plaintiffs had a long-term

relationship with the federal Crown. The federal Crown was their employer and

their pension plan administrator. This reinforced their reliance on information

from the Treasury Board and the Superannuation Directorate, and increased their

expectation that if there was highly relevant information that they required in order

to make an informed decision about the Loba option, and the Treasury Board or

Superannuation Directorate had that information, it would be passed on to them.

[875]

For these reasons, the federal Crown as represented by the Treasury

Board and the Superannuation Directorate was the most reliable source of

information for the Plaintiffs regarding legitimate options available to them under

the PSSA were they to resign from the public service.

[876]

In the context of these cases, the Plaintiffs’ reliance on the lack of any

warnings, conditions or qualifiers conveyed by the government in its written

publications or through its designated compensation advisors was reasonable.

Several factors support this conclusion.

[877]

In 2000, PWGSC, with help from the TBS, produced and distributed

the SAM and Special Bulletins to pay and benefits sections in departments

throughout the federal government as an authoritative guide for compensation

advisors to rely on when providing information to public servants. The TBS and

PWGSC realized that compensation advisors would rely on the information

provided in the SAM and Special Bulletins and that public servants in turn would

rely on the information provided to them by the compensation advisors. The TBS

and PWGSC realized the importance of the information contained in the SAM and

Special Bulletins being accurate and complete.

[878]

The Treasury Board also distributed Information Bulletins regarding

the PSSA to the Heads of Human Resources at the various government departments

and agencies with the intention that the contents of those bulletins would be

conveyed to the public servants in that department or agency. Additional sources

of information for public servants were a website maintained by the TBS and one

maintained by PWGSC. PWGSC realized in 2000 that public servants would rely

on these other sources of information, as well as on the information they received

from their compensation advisors, when they had a question about the PSSA and

more particularly about their options and entitlements under the PSSP.

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[879]

Through these various government publications, the Defendant itself

had taken steps to highlight to public servants the availability of RTAs and to

identify approved employers for this purpose. The message conveyed in the

government publications was that RTAs provided an opportunity to public servants

and the government was attempting to ensure that those for whom such an option

might be of interest learned about it prior to the deadline. The government directed

its public servants to consult their compensation advisors for information

concerning RTAs. It was reasonable for the Plaintiffs to believe that, if the

government was aware of a significant risk associated with their pursuing a

transfer brought to their attention by the government itself, the government would

bring that risk to their attention either through notices or through information to be

provided to them by their compensation advisors. It was reasonable for the

Plaintiffs to assume that the Treasury Board had set up a process by which relevant

information of this nature would be brought to their attention.

[880]

The government had the knowledge as to what it considered

constituted an employment relationship and what it considered circumstances that

satisfied the primary purpose rule; no one had better knowledge of its own policies.

[881]

The decision to be made by the Plaintiffs was a serious one. Gravelle,

Macpherson, Charko, Godwin and the Plaintiffs’ individual compensation advisors

all recognized this. All government players understood that the Plaintiffs’

pensions could be impacted by their decision, and their pensions were very

important to them.

[882]

All of the Plaintiffs asked their compensation advisors for information

that the compensation advisors realized related to RTAs, and in many cases, the

Plaintiff indicated he or she was considering the Loba RTA. It would have been

clear to all of the Plaintiffs’ compensation advisors that the Plaintiffs were seeking

this information because they were considering a transfer under an RTA; and in

some cases, it would have been clear that a transfer under the Loba RTA was being

considered.

[883]

The written representations made by the Treasury Board or PWGSC

were made in the course of their functions as administrator of the PSSP. The

information and advice provided to the Plaintiffs in the form of an implied

representation was made by compensation advisors in the course of their work to

provide advice to public servants about their pension entitlements.

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[884]

Although the misrepresentation was in the form of an implied

representation or an omission, and they generally carry less weight than a positive

representation, the misrepresentation must be considered in context. Part of that

context was the positive representation contained in the government publications

referred to; namely, that Loba was an approved employer, the Loba RTA was there

for the use of public servants, and a transfer would occur if an application was

submitted by October 15^th.

[885]

I reject the Defendant’s argument that the Plaintiffs should have made

inquiries directly of the TBS, the CRA or PWGSC regarding Loba for the

following reasons: (1) the government gave the Plaintiffs no indication that the

Loba RTA was anything other than a routine arrangement available for

consideration by public servants; (2) in none of the government publications

relating to RTAs, did the government advise interested public servants to contact

the TBS, the CRA or PWGSC; (3) the SAM specifically identified compensation

advisors as the individuals to whom public servants should turn for relevant

information concerning RTAs; (4) compensation advisors had been specifically

advised by PWGSC not to contact the Superannuation Directorate with questions

about active files; (5) Gravelle did not understand the importance of the primary

purpose rule in the circumstances of this case until it was explained to her by

Godwin – it is unreasonable to expect public servants not working in the field of

pensions and income tax to realize that there was a potential problem requiring

further consideration; and (6) in that the government had identified Loba as an

approved employer, it would be unreasonable to expect public servants to conclude

that Loba may not be an employer at all and may be doing something that the

government considered illegitimate.

[886]

The Defendant submits that, since Parent advised prospective Loba

workers that the Superannuation Directorate would be verifying their employment

with Loba, it was unreasonable for the Plaintiffs to rely on any government

publications to the effect that if an application for transfer was submitted prior to

October 15, 2000, the transfer would be completed. I reject this. I accept the

evidence of the Plaintiffs that they considered the verification to be done by the

Superannuation Directorate a routine matter and not something that could

potentially be a roadblock to an eventual transfer if they were in fact working on

contract through Loba.

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[887]

The Defendant submits that the Plaintiffs should have obtained legal

advice before resigning from the public service. I reject this argument. Quite

understandably, the Plaintiffs did not realize that they needed legal advice before

pursuing an opportunity presented to them by their employer and by the sponsor

and administrator of their pension plan. They assumed that they could take at face

value what the Treasury Board was holding out to them as a routine matter. Why

should ordinary public servants with no expertise in either employment law or

income tax conclude that they required legal advice before pursuing the Loba RTA

when no government publications alerted them to this and when Gravelle herself

did not consider this necessary for them at the time?

(d) Reliance Placed on Negligent Misrepresentations of Parent, Loba and

WBP

[888]

I find that all of the Plaintiffs, including Dufour, relied on Parent’s

implied representation to them that he was unaware of any serious government

concerns that could result in the Loba pension plan being de-registered and no

transfers occurring under the Loba RTA. In the circumstances, I consider this

reliance reasonable.

[889]

The misrepresentations were made during the course of Parent’s work

– either as an actuary with WBP, or as President of Loba. He was marketing Loba

to the Plaintiffs in the anticipation of benefiting financially if they joined Loba.

Parent’s presentation to the Plaintiffs was planned and structured. He chose what

information to provide and what information to withhold.

[890]

It was clear when the Plaintiffs were consulting Parent that they had

virtually no information about the Loba RTA and the Loba pension plan aside from

Loba being an approved employer with an RTA. During Parent’s interactions with

the Plaintiffs, everyone realized that the Plaintiffs were looking to him for relevant

information to inform their decision whether or not to leave the public service and

join Loba. Parent realized from what the Plaintiffs had told him, and at least with

all but Nobert and Dufour from the shortness of the time between their meeting

with him and the October 15^thdeadline, that the Plaintiffs would have very little

opportunity to consult any other professionals concerning the Loba option.

[891]

There were no factors in the circumstances which should have raised

suspicion on the part of the Plaintiffs as to whether they could rely on Parent’s

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representations. They were unaware of the government scepticism about Parent,

WBP and Loba. They were unaware of any government concerns about the

validity of the Loba arrangements. All they knew from the perspective of the

government was that public servants were being told to take advantage of the

opportunity presented by RTAs prior to October 15^th. In regard to Loba, all the

Plaintiffs knew was that it was an approved employer with an RTA. In regard to

Parent, all the Plaintiffs knew was that he was an actuary, a member of WBP, and

the consulting actuary and administrator for the Loba pension plan. Some

Plaintiffs also knew that WBP had been involved in presenting pre-retirement

courses for the public service. Some Plaintiffs knew that Parent was the President

of Loba and was the person with whom the government communicated in regard to

the Loba RTA.

[892]

Although the misrepresentations were in the form of an implied

representation or an omission, again, the context in which the representations

occurred still favour the reasonableness of the Plaintiffs relying on them. The

Plaintiffs were meeting with Parent – at his invitation – to obtain information

precisely on whether joining Loba and having their pension entitlements

transferred to the Loba pension plan would be beneficial to them financially. The

representations went to the heart of this topic in that they related to the risks

associated with this course of action.

[893]

Once the Plaintiffs became members of the Loba pension plan, they

relied on Parent, Loba and WBP as pension plan administrators to provide them

with timely and accurate information concerning the status of the transfers, as they

were entitled to do and as Parent and Burnside realized they were doing. The

Plaintiffs relied on the absence of information to the contrary prior to December

2001 to conclude that the government was continuing to process the transfers

under the Loba RTA – even if slowly. Again I find that reliance reasonable.

Parent acknowledged that, had the Plaintiffs been advised earlier of the hold that

had been placed on the Loba transfers, they could have sought re-employment in

the public service and that could have reduced their pension and salary losses.

(e) Reliance Placed on Jemus’ Negligent Misrepresentations

[894]

Even if I had found that the failure of Jemus to advise Findlay of the

compensation arrangement Pension Positive had with WBP amounted to a

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negligent misrepresentation, the Defendant has not proven that Findlay relied on

that omission.

[895]

Findlay’s evidence was not that he relied on Jemus’ silence as to his

compensation agreement with WBP to conclude that Jemus was totally

independent financial analyst. Instead his evidence was that he assumed that

Jemus was independent prior to consulting him and that was one of the reasons

why he consulted him. Findlay did not testify as to why he had made this

assumption. He had been referred to Jemus by his colleagues at Environment

Canada. At no time did Jemus hold himself out as being completely independent

from WBP. In fact in the written analysis he provided his clients, he advised them

to get an estimate from WBP before completing an Appendix B. Findlay’s

reliance on Jemus being independent may have had its origins in what he had been

told by colleagues, but it did not originate in any form of misrepresentation by

Jemus. Even if Findlay had placed some reliance on Jemus’ silence, I have not

been persuaded that any such reliance was reasonable. Jemus was a life insurance

agent and marketed such products as life insurance policies, annuities and other

investments. It is commonly known that agents receive commissions as a result of

selling such products. There was no evidence that Findlay was charged by Jemus

for completing the financial analysis, yet a reasonable person would assume that

Jemus would be compensated for his work. In these circumstances, it would not

have been reasonable for Findlay to rely on Jemus’ silence regarding any

commissions or compensation to which he was entitled as an indication that he was

not in fact receiving any such financial benefit from WBP. Before making this

assumption, it was incumbent on Findlay to at least ask Jemus if the assumption

was accurate. I accept Jemus’ evidence that, if asked, he answered honestly.

[896]

In any event, the Defendant has not proven that, if Jemus’ omission is

accepted as a negligent misrepresentation on which Findlay relied, it caused

Findlay any resulting loss. Findlay’s evidence was, had he known that Jemus was

receiving a commission, he would have consulted another pension expert to

provide the same type of analysis that Jemus had done. If that expert’s analysis

was the same as Jemus, Findlay would still have joined Loba. The evidence was

the Jemus’ financial analysis was accurate. In all likelihood, Findlay would have

obtained essentially the same financial analysis from another expert, and therefore

would have joined Loba.

(f) Conclusion

- 293 -

[897]

The Defendant is liable to each of the Plaintiffs for negligent

misrepresentation. Parent, WBP and Loba are jointly and severally liable to the

Defendant for contribution for such damages due to the negligent

misrepresentations they made to the Plaintiffs. The issue of apportionment is dealt

with below. Jemus is not liable for contribution in regard to this category of

damages, as he did not make any actionable negligent misrepresentations to the

Plaintiffs.

Breach of Fiduciary Duty

[898]

The Defendant argues that Parent, Loba, WBP and Jemus should be

held responsible for those losses of the Plaintiffs and Dufour occasioned by a

breach of their fiduciary duties as financial advisors and/or administrator or third

party administrator of the Loba pension plan. The Defendant submits that, since

the Negligence Act⁷⁴⁷does not apply to breach of fiduciary duty, the Defendant

cannot be held liable to contribute to any damages attributable to any breach of

fiduciary duty to the Plaintiffs or Dufour on the part of the Third Parties.

[899]

I accept this proposition; however, in the end result, it does not assist

the Defendant. As I will explain, to the extent that any fiduciary duty to the

Plaintiffs and Dufour existed on the part of Parent, Loba, WBP and Jemus, it was

breached in a narrowly-defined fashion that did not produce any further damages

to the Plaintiffs or Dufour not already dealt with under the heading of Negligent

Misrepresentation.

Lifting the Corporate Veil

(a) Parent

[900]

The Defendant submits that, in addition to Loba and WBP being liable

for breach of the fiduciary duties they owed the Plaintiffs and Dufour, Parent was

personally liable for such breaches. Parent argues that at all times he was acting on

behalf of and in the interests of Loba and WBP and therefore should not be

personally liable for any breach of fiduciary duties on their part.

[901]

As has been held in cases such as Royal Bank of Canada v. Ponce,⁷⁴⁸

the separate existence of a corporate entity will not be permitted to be used as an

instrument to protect an officer from the consequences of his own improper

conduct. Here, the allegation is that both Loba and WBP owed a fiduciary duty to

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the Plaintiffs and Dufour, and Parent, as the directing mind of both corporations,

decided how that fiduciary duty would be met. He made the decision as to what

information to share with the Plaintiffs and Dufour, and did so not only with the

interests of Loba and WBP in mind, but also with his own personal financial

interests in mind. In these circumstances, it is appropriate that the corporate veil

be lifted.

[902]

Parent stood to receive a significant sum through his ownership

interest in Syglam as a result of the monies he contemplated paying to WBP and

possibly himself as trustee and plan administrator from the 7.5% surplus remaining

in the Loba pension plan after Loba workers had transferred their pension

entitlement out of the plan.⁷⁴⁹He contemplated $923,000 being payable to WBP

as fees associated with the Loba RTA. WBP would pay $378,000 to various Loba

recruiters and would retain $551,000. Over and above that, WBP would receive

fees when individuals set up IPPs and when assets in the IPPs were invested. An

additional $923,000 would remain in the Loba pension plan as surplus. Parent

contemplated accessing these funds for the benefit of himself and his fellow

shareholders in Syglam by having substantial fees charged to the plan, by having

surplus paid to himself and his wife as the only remaining Loba pension plan

members or by winding up the plan and having the surplus paid to Loba. The

significant financial interest that Parent personally had in the Loba arrangements,

his position as the directing mind of all of the operations and his acknowledgement

that he put all of this structure into place to pursue his own economic interests

support the lifting of the corporate veil.

[903]

In any event, Parent had a direct relationship with the Plaintiffs and

Dufour in his capacity as a professional actuary. Additionally, he labelled himself

as the administrator and the third party administrator of the Loba pension plan, and

in both capacities had a direct relationship with the members of the Loba pension

plan.

(b) Jemus

[904]

Jemus conceded that in regard to a breach of fiduciary duty, one

cannot hide behind a corporate veil.

Overview

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[905]

In Lloyds Bank Ltd. v. Bundy,⁷⁵⁰Sir Eric Sachs stated the fiduciary

principle as follows:

Such cases tend to arise where someone relies on the guidance or advice of

another, where the other is aware of that reliance and where the person upon

whom reliance is placed obtains, or may well obtain, a benefit from the

transactions or has some other interest in it being concluded. In addition, there

must, of course, be shown to exist a vital element which in this judgment will for

convenience be referred to as confidentiality. It is this element which is so

impossible to define and which is a matter for the judgment of the court on the

facts of any particular case.

[906]

As La Forest J. pointed out in the leading case of Hodgkinson v.

Simms,⁷⁵¹the vulnerability of the person seeking guidance or advice is an indicator

of the existence of a fiduciary relationship, but what also must be present is

loyalty, trust, and confidentiality. These qualities differentiate a fiduciary

relationship giving rise to a duty of loyalty in addition to a duty of care from other

reliance-based relationships giving rise to a simple duty of care.⁷⁵²The fiduciary

principle “monitors the abuse of a loyalty reposed”.⁷⁵³

[907]

Certain relationships have as their essence discretion, influence over

interests, and an inherent vulnerability. In these relationships, there is a rebuttable

presumption, arising out of the inherent purpose of the relationship, that one party

has a duty to act in the best interest of the other party. Two examples of this type

of relationship are that of trustee-beneficiary and agent-principal.⁷⁵⁴In addition,

there are certain situations in which fiduciary obligations, though not innate to a

given relationship, arise as a matter of fact out of the specific circumstances of that

particular relationship. “In these cases, the question to ask is whether, given all the

surrounding circumstances, one party could reasonably have expected that the

other party would act in the former’s best interests with respect to the subject

matter at issue.”⁷⁵⁵The presence of discretion, influence, vulnerability, trust,

community or industry standards, a complex subject matter and a subject matter

important to the vulnerable party will offer evidentiary support to the existence of

such a situation.⁷⁵⁶

[908]

In the advisory context, for a relationship to be defined as fiduciary,

there must be something more than a simple undertaking by one party to provide

information and execute orders for the other.⁷⁵⁷As stated by Professor Finn in

“The Fiduciary Principle”:⁷⁵⁸

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… fiduciary responsibilities will be exacted where the function the advisor

represents himself as performing, and for which he is consulted, is that of

counselling an advised party as to how his interests will or might best be served in

a matter considered to be of importance to his personal or financial well-being,

and in which the advisor would be expected both to be disinterested, save for his

remuneration, and to be free of adverse responsibilities unless the contrary is

disclosed at the outset. It does seem to be the case, here, that our ready

acceptance of a fiduciary expectation is coloured both by our assumption that

credence is likely to be given to any advice given and by our perception of the

social importance of the advisory function itself.

[909]

In the context of advisory relationships, the fact that the vulnerable

party could have protected himself or herself by obtaining a second opinion, does

not negate the existence of a fiduciary relationship. As La Forest J. stated in

Hodgkinson v. Simms: ⁷⁵⁹“… it would be surprising indeed to expect an advisee to

protect him- or herself from the abuse of power by his or her independent

professional advisor when the very basis of the advisory contract is that the advisor

will use his or her special skills on behalf of the advisee”.

[910]

Canadian courts have recognized a fiduciary duty in the investment

advice aspect of many kinds of financial service relationships.⁷⁶⁰La Forest J. in

Hodgkinson v. Simms adopted the following quote from Keenan J. in Varcoe v.

Sterling⁷⁶¹as accurately summarizing the law in the context of independent

professional advisory relationships, whether the advisors are accountants,

stockbrokers, bankers, or investment counsellors:

The relationship of broker and client is not per se a fiduciary relationship . …

Where the elements of trust and confidence and reliance on skill and knowledge

and advice are present, the relationship is fiduciary and the obligations that attach

are fiduciary. On the other hand, if those elements are not present, the fiduciary

relationship does not exist. … The circumstances can cover the whole spectrum

from total reliance to total independence. …

…

The relationship of the broker and client is elevated to a fiduciary level when

the client reposes trust and confidence in the broker and relies on the broker’s

advice in making business decisions. When the broker seeks or accepts the

client’s trust and confidence and undertakes to advise, the broker must do so fully,

honestly and in good faith. … It is the trust and reliance placed by the client

which gives to the broker the power and in some cases, discretion, to make a

business decision for the client. Because the client has reposed that trust and

confidence and has given over that power to the broker, the law imposes a duty on

the broker to honour that trust and respond accordingly.

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[911]

In the context of a financial advisory relationship, it is a question of

fact as to whether the parties’ relationship was such as to give rise to a fiduciary

duty on the part of the advisor.

[912]

The proper approach to damages for breach of a fiduciary duty is

restitutionary.⁷⁶²The plaintiff is entitled to be put in as good a position as he or

she would have been in had the breach not occurred. That being said, “a court

exercising equitable jurisdiction is not precluded from considering the principles of

remoteness, causation and intervening act where necessary to reach a just and fair

result.”⁷⁶³As emphasized by La Forest J. in Hodgkinson v. Simms, courts should

strive to treat similar wrongs similarly, regardless of the particular causes of action

that may have been pleaded. In situations where only a restricted breach of a

fiduciary duty is proven, the plaintiff must prove what losses flowed from that

breach, as distinct from losses being occasioned by other causes unrelated to the

breach of fiduciary duty.⁷⁶⁴

Is Parent, Loba or WBP liable for breach of fiduciary duty?

(a) Individual Plaintiffs and Dufour

[913]

In that a fiduciary duty arises in the context of a relationship, I must

consider the particular circumstances relating to Parent’s relationship with each

Plaintiff and Dufour.

(i)

Findlay

[914]

Through the Hill Times,⁷⁶⁵Findlay knew that Loba was advertising

the existence of its RTA and WBP was Loba’s pension plan actuary. Before

Findlay met Parent, he had already sought assurance from his compensation

advisor that the Loba RTA was valid and that there were no problems with it.

When Findlay forwarded his salary and service records to Burnside at WBP, he

understood that an actuary would be completing a financial analysis on his behalf.

Findlay received WBP’s financial analysis from Burnside on October 2, 2000.

Findlay met with Parent for approximately one hour on October 9^th. Subsequently,

Findlay sought a second financial opinion from Jemus, whom he already knew.

Upon having Parent’s financial analysis confirmed, Findlay signed the relevant

documents at WBP’s offices on October 11, 2000.

- 298 -

[915]

Parent told Findlay that he was the President of Loba, the consulting

actuary for the Loba pension plan and the administrator of the Loba pension plan.

Findlay did not ask him about any potential conflict of interest. Parent told Findlay

that a portion of the funds that would be transferred to the Loba pension plan on

Findlay’s behalf would remain in the plan and would not be paid to Findlay.

Findlay could not say that Parent did not tell him that WBP had an agreement with

Loba to get a share of those monies after Findlay resigned from Loba. Findlay was

aware that Parent had a financial interest in WBP and in Loba, though he was

unaware of the details of that arrangement.

(ii) Ault

[916]

Ault met with Parent on September 19, 2000 and then again on

October 9, 2000. Each meeting lasted approximately one hour. Between the

meetings, Ault obtained a financial analysis from Jemus. When Ault first met

Parent, she understood that he was an actuary with WBP and the President of

Loba. Parent did not tell Ault that he was the owner of Loba; only that he had

assumed management of the company on behalf of the previous owner. Parent did

not tell Ault that WBP had a compensation agreement with Loba, that WBP would

keep a percentage of the 7.5% holdback, that Parent was a majority shareholder in

Syglam, or that he personally would benefit financially if she joined Loba.

Nevertheless, Ault assumed that there would be some benefit for WBP as a result

of the work it was doing respecting Loba. Ault could not say that Parent did not

tell her that he was also the administrator of the Loba pension plan. Ault could not

say whether Parent told her to get legal advice, but it was possible that he did.

(iii) Shepherd

[917]

On October 11, 2000, Shepherd met with Parent and Burnside for

approximately one hour. What Shepherd wanted from Parent was information

regarding his pension entitlement under the PSSP and under the Loba RTA. As

well he had specific questions for Parent, one being who received the 7.5% of the

transferred amount that Shepherd would not receive, and what that payment was

for. Due to time constraints, this last issue was not canvassed fully. On October

12^th, Shepherd sat in on Collier’s interview with Parent, but did not ask questions.

On October 13^th, Shepherd met with Burnside to sign the documentation.

[918]

When Shepherd met with Parent, he understood that he was an

actuary, the administrator of the Loba pension plan and the President of Loba. At

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no time prior to Shepherd leaving the public service did Parent advise him that

WBP had a compensation agreement with Loba, that Parent was a partner of WBP,

that Syglam owned both WBP and Loba or that Parent owned Syglam.

Nevertheless, Shepherd assumed that Parent was a partner of WBP.

(iv) Collier

[919]

Collier met with Parent for approximately one hour on October 12,

2000. Collier was aware of the good reputation of WBP, and he wanted Parent’s

advice about the advantages and disadvantages of his joining Loba. Parent told

Collier that he was an actuary with WBP, the actuary who had negotiated the Loba

RTA, the administrator of the Loba pension plan and President of Loba. Parent did

not explain how he, WBP or Loba were benefiting financially from the Loba

arrangements; however, Collier expected them to be compensated for their

services. Parent did not divulge information about his business dealings with Loba

or its affiliates. Collier was unaware that Parent had an ownership interest in both

WBP and Loba.

(v) Temple

[920]

YTemple, acting as Temple’s agent, met with Parent to obtain the

relevant numbers for Temple under the Loba RTA. Approximately one week later,

after obtaining advice from two other financial advisors, Temple and YTemple met

with Parent for approximately one hour. Temple understood that Parent was an

actuary providing actuarial advice through WBP. Temple knew that WBP was a

respected actuarial firm in Ottawa that had given courses in the past to public

servants regarding retirement.

[921]

Parent did not advise Temple that he was the majority shareholder in

Syglam, that Syglam owned Loba, that Parent was the President of Loba or that

Parent would benefit personally as a result of the transfer of Temple’s pension

entitlements to Loba. That being said, Temple assumed that Parent would be

benefiting financially; he just did not understand exactly how. I find that during

the interactions YTemple and Temple had with Parent and Burnside, it would have

been obvious to them that Parent was representing Loba, as well as WBP.

(vi) Armstrong

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[922]

Buxton provided Armstrong with information about Loba and referred

him to Pension Positive. Armstrong received a financial analysis from Jemus. He

also sought advice from two other financial advisors. Armstrong spoke again with

Buxton, who advised that he had done some research on Loba and it passed “the

stink test”, and he spoke with another senior colleague in Ottawa who advised that

many people were joining Loba and the Loba arrangement seemed “okay”.

Armstrong reconfirmed the accuracy of the figures with Jemus and obtained two

references from him.

[923]

Armstrong had only a five to ten minute conversation with Parent, the

focus of which was on the employment relationship Armstrong was to have with

Loba. Subsequently Armstrong had a lengthier conversation with Burnside to

clarify several points.

[924]

Armstrong understood that Parent was involved with Loba and WBP,

but he was unaware that Parent owned Loba or that Parent had a direct financial

interest in Loba. Armstrong understood that WBP was the administrator of the

Loba pension plan but he was unaware of how WBP was paid for its services.

Parent did not advise Armstrong that he would personally gain if Armstrong joined

Loba.

(vii) Luck

[925]

Luck learned of Loba from his supervisor at work. He also discussed

the Loba option with two other senior colleagues who were seriously considering

Loba. Luck communicated with Burnside in order to get a financial analysis done.

Two days later, he and his wife then met with Parent for approximately a half-

hour. When Luck met with Parent, he understood that Parent was an actuary who

would be providing him with information and advice about his pension. He did not

understand the relationship between Loba and WBP and was unaware that Loba

had a compensation agreement with WBP. Parent did not tell Luck that he had an

ownership interest in both Loba and WBP and would personally gain if Luck

joined Loba. Luck’s evidence was, had he known this, it would not necessarily

have made any difference with his joining Loba; but he would have wanted to

know what Parent stood to gain before making his decision. That being said, he

expected Parent and WBP to be compensated for the work they did in regard to

Loba.

- 301 -

[926]

I find that, even though Parent may not have told Luck that he was the

President of Loba, Luck understood that Parent was the driving mind behind Loba.

Luck, like all of the other Plaintiffs but Armstrong, met with both Parent and

Burnside at the offices of WBP and signed documentation relating to Loba, such as

an employment contract, while at those offices. It would have been clear to Luck

that Loba was operating out of the WBP offices and that WBP, and Parent, were

closely associated with Loba.

(viii) Nobert

[927]

Through WBP’s advertisement in the Hill Times,⁷⁶⁶Nobert knew that

WBP was advertising the existence of Loba’s RTA and it was providing actuarial

services to Loba. Nobert and her husband met with Parent for over an hour.

Nobert understood that Parent was an actuary who could provide her with a

financial analysis regarding some options available to her under the PSSP. After

receiving Parent’s analysis, Nobert consulted senior public servants working in the

Compensation Community for advice regarding Loba, and her husband, on her

behalf, consulted a certified management accountant. Six weeks after their first

meeting, Nobert met with Parent a second time in order to sign the necessary

documents.

[928]

During their first meeting, Parent made it clear that he was the

President of WBP, the consulting actuaries and pension plan administrator for the

Loba pension plan. Parent did not explain to Nobert that he had an ownership

interest in both WBP and Loba and that he would gain personally if Nobert joined

Loba. Parent did not tell Nobert that Loba had a compensation agreement with

WBP and that WBP would be keeping a percentage of the funds transferred to the

Loba pension plan; nevertheless, Nobert understood that 7.5% of the amount

transferred to the Loba pension plan on her behalf would either remain in the plan

or be used for the costs of plan administration.

(ix) Dufour

[929]

Dufour was introduced to the Loba RTA by Jemus, to whom she had

been referred by a colleague. Dufour had approximately six meetings with Jemus,

during which she sought his financial advice relating to retirement. Jemus

accompanied Dufour to her first meeting with Parent. She met Parent on four or

five occasions between April and June 2000 and resigned from the public service

in May, effective June 9^th. Dufour understood that Parent was Loba’s President or

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CEO and an actuary with WBP, an actuarial firm. She realized that when she was

meeting with Parent about Loba, she was doing so at WBP’s offices. Parent did

not tell Dufour that Loba was paying a service fee to WBP. He did not tell her that

he had an ownership interest in both WBP and Loba and would benefit personally

if she joined Loba. Dufour did understand that if she joined Loba, Loba would get

some of the money that would be transferred to the Loba pension plan on her

behalf. Finally, Parent did not tell Dufour that WBP was discussing a

compensation agreement with Jemus.

(b) Did Parent, Loba or WBP owe a fiduciary duty to the Plaintiffs and

Dufour?

[930]

When Parent dealt with each of the Plaintiffs and Dufour, he was

functioning in different capacities. He was representing: (1) Loba as a prospective

employer or employer; (2) Loba as the sponsor and plan administrator of the Loba

pension plan; (3) WBP as the third party administrator of the Loba pension plan;

(4) WBP as the consulting actuary for the Loba pension plan; and (5) WBP as the

consulting actuary to the Plaintiffs and Dufour when initially giving them advice.

In his dealings with the Plaintiffs and Dufour, Parent did not explicitly differentiate

the various roles he was playing.

[931]

Parent was acting as an agent of Loba, the prospective employer,

when he was discussing what Loba had to offer the Plaintiffs and Dufour and when

he was having the Plaintiffs and Dufour sign the Loba employment agreement and

other documents relating to their joining Loba. After they joined Loba, Parent was

acting as an agent of Loba when dealing with the Plaintiffs and Dufour on

employment issues. No argument has been advanced that Parent, when acting as a

prospective employer or employer, owed a fiduciary duty to the Plaintiffs or

Dufour.

[932]

Parent was acting as an agent of WBP, the consulting actuary of the

Loba pension plan and the third party administrator of the plan when, prior to their

joining Loba, he was explaining to the Plaintiffs and Dufour the terms of the Loba

pension plan and Loba RTA and was having the Plaintiffs and Dufour sign

documents relating to the pension transfer. When providing this type of

information as consulting actuary to Loba or third party administrator of the Loba

pension plan, Parent and WBP were really acting as the agent of Loba, the

prospective employer, explaining to the Plaintiffs and Dufour one of the benefits

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associated with employment with Loba. Again, no argument has been advanced

that Parent, as the agent of a prospective employer – or the prospective employer

itself – owed a fiduciary duty to the Plaintiffs or Dufour.

(i)

Parent/Loba as Administrator; Parent/WBP as Third Party

Administrator

[933]

The Defendant argues that Parent, when acting for Loba as

administrator of the Loba pension plan and when acting for WBP as third party

administrator of the Loba pension plan, owed a fiduciary duty to the Plaintiffs and

Dufour as plan members. Similarly, the Defendant argues that Loba as the

administrator and WBP as third party administrator owed a fiduciary duty to the

Plaintiffs and Dufour. The onus is on the Defendant to prove that as the Loba

pension plan administrator or third party administrator, Parent, Loba and WBP

owed a fiduciary duty to the Plaintiffs and Dufour. The Defendant has met that

onus.

[934]

During cross-examination, Parent admitted that, once Syglam

purchased Loba from Martin, Parent became the plan administrator in addition to

his role as consulting actuary and third party administrator. Parent also admitted

that pension plan administrators owe some fiduciary duties to the members of the

pension plan. This makes sense, considering the power of a pension plan

administrator to affect the interests of pension plan members. It is also consistent

with the following provisions in the Pension Benefits Act:

Care, diligence and skill

22(1) The administrator of a pension plan shall exercise the care, diligence and

skill in the administration and investment of the pension fund that a person of

ordinary prudence would exercise in dealing with the property of another person.

Special knowledge and skill

(2)

The administrator of a pension plan shall use in the administration of the

pension plan and in the administration and investment of the pension fund all

relevant knowledge and skill that the administrator possesses or, by reason of the

administrator’s profession, business or calling, ought to possess.

…

Conflict of interest

(4)

An administrator …shall not knowingly permit the administrator’s interest

to conflict with the administrator’s duties and powers in respect of the pension

fund.

Employment of agent

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(5)

Where it is reasonable and prudent in the circumstances so to do, the

administrator of a pension plan may employ one or more agents to carry out any

act required to be done in the administration of the pension plan and in the

administration and investment of the pension fund.

…

Responsibility for agent

(7)

An administrator of a pension plan who employs an agent shall personally

select the agent and be satisfied of the agent’s suitability to perform the act for

which the agent is employed, and the administrator shall carry out such

supervision of the agent as is prudent and reasonable.

Employee of agent

(8)

An employee or agent of an administrator is also subject to the standards

that apply to the administrator under subsections (1), (2) and (4).

Benefit by administrator

(9)

The administrator of a pension plan is not entitled to any benefit from the

pension plan other than pension benefits, ancillary benefits, a refund of

contributions and fees and expenses related to the administration of the pension

plan and permitted by the common law or provided for in the pension plan.

…

Payment to agent

(11) An agent of the administrator of a pension plan is not entitled to payment

from the pension fund other than the usual and reasonable fees and expenses for

the services provided by the agent in respect of the pension plan.

[935]

dates:

The Plaintiffs/Dufour joined the Loba pension plan on the following

Findlay⁷⁶⁷

Ault⁷⁶⁸

October 14, 2000

October 13, 2000

October 14, 2000

October 13, 2000

October 14, 2000

August 30, 2000

June 13, 2000

Shepherd⁷⁶⁹

Collier⁷⁷⁰

Temple⁷⁷¹

Armstrong⁷⁷²

Luck⁷⁷³

Nobert ⁷⁷⁴

Dufour⁷⁷⁵

[936]

I find that as of the date of membership in the Loba pension plan,

Parent, Loba and WBP, as plan administrator or third party administrator, owed a

fiduciary duty to Dufour and each of the Plaintiffs. No specific argument was

advanced nor authority relied on to support the conclusion that a plan administrator

or third party administrator owes a fiduciary duty to prospective employees of the

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plan sponsor and therefore prospective members of the pension plan, and I make

no such finding.

[937]

As administrator or third party administrator of the Loba pension plan,

Parent, Loba and WBP owed the duties to the Plaintiffs and Dufour set out in s. 22

of the Pension Benefits Act. These duties included the duty of faithfulness. The

Plaintiffs and Dufour reasonably expected Parent, Loba and WBP in their capacity

as pension plan administrator or third party administrator not to put their personal

interests ahead of their obligations to the Plaintiffs and Dufour as pension plan

members. Included in the duty of faithfulness was the duty to disclose to the Loba

pension plan members all material information relating to their rights and

obligations under the pension plan, and especially all material information that

might adversely impact their rights as pension plan members. Furthermore, that

duty included the requirement to act prudently in carrying out their functions as

administrator or third party administrator of the pension plan.

[938]

Parent and WBP owed the additional duties required of them under

the CIA’s Rules of Professional Conduct⁷⁷⁶which were referred to above in the

section dealing with Duty of Care under Negligent Misrepresentation. These

included the duty to act with integrity, not to be associated with anything which the

actuary knows or should know is false or misleading, to disclose the sources of all

direct or indirect compensation in regard to professional services being provided to

a client, and not to act in an actual or potential conflict of interest without making

full disclosure of the conflict to those potentially impacted and receiving their

express consent.

(ii) Parent/WBP as Consulting Actuaries

[939]

Parent and WBP were acting as consulting actuaries for the Plaintiffs

and Dufour when Parent explained to each of them calculations that had been done

to gauge what, if any, financial advantage might accrue to the individual through

the transfer of pension entitlements to the Loba pension plan from the PSSP. In

providing this information to the Plaintiffs and Dufour, Parent was making use of

factual information to which he was privy as a result of his other roles with Loba

and WBP. The issue is whether Parent and WBP owed a fiduciary duty to each

Plaintiff and Dufour when actuarial consulting services were being provided to that

individual.

- 306 -

[940]

There are several factors which support the conclusion that Parent and

WBP were in a fiduciary relationship with the Plaintiffs and Dufour when

providing them with a financial analysis relating to their pension entitlement under

the PSSP and the possibilities under the Loba RTA.

[941]

WBP is an actuarial firm. Parent held himself out to the Plaintiffs and

Dufour as being an actuary and pension expert, and Parent knew that the Plaintiffs

and Dufour looked to WBP, and more particularly himself, for information about

their pension entitlements because he was an actuary. Parent realized that the

Plaintiffs and Dufour would place trust in the information he provided in great

measure because he was a professional actuary subject to professional obligations.

[942]

Actuaries are a self-regulating profession. Actuaries practising in

Ontario are subject to the professional and ethical standards in the CIA’s Rules of

Professional Conduct.⁷⁷⁷Those of particular interest to this analysis have been

reproduced above in the section on Duty of Care under the heading Negligent

Misrepresentation.

[943]

The subject matter being dealt with by Parent in his role as a

consulting actuary was very complex. The Plaintiffs and Dufour did not have the

actuarial skills to be able to verify the numbers provided by Parent. The Plaintiffs

and Dufour did not have the expertise in regard to entitlements under the PSSP or

the Loba pension plan to be able to verify the options being presented by Parent.

The Plaintiffs and Dufour had no expertise in regard to registration requirements

for pension plans. Parent realized the limits of their knowledge regarding

pensions. In this sense, the Plaintiffs and Dufour were vulnerable. They had to

place their trust in the numbers and analysis being provided by Parent or seek a

second opinion from someone equally knowledgeable with the PSSP and Loba

pension plans. As far as they and Parent were aware, no one had as much expertise

about the Loba pension plan as Parent did.

[944]

The Plaintiffs’ and Dufour’s PSSP pensions were significant assets.

In each case, the Plaintiff/Dufour was a senior public servant with a significant

salary and numerous employment benefits. In each case, the Plaintiff had family

commitments. In that the Loba option required the individual to resign from such

lucrative employment, it was particularly important that the Plaintiffs and Dufour

had full information about the advantages and disadvantages of that course of

action before making a decision. Parent was aware of this.

- 307 -

[945]

During the course of his interactions with the Plaintiffs and Dufour,

Parent obtained confidential information about their family situations, their

incomes, their positions and their goals for the future that neither the Plaintiffs nor

Dufour would have shared with a stranger, such as Parent, unless they believed that

the person was under a duty to use that information for their benefit.

[946]

There are policy considerations supporting the existence of a fiduciary

duty. It is in the public interest that people have financial security in their senior

years and that they not make any decision impacting their financial security

without having a full understanding of what that impact will be. People should be

encouraged to seek professional advice where they need it in order to make an

informed decision. People will only seek such advice if they are assured that the

professional advisor will act in accordance with the professional standards

governing his or her profession. It is important to reinforce the notion of

professional integrity amongst all of our professions to support the reasonable

expectations of the public and to ensure appropriate professional involvement in

the orderly management of society.

[947]

Another policy consideration is that Parent, for his own financial

benefit, put himself in a situation where he was wearing many hats when he was

interacting with the Plaintiffs and Dufour, without first having figured out how he

could do that and still meet his professional obligations regarding conflict of

interest.

[948]

There are other factors, however, which militate against a fiduciary

duty being recognized.

[949]

When the Plaintiffs and Dufour met with Parent to learn about the

Loba option, they did not have any pre-existing relationship with him. Therefore

there was no expectation that he would feel loyalty toward them, aside from the

loyalty inherent in any professional relationship. Aside from Armstrong and

Dufour, the other Plaintiffs met with Parent on only one or at most two occasions.

The meetings ranged from one-half hour to just over an hour. Armstrong never

met with Parent. Dufour met with Parent on four or five occasions.

[950]

The Plaintiffs and Dufour met with Parent because they had been

directed to him for information about Loba through a referral from colleagues, a

referral from Jemus or an advertisement about the October 15^thdeadline. Those

Plaintiffs who accessed the October 15^thwebsite knew that they would be

- 308 -

connected to Loba’s actuaries, WBP. It was clear to each Plaintiff and to Dufour

before he or she met Parent that Parent was working in some way with Loba and

was not a completely independent actuary connected to the circumstances only

through his meeting with that individual. Certainly prior to their resignation from

the public service, all of the Plaintiffs and Dufour realized that Parent was working

for Loba in some capacity, and therefore would have divided loyalties.

[951]

I find that Parent advised each Plaintiff and Dufour that, in addition to

being an actuary with the necessary skills to explain their options to them, he was

also representing Loba. Although Parent did not tell most of the Plaintiffs or

Dufour that he had an ownership interest in Loba, he made it clear that he was the

senior officer of Loba. Clearly, in this capacity, he owed a duty to Loba which all

of the Plaintiffs and Dufour realized could conflict with any duty he owed them.

After meeting with Parent, all of the Plaintiffs and Dufour understood that Loba

stood to gain financially from their joining Loba. Parent explained to all of the

Plaintiffs that up to 7.5% of the monies being transferred from the PSSP would be

retained in the Loba pension plan – and not for the benefit of the Plaintiffs.

[952]

Neither Dufour nor any of the Plaintiffs was unsophisticated,

uneducated, or vulnerable due to age, illness, disability or other personal factors.

All had the benefit of higher education, longevity within the public service, access

to compensation advisors tasked to provide them with advice regarding their

pension options and access to independent professionals for advice regarding the

Loba option. None had to make a decision under duress, aside from the duress

caused by the imminent October 15^thdeadline. With the exception of Armstrong,

all had stable employment situations and no requirement to be seeking alternatives.

[953]

All of the Plaintiffs and Dufour testified that they went to Parent for

information about the Loba option. They needed to know the financial

ramifications of transferring their pension entitlement to the Loba pension plan

instead of staying in the PSSP. They did not seek, nor did they obtain, advice

about what they should do. I accept this. Prior to October 15^th, neither Dufour nor

any of the Plaintiffs gave Parent discretion to act or make a decision on his or her

behalf. I find that, when explaining the financial ramifications of the Loba option,

Parent was assiduous in not recommending any course of action to the Plaintiffs

and Dufour and in not pressuring them to join Loba. He made it very clear to each

Plaintiff and to Dufour that all he was doing was providing them with a financial

- 309 -

analysis that they could use in deciding whether the Loba option was right for

them.

[954]

Inherent in Parent’s explanations of the Plaintiffs’ and Dufour’s

options was his understanding of the impact of pension and income tax laws on the

circumstances, as he understood them to be. In this regard, there is no evidence

that Parent held himself out as having specialized knowledge in regard to income

tax or employment law. None of the Plaintiffs looked to Parent for legal advice. I

find that, although the Plaintiffs and Dufour may have assumed that Parent had

sufficient knowledge of applicable pension law to know whether the options he

was presenting to them were viable, they realized that what he was offering them

was essentially a financial analysis, not a legal analysis.

[955]

Aside from Luck, neither Dufour nor the other Plaintiffs placed full

faith in Parent or in the analysis he was providing. Findlay, Ault, Shepherd,

Collier, Armstrong and Dufour consulted Jemus for another financial opinion.

Temple, Armstrong and Nobert consulted other financial advisors. Findlay, Ault,

Shepherd, Armstrong and Nobert sought opinions regarding the Loba RTA from

their compensation advisors or other colleagues more senior than themselves

whom they believed would have more information about Loba than they had.

Aside from Luck, all of the other Plaintiffs wanted some form of confirmation that

Parent could be relied on; they did not take this for granted by virtue of his

professional designation. This displayed a level of caution or reservation about

Parent’s loyalty to them that would not normally be seen in the fiduciary context.

[956]

Ultimately, the question to be asked is “…whether given all the

surrounding circumstances, one party could reasonably have expected that the

other party would act in the former’s best interests with respect to the subject

matter at issue. … what is required is evidence of a mutual understanding that one

party has relinquished its own self-interest and agreed to act solely on behalf of the

other”.⁷⁷⁸

[957]

The onus is on the Defendant to prove that Parent and WBP owed the

Plaintiffs and Dufour a fiduciary duty during the period prior to their resignation

from the public service. There are strong arguments on both sides of the question

and undoubtedly the consulting actuary relationship between Parent/WBP and each

Plaintiff and Dufour had many hallmarks of a fiduciary relationship. Nevertheless,

I conclude that the Defendant has not met the onus of proving that a fiduciary

- 310 -

relationship existed prior to the Plaintiffs/Dufour becoming members of the Loba

pension plan.

[958]

With all but Dufour, Parent had minimal interaction with each of the

Plaintiffs when he was acting as their consulting actuary, and in the case of Luck

met him on only one occasion for approximately one-half hour. The Plaintiffs and

Dufour sought and obtained specific information based on an actuarial analysis.

They did not seek or receive advice or recommendations in a broader sense.

Although the Plaintiffs and Dufour relied on Parent’s financial analysis because

they expected him to know how to do such an analysis due to his professional

credentials, they did not look to Parent as a counsellor. Most importantly, all of

the Plaintiffs and Dufour were aware that Parent was wearing many hats when he

was meeting with them. All were aware that he had obligations to WBP and to

Loba in addition to them. All understood that he had interests other than their own

to consider during their interactions. In this sense, they understood that he had

divided loyalties.

(c) Did Parent, Loba and WBP breach their fiduciary duties to the

Plaintiffs and Dufour?

[959]

The key duties owed by a fiduciary are the duty to act honestly and in

utmost good faith, the duty to avoid potential conflicts of interest, the duty to make

full disclosure of all material information and the duty of prudence, care and skill.

Material information is information that a reasonable person would consider likely

to bear on the person’s judgment in regard to the mandate that the person has given

the fiduciary; in other words, in regard to the matters in which the person is

reposing trust and confidence in the fiduciary.⁷⁷⁹

[960]

In that Parent, Loba and WBP as pension plan administrators or third

party administrators only owed a fiduciary duty to the Plaintiffs and Dufour during

the period after the Plaintiffs/Dufour became members of the Loba pension plan, I

will only consider the actions and omissions of Parent, Loba and WBP vis-à-vis

each Plaintiff and Dufour, once that individual became a member of the Loba

pension plan.

[961]

In the circumstances of these cases, the most significant fiduciary duty

that Parent, Loba and WBP as plan administrators or third party administrators

failed to meet was to advise pension plan members of Godwin’s letter to Parent of

- 311 -

September 15, 2000 (which Parent had on September 23, 2000) and his letter to

Gravelle of September 7, 2000 (which Parent had on October 11, 2000). The

Information Sheet attached to Godwin’s September 15^thletter was written for the

benefit of prospective pension plan members, and Godwin specifically asked Loba

to provide a copy to those considering joining the Loba pension plan. Parent had

this letter prior to Findlay, Ault, Shepherd, Collier, Temple, Armstrong, and Luck

joining Loba, becoming members of the Loba pension plan or submitting their

letters of resignation to the public service. In Nobert’s case, she had already joined

Loba and had become a member of the Loba pension plan; however, her effective

date for resignation from the public service was September 29^th, after Parent had

received Godwin’s letter and Information Sheet. In regard to Dufour, she had

already resigned from the public service long before Parent received Godwin’s

letters.

[962]

I have already found that all of the Plaintiffs and Dufour would not

have joined Loba had they been aware of the contents of either of Godwin’s letters.

In regard to the Plaintiffs, I find that, had they seen either of the Godwin letters

immediately upon becoming members of the Loba pension plan, they would have

withdrawn their letters of resignation from the public service and would have

remained in the public service. In Nobert’s case, although she had already joined

Loba when the letter was written, had it been drawn to her attention in a timely

manner, she would have had the ability to withdraw her resignation from the public

service and her application for a transfer under the Loba RTA, and I find that she

would have done that. Dufour testified that she probably could have been rehired

by the public service, but in a different position; however, the evidence does not

persuade me that this is what Dufour would have done. By this time, Dufour had

accepted employment at the Illinois Geological Survey.

[963]

Another aspect of a fiduciary obligation is the duty to disclose any

financial interest that the fiduciary has in the subject upon which advice is being

sought. This duty includes full disclosure of any points of conflict inherent in

continued dealings between the fiduciary and his client.⁷⁸⁰

In certain

circumstances, this duty may include advising the client to obtain appropriate

independent professional advice.

[964]

In regard to the financial interest that Parent, Loba and WBP had in

the Loba pension plan, none of them ever explained to the Plaintiffs and Dufour

what would happen to the funds remaining in the Loba pension plan after 92.5% of

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transferred monies had been paid out to them. The Plaintiffs and Dufour were

never told that half of this amount would be paid to WBP, with WBP then paying

amounts to third parties such as Zeithammel, Jemus and Reid. The Plaintiffs and

Dufour were never told that Parent’s goal was to get the balance of the surplus in

the Loba pension plan paid out in some fashion so as to benefit the shareholders of

Syglam.

[965]

I find that, although most people in the position of the Plaintiffs and

Dufour would have wanted to know what would happen to the remaining 7.5%

paid into, but not out, of the Loba pension plan for their benefit, none of the

Plaintiffs or Dufour showed much interest in this information. Only Shepherd

indicated that this was a question he had for Parent. During Parent’s interviews

with the Plaintiffs and Dufour prior to their joining Loba, he explained to each that

he or she was guaranteed to receive only 92.5% of the monies transferred from the

PSSP, and that the remaining amount would remain in the Loba pension plan to be

used, in part, to pay for the administration of the plan. The Plaintiffs and Dufour

effectively consented to this arrangement realizing all the while that they did not

have the particulars of how the money would be used and realizing that Parent,

Loba and WBP likely would be getting a portion of these monies. Once members

of the Loba pension plan, the Plaintiffs and Dufour continued to acquiesce in the

arrangement and never sought further information as to who would benefit from

the 7.5%. The Defendant has not persuaded me that the Plaintiffs and Dufour

could have succeeded in an action against Parent, Loba and WBP for a breach of

fiduciary duty on this basis.

[966]

Sections 22(9) and 22(11) of the Pension Benefits Act limit the

financial benefit that a pension plan administrator or a third party administrator can

receive from the pension plan that they are administering. Any fees or expenses

received by an administrator must relate to the administration of the plan and be

permitted by the common law or provided in the pension plan. Third party

administration fees and expenses have to be usual and reasonable for the services

provided by the agent in respect of the pension plan. Bulletin 5/3 (Fall 1994) of

the Financial Services Commission of Ontario entitled “Handling of Plan Fund

Expenses and Maintenance of Plan Records – PBA, 1987 s. 22, s. 27” provided

further guidance on what fees and expenses were acceptable, stating:.

The Administrator must first determine whether payment of the applicable fees

and expenses would constitute a prudent use of the plan funds (i.e., whether the

service rendered to the pension plan is appropriate and whether it would provide

- 313 -

value to the pension plan when compared to the cost of the service).

Consideration must also be given to the provisions of the pension plan

document(s).

[967]

Parent acknowledged that it would not be acceptable under the

Pension Benefits Act for fees to be paid out of the Loba pension plan directly to

people like Zeithammel, Jemus and Reid who recruited Loba workers. It follows

that payment of such sums indirectly through WBP, if that raised the fees charged

by WBP above that which would be reasonable for the actuarial or administrative

functions it was performing, would also be impermissible. Parent acknowledged

that his plan for WBP to charge substantial fees to the Loba pension plan in order

to access the surplus within the plan was also impermissible under the Pension

Benefits Act. Parent could not say that the fees intended to be charged to the Loba

pension plan by WBP as consulting actuaries to the plan or by Loba and WBP as

plan administrators would constitute a prudent use of plan funds. This represented

another breach in the fiduciary duties owed by Parent, Loba and WBP as plan

administrators or third party administrators; however, the Defendant has not

proven that the Plaintiffs and Dufour did not consent or acquiesce to the

arrangement. The Defendant has not established that the Plaintiffs and Dufour

could have succeeded in an action against Parent, Loba and WBP for breach of

fiduciary duty on this ground.

[968]

As part of their fiduciary duty to make full disclosure to the Plaintiffs

and Dufour of all material facts in their knowledge impacting on their entitlement

under the Loba pension plan, Parent, Loba and WBP were obliged to notify the

Plaintiffs and Dufour as soon as they became aware of the hold that had been

placed on transfers from the PSSP to the Loba pension plan under the Loba RTA.

Parent, and therefore Loba and WBP, learned of the hold early in January 2001.⁷⁸¹

By March 6, 2001, Parent had been able to determine through communications

with Gravelle that the hold related to concerns the CRA had about the ongoing

registration of the Loba pension plan.⁷⁸²The Plaintiffs and Dufour were advised of

the hold only in a letter to them from Loba dated December 19, 2001. This

withholding of information amounted to a breach of fiduciary duties. The real

question is whether any damage flowed from this breach.

[969]

Any damages which the Plaintiffs and Dufour would have been able

to collect from Parent, Loba and WBP relating to the failure to advise of the

Treasury Board hold would have been assessed relative to the position that the

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Plaintiffs and Dufour would have been in had the breach not occurred. No

evidence was adduced from any of the Plaintiffs or Dufour as to what they would

have done had they been aware of the Treasury Board hold in March 2001. The

evidence as a whole does not persuade me that, in the absence of knowing the

contents of one of Godwin’s letters, any of the Plaintiffs or Dufour, learning of the

hold in March 2001, would have acted any differently than they did between

March and December 2001.

[970]

Parent, quite reasonably, was confident that the hold would be lifted

and he would have conveyed that to the Plaintiffs and Dufour. Parent, and the

Plaintiffs, had provided honest and accurate information to the Superannuation

Directorate about the relationship between Loba and its workers, and the

Superannuation Directorate had accepted that information as confirming that an

employment relationship existed. Parent had a legal opinion to support this

conclusion. As well, Parent’s lawyers were in active consultation with the CRA in

an effort to deal with their concerns. By September 2001, all of the Plaintiffs and

presumably Dufour were aware that the CPP/EI Eligibility Rulings Section of the

CRA had concluded that the Loba workers had an employment relationship with

Loba.

[971]

The Defendant has not proven that this breach of fiduciary duty,

considered in isolation from the breach associated with the failure to disclose the

Godwin letters, would have resulted in damages being greater than what they

otherwise would have been.

[972]

Any losses suffered by the Plaintiffs as a result of a breach of

fiduciary duty on the part of Parent, Loba and/or WBP as pension plan

administrators or third party administrators are the same losses resulting from the

negligent misrepresentations of the Defendant, Parent, Loba and WBP.

Is Jemus liable for breach of fiduciary duty?

[973]

The Defendant submits that Jemus owed the Plaintiffs and Dufour a

fiduciary duty and he breached that duty by failing to advise them of the

compensation agreement he had with WBP.

[974]

Jemus was in discussions with Parent about the possibility of a

referral fee for individuals he sent to Loba long before Jemus met with any of the

Plaintiffs in regard to Loba. By December 15, 1999, a draft agreement had been

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proposed between Parent, Jemus and Lepine regarding a pooling of fees from

pension consulting regarding the Loba RTA. This agreement was never signed. It

was only on October 6, 2000 that an agreement was finalized between Parent, on

behalf of WBP and Jemus, on behalf of Pension Positive,⁷⁸³which stated that

Jemus would “act to promote the recruitment of employees for Loba Limited who

ha[d] a Reciprocal Transfer Agreement with the Public Service Superannuation

Act (PSSA)”⁷⁸⁴in return for a referral fee in respect of any employees that Jemus

brought to Loba. WBP made some payments under this agreement in regard to

commissions from mutual funds; the payments were made to Pension Positive.

[975]

When the Plaintiffs and Dufour consulted Jemus, he was a life

insurance agent licensed to sell life insurance, annuities and related investments.

He obtained an income from the commissions he received for the sale of these

products. Between 1997 and 2000, Jemus also provided pre-retirement seminars to

assist individuals in understanding their options upon retirement. Due to his years

of work with the Superannuation Directorate, Jemus understood the intricacies of

the PSSP, and was able to advise individuals as to their options under the PSSP,

though he was not very familiar with RTAs. On occasion, public servants

consulted Jemus privately to obtain calculations as to the value of their pension

entitlements under the PSSP, assuming different retirement dates and options.

Neither Pension Positive, nor Jemus, advertised these services. Clients consulted

him for pension advice as a result of the pre-retirement seminars or through word

of mouth.

[976]

The relationship between an insurance agent and an insured has been

put in the category of fiduciary relationships,⁷⁸⁵but there are cases where, on the

particular facts of the case, the agent has been held not to owe a fiduciary duty to

the insured.⁷⁸⁶In any event, when dealing with the Plaintiffs, Jemus was not

wearing his hat as an insurance agent; he was wearing his hat as a financial advisor

regarding pension issues. Financial advisors do not necessarily owe fiduciary

duties to their clients by virtue of the nature of the relationship. It is a question of

fact in each case whether such a duty is owed.⁷⁸⁷

(a) Individual Plaintiffs and Dufour

[977]

I will first consider the facts giving rise to the relationship between

Jemus and each Plaintiff whom he served.

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(i)

Findlay

[978]

Findlay was referred to Jemus by a colleague. He knew Jemus from a

pre-retirement course he had taken in 1997 after which he had consulted Jemus to

discuss his individual situation. Findlay had one meeting with Jemus on October

11, 2000. He understood that Jemus was a financial analyst with no financial

interest in Loba who would act as an independent advisor. What Findlay sought

from Jemus was factual financial information; he was not asking Jemus whether or

not he should join Loba. The analysis that Findlay obtained from Jemus was to the

effect that it would be to Findlay’s financial advantage to join Loba; however,

Jemus also noted that Findlay would lose benefits such as medical and dental

coverage and the government death benefit if he joined Loba.

[979]

Findlay was aware that 7.5% of the amount transferred to the Loba

pension plan on his behalf would remain in the plan to fund people who managed

the plan. Jemus did not tell Findlay that he would receive a portion of this if

Findlay joined Loba. If Jemus had told Findlay this, it may or may not have

changed his view as to whether to join Loba. He had been under the impression

that Jemus was providing an independent third party analysis. If he learned that

Jemus was not independent, he likely would have obtained another financial

analysis. If he received the same analysis from a truly independent financial

advisor, in all likelihood, Findlay would have joined Loba. There is no evidence

that an independent financial advisor would have provided any different analysis of

the data.

(ii) Ault

[980]

Ault was referred to Jemus by two colleagues and was aware that

several colleagues at Environment Canada had used his services when considering

whether to join Loba. Ault also knew Jemus from a pre-retirement course she had

attended in 1996 after which she had asked Jemus for an individual analysis of her

situation. Ault met Jemus on one occasion. She understood that Jemus was a

pension and pre-retirement expert who had worked with the Superannuation

Directorate for years prior to his retirement from the public service. Jemus

compared the difference in the value of her pension entitlement between her using

the Loba RTA and her accessing other options under the PSSP. Jemus did not tell

Ault that it would be advantageous or disadvantageous to her to take the Loba

option. He simply provided her with the numbers and said that the arrangement

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would be workable. He left the decision entirely up to her. During their meeting,

Jemus did not tell Ault that he was discussing a compensation package with WBP

for any individuals he saw who eventually decided to join Loba.

(iii) Shepherd

[981]

Shepherd was referred to Jemus by a colleague. Shepherd had no

previous contact with Jemus before their meeting of October 6, 2000 to discuss the

Loba option. Shepherd consulted Jemus for a financial analysis that would help

him make a decision about whether to join Loba. The analysis indicated that

joining Loba would be to Shepherd’s financial advantage. At the same time,

Jemus pointed out some disadvantages with joining Loba, namely the lack of a

supplementary death benefit, a medical and dental plan, and the PSMIP. Shepherd

neither sought nor received from Jemus any direction as to what Shepherd should

do. All he wanted, and all he received, was information. Shepherd thought that

Jemus was an independent source of advice. Jemus did not tell Shepherd that he

was discussing a compensation package with WBP for any individuals he saw who

eventually decided to join Loba. As far as Shepherd was aware, the financial

analysis that Jemus provided to him was completely accurate.

(iv) Collier

[982]

Collier was referred to Jemus by Shepherd. He had no previous

relationship with Jemus. Collier saw Jemus on one occasion. Jemus provided

Collier with an analysis of what could be available to him under the PSSP and

under the Loba RTA. Collier did not ask Jemus for advice as to what he should do,

and Jemus did not give him that advice. Collier did not fully understand

everything that Jemus was explaining to him and he felt that he needed additional

clarification from sources in addition to Jemus, such as Parent. Collier had no

reason to believe that the numbers given to him by Jemus were incorrect. Due to

the passage of time, Collier could not remember the nature of his discussions with

Jemus. The Defendant has not proven that Jemus did not tell Collier that he had a

relationship with Parent or would be receiving compensation if Collier joined

Loba.

(v) Armstrong

[983]

Armstrong was referred to Jemus by Buxton. He had not heard of

Jemus or Pension Positive before this time. Armstrong had two telephone

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conversations with Jemus. During the first, Jemus explained the Loba RTA,

during the second Armstrong posed questions and obtained further clarification

about aspects of the Loba arrangements. Jemus provided him with the names of

two individuals who had obtained a financial analysis from Jemus prior to having

their pension entitlements transferred under other RTAs. Armstrong contacted one

of these individuals, who confirmed that the numbers Jemus had generated had

been accurate. Armstrong has no reason to believe that the numbers provided to

him by Jemus were not accurate.

[984]

Armstrong understood that Jemus would get a finder’s fee through the

transfer of Armstrong’s pension under the Loba RTA, and he would get a

percentage of future investments. This did not trouble Armstrong. Armstrong

spoke to two independent financial advisors about Jemus’ calculations and about

the 7.5% fee remaining with Loba or WBP. His advisors said that this was not

unreasonable.

(vi) Dufour

[985]

Dufour was referred to Jemus by a colleague who had attended a pre-

retirement course. Dufour understood that Jemus was a specialist regarding

pensions. She met with Jemus on approximately six occasions to receive financial

advice relating to retirement. When it became apparent to Jemus that Dufour

might be interested in consulting after resigning from the public service, he

introduced her to the concept of RTAs and, more particularly, the Loba RTA.

Jemus did not advise Dufour that he was negotiating a compensation agreement

with Parent and would likely benefit financially if Dufour joined Loba. Jemus

went with Dufour for her first meeting with Parent. She continued to see Jemus

after she met Parent and continued to review the figures with Jemus.

(b) Did Jemus owe a fiduciary duty to the Plaintiffs and Dufour?

[986]

The onus is on the Defendant to establish that Jemus owed a fiduciary

duty to the Plaintiffs and Dufour. The evidence, which I have just reviewed,

regarding the nature of the relationship between the Plaintiffs/Dufour and Jemus is

sparse. Neither Dufour nor any of the Plaintiffs brought an action against Pension

Positive or Jemus for breach of a fiduciary duty. None alleged that Pension

Positive or Jemus had breached any duties owed to them. None criticized the

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information Jemus had provided to them. All considered that information to have

been accurate and helpful.

[987]

Despite this, the Defendant submits that Jemus owed fiduciary duties

to Dufour and to those Plaintiffs who consulted him, and that he breached those

duties by not advising them that he would receive a finder’s fee for each individual

who joined Loba after having seen Jemus. Jemus denies that any such fiduciary

duty existed in regard to any of the Plaintiffs or Dufour.

[988]

Some aspects of Jemus’ relationship with the Plaintiffs and Dufour

support the existence of fiduciary duties.

[989]

As discussed in regard to Parent, due to the complexity of the subject

matter and its inaccessibility to the average person, the Plaintiffs and Dufour were

vulnerable. Jemus realized this. As well, Jemus realized the importance of the

subject matter to the Plaintiffs and Dufour. Before Jemus prepared the financial

analysis for an individual, that individual would have completed an intake

questionnaire required by Pension Positive.⁷⁸⁸

That questionnaire sought

information about the individual’s age, personal circumstances, income, assets,

years of service, retirement goals, and other employment benefits. The individual

shared this confidential information with Pension Positive on the understanding

that it would be used only for his or her benefit. It was clear to Jemus, both from

these questionnaires and from his interviews with Dufour and the Plaintiffs, that

their pensions were significant assets that were very important to their financial

security. Jemus understood that Dufour and the Plaintiffs would count on him to

provide an accurate financial analysis and that they would rely on that analysis in

making decisions about when and how to access their pension entitlements.

[990]

In regard to Dufour, there are two additional factors. Dufour had an

ongoing relationship with Jemus as evidenced by the six meetings she had with

Jemus. Dufour looked to Jemus for financial advice relating to her retirement

options. It was Jemus who introduced Loba to Dufour.

[991]

Other aspects of Jemus’ relationship with Dufour and the Plaintiffs

militate against the existence of fiduciary duties.

[992]

In the case of Shepherd, Collier, Armstrong and Dufour, Jemus had no

pre-existing relationship with the Plaintiff. In the case of Findlay and Ault, each

had consulted Jemus previously – but that had been years earlier and had not led to

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an ongoing relationship. Thus, when the Plaintiffs consulted Jemus in 2000, they

did not expect a sense of loyalty on Jemus’ part arising from a long-standing

advisory relationship. In all cases but Dufour, Jemus met with (or in the case of

Armstrong spoke with) the Plaintiffs on only one or two occasions to explain his

financial analysis.

[993]

All of the Plaintiffs, but not Dufour, confirmed Jemus’ evidence that

he had not provided them with advice or recommendations as to what choices they

should make. In regard to all of the Plaintiffs and Dufour, Jemus provided them

with an analysis explaining which options were or were not financially

advantageous to them. He pointed out the disadvantages, as well as the

advantages, presented with the Loba option. The Plaintiffs and Dufour used that

information, along with information they gleaned elsewhere, in deciding whether

or not to join Loba. Most significantly, all of the Plaintiffs, but not Dufour, went

to Jemus seeking specific information about the Loba RTA. It was those Plaintiffs,

and not Jemus, who initiated the discussion about the Loba RTA. Jemus did not

try to push the Loba option on any of those Plaintiffs.

[994]

Jemus did not hold himself out as having any special knowledge or

information about the Loba arrangements, aside from being able to present a

financial analysis about the income available if an individual chose the Loba RTA.

In all cases, Jemus referred the individual to Parent if he or she was interested in

what Loba had to offer.

[995]

Neither Dufour nor any of the Plaintiffs was unsophisticated,

uneducated, or vulnerable due to age, illness, disability, economic hardship, or any

other personal factor. They had other potential sources of information of which

they were fully aware.

[996]

Neither Dufour nor any of the Plaintiffs delegated any decision-

making authority or discretion to Jemus.

[997]

No evidence was adduced as to what, if any, professional standards,

rules of conduct or professional ethics applied to Jemus in regard to the type of

information he was providing Dufour and the Plaintiffs.

[998]

In these circumstances I find that Jemus was not in the position of a

fiduciary in regard to Findlay, Ault, Shepherd, Collier and Armstrong. However,

he was in a fiduciary role in regard to Dufour. I consider Dufour’s situation

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different because she had consulted Jemus for advice, as well as information,

concerning her retirement options. She developed a relationship with him over a

period of time and in those circumstances would have had higher expectations on

him for loyalty to her interests than the other Plaintiffs would have had. Finally, it

was Jemus who introduced Dufour to Loba.

(c) Did Jemus breach his fiduciary duty to Dufour?

[999]

I accept Jemus’ evidence that, when he was explaining to the

individual that he or she was guaranteed to receive 92.5% of the amount

transferred to the Loba pension plan from the PSSP, he advised that the remaining

7.5% was to pay for the administration of the Loba pension plan and to pay for

commissions. I find, however, that at no point did Jemus tell Dufour that he or

Pension Positive in particular might receive a financial benefit if Dufour joined

Loba. When Dufour was meeting with Jemus and when she decided to resign from

the public service to join Loba, Jemus had not yet concluded an agreement with

Parent regarding the compensation he would receive if he referred persons to Loba.

Nevertheless, negotiations regarding such an arrangement had been underway well

before Dufour consulted Jemus and I find that Jemus believed when he introduced

Dufour to Loba that he likely would receive a commission for doing so.⁷⁸⁹As a

fiduciary, Jemus was obliged to inform Dufour that he stood to gain if she joined

Loba so that she understood that in providing her with advice, he was not a totally

disinterested advisor. Jemus breached that duty. ⁷⁹⁰

[1000]

No evidence was adduced as to how Dufour’s situation would be any

different had Jemus not breached his fiduciary duty to her. There is no evidence

that, had Dufour known of Jemus’ financial arrangements with WBP, she would

not have relied on Jemus’ financial analysis, would not have met with Parent,

would not have left the public service when she did and would not have joined

Loba. Consequently, while Jemus breached his fiduciary duties to Dufour, I

cannot find that any damages flowed therefrom.

Is the Defendant liable for breach of fiduciary duty?

[1001]

In their written submissions, Parent, Loba and WBP argue that as the

administrator of the PSSP, the TBS owed a fiduciary duty to the Plaintiffs. The

Plaintiffs did not sue the Defendant for breach of a fiduciary duty. Parent, WBP

and Loba did not defend the main action. Jemus did defend the main action, but

not on this basis. In their Defence to the Third Party Claim, the Third Parties did

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not allege any breach of fiduciary duty on the part of the Defendant as an answer to

the Defendant’s claim for contribution and indemnity. Consequently, this issue

need not be canvassed.

Damages

Causation of Damages

(a) But for Test

[1002]

The Defendant submits that the Defendant’s alleged

misrepresentations were not the cause of the Plaintiffs’ losses.

[1003] There is no liability for negligent misrepresentation unless the plaintiff

has suffered some loss as a result of the reliance on the negligent

misrepresentation. Normally, the plaintiff bears the burden of showing that “but

for” the negligent act or omission of the defendant, the injury would not have

occurred and the plaintiff would not have incurred the damages in question. So

long as a defendant’s act is a cause of the plaintiff’s damage, the defendant is fully

liable for that damage.⁷⁹¹

[1004]

In certain situations a “material contribution” test will suffice to

establish causation. There are two requirements: (1) for reasons beyond the

plaintiff’s control, it must be impossible for the plaintiff to prove that the

defendant’s negligence caused the plaintiff’s injury using the “but for” test; and (2)

it must be clear that the defendant breached a duty of care owed to the plaintiff,

therefore exposing the plaintiff to an unreasonable risk of injury, and the plaintiff

must have suffered that form of injury. One situation recognized as requiring an

exception to the “but for” test is where it is impossible to prove what a particular

person in the causal chain would have done had the defendant not committed a

negligent act or omission.⁷⁹²The Plaintiffs can meet the “but for” test in the

circumstances of these actions and need not rely on the “material contribution”

test.

[1005]

The plaintiff seeking damages in an action for negligent

misrepresentation is entitled to be put in the position he or she would have been in

if the misrepresentation had not been made.⁷⁹³The plaintiff must establish what

that position would have been on a balance of probabilities. The fact that this

cannot be determined with any certainty does not mean that the court should not do

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its best, based on the available evidence, to calculate the loss.⁷⁹⁴The defendant

need not put the plaintiff in a better position than his or her position would be

absent the defendant’s tortious conduct. As well, where there is a second wrongful

act, or contributory negligence of the plaintiff, after or along with the wrongful act

of the defendant, each tortfeasor is entitled to have the consequences of the acts of

the other tortfeasor, or the negligent plaintiff, taken into account.⁷⁹⁵

[1006]

Usually the plaintiff’s position is that, absent the misrepresentation,

the plaintiff would not have entered into the transaction. Once the loss occasioned

by the transaction is established, the plaintiff has discharged the burden of proof

with respect to damages. In circumstances where a defendant alleges that the

plaintiff would have changed his or her position even in the absence of the

negligent misrepresentation, the burden of proof rests on the defendant to establish

that this would have been the case. ⁷⁹⁶

[1007]

In none of the cases has the Defendant proved on a balance of

probabilities that, absent the negligent misrepresentations of the Defendant, the

Plaintiff would have left the public service when he or she did or at any point

thereafter, short of the date which was the Plaintiff’s probable retirement date.

Therefore it is taken as a fact that, had the Defendant advised the Plaintiffs prior to

the effective date of their resignation from the public service of the significant risk

with Loba-type arrangements identified by the CRA, the Plaintiffs would not have

resigned from the public service when they did to join Loba. It was the act of

leaving the public service when they did to join Loba that resulted in the damages

which the Plaintiffs incurred because Loba did not provide them with the same

salary and other benefits as those to which they would have been entitled through

continued employment with the public service. The Plaintiffs’ leaving the public

service to join Loba was the pre-condition to the Plaintiffs incurring a loss and

would not have happened absent the Defendant’s misrepresentations.

(b) Intervening Event: De-registration of the Loba Pension Plan

[1008]

The Defendant submits that the Plaintiffs’ alleged losses arose directly

from the failure to transfer funds from the PSSP to the Loba pension plan, that this

failure occurred because Loba’s pension plan was de-registered in 2005, and the

de-registration was an intervening event not directly caused or contributed to by

the conduct of the Defendant. The Defendant argues that WBP, Loba and Parent

were solely responsible for the revocation of the Loba pension plan.

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[1009]

There is no question that the Plaintiffs would not be suing the

Defendant for losses had the Loba pension plan not been de-registered, thereby

making transfers under the Loba RTA impossible to complete. The Plaintiffs’

financial circumstances would have been what they anticipated they would be

when resigning from the public service; or, to the extent that they were not, the

Plaintiffs would have had no recourse against the Defendant or any of the Third

Parties because they would have voluntarily assumed the risk of such losses.

However, this does not negate a finding that the Defendant’s misrepresentations

caused the Plaintiffs’ losses. The de-registration of the Loba pension plan, and the

indefinite suspension of transfers under the Loba RTA, would not have had any

impact on the Plaintiffs had they not first resigned from the public service to join

Loba. The Plaintiff’s resignation was the first step in the chain of events that

resulted in his or her losses. The resignation would not have occurred absent the

Defendant’s negligent misrepresentations.

(c) Plaintiffs Leaving the Public Service for Reasons Other Than the

Loba RTA and Pension Promise

[1010]

The Defendant submits that the Plaintiffs were prepared to leave the

public service for reasons other than the Loba RTA opportunity. The evidence is

woefully inadequate to persuade me that any of the Plaintiffs would have left the

public service when they did, or at a date prior to the date I have indicated in the

section of the Assumed Retirement Date below, if it were not for the Loba RTA

opportunity. In regard to Dufour, I have found that she would have left the public

service shortly after she did even if the Loba RTA were not available.

Foreseeability of Losses

[1011]

The Defendant submits that, based on the evidence available to it in

October 2000, it was not foreseeable to the Defendant that individuals who left the

public service to join Loba would not have comparable salary and pension benefits

with their new employer.

[1012]

What was known to the Defendant was that Loba did not guarantee

work or income to any of the Plaintiffs when they joined Loba. The Plaintiffs were

expected to find their own work and to negotiate the best contractual terms they

could with the organizations with which Loba signed contracts. This information

meant that the Defendant appreciated, or should have appreciated, that there was a

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risk that the Plaintiffs would not receive the same earnings through Loba that they

would have received as public servants. As well, in that the Loba standard form

employment agreement, of which the Defendant had a copy in June 2000, made no

mention of any employment benefits aside from the Loba pension plan, the

Defendant realized or should have realized that the Plaintiffs may not have had

access to health or life insurance through Loba.

[1013]

The Defendant argues that, if damages are payable, they should be

calculated as the difference between what the Plaintiffs hoped to gain in pension

benefits by joining Loba in comparison with what Parent advised them their PSSP

pension was worth at the time. Otherwise, the Plaintiffs should not recover

anything for their loss of salary or other employment benefits, because when

joining Loba, they were prepared to forego such public service benefits and accept

the lower income and absence of health and life insurance at Loba.

[1014]

Although the calculation of loss in this fashion would be appropriate

if the Defendant’s negligence related to the actual de-registration of the Loba

pension plan or the refusal to transfer pension monies under the Loba RTA – that is

not the basis of the Plaintiffs’ claim. Rather, their claim is for negligent

misrepresentation, and damages for that cause of action are based on where the

Plaintiffs would be had the negligent misrepresentation not occurred. I have found

that the Plaintiffs would have stayed public servants.

Taxation of Damages for Pension Loss

[1015]

Krishna in The Fundamentals of Canadian Income Tax⁷⁹⁷relying on

London & Thames Haven Oil Wharves Ltd. v. Attwooll,⁷⁹⁸provides the following

statement of principle:

The taxation of damages depends upon the nature of the underlying legal right

that leads to the payment. On what account did the taxpayer receive the

damages? Generally, damages in lieu of taxable receipts are taxable. Damages

for non-taxable receipts are not taxable.

This applies whether the right in question arises from an obligation to pay damages

for a tort or whether the right arises from another cause of action. The court must

determine whether the loss to the plaintiff in lieu of which damages will

compensate would have been taxable in the plaintiff’s hands, remembering that

“the characterization of damages as taxable income or non-taxable capital receipts

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depends upon the nature of the legal right settled and not upon the method used to

calculate the award.”⁷⁹⁹

[1016]

The loss of the Plaintiffs to be compensated is the loss of salary,

pension and severance pay – all forms of income on which income tax would have

been payable had these monies been received in the normal course. Consequently,

I find that any damages awarded to replace salary, pension income and severance

pay that the Plaintiffs would have received had they continued in the public service

until their assumed retirement dates will be taxable in their hands in the year of

receipt.

Expert Evidence

[1017]

Each Plaintiff, other than Luck, relied on the expert evidence of John

Christie (“Christie”), an actuary, to establish the loss he or she sustained in the

value of his or her PSSP pension as a result of leaving the public service when he

or she did in 2000 and thereafter not accruing benefits under the PSSP. Christie

did not purport to do an overall calculation of the Plaintiffs’ pension losses, taking

into account any pensions to which they were entitled through other employers,

such as Loba. Neither the Defendant nor the Third Parties tendered any expert

evidence to challenge that of Christie, though the Defendant’s counsel cross-

examined Christie extensively on his methodology.

[1018]

Christie did two calculations of the present-day value of each

Plaintiff’s PSSP pension as of November 1, 2007 – a date shortly after Christie

testified at trial. The first is based on the reality that the Plaintiff ceased to be a

member of the PSSP in 2000 and started to receive the PSSP pension on the date

that the Plaintiff did or will start to receive that pension, as stipulated by the

Plaintiffs’ counsel. The second is based on the assumption that the Plaintiff

continued to work with the public service until an assumed retirement date

stipulated by the Plaintiffs’ counsel. That assumed retirement date is the date that

the Plaintiff asserts would have been the date that he or she would have ceased to

work for the federal public service had the Plaintiff not chosen to join Loba.

[1019]

In the calculations of both the actual and hypothetical pension

benefits, Christie took into account the value of survivor benefits payable to a

surviving spouse, taking into account the mortality tables applying to both the

Plaintiff and his or her spouse. He also took into account the impact of the CPP

- 327 -

offset. In the calculation of the hypothetical benefits, Christie also took into

account the cost of the employee contributions that the Plaintiff would have to pay

until his or her hypothetical retirement date.

[1020]

In comparing the November 1, 2007 present-day value of the actual

pension received by the Plaintiff to the hypothetical pension that would have been

received with a later hypothetical retirement date, in every case in which the

Plaintiff eventually chose to receive a PSSP pension backdated to October 2000,

the value of the actual pension received up to November 1, 2007 was greater than

the value of the hypothetical pension that would have been received up to that date.

This was due to the longer period of receipt of the actual pension. This reflected a

gain to be offset by any pension loss to be suffered by the Plaintiff from November

1, 2007 forward. In that each Plaintiff paid income tax on the pension payments he

or she received, and would have had to pay tax on the hypothetical pension

payments, Christie discounted both by the average 2007 tax rate of 13.5% to

produce a net figure representing the actual benefit to the Plaintiff for having been

in receipt of a pension for the period prior to November 1, 2007. In regard to the

calculation of hypothetical benefits, Christie also discounted the cost of employee

contributions by the same percentage, since the Plaintiff got to deduct this cost for

income tax purposes. His choice of 13.5%, although potentially low for some

Plaintiffs, maximized the gain during this period, and therefore was a conservative

estimate favouring the Defendant and a reasonable assumption to make for the

purpose of these calculations.

[1021]

In that any damages award will be subject to tax in the hands of the

Plaintiffs during the year of receipt, and the damages will be added to any other

income on which the Plaintiff pays tax in that year, Christie grossed up the figure

relating to the pre-November 1, 2007 gain to a number that, if discounted by the

Plaintiff’s marginal tax rate, would reflect the after-tax gain to the Plaintiff

calculated for that period.

[1022]

When calculating the present-day value of the future loss after

November 1, 2007, Christie compared the Plaintiff’s actual monthly pension with

his larger hypothetical pension and determined the before-tax monthly pension

loss. Had the Plaintiff received the extra pension income, it would have been

subject to income tax at the Plaintiff’s marginal tax rate. The true loss to the

Plaintiff was therefore the loss of pension income after deducting income tax at the

marginal tax rate. Christie then determined the cost of a lifetime annuity to replace

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that loss in after-tax income. He then grossed up that cost to a number that, if

discounted by the marginal tax rate applicable to the Plaintiff, would leave the

Plaintiff with the after-tax dollars necessary to purchase the annuity. From this

Christie deducted the grossed up value of the pre-November 1, 2007 gain to offset

the post-November 1, 2007 loss, producing the net pension loss being claimed by

the Plaintiff.

[1023]

The determination of the cost of a lifetime annuity to cover future

pension loss was a theoretical exercise in that the PSSP is a fully indexed plan, but

fully indexed annuities cannot be purchased on the market. Christie used as his

starting point the cost of a level annuity on the market because he considered the

purchase of a prescribed annuity the most tax-efficient way of replacing the

Plaintiffs’ pension loss. He discovered that the market quotations for a prescribed

level annuity were roughly equivalent to using the CIA Transfer Value

Recommendations for level pensions, but modifying them by reducing the interest

rates by one percentage point. Christie’s evidence was that the difference between

the prescribed annuity rates for level pensions and the CIA Transfer Value

Recommendations for level pensions is due to the insurance company’s margin for

its own expenses in issuing the annuity and its own profit margin.

[1024]

Christie then looked at the CIA Transfer Value Recommendations for

fully indexed pensions and reduced the interest rates by one percentage point to

reflect what fully indexed annuities would cost on the market, if they were

available.

This interest rate modification to the CIA Transfer Value

Recommendations for fully indexed pensions results in a higher present value

factor, increasing damages.

[1025]

No evidence was adduced that any of the Plaintiffs will in fact be

purchasing an annuity with any damage award they receive. Consequently, there is

no evidence that they will incur the extra costs associated with the purchase of an

annuity in order to actually replace the loss of pension income. In these

circumstances, I find that, at this stage in Christie’s calculations, damages should

be calculated using the CIA Transfer Value Recommendations as a reference point

for the value of a fully indexed pension, and not Christie’s theoretical calculation

of the cost of a fully indexed prescribed annuity if such a product was available on

the market.

- 329 -

[1026]

Subject to this one qualification, I accept the methodology employed

by Christie as a reasonable method of calculating the Plaintiffs’ loss regarding the

value of his or her PSSP pension. His calculations will have to be redone,

however, to take into account this modification, any finding I make regarding

assumed retirement date, changes in interest rates and the passage of time from

November 1, 2007 to the date payment is to be made. When these new

calculations are done, the marginal tax rate applied to each Plaintiff to reflect the

fact that their damage awards will be taxable in their hands in the year of receipt

shall be adjusted to reflect the true tax rate to be applied, taking into account the

level of damages to be received and their income from other sources.

[1027]

I reject the Defendant’s assertion that little weight should be assigned

to Christie’s evidence because he failed to act as a neutral friend of the court. The

Defendant criticized Christie’s acceptance of the hypothetical retirement dates

proposed by the Plaintiffs’ counsel. In my view, considering Christie’s limited

retainer, it was appropriate for Christie to do his calculation based on those

hypothetical dates. Ultimately it is up to the Court to decide what the date should

be based on all of the evidence and, in this regard, Christie’s opinion as to the most

probable date is of minimal, if any, relevance.

Assumed Retirement Date

[1028]

A key determination in the calculation of both salary and pension loss

is the date it is assumed each Plaintiff would have resigned from the federal public

service, had the Plaintiff not resigned in 2000 to join Loba. Each Plaintiff testified

as to the date he or she contemplated leaving the public service, prior to becoming

aware of the Loba option. This evidence must be considered in the context of the

evidence as a whole, including: (1) the Plaintiff’s age, health, family

circumstances, financial circumstances, career to date, satisfaction with that career,

years of service under the PSSA, and entitlements under the PSSA; (2) the

availability of work for the Plaintiff within the public service; (3) plans within the

Plaintiff’s family; (4) other opportunities available to the Plaintiff outside the

federal public service; and (5) any other evidence relating to the circumstances and

the knowledge of the Plaintiff before any negligent misrepresentations were made

to the Plaintiff regarding Loba. Hindsight cannot be used in determining the

assumed retirement date; nevertheless, subsequent events, such as the length of

time the Plaintiff actually continued to work, may help to confirm the

reasonableness of the assumed retirement date chosen.

- 330 -

[1029]

As an aspect of their damages claims, it is for the Plaintiffs to prove

that they would have stayed in the public service to a hypothetical retirement date

in the future, had they not left to join Loba.

[1030]

The Defendant argued that considerable weight should be placed on

the probability that a public servant of a certain age with certain years of service

would retire in any given year, based on plan experience as documented in the

Actuarial Reports on the PSSP prepared every three years for funding purposes by

the Office of the Superintendent of Financial Institutions.⁸⁰⁰The Actuarial Reports

provide a backdrop against which a Plaintiff’s stated intention about a retirement

date can be gauged for reasonability; however, the probabilities expressed in those

reports are not determinative of the issue of an assumed retirement date. A specific

finding of fact regarding an assumed retirement date must be made for each

Plaintiff given all of the circumstances at the time the Plaintiff actually decided to

resign from the public service.

[1031]

The Defendant argues that the evidence supports a finding that Parent

advised all of the Plaintiffs not to leave the public service just to take advantage of

the Loba RTA, and to consider the Loba RTA only if they were planning to leave

or retire from the public service in the near future in any event. Dufour testified

that Parent clearly gave her this message. Ault, Shepherd, Collier, Temple and

Luck testified that they had no recollection of Parent saying this to them. Nobert

did not remember whether Parent told her this, though he did tell her that she

would not want to leave the public service prior to her 50^thbirthday, and he did not

apply any pressure for her to join Loba. No evidence on this issue was adduced

from Findlay or Armstrong.

[1032]

I find that in all of his interviews with the Plaintiffs, Parent refrained

from exerting any pressure on them to join Loba. I find that Parent made it clear to

all of the Plaintiffs that they should not resign from the public service to join Loba

simply because they might receive more value for their PSSP pension at that point

in time. He encouraged them to look at the entire picture, including giving up

work that they may find interesting, a guaranteed salary and other employment

benefits. Moving to contract or consulting work or retiring from the workforce

over the few years had to be something that appealed to the Plaintiffs at that

particular time in their career; otherwise, the Loba RTA was not for them.

- 331 -

[1033]

The Defendant argues that this should result in a finding that the

Plaintiffs would have resigned or retired from the public service shortly after

October 2000 – even if they had not joined Loba. This conclusion does not

necessarily follow. I find that all of the Plaintiffs, for different reasons, were open

to the idea of leaving the public service. Until the fall of 2000, they had not

decided to do so because it would not have been advantageous to them financially.

The Loba RTA changed that and made resignation from the public service

financially feasible.

(a) Findlay

[1034]

Findlay testified that, prior to joining Loba, his intention had been to

retire from the public service and commence to receive his PSSP pension when he

turned 60 years of age (August 4, 2008). The Defendant submits that, had Findlay

not joined Loba, he likely would have left the public service in May 2007 when he

would have had 30 years of service and would have been 58 years of age. The

evidence relied on by the Defendant to support this conclusion was that Mr.

Findlay would have been entitled to an unreduced pension at that time and the

PSSP experience was that between 57%⁸⁰¹and 65%⁸⁰²of male public servants had

retired by the time they attained 60 years of age with 31 years of service.

[1035]

I accept Findlay’s evidence that a heavy workload and stress at

Environment Canada in Ottawa had resulted in his seeking the Interchange Canada

Agreement with Pollution Probe. His evidence was that he had been content

working with Pollution Probe and wished to continue working there. There was no

evidence as to whether the Interchange Agreement between Environment Canada

and Pollution Probe would have to have ended at any particular point or as to what

work would then have been available for Findlay back at Environment Canada.

There was no evidence regarding Findlay’s personal circumstances and the reasons

why it would have been more or less likely for him to retire prior to his 60^th

birthday.

[1036]

I found Findlay to be a candid and credible witness. Nevertheless,

although I accept his evidence that in the fall of 2000, his intention had been to

retire when he turned 60 in 2008, I find that, had Findlay not joined Loba, it was

probable that Findlay would have retired on May 30, 2007, when he had completed

30 years of service and could receive an unreduced pension. The work

environment at Environment Canada, where Findlay had spent his entire career,

- 332 -

was not conducive to keeping employees beyond the first date they could obtain an

unreduced pension – especially when they had opportunities elsewhere to continue

working.

(b) Ault

[1037]

Ault’s evidence was that in September 2000, she had no plans to leave

the public service; she anticipated staying until February 15, 2007 so as to have 25

years of pensionable service under the PSSA. The Defendant’s position is that, had

Ault not taken the Loba option in October 2000, she would have left Environment

Canada before February 2007, and more particularly on her 60^thbirthday on

December 5, 2002.

[1038]

I find that in the summer of 2000, Ault had just completed a large

project for Environment Canada and she was starting to think about what she could

do next. I find that, although she had no specific plans to leave Environment

Canada, she was open to other options, including looking at other departments.

[1039]

Ault acknowledged that workload stress and the culture in

Environment Canada were factors that influenced her decision to leave when she

did. She agreed that the EPS was chronically underfunded following the program

review adjustments of the mid-1990s with negative consequences on workload and

morale. Ault did not believe that the work demands were sustainable at

Environment Canada. In her September 12, 2000 note to her compensation advisor

seeking her service and salary records, Ault stated that she was having an analysis

carried out by a financial advisor “to determine the benefits of leaving the federal

government prior to the age of 60 years”.⁸⁰³Wright testified that in 1999, Ault had

advised her that she probably would be retiring in two to three years and that she

would assist in the middle of 2001 to work on succession planning.

[1040]

In the fall of 2000, when Ault consulted Jemus, she indicated in his

standard form questionnaire that her desired date of retirement was in 2002, when

she attained 60 years of age. In a September 14, 2000 e-mail, Ault specifically

asked for a comparison of the transfer option to retirement at age 60 with a

government pension. In late August or early September, Ault told Wright that she

was considering a transfer package that was available only until October 15^th. She

advised Wright that she would have to work for the company at least one more

- 333 -

year, and then might possibly retire. Ault was entitled to an unreduced pension

once she turned 60.

[1041]

I am satisfied, based on all of the evidence relating to Ault that, had

she not joined Loba, she would have retired from the public service and

commenced to receive her pension no later than on her 60^thbirthday (December 5,

2002). That is not to say that she would have ceased working at that time. The

likelihood was that following retirement, she would have attempted to work on

contract as a consultant or engage in some other income-earning endeavour.

[1042]

In arriving at this conclusion, I am considering only the evidence that

relates to Ault specifically. The Defendant also points to the PSSP experience that

between 80%⁸⁰⁴and 84%⁸⁰⁵of female public servants had retired by the time they

attained 64 years of age with 25 years of service. These statistics suggest that my

finding is reasonable.

(c) Shepherd

[1043]

I find that in September 2000, Shepherd had no immediate plans to

leave the public service. His intended retirement date was at age 55 (June 7,

2004), when there would have been no penalties in the calculation of his pension

entitlement. I find that, had Shepherd not left the public service to join Loba, he

would have retired from the public service on June 7, 2004.

[1044]

Christie’s evidence about probabilities supports the finding that this

would have been the earliest date on which Shepherd would have retired. The

PSSP experience was that only between 32%⁸⁰⁶and 41%⁸⁰⁷of male public servants

had retired by the time they attained 55 years of age with 31 years of service.

(d) Collier

[1045]

In the fall of 2000, Collier was looking for a change from his work at

CAC and had applied, unsuccessfully, for a lateral transfer to Health Canada. I

find that he had no immediate thoughts of retiring from the public service. I accept

his evidence that, in the fall of 2000, his plan was to retire from the public service

when he turned 55 (October 10, 2004) and this is what he would have done. I

reject the Defendant’s submission that, because Collier was considering resigning

from Loba once the monies from the PSSP had been transferred to the Loba

- 334 -

pension plan (which could have been as early as July 2001), that meant that, had

Collier stayed with the public service, he would have retired on that same date.

[1046]

Christie’s evidence about probabilities, reported above for Shepherd,

supports the finding that October 10, 2004 would have been the earliest date on

which Collier would have retired.

(e) Temple

[1047]

In the fall of 2000, Temple had no imminent plans to retire from the

public service. He was under no pressure to leave Fisheries and Oceans Canada;

he still had one child in high school and one in university to support. In 2000,

Temple could have retired and received an unreduced pension because his age and

years of service totalled at least 85. Nevertheless, I find that Temple’s intention

was to continue working in the public service until May 13, 2003, when he would

have been entitled to a full pension after 35 years service. The PSSP experience

was that between 71%⁸⁰⁸and 79%⁸⁰⁹of male public servants had retired by the

time they attained 62 years of age with 35 years of service.

(f) Armstrong

[1048]

When Armstrong resigned from the public service in October 2000,

he was 50 years old and had 22 years of service.⁸¹⁰He is claiming that, had he not

joined Loba, he would have continued working for the federal government until his

60^thbirthday on May 2, 2010.

[1049]

According to Armstrong, in the fall of 2000, he had no thoughts of

retiring from the public service. He was married and had three sons. His wife did

not work outside the home. One son was at university and the other two were

heading there. Armstrong’s evidence was that he planned to stay with the public

service until May 2, 2010, when he turned 60.

[1050]

In an e-mail to Shea dated October 3, 2000, Armstrong stated that, if

he joined Loba, he planned to work another five, eight or ten years. He

acknowledged that, during earlier conversations with his wife, he had discussed

working until he had 30 to 35 years of service. It is unclear from the evidence

whether Armstrong would have had 30 years of service on July 31, 2008 or on

- 335 -

January 31, 2009. After 30 years of service, he would have been entitled to an

unreduced pension.

[1051]

The PSSP experience was that between 67%⁸¹¹and 74%⁸¹²of male

public servants had retired by the time they attained 60 years of age with 31 years

of service.

[1052]

I find that Armstrong’s likely retirement date, had he stayed with the

public service, would have been after 30 years of service. Two key factors in his

not retiring earlier were that his wife did not work outside the home and he had

three sons to help through university.

(g) Luck

[1053]

Luck’s evidence was that, in the summer of 2000, he was planning to

retire from the public service on April 17, 2003, after he had 25 years of service.

Had he been able to transfer his pension to Loba, he would have retired in 2001

because the pension monies available to him at that time would have been greater

than what he would have received had he continued to work with the public service

until 2003. I find that Luck’s likely retirement date, had he stayed with the public

service, would have been on April 17, 2003.

(h) Nobert

[1054]

Nobert’s evidence was that in September 2000, her planned retirement

date was once she had attained 30 years of service, which would have been in the

spring of 2004. Nevertheless, Christie prepared his report on the basis of Nobert

retiring after her 54^thbirthday on September 23, 2004. The Defendant’s position is

that Nobert has not established that, had she not taken the Loba option, she would

have remained in the public service until September 2004. I agree.

[1055]

I find that in September 2000, Nobert’s intention was to retire from

the public service once she had 30 years of service, which would have been in

March 2004. On that date she would have been entitled to an unreduced pension.

Nobert had already shown in her earlier career her keen interest in sailing and

travelling, and working full-time in the public service got in the way of these

pastimes. Nobert and her husband did not have children that they were continuing

to support. In July 2000, Nobert had inquired of her compensation advisor what

her pension would be if she retired in September 2000 or 2002.

- 336 -

[1056]

Decisions Nobert took after leaving the public service offer credence

to this finding. From November 20, 2003 to April 30, 2004, Nobert was on an

extended leave from the Office of Disability Issues so that she could travel with

her husband.⁸¹³While working on the Interchange Agreement with the Office of

Disability Issues, Nobert worked a four-day week.

[1057]

The PSSP experience was that only between 10%⁸¹⁴and 22%⁸¹⁵of

female public servants had retired by the time they attained 54 years of age with 30

years of service. Nevertheless, Nobert’s particular circumstances persuade me that

she would have.

(i)

Dufour

[1058]

Minimal evidence was tendered at trial regarding Dufour’s intentions

about retirement prior to her learning of the Loba option. Throughout her career

with the public service, she had periodically submitted applications for work

elsewhere. In February 2000, she had submitted an application for work at the

Illinois Geological Survey. I find that she was seeking information from her

compensation advisor and from Jemus about how to maximize the value of her

pension if she were to pursue this opportunity. Based on the limited evidence

tendered at trial, I find that it was likely that, even if the Loba option had not

presented itself, Dufour would have resigned from the public service no later than

October 1, 2000. By this time, she would have had 25 years of pensionable service

in the PSSP. She may have been able to take a leave of absence from the

government while attending the Sydney Olympics. She then would have been

ready to commence employment with the Illinois Geological Survey in October. I

find that the likelihood was that she would have started to collect an unreduced

annuity under the PSSP once she attained 60 years of age.

RRSPs and Additional RRSP Room

[1059]

During the trial, the Defendant adduced evidence as to the

contributions various Plaintiffs made to RRSPs between the time they left Loba

and their assumed retirement date and as to the additional RRSP contributions

various Plaintiffs could have made during this period. It is unclear why this

evidence was tendered. No coherent argument was advanced during submissions

as to how the existence of such RRSPs or the availability of additional RRSP room

- 337 -

should have impacted on the calculation of the Plaintiff’s damages. In my view,

neither can play a role in the calculation of damages.

[1060]

To the extent that Plaintiffs contributed to RRSPs, they had to do so

from their income. From any value to be assigned to those RRSPs would have to

be deducted the contributions made by the Plaintiffs. No evidence was adduced as

to the difference between the value of the RRSPs and the contributions to create

them and no calculation was provided as to the net benefit to the Plaintiffs arising

from the deferral of income taxes.

Mitigation of Loss

[1061]

No Plaintiff can recover damages for those losses which were fully

within his or her control and could, through reasonable steps, have been lessened.

The burden of establishing that the Plaintiff could reasonably have taken steps to

reduce his or her damages falls on the Defendant.

[1062]

The Defendant submits that the Plaintiffs should have secured better

contracts or better alternate employment after January 1, 2002; however, no

evidence was adduced at trial respecting any Plaintiff that would tend to show that

better contracts or alternate employment from what the Plaintiffs in fact had would

have been available to the Plaintiffs had they taken reasonable steps to secure it –

subject to the following exceptions.

(a) Shepherd

[1063]

For two weeks in October 2000, Shepherd received no income – either

from the government or from Loba because the Interchange Canada Agreement

had not yet been signed. Shepherd chose to work for the NCR JCTC without

remuneration over this period. Between April 26, 2004 and June 7, 2004,

Shepherd had no employment. He had offered to rejoin the public service for those

six weeks in order to keep working for the NCR JCTC under an Interchange

Agreement, but the government was not interested.

[1064]

The Defendant has not satisfied me that Shepherd failed to mitigate

his damages during these two periods, and therefore no reduction will be made to

his salary loss on this account.

(b) Collier

- 338 -

[1065]

Collier decided to move into full-time teaching in January 2003

because teaching is what he loves. This meant that his salary was reduced from

that which he had been able to earn through contract work with the government

during both 2001 and 2002. For the purpose of calculating the impact Collier’s

choice of moving to Loba had on his earnings in 2003 and 2004, until his assumed

retirement date, Collier’s income from salary shall be assumed to be what he was

earning in 2002, namely $77,800.

(c) Temple

[1066]

Temple did not seek any contract work from October to December

2000. His father had died on September 16, 2000, and as the executor of his estate,

Temple had to spend considerable time in Port Hope closing the household and

managing the estate. When Temple left the public service, he had 22 days of

accumulated vacation time for which he would have been paid. This would have

provided him with time to deal with his father’s estate. It was Temple’s choice not

to seek contract work prior to January 2001. Prior to his resignation from the

public service, Temple had been confident that he would be able to find consulting

work with the government. In fact, he was able to secure such work from January

2001 to December 2003. I find that, had Temple taken reasonable steps to obtain

contract work during the period from October 15^thto December 31, 2000, he would

have been able to do so. Damages will be calculated based on the assumption that,

had Temple remained with the public service, he would have been on an unpaid

leave of absence for that portion of the period from October 15^thto December 31,

2000 which his accumulated vacation leave did not cover.

(d) Luck

[1067]

Although I will go on to find that no damages are payable to Luck due

to his failure to adequately prove the damages that flowed from the various

misrepresentations, I will deal with the issue of mitigation of damages for the

purpose of making findings of fact that could be of use to a reviewing court.

[1068]

Luck’s contract with Systematix ended on June 30, 2001. There is no

evidence that Luck looked for contract work over the summer of 2001. I find that

in the fall of 2001, Luck resumed his search for employment, sending out his

resumé to various government departments that were using the software of which

- 339 -

he had specialized knowledge. When this produced no results, Loba assisted him

in updating his resumé⁸¹⁶and he resent his resumé in January 2002. As well, he

pursued contract options at other government offices, he sought further contracts

through Systematix, and he pursued contracts through other resource companies

while still trying to maintain his status as a Loba employee.⁸¹⁷Luck was offered a

three month casual position with INAC in September 2002, but declined it because

he still wanted to put work through Loba and INAC was not prepared to enter a

contract with Loba. By this time, Loba had sued the government.

[1069]

Due to a trip out of the country in February 2002, Luck was

unavailable to look for work or perform any contract work that might have been

available.

[1070]

I find that Luck failed to mitigate his damages during a period of two

weeks in February and for a three-month period in the fall of 2002 when he could

have had the INAC contract. If I were to allow Luck damages, I would calculate

them based on the assumption that, had Luck remained with the public service, he

would have been on an unpaid leave of absence during these two periods of time.

Otherwise, I have not been persuaded that Luck failed to mitigate his damages.

(e) Nobert

[1071]

Between October 2000 and March 2001, Nobert worked on contract

with the Office of Learning Technologies.⁸¹⁸This was followed by a gap in

Nobert’s contracts, with her making minimal efforts to find contract work. From

September 2001 to May 2002, Nobert became a casual worker for the Office for

Disability Issues. In addition, she worked on contract through Loba with the

Office of Learning Technologies from December 2001 to February 2002.⁸¹⁹At

some point, her Assistant Deputy Minister advised her that it would be better for

her not to do any further work for the Office of Learning Technologies while she

was working for the Office for Disability Issues, and she stopped doing so. From

May 15, 2002 to September 30, 2004, Loba had an Interchange Canada Agreement

with the Office for Disability Issues for Nobert’s services⁸²⁰; however, from

November 20, 2003 to April 30, 2004, Nobert was on an extended leave so that she

could travel with her husband.⁸²¹From November 2001 to September 2004, when

Nobert was working for the Office for Disability Issues, she was working a four-

day week.

- 340 -

[1072]

I find that Nobert did not work for the period from March 2001 to

September 2001 by her own choice. Damages will be calculated based on the

assumption that, had Nobert remained with the public service, she would have

been on an unpaid leave of absence from March 2001 to September 2001, and from

November 20, 2003 to April 30, 2004 when Nobert was on an extended leave so

that she could travel with her husband.

[1073]

From November 2001 to November 19, 2003 and from May 1, 2004

to September 2004, by choice, Nobert worked a four-day week. Nobert’s damages

shall be calculated based on the assumption that, had she continued to work in the

federal public service, she would have worked only a four-day week during these

periods.

(f) Dufour

[1074]

Jemus defended the main action on the grounds that Dufour did not

suffer any damages as a result of her decision to resign from the public service

when she did and, in the alternative, that if she did suffer any damages, they were

as a result of a failure on her part to mitigate damages.

[1075]

Dufour worked full-time for the Illinois Geological Survey from

October 2000 to October 2005. She enjoyed her work and was appreciated there.

Had she wanted to, she could have continued to work for the Illinois Geological

Survey until her 60^thbirthday on June 1, 2012. Despite this, Dufour decided to

resign from the Illinois Geological Survey in October 2005 to return to the Ottawa

area and work as a consultant. Her current earnings were not explored. In case it

is of relevance to a reviewing court, I find that, if Dufour is earning less as a

consultant than she could have earned at the Illinois Geological Survey, then

Dufour would have failed to mitigate her damages from October 2005 forward and

any damages would be calculated on the basis of Dufour having been able to earn

at least what she could have earned through her employment with the Illinois

Geological Survey.

Quantification of Damages

[1076]

In regard to all of the Plaintiffs, their losses should be calculated from

the date their resignation from the public service became effective until their

assumed retirement date.

- 341 -

[1077]

In regard to the calculation of pension loss for each of the Plaintiffs,

the value of the Plaintiff’s entitlement under the Loba pension plan and any IPP or

other pension plan, less the Plaintiff’s contributions to such plans, should be

deducted from the Plaintiff’s losses. The deduction should be grossed up in the

same way as the Plaintiffs’ losses are grossed up to reflect the reality that they will

have to pay income tax on the damages they receive in the year of receipt.

[1078]

In regard to the calculation of pension loss for each of the Plaintiffs,

no deduction from the Plaintiff’s losses shall be made for any contributions the

Plaintiff made to RRSPs in the years in question or for any unused RRSP

contribution room in any year in question.

[1079]

In regard to the calculation of salary loss, the Plaintiffs are entitled to

receive damages based only on the net losses they sustained after taxes as a result

of their not having the benefit of their public service incomes. Consequently, for

each year during which recoverable losses were sustained, an income tax return

will have to be prepared replacing the Plaintiff’s actual earnings as I determine

them to be with what I have found he or she would have earned as a public servant.

This hypothetical income tax return will be compared to the Plaintiff’s actual

income tax return and notice of assessment in the year in question. Any increase in

income tax that would have been payable had the Plaintiff been in receipt of his or

her public service salary will be deducted from the Plaintiff’s salary loss.

[1080]

In regard to the calculation of severance pay loss for all of the

Plaintiffs, the Defendant submitted that in addition to the severance pay actually

received by the Plaintiffs, interest on that severance pay until the assumed

retirement date should have been used to reduce the Plaintiffs’ losses. I accept this

argument.

[1081]

New loss calculations will have to be done for the Plaintiffs based on

these directions, the one qualification made to Christie’s methodology, the

assumed retirement dates that have been found, and the following findings of fact

made in regard to each of the Plaintiffs. I allow all of the Plaintiffs damages for

pension loss, salary loss and severance pay loss in the amounts that will be

determined through the new loss calculations. I will indicate below whether any of

the Plaintiffs are entitled to damages for other losses.

Individual Plaintiffs

- 342 -

(a) Findlay

[1082] For the calculation of all damages it will be assumed that, had he

continued working with the public service beyond October 2000, Findlay would

have retired on May 30, 2007, after attaining 30 years of service, and would have

started to receive his pension on June 1, 2007.

(i)

Pension Loss

[1083]

Findlay accumulated $14,672 in an IPP and $755 in the Loba pension

plan inclusive of interest (of which $377.31 represented employee

contributions).⁸²²

[1084]

Although I have found that had Findlay not joined Loba it was

probable that he would have remained with the public service until he had 30 years

of service, I also find that there was a possibility that Findlay would have chosen to

leave the public service before then. Findlay was not enjoying his work at

Environment Canada due to the heavy workloads and constant stress. It is possible

that, at the end of the Interchange Agreement, Findlay would have decided not to

return to a work situation he was not enjoying. He may have stayed on at Pollution

Probe in another capacity, or he may have sought employment or contract work

elsewhere outside the public service. In these circumstances, I find that it would

be reasonable to discount Findlay’s anticipated pension loss by 10% to represent

the contingency that, due to the poor work environment at Environment Canada

and opportunities elsewhere, Findlay would have resigned from the public service

prior to May 30, 2007.

(ii) Salary Loss

[1085]

Findlay’s salary rate in the federal public service was determined in

accordance with the rates of pay set out in the collective agreement for the

architecture, engineering and land survey group from time to time for employees

classified at the ENG-6 level. His salary at the date of his resignation from the

public service in October 2000, as determined retroactively through a new

collective agreement signed December 19, 2001, was $88,058. The annual salary

rates for employees at the ENG-6 level after October 2000 was as set out in the

rates of pay for the ENG Group published by the Treasury Board on its website.

Throughout the years in question, Findlay would have been entitled to a bilingual

bonus of $800 annually. On December 21, 2000, the Treasury Board and PIPS

- 343 -

signed a Memorandum of Understanding⁸²³which provided for payment of a

terminable allowance to public servants in the ENG-6 category, retroactive to

October 1, 2000. This terminable allowance was part of the employees’ collective

agreement. The terminable allowance was not included as part of an employee’s

salary for pension purposes.

[1086]

The annual salary and terminable allowance rates for an employee at

the ENG-6 level in the Plaintiff’s position were:

Terminable

Year

Salary

Allowance

$ 13,064

$ 13,423

$ 13,759

$ 14,103

$ 14,441

$ 14,802

Bilingual Bonus

$ 800

Effective October 1, 2000

Effective October 1, 2001

Effective October 1, 2002

Effective October 1, 2003

Effective October 1, 2004

Effective October 1, 2005

Effective October 1, 2006

Effective October 1, 2007

$ 88,058

$ 90,259

$ 95,740

$ 98,134

$100,587

$103,001

$105,576

$107,280

[1087]

The Defendant argued that, in calculating the damages to which

Findlay is entitled, the terminable allowance should not be included in the

calculation of the earnings Findlay would have had if he had continued

employment with the public service beyond October 2000 because: (1) the

Memorandum was only signed on December 21, 2000; (2) it provided that the

terminable allowance would not be paid to a person who had ceased to be a

member of the bargaining unit prior to the date of signing of the Agreement; and

(3) Findlay had resigned from the public service in October 2000. This misses the

point. In calculating what his earnings would have been had he not resigned from

the public service, it must be assumed that he would have continued to work with

the public service until the assumed retirement date.

[1088]

The Defendant argued that, as of October 1, 2007, Findlay would not

have been entitled to the terminable allowance because the collective agreement to

which he was subject had expired. I reject this argument. In Professional Institute

of the Public Service of Canada v. Treasury Board,⁸²⁴the Public Service Labour

Relations Board held that a terminable allowance provided for in a collective

agreement continues to be payable pursuant to the “statutory freeze” provisions in

s. 52 of the Public Service Staff Relations Act.⁸²⁵The Board’s decision was upheld

by the Federal Court of Appeal.⁸²⁶

- 344 -

[1089]

Findlay’s income from salary and business from 2000 to 2006, as

reflected in his income tax returns and notices of assessment, was as follows:

Year

Salary

Gross Bus. Income Net Bus. Income

2000 after Oct.15

2001

2002

$ 8,012

$ 84,299

$ 49,770⁸²⁷$ 25,626

$ 11,659

2003

2004

2005

2006

nil

$ 94,500

$101,950

$103,765

$ 80,268

$ 86,505

$ 86,561⁸²⁸

$ 87,749⁸²⁹

[1090]

No evidence was tendered as to what Findlay’s gross business income

was in 2003. Between 2004 and 2006, Findlay deducted approximately 15% of his

gross business income as business expenses. I assume he did the same in 2003 and

find that his gross business income that year was $94,500. Findlay has been in the

same position at Pollution Probe since 1998, when he first went on the Interchange

program. There is no evidence that, once Findlay started to work on contract

directly with Pollution Probe in 2002, his work conditions changed or he was

obliged to incur increased costs in order to generate his contract income. The goal

in assessing damages is to compare the benefits Findlay actually received after he

left the public service with what he would have received had he stayed in the

public service after October 2000. In the absence of a more detailed accounting

and explanation of what business expenses Findlay incurred when working on

contract with Pollution Probe, I decline to allow any of his business expenses for

the purpose of calculating damages. The fact that they might be legitimate

deductions for income tax purposes does not necessarily make them legitimate

deductions for the purpose of calculating losses.

[1091]

Findlay’s salary loss will also be subject to a 10% discount for

contingencies for the same reasons as those provided in regard to his pension loss.

(iii) Severance Pay Loss

[1092]

When Findlay left the public service, he received severance pay of

$31,665.⁸³⁰Had Findlay continued in the public service until August 4, 2008, he

would have received severance pay upon retirement of $71,520. The severance

pay loss will be based on an assumed retirement date of May 30, 2007, subject to a

10% contingency discount.

- 345 -

(b) Ault

[1093] For the calculation of all damages it will be assumed that, had she

continued working with the public service beyond October 2000, Ault would have

retired on her 60^thbirthday on December 5, 2002 and would have started to receive

her pension on January 1, 2003.

(i)

Pension Loss

[1094]

Ault accumulated $2,569.33 in the Loba pension plan inclusive of

interest of $171.20 (of which $1,199.07 represented employee contributions).⁸³¹

[1095] The Defendant submits that Ault’s contributions to her RRSPs

following her resignation from the public service should be deducted from her

pension loss. I have rejected this argument. Nevertheless, in case this is in error, I

make the following findings of fact.

[1096]

Ault made the following contributions to her RRSP:

2000

$27,875 being her severance pay

2001

2003

2004

$ 4,337

$24,000

$ 9,920

Ault did not make any contributions to an RRSP in 2005 although she had unused

room of $5,351.

(ii) Salary Loss

[1097]

Ault’s salary rate in the federal public service was determined in

accordance with the rates of pay set out in the collective agreement for the physical

sciences (“PC”) group from time to time for employees classified at the PC-5 level.

Her salary at the date of her resignation from the public service in October 2000, as

determined retroactively through a new collective agreement signed December 21,

2000, was $86,909. The annual salary rates for employees at the PC-5 level after

October 2000 was as set out in the rates of pay for the PC Group published by the

Treasury Board on its website.

[1098]

The annual salary rates for an employee at the PC-5 level in the

Plaintiff’s position were:

- 346 -

Year

Salary

Effective October 1, 2000

Effective October 1, 2001

Effective October 1, 2002

Effective October 1, 2003

Effective October 1, 2004

Effective October 1, 2005

Effective October 1, 2006

$ 86,909

$ 89,082

$ 94,391

$ 96,751

$ 99,170

$101,550

$104,089

[1099]

Ault’s income from salary and independent contract work from 2000

to 2006, as reflected in her income tax returns and notices of assessment, was as

follows:⁸³²

- 347 -

Year

2000

2001

2002

2003

2004

2005

2006

Salary

Gross Bus. Income Net Bus. Income

$ 69,595

$ 38,280

$ 13,273

$ 51,720

$ 76,239

$ 74,228

$ 59,093

$ 16,435

$ 52,070

$ 27,345

$ 59,670

$ 53,355

$ 26,786

nil

$

nil

$ 37,526

[1100]

Ault deducted from her gross business income expenses relating to her

car, gasoline and parking and a percentage of her house as a home office. No

details were provided regarding these expenses. In the absence of a more detailed

accounting and a true comparison of the difference between what Ault’s expenses

in this regard were when she was a public servant compared to what they became

when she was working on contract, I decline to allow any of her business expenses

for the purpose of calculating salary loss. In doing so, I am not questioning their

legitimacy for the purpose of income tax calculations.

(iii) Severance Pay Loss

[1101]

When Ault left the public service, she received severance pay of

$29,729.⁸³³Had Ault continued in the public service until March 2007, she would

have received $50,042. Ault’s severance pay loss must be recalculated based on an

assumed retirement date of December 5, 2002.

(c) Shepherd

[1102]

For the calculation of all damages it will be assumed that, had he

continued working with the public service beyond October 2000, Shepherd would

have retired on his 55^thbirthday on June 7, 2004 and would have started to receive

his pension on July 1, 2004.

(i)

Pension Loss

[1103]

Shepherd accumulated $17,177 in the Loba pension plan inclusive of

interest of $1,108.50 (of which $8,034.62 represented employee contributions).⁸³⁴

[1104] The Defendant submits that Shepherd’s contributions to his RRSPs

following his resignation from the public service should be deducted from his

- 348 -

pension loss. I have rejected this argument. Nevertheless, in case this is in error, I

make the following findings of fact.

[1105]

Shepherd made the following contributions to his RRSP:

2001

2003

$ 3,253⁸³⁵

$ 20,280⁸³⁶

[1106]

Shepherd had unused contribution room as follows:

2002

2003

2004

$ 13,500⁸³⁷

$ 7,720⁸³⁸

$ 23,220⁸³⁹

(ii) Salary Loss

[1107]

Shepherd’s salary rate in the federal public service was determined in

accordance with the rates of pay for employees in the Executive Group. Shepherd

was classified at the EX-1 level. Shepherd was also entitled to an annual

performance bonus based on an assessment of his performance. From 1996

forward to October 13, 2000, Shepherd always received a performance bonus

based on the category of having met all expectations.⁸⁴⁰In the last couple of years,

he was at the maximum pay for someone in the EX-1 category. In August 1997,

he received a plaque of appreciation for his hard work and dedication. I find that,

it is more likely than not that, had Shepherd continued with the public service until

his retirement date at age 55, he would have received the maximum performance

bonus available each year for someone who met all expectations. Performance

bonuses received by an EX employee are included as part of the employee’s salary

for pension purposes.⁸⁴¹

[1108]

The annual salary for employees at the job rate at the EX-1 level from

2000 to 2004, as published on the Treasury Board’s website,⁸⁴²was:

Year

Salary

Maximum Performance Pay %

5% = $4,720

5% = $4,870

6% = $5,982

8% = $5,110

Effective April 1, 2000

Effective April 1, 2001

Effective April 1, 2002

Effective April 1, 2003

Effective April 1, 2004

$ 94,400

$ 97,400

$ 99,700

$102,200

$104,800

n/a

- 349 -

[1109]

Shepherd’s income from salary from October 15, 2000 to June 7,

2004, as reflected in his T-4s,⁸⁴³was as follows:

- 350 -

Year

Income from Salary

2000 after Oct.15

$ 6,723

$ 99,594

$ 93,399

$101,289

2001

2002

2003

2004 until April 26 $ 47,562

(iii) Severance Pay Loss

[1110]

When Shepherd left the public service, he received severance pay of

$50,831. Had Shepherd continued in the public service until June 7, 2004, he

would have received severance pay upon retirement of $56,431.

(iv) Cost of Replacement Life Insurance

[1111]

On November 28, 2000, Shepherd obtained life insurance coverage of

$174,000⁸⁴⁴to replace the PSMIP. The cost of that replacement coverage for the

period in question was $2,484. Shepherd did not deduct from this the cost he

would have incurred to maintain his supplementary death benefit during this

period. Christie’s evidence was that this cost was minor. I allow $2,000 for this

category of damage.

(v) Cost of Replacement Health Insurance

[1112]

Shepherd is seeking $8,360 for medical and dental expenses that

would have been covered under his medical and dental plans with the public

service for the period from October 15, 2000 to June 7, 2004.⁸⁴⁵Shepherd has

done his calculations taking into account that under his public service medical

plan, he received 80% of his expenses, after an annual deductible of $100 per

family per year, and under the dental plan, he received 90% after a deductible of

$50 per family per year.

[1113]

Shepherd claimed a medical expense tax credit under s. 118.2(1) of

the Income Tax Act in 2002 and 2003 totalling $863, which shall be taken into

account in calculating his damages for these years. As well, Shepherd has not

satisfied me that all of the entries making up $8,360 would have been covered

under his medical and dental plans with the public service. I find that only $7,000

would have been covered.

- 351 -

(d) Collier

[1114] For the calculation of all damages it will be assumed that, had he

continued working with the public service beyond October 2000, Collier would

have retired on his 55^thbirthday on October 10, 2004 and would have started to

receive his pension on November 1, 2004.

(i)

Pension Loss

[1115]

Collier accumulated $31,811 in his University of Ottawa pension,⁸⁴⁶

$18,820.99 in an IPP (of which $5,268.37 represented employee contributions),

and $3,979 in the Loba pension plan inclusive of interest of $285.35 (of which

$1,858.32 represented employee contributions).⁸⁴⁷

[1116]

On January 1, 2003, Collier joined the University of Ottawa pension

plan⁸⁴⁸and became entitled to long-term disability, group life insurance and health

insurance. His earnings from additional overload courses are not included in his

pensionable earnings. When Collier was working with Loba, he established an

IPP, the assets of which were transferred to a registered retirement savings plan.⁸⁴⁹

Prior to establishing the IPP, Collier contributed to the Loba pension plan. He has

received a refund of those contributions.⁸⁵⁰

[1117]

The Defendant submits that Collier’s contributions to his RRSPs

following his resignation from the public service should be deducted from his

pension loss. I have rejected this argument. Nevertheless, in case this is in error, I

make the following findings of fact.

[1118]

Collier made the following contributions to his RRSP:

2000

$39,598 being his severance pay⁸⁵¹

$ 6,800⁸⁵²

2001

2002

2004

$ 5,000⁸⁵³

$ 12,000⁸⁵⁴

(ii) Salary Loss

[1119]

Colliers’s salary rate in the federal public service was determined in

accordance with the rates of pay set out in the collective agreement for the audit

(AU) group from time to time for employees classified at the AU-4 level. His

salary at the date of his resignation from the public service in October 2000 was

- 352 -

$67,616. The annual salary rates for employees at the AU-4 level after October

2000 was as set out in the rates of pay for the AU group published by the Treasury

Board on its website.⁸⁵⁵

[1120]

The annual salary rates for an employee at the AU-4 level in the

Plaintiff’s position were:⁸⁵⁶

Year

Salary

Effective October 1, 2000

Effective June 22, 2001

Effective October 1, 2001

Effective June 22, 2002

Effective June 22, 2003

Effective June 22, 2004

$ 72,102

$ 74,121

$ 76,507

$ 78,420

$ 82,888

$ 84,753

[1121]

In the Interchange Canada Agreement signed by Collier and Health

Canada on June 15, 2001, it stated that Collier’s salary would be $72,115 annually.

Health Canada undertook to reimburse Loba this sum plus 20% for the additional

cost of employer-paid benefits. This was significantly greater than what Collier

had been receiving from Loba and represented the salary to which Collier would

have been entitled had he remained a public servant.

[1122]

On January 1, 2003, Collier entered a five-year contract with the

University of Ottawa as a lecturer in the accounting field. At trial, his intention

was to extend the contract for three further years.

[1123]

Collier’s income from salary and teaching from 1998 to 2006, as

reflected in his income tax forms, was as follows:

Year

1998

1999

Salary

n/a

Part-time Teaching

$ 19,984⁸⁵⁷

$ 18,488⁸⁵⁸

$ 19,766⁸⁶⁰

$ 38,062⁸⁶¹

$ 31,987⁸⁶²

$ 18,430⁸⁶³

$ 6,000⁸⁶⁴

n/a

2000 (Loba salary) $ 7,135⁸⁵⁹

2001

2002

2003

2004

$ 66,768

$ 65,609

$ 54,014

$ 68,912

[1124]

In 2000, 2001 and 2002, Collier filed Declarations of Conditions of

Employment under the Income Tax Act to the effect that he was required by his

- 353 -

employer to pay certain expenses associated with his employment. As a result,

Collier was able to deduct expenses associated with his cellular phone, a rental

computer, and a fax machine. He also deducted a portion of his vehicle expenses,

including parking, because he travelled to his place of work for purposes of

employment. Finally Collier deducted some food and beverage expenses. While

all of these deductions may have been legitimate for income tax purposes, I find

that they are not appropriate deductions from earnings for purposes of determining

Collier’s salary loss. Collier’s out of pocket expenses did not change significantly

when he left the public service to join Loba. As a public servant, he used a bus

pass. As a Loba employee, he chose to use his vehicle, even though he was

attending one office during the period of a contract. There is no evidence that

Collier needed to use his vehicle for work-related purposes. Considering he

always did part-time teaching, his need for a cellular telephone, computer and fax

machine would not have changed significantly.

[1125]

In 1998 and 1999, Collier taught accounting on a part-time basis for

Algonquin College, the University of Ottawa and the Certified General

Accountants of Ontario. He continued to do so once he joined Loba. In 2001 and

2002, Collier increased the amount of part-time teaching he was doing in order to

supplement the lower income he was receiving through Loba. Once Collier

became a full-time lecturer at the University of Ottawa, he reduced the extra

teaching he was doing. In calculating Collier’s damages relating to salary loss, his

earnings under salary listed above shall be taken into account. In addition, any

income he earned from part-time teaching in excess of $20,000 annually in 2001

and 2002 shall be added in to his earnings for those years. No additional part-time

teaching income shall be added to his earnings for 2003 and 2004.

[1126]

As I have already indicated in the section dealing with mitigation of

damages, it will be assumed that Collier’s income from salary during 2003 and

2004 until his assumed retirement date was $77,596 annually, rather than the lower

amount he received through teaching on a full-time basis.

(iii) Severance Pay Loss

[1127]

When Collier left the public service, he received severance pay of

$37,198.⁸⁶⁵Had Collier continued in the public service until October 10, 2004, he

would have received severance pay upon retirement of $48,900.

(iv) Cost of Replacement Life Insurance

- 354 -

[1128]

After leaving the public service, Collier obtained replacement life

insurance on November 28, 2000 for $25,000 and on April 19, 2002 for an

additional $100,000.⁸⁶⁶The cost of that replacement coverage was $1,929. Collier

did not deduct from this the cost he would have incurred to maintain his

supplementary death benefit during this period. As well, both policies were joint

policies with his wife, and his wife would not have been covered under the public

service plan. I allow $1,000 for this category of damages.

(v) Cost of Replacement Health Coverage

[1129]

Collier incurred a cost of $781 for vision care expenses for himself

and his wife between October 2000 and December 2002.⁸⁶⁷However, under the

public service vision care plan, only 80% was refundable, with a maximum of

$200 per person being allowed every two years. Consequently, Collier is only

entitled to recover $400.

(e) Temple

[1130]

For the calculation of all damages it will be assumed that, had he

continued working with the public service beyond October 2000, Temple would

have retired on May 13, 2003, after having attained 35 years of service, and would

have started to receive his pension on June 1, 2003.

(i)

Pension Loss

[1131]

Temple accumulated $973.60 in the Loba pension plan inclusive of

interest (of which $400.31 represented employee contributions).⁸⁶⁸

[1132] The Defendant submits that Temple should have made use of his

unused RRSP contribution room to reduce his pension loss. I have rejected this

argument. Nevertheless, in case this is in error, I make the following findings of

fact. Temple’s unused RRSP contribution room which was as follows:

2000

2001

2002

2003

$ 19,695⁸⁶⁹

$ 22,596⁸⁷⁰

$ 23,547⁸⁷¹

$ 24,555⁸⁷²

(ii) Salary Loss

- 355 -

[1133]

Temple’s salary rate in the federal public service was determined in

accordance with the rates of pay set out in the collective agreement for the

Personnel Administration (“PE”) group from time to time for employees classified

at the PE-4 level. His salary at the date of his resignation from the public service

in October 2000, as determined retroactively under a Treasury Board adjustment

on October 19, 2000, was $65,363 annually. The annual salary rates for employees

at the PE-4 level after October 2000 was as set out in the rates of pay for the CO

Group published by the Treasury Board on its website.

[1134]

The annual salary rates for an employee at the PE-4 level in the

Plaintiff’s position were:⁸⁷³

Year

Salary

Effective October 1, 2000

Effective October 1, 2001

Effective October 1, 2002

$ 65,363

$ 68,335

$ 70,043

[1135]

Temple’s income from salary and independent contract work (net of

expenses) from 2000 to 2003, as reflected in his notices of assessment, was as

follows:⁸⁷⁴

Year

2000

2001

2002

2003

Total Income

$ 78,368

$ 10,809

$ 25,591

$ 53,232 ($8,620 relating to period prior to May 13, 2003)

[1136]

Temple did not seek contract work in the fall of 2000 as a result of the

work he had to do wrapping up his father’s estate. Temple assumed that, had he

stayed in the public service, he would have used bereavement leave and his 22

days of accumulated vacation leave to work on his father’s estate. He would not

have been away from work for the entire period from October 13, 2000 to

December 31, 2000. He claims, therefore, that he would not have lost any income

in the fall of 2000, as he did after he had joined Loba but was not doing any

contract work prior to January 2001. Temple’s total income from the public

service and Loba in 2000 was $78,368⁸⁷⁵– considerably greater than his public

service salary would have been until October 13, 2000, namely $57,193. No

explanation was provided to account for the additional $13,005 of employment

income, though it may relate to Temple’s accumulated vacation leave. As has

- 356 -

already been indicated above under Mitigation, damages will be calculated based

on the assumption that, had Temple continued to work for the public service, he

would have been on an unpaid leave of absence for that portion of the period from

October 13, 2000 to December 31, 2000 not covered by Temple’s accumulated

vacation leave.

(iii) Severance Pay Loss

[1137]

When Temple left the public service, he received severance pay of

$36,665. Had Temple continued in the public service until May 13, 2003, he

would have received severance pay upon retirement of $40,410. Damages for

severance pay loss are allowed, but subject to the adjustment to reflect the findings

previously made regarding mitigation.

(iv) Investment Loss Claim

[1138]

When Temple resigned from the public service, he had various mutual

funds which he had acquired during his career. The evidence of Temple and

YTemple, who acted as his financial advisor during this period, was that, due to the

lack of income from 2000 to 2003, Temple was forced to liquidate some of these

investments.⁸⁷⁶Temple is seeking damages of $23,883 as a result. I disallow this

entire claim for the following reasons.

[1139]

First, there is inadequate evidence as to the purpose for which these

investments were liquidated. Secondly, in regard to mitigation of damages, I am

not satisfied that Temple took adequate steps throughout this period to maximize

his earning potential. Thirdly, YTemple cashed in some weak stocks and held on

to others that were more profitable. There would have to have been some

averaging of gains and losses. Fourthly, YTemple chose a day of reckoning when

prices were high, therefore augmenting the damages calculation. Finally, some

consideration would have to be given to the true, after-tax, loss to Temple.

(f) Armstrong

[1140]

For calculation of damages it will be assumed that, had he continued

working with the public service beyond October 2000, Armstrong would have

retired after he had attained 30 years of service and would have started to receive

his pension on the first of the following month.

- 357 -

(i)

Pension Loss

[1141]

Armstrong accumulated $3,197.14 in the Loba pension plan inclusive

of interest (of which $1,492.88 represented employee contributions).⁸⁷⁷

[1142] The Defendant submits that Armstrong’s contributions to his RRSPs

following his resignation from the public service should be deducted from his

pension loss. I have rejected this argument. Nevertheless, in case this is in error, I

make the following findings of fact. From 2000 to 2006, Armstrong made the

following contributions to an RRSP:

2000

2001

2002

2003

2004

2005

2006

$17,794

$ 3,000

$ 3,125

$ 4,500

$ 250

$18,500

As of 2006, Armstrong had $12,262 of unused RRSP contribution room.⁸⁷⁸

[1143] On June 22, 2000, Armstrong had been placed on surplus status. By

October 2000, he had not been offered another position within the public service.

He was subject to lay-off by December 22, 2000 if another position did not

materialize. Armstrong was ready to relocate and be retrained in order to qualify

for another position. That being said, there was a possibility that Armstrong might

have had to look elsewhere for employment as early as 2001. Armstrong found

being on surplus status was stressful. It was impacting his health, and he had

thought about grieving his status. In these circumstances I find that it would be

reasonable to discount Armstrong’s anticipated pension loss by 15% representing

the possibility that either his position with the public service would have

terminated prior to his assumed retirement date as a result of the federal

government not having a position for him or he would have decided for personal

reasons to leave the public service due to job dissatisfaction or job demands.

[1144]

Armstrong’s pension loss must be recalculated based on the new

assumed retirement date with a 15% contingency discount.

(ii) Salary Loss

- 358 -

[1145]

Armstrong is claiming loss of salary in the amount of $50,861 for the

period from October 15, 2000 to June 1, 2010 based on the difference between

what Armstrong would have earned had he continued to work for the public

service until June 1, 2010, compared to what he has earned, and what he

anticipates he will earn, to that date. In determining what he has earned,

Armstrong has used his salary from Loba and from Wiebe Environmental and

EBA Engineering and his net business income from Armstrong Engineering. The

only exception to this is that in 2001, Armstrong used the net figure of $34,589

instead of the gross figure of $41,961 as his earnings from Loba. In that the

difference was not adequately justified as an allowable deduction from salary, I do

not allow it. For the purpose of any calculations, $41,961 shall be considered

Armstrong’s earnings in 2001.

[1146]

Armstrong’s salary rate in the federal public service was determined

in accordance with the rates of pay set out in the collective agreement for the

Commerce (“CO”) group from time to time for employees classified at the CO-2

level. His salary at the date of his resignation from the public service in October

2000, as determined retroactively through a new collective agreement signed

December 19, 2000, was $72,422 annually. The annual salary rates for employees

at the CO-2 level after October 2000 was as set out in the rates of pay for the CO

Group published by the Treasury Board on its website.

[1147]

The annual salary rates for an employee at the CO-2 level in the

Plaintiff’s position were:⁸⁷⁹

Year

Salary

Effective June 22, 2000

Effective June 22, 2001

Effective June 22, 2002

Effective June 22, 2003

Effective June 22, 2004

Effective June 22, 2005

Effective June 22, 2006

$ 72,422

$ 74,450

$ 76,311

$ 81,093

$ 82,918

$ 84,908

$ 87,031

[1148]

In his calculations, Christie assumed that Armstrong’s public service

income would increase by 3% in each of 2007, 2008 and 2009. I accept that as

being a reasonable assumption. Armstrong’s income from salary and independent

contract work from 2000 to 2006, as reflected in his income tax returns and notices

of assessment, was as follows:⁸⁸⁰

- 359 -

Year

Salary

Gross Bus. Income Net Bus. Income

2000 (from Loba)

2001

2002

2003

2004

$ 1,201

$ 41,961⁸⁸¹

$ 19,379

$

nil

$

nil

$ 44,319

$ 64,032

$ 67,524

$ 38,283

$ 57,630

$ 55,116

$

nil

2005

2006

$ 54,308

$122,604

$

nil

$

nil

[1149]

The Defendant took no issue with the business expenses Armstrong

deducted from his gross business income to produce the net business income used

in the salary loss calculations. I accept that Armstrong incurred these expenses in

order to generate business income.

[1150]

Armstrong projects his income at Wiebe into the future will be:

Year

Salary

2007 (projected)

2008 (projected)

2009 (projected)

2010 (projected

to June 1,2010)

$110,000

$ 44,423

I consider this a conservative assessment of what Armstrong’s earnings will be into

the future and would increase this amount to $115,000 annually. In 2006,

Armstrong’s hourly rate at Wiebe was $52.50. He received a bonus of

approximately $11,500 for meeting his targets. In 2007, Armstrong did not expect

to meet his targets.

[1151]

Armstrong’s salary loss must be recalculated based on the new

assumed retirement date with a 15% contingency discount.

(iii) Severance Pay Loss

[1152]

When Armstrong left the public service, he received $15,312 in

severance pay. Had Armstrong continued in the public service until June 1, 2010,

he would have received severance pay upon retirement of $54,840. Although I

allow this category of loss, the actual recovery will be based on the new assumed

retirement date and will be subject to a 15% contingency discount.

(g) Luck

- 360 -

[1153]

If damages were allowed for Luck, they would be calculated based on

the assumption that, had he continued working with the public service beyond

October 2000, Luck would have retired on April 17, 2003, after having attained 25

years of service, and would have started to receive his pension on May 1, 2003.

- 361 -

(i)

Pension Loss

[1154]

Luck is seeking no damages for pension loss and did not present any

expert evidence comparing the capitalized value of his pension had he continued to

work for the public service until April 2003 and the capitalized value of the actual

pension he received effective October 2000. Christie prepared a report on behalf

of Luck, but it was not produced for the Defendant nor tendered at trial. It is

possible that the capitalized value of the pension Luck is actually receiving is

greater than the capitalized value of the pension he would have received had he

continued working with the public service until April 2003 – the increased value

being due in part to Luck’s starting to receive it two and a half years earlier, and

the pension at that time being unreduced due to age.

[1155]

The damages in these cases relate to loss of employment benefits,

which include salary, pension, severance pay, life insurance and medical coverage

due to the Plaintiff resigning from the public service earlier than he or she would

have absent the Defendant’s misrepresentations. For convenience sake, the

Plaintiffs broke down their calculation of damages into categories, such as pension

loss, salary loss, loss of severance pay etc. In determining the loss suffered by

each Plaintiff, I must compare the two packages of benefits – that received by the

Plaintiff after resigning from the public service in 2000 and that which the Plaintiff

would have received had he or she continued to his or her assumed retirement date.

It is the net impact on the Plaintiff from all of the financial ramifications of the two

resignation dates that must be taken into account. Without any evidence as to the

impact Luck’s resignation from the public service in October 2000 had on the

capitalized value of his pension, I cannot conclude that Luck suffered any loss

resulting from that early resignation.

[1156]

The onus is on Luck to prove his damages. He could have done so,

but chose to leave out a piece of the puzzle. Consequently, his claim for damages

must fail. In case I am found to be in error in denying damages for this reason, I

will make factual findings in regard to Luck’s losses respecting salary, severance,

interest and health insurance.

(ii) Salary Loss

[1157]

Luck’s salary rate in the federal public service was determined in

accordance with the rates of pay set out in the collective agreement for the

Financial Management (“FI”) group from time to time for employees classified at

- 362 -

the FI-3 level. His salary at the date of his resignation from the public service in

October 2000, as determined retroactively through a new collective agreement

signed March 2, 2001, was $70,904 annually. The annual salary rates for

employees at the FI-3 level after October 2000 were as set out in the rates of pay

for the FI Group published by the Treasury Board on its website.

[1158]

The annual salary rates for an employee at the FI-3 level in the

Plaintiff’s position were:⁸⁸²

Year

Salary

Effective October 15, 2000

Effective November 7, 2000

Effective November 7, 2001

Effective November 7, 2002

$ 70,904

$ 72,677

$ 74,712

$ 79, 712

[1159]

Luck’s income from salary and independent contract work from 2000

to 2003, as reflected in his income tax returns and notices of assessment, was as

follows:⁸⁸³

Year

2000

2001

2002

2003

PS Salary

$ 59,570

Loba Salary

$ 15,408

$ 1,367⁸⁸⁴$ 46,559

$

nil

$

nil

The net salary loss as calculated in Exhibit 83 provides an appropriate

methodology, subject to adjustments to reflect findings regarding mitigation.

(iii) Severance Pay Loss

[1160]

Had Luck resigned from the public service on April 15, 2003, his

severance pay would have been 24 weeks at $1,531 per week for a total of

$36,744. When he resigned in October 2000, Luck received $29,950. The

calculation of Luck’s severance pay loss would have to be adjusted to reflect my

findings regarding mitigation.

(iv) Cost of Replacement Health Coverage

[1161]

I find that Luck paid $4,919 for replacement health coverage through

Liberty Health and Blue Cross for the period from January 1, 2001 to April 30,

2003.⁸⁸⁵If damages were to be allowed to Luck, the medical expense tax credit to

- 363 -

which he was entitled for these payments during the corresponding taxation years

under s. 118.2(1) of the Income Tax Act⁸⁸⁶would have to be taken into account.

(v) Interest Expense Claim

[1162]

Luck is claiming $1,383 in damages for interest he paid on his line of

credit from November 2001 to January 2003 on the grounds that, had he continued

to work with the public service, he would not have had to use his line of credit.

The oral and documentary evidence produced by Luck was insufficient to establish

the connection between his not working for the public service and his need to draw

down on his line of credit.⁸⁸⁷If damages were allowed to Luck, this interest

expense would not form part of them.

(vi) Investment and Rental Income

[1163]

The Defendant takes the position that any damages payable to Luck

should be reduced by the investment and rental income he received during the

years in question. I reject this argument. There is no relationship between what

Luck may have received from investments and rental units and his losses

occasioned by his resigning from the public service prior to his assumed retirement

date. There was no evidence that, had Luck continued in the public service until

April 2003, he would not have received the investment and rental income.

(h) Nobert

[1164]

For calculation of damages it will be assumed that, had she continued

working with the public service beyond October 2000, Nobert would have retired

on March 16, 2004, after having attained 30 years of service, and would have

started to receive her pension on April 1, 2004.

(i)

Pension Loss

[1165]

Nobert accumulated $35,904 in her IPP inclusive of interest (of which

$8,855.88 represented employee contributions)⁸⁸⁸and $3,203.09 in the Loba

pension plan inclusive of interest (of which $1,803.17 represented employee

contributions).⁸⁸⁹

- 364 -

[1166]

Nobert’s pension loss has to be recalculated based on the assumed

retirement date of March 16, 2004 and based on my findings regarding mitigation.

The calculations shall be done based on Nobert working at the ES-6 salary level.

[1167]

For two reasons I find that it would be reasonable to reduce Nobert’s

anticipated pension loss by 15% for contingencies. Those contingencies include

the possibility that, due to “the pull of the sea” or for other reasons, Nobert may

have chosen to retire prior to March 16, 2004 and, due to decisions over which she

might have no control, she would not have been able to continue at the ES-6 salary

level until March 2004. In September 2000, Nobert was only in an acting ES-6

position and, although I have found that it was likely she would continue at this

salary level, this was not guaranteed.

[1168]

The Defendant submits that Nobert’s contributions to her RRSPs

following her resignation from the public service should be deducted from her

pension loss. I have rejected this argument. Nevertheless, in case this is in error, I

make the following findings of fact.

[1169]

Nobert made the following contributions to her RRSP:⁸⁹⁰

2000

2001

2002

2003

2004

2005

$ 27,000 ($21,238 of severance pay; rest earnings)

$ 14,317

$ 8,946

$ 10,139

$

nil

$ 16,126

Nobert did not make any contributions to an RRSP in 2004 although she had

unused room of $15,526.

(ii) Salary Loss

[1170]

Nobert is seeking damages of $126,433 for loss of salary during the

period from October 1, 2000 to September 30, 2004, based on the assumption that

she would have stayed employed at the ES-6 level throughout this period. Nobert

is calculating her damages on the assumption that she would have worked five-day

weeks, even though she chose to work four-day weeks from November 2001 to

September 2004, and she was on unpaid leave from November 2003 to April 2004.

- 365 -

[1171]

When Nobert became the Manager of New Practices in Learning

Technologies and Research in 1998, she was in an acting ES-6 position. She

remained responsible for policy development in her former role of Senior Analyst,

but took on the additional responsibilities as a Manager. Nobert was advised that

she was on track to become an executive, and she would be afforded the training

and experience she needed in order to attain this goal. In 1998, Nobert’s salary

started at the lower ES-6 level and then rose in the normal progression as an ES-6.

Her contract was extended on a regular basis, the last extension being on July 17,

2000 for the period up to September 30, 2000.⁸⁹¹Nobert assumed that if she

continued with the federal public service, she would have been paid at an ES-6

level, either through further extensions of her acting role, through her seeking a

reclassification of that role, or through her moving to another ES-6 position. I

accept this as being probable.

[1172]

Nobert’s salary rate in the federal public service was determined in

accordance with the rates of pay set out in the collective agreement for the

Economics (“ES”) group from time to time for employees classified at the ES-6

level. Her salary at the date of her resignation from the public service on

September 30, 2000, as determined retroactively through a new collective

agreement signed June 27, 2001, was $79,985. The annual salary rates for

employees at the ES-6 level after September 2000 was as set out in the rates of pay

for the ES Group published by the Treasury Board on its website.⁸⁹²

[1173]

The annual salary rates for an employee at the ES-6 level in the

Plaintiff’s position were:⁸⁹³

Year

Salary

Effective September 30, 2000

Effective October 5, 2000

Effective June 22, 2001

Effective October 5, 2001

Effective June 22, 2002

Effective June 22, 2003

Effective June 22, 2004

$ 79,985

$ 80,350

$ 82,359

$ 86,106

$ 88, 259

$ 90,465

$ 92,500

[1174]

Nobert’s income from salary and other sources from 2000 to 2004, as

reflected in her income tax returns and notices of assessment, was as follows:⁸⁹⁴

Year Gov. Salary Loba Salary Other Salary RRSP

Other

Empl. Expenses

- 366 -

2000 $ 64,581

2001 $ 20,067

2002 $ 21,957

$ 2,606

$ 20,889

$ 44,189

$ 71,801

$ 38,896

$ 14,487

$ 10,000 $ 23,946 $ 1,104

2003 $

2004 $

nil

[1175]

In determining what Nobert earned to replace her salary from

September 2000 to March 2004, I will not allow any deduction for employment

expenses for the same reasons given above in regard to Findlay, Ault and Collier.

As well, Nobert’s salary loss must be recalculated based on the assumed date of

retirement of March 16, 2004 and based on my findings regarding mitigation.

Finally, a 15% discount must be applied for contingencies.

(iii) Severance Pay Loss

[1176]

When Nobert left the public service, she received severance pay of

$21,238. Had Nobert continued in the public service until March 2004, she would

have received a higher amount. Nobert is claiming the difference as damages. The

higher amount needs to be recalculated based on the assumed retirement date of

March 16, 2004 and based on my findings regarding mitigation. Finally a 15%

discount must be applied for contingencies.

(i)

Dufour

[1177]

In that Dufour settled her claim with the Defendant prior to trial, the

calculation of her damages was not dealt with at trial. That being said, if any

calculation of damages is required in regard to the Third Party Claim, the

calculation shall be done based on the assumption that had she not joined Loba,

Dufour would have retired from the public service no later than October 1, 2000.

(i)

Pension Loss

[1178]

No evidence was adduced as to any pension loss suffered by Dufour.

(ii) Salary Loss

[1179]

From October 2000 to October 2005 Dufour worked with the Illinois

State Geological Survey, and contributed to a pension plan there. Even though she

enjoyed her work and could have stayed until age 60, she decided to leave in the

fall of 2005. Currently she works on contract and is not in receipt of any pension.

- 367 -

She has instructed Treasury Board that she will start to receive her PSSA pension

when she is 60.

[1180]

During the years Dufour worked for the Illinois State Geological

Survey, she earned the following amounts:⁸⁹⁵

- 368 -

Year

2000

2001

2002

2003

2004

2005

Salary

$ 16,592

$ 80,222

$ 81,680

$ 84,553

$ 84,540

$ 74,917

Apportionment of Damages for Negligent Misrepresentation

Jurisprudence

[1181]

The procedure to be followed by the court in apportioning liability

under the Negligence Act, supra was set out in Martin v. Listowel Memorial

Hospital⁸⁹⁶and can be summarized as follows:

• First, one must determine what role the negligence of each wrongdoer played

in causing or contributing to the ultimate damage suffered when a number of

mistakes together created the problem for the plaintiff. What is the relative or

comparative blameworthiness or culpability of each wrongdoer? To what

degree did each wrongdoer depart from the norm of reasonable conduct?

• The rule of vicarious liability allows a party who has been injured by an

employee in the course of employment to sue the employer for the loss without

having to sue the employee who may or may not be as financially able to

compensate the plaintiff. The wrongdoing of that employee gets assigned to the

employer when liability is being apportioned.

• The court should not apportion fault personally to anyone not named as a party;

that person’s liability can only come into play through vicarious liability of

someone named as a party.

• All persons sued who caused or contributed to the damage suffered by the

plaintiff are jointly and severally liable to the plaintiff for the damage.

Therefore the plaintiff’s judgment against each wrongdoer is in the amount of

100% of the damages suffered, but the plaintiff can only collect a total of 100%

of the damages assessed.

- 369 -

• As between themselves, defendants are each entitled to contribution and

indemnity to the extent a defendant overpays its portion of damages, and any

defendant who successfully claimed against a third party is also entitled to

contribution and indemnity from that third party to the extent of that party’s

fault.

• “…the effect of s. 1 of the [Negligence] Act is to define the legal effect of a

finding by concurrent wrongdoers. The effect is to change the common law,

and impose on concurrent wrongdoers joint and several liability to the plaintiff.

It is the only section of the Act which imposes liability, as opposed to

apportioning fault. The section is substantive, not procedural. Therefore when

applying the section to any specific action, it is understood that joint and several

liability to the plaintiff can and will attach only to a party defendant, although

others who may also have been at fault could potentially have been found

jointly and severally liable had they been sued by the plaintiff. Because

procedurally the section only affects defendants, under this section the court is

to apportion degrees of fault only to defendants. The court must also apportion

fault to the other parties, the plaintiff and third parties, not under s. 1 of the Act

but rather pursuant to ss. 3 and 4 of the Act, and in accordance with the

requirements of the pleadings.”⁸⁹⁷

Contributory Negligence

(a) Jurisprudence

[1182]

In Bow Valley Husky (Bermuda) Ltd. v. Saint John Shipbuilding

Ltd.⁸⁹⁸the Supreme Court adopted the following test for contributory negligence:

The test for contributory negligence was summarized by Denning L.J. in Jones v.

Livox Quarries Ltd., [1952] 2 Q.B. 607 (C.A.) at p. 615:

Although contributory negligence does not depend on a duty of care, it

does depend on foreseeability. Just as actionable negligence requires the

foreseeability of harm to others, so contributory negligence requires the

foreseeability of harm to oneself. A person is guilty of contributory

negligence if he ought reasonably to have foreseen that, if he did not act as

a reasonable, prudent man, he might be hurt himself; and in his reckonings

he must take into account the possibility of others being careless.

- 370 -

[1183]

In Avco Financial Services Realty Ltd. v. Norman,⁸⁹⁹Charron J.A. (as

she then was), explained how, at law, a finding of negligent misrepresentation does

not preclude a finding of contributory negligence.

…While the injured party’s own conduct must be considered under both tests, the

focus is different. With respect to the analysis on negligent misrepresentation, the

focus is on the reasonableness of the reliance (and, of course, its foreseeability

from the perspective of the representor). In this respect, the circumstances

surrounding the misrepresentation in question are of paramount importance.

Whether or not it was reasonable to rely on the representation will depend on an

array of factors. …

On the question of contributory negligence, the focus is on the event that

occasioned the loss. The injured party’s conduct, in all the circumstances

surrounding that event, must be considered in order to determine whether it acted

reasonably in its own interest or whether it contributed to the loss by its own fault.

The circumstances surrounding the event that occasioned the loss, depending on

the particular facts of the case, may be much wider in scope than the

circumstances surrounding the negligent misrepresentation. Hence, at this stage

of the inquiry, the reasonableness of the injured party’s reliance on the

misrepresentation must be assessed in the context of the event that occasioned the

loss. According to the test for contributory negligence …, the injured party will

be found guilty of contributory negligence if it ought to have foreseen that it may

harm itself by failing to act reasonably and prudently. In this context, the injured

party’s failure to act as a reasonable and prudent person may include a failure to

guard against the foreseeable carelessness of others.

[1184]

As Charron J.A. pointed out, because reliance by the injured party on

the misrepresentation must itself be reasonable, in many cases it is difficult for the

defendant to prove contributory negligence once a finding of negligent

misrepresentation has been made against it. “If the allegation of contributory

negligence is based on the contention that the injured party acted unreasonably in

relying on the misstatement, the question will already have been determined on the

main claim, and the plea of contributory negligence will not succeed.”⁹⁰⁰

[1185]

A finding of contributory negligence on the part of the plaintiff has

led to a reduced damages award in several cases.

[1186]

In Grand Restaurants of Canada Ltd. v. City of Toronto,⁹⁰¹it was held

that a restauranteur who received false information from the City about the

existence of a file at the City with respect to property he was purchasing was held

- 371 -

responsible for 50% of his losses because he had not made independent inquiries

about the existence of work orders, even though he had been aware of the existence

of a previous work order relating to a liquor licence and he knew he wanted to get

a liquor licence for the premises.

[1187]

In H.B. Nickerson & Sons Ltd. v. Wooldridge,⁹⁰²a prospective

employee living abroad was erroneously told that he could expect to easily obtain

Canadian qualifications necessary for his proposed employment. He moved to

Canada in reliance on this advice, but then learned that he would require a

substantial period of Canadian experience before qualification. He was found 40%

liable for his loss for not having made independent inquiries.

[1188]

In Gallant v. Central Credit Union Ltd.,⁹⁰³a credit union was held

60% liable for the losses incurred by clients when at the time of renewal of their

mortgage with a new mortgagee, their loans officer did not advise them that

disability coverage, which they previously had with their mortgage, would not be

included with the new mortgage. The couple was found 40% liable for failing to

seek additional information from the new mortgagee about its insurance coverage.

[1189]

In Goddard v. Canada,⁹⁰⁴a member of the Canadian Armed Forces

decided to take early retirement under the Forces Reduction Program based on

erroneous information she had been given by the Employment Insurance

Commission that she would still qualify to receive maternity benefits while

benefiting from the severance package. The Court determined that the plaintiff

was not entirely justified in relying solely on the information provided to her by

the Employment Insurance Commission, and found her equally liable.

[1190]

Although contributory negligence may be available as a partial

defence to liability;⁹⁰⁵in some cases similar to the cases at hand, it has not been

found to exist. One example is the case of Spinks v. Canada⁹⁰⁶where information

of a higher specialized nature relating to his pension entitlement with AECL was

being imparted to the Plaintiff. Nothing in the information and documentation

presented to Spinks in regard to his AECL pension suggested that his prior service

in Australia with AAEL could in any way be accommodated under the PSSA. It

was understandable for Spinks to rely totally on the information provided to him

by his employer. He was at his employer’s mercy. There was no reason for

Spinks to second-guess the employer. Considering the special relationship

between Spinks and his employer, it was reasonable for Spinks to rely on the

- 372 -

information he received from his employer and not to seek information

independently.

[1191]

In circumstances where the meaning which the plaintiff attributes to

communications is reasonable and appears sufficiently clear from the

communication given, it is not unreasonable for the plaintiff to assume that he

understands the message being conveyed and does not require further

clarification.⁹⁰⁷

(b) Did the Plaintiffs exercise due diligence before resigning from the

public service to join Loba?

[1192]

The Defendant submits that, considering the following factors, a

reasonable person being presented with the Loba option would have taken steps to

research the opportunity and consult experts before resigning from the public

service to join Loba:

• The decision to resign from long-term employment with the public

service and transfer pension entitlements from the secure PSSP to a

private pension plan were significant life decisions.

• The PSSP was one of each Plaintiff’s most significant assets, if not his or

her most significant asset.

• Reciprocal transfer agreements were a new concept to the Plaintiffs.

• Loba was an unknown company to the Plaintiffs.

• None of the Plaintiffs had had any previous knowledge of or interactions

with Parent.

• The meeting (or in Armstrong’s case, the telephone conversation) during

which Parent explained the Loba option to a Plaintiff was short and did

not afford the Plaintiff adequate time to digest what was involved.

• Aside from Nobert and Dufour, the Plaintiffs had to make their decisions

in a very brief period.

- 373 -

[1193]

The Defendant also asserts that, due to Parent’s “standard

presentation” and the documents he provided, the Plaintiffs knew or ought to have

known the following:

• They had to resign from the public service before they could request a

transfer of their pensions to Loba through its RTA.

• The TBS was not in favour of the way in which Parent intended to use

the RTA.

• The TBS had concerns about the terms and conditions of their

employment with Loba.

• It was not for certain that the monies would transfer even once they

joined Loba because the Superannuation Directorate still had to verify the

employment relationship of each individual who requested a transfer.

• A bona fide employer/employee relationship had to exist between Loba

and its members.

• Loba was retaining a portion of the pension funds transferred as its profit

for the transaction.

• Parent had negotiated six other RTAs with the federal government in the

past which had been cancelled but that two were “missed”, including

Loba’s.

• There had been a prior hold on the transfer of funds under the Loba RTA

but that the hold had been lifted.

• The Plaintiffs were not guaranteed any income or salary from Loba.

[1194]

I have already found that, although many presentations were similar

and a number of Plaintiffs received the same documents, not all Plaintiffs were told

the same thing or received all of the documents the Defendant called the standard

package.

[1195]

I do find that all of the Plaintiffs knew that they had to resign from the

public service before they could request a transfer of their pensions under the Loba

RTA; that a bona fide employment relationship had to exist between Loba and its

- 374 -

workers; that a portion of the pension funds transferred to the Loba pension plan

would remain in the plan for the benefit of Loba, WBP or Parent; and that the

Plaintiffs were not guaranteed any income or salary with Loba. As I deal with

individual Plaintiffs, I will make findings as to whether that Plaintiff had the other

information alleged by the Defendant.

[1196]

The Defendant submits that, in these circumstances, in order to

exercise due diligence, a reasonable person would have taken at least some of the

following steps before resigning from the public service:

• Verify the legitimacy of Loba;

• Verify the legitimacy of Parent;

• Verify the information Parent provided to the Plaintiff during the

interactions with Parent;

• Speak to a representative of the TBS, the Superannuation Directorate, the

CRA or other government departments;

• Review the CRA website for relevant information;

• Consult a financial expert; or

• Consult a lawyer.

[1197]

I accept the proposition that, before resigning from long-term secure

employment with the public service to work for a consulting company with no

track record, thereby capping one’s membership in one of the best pension plans in

the country, a reasonable and prudent person would try to ensure that there were no

significant risks associated with this decision that could result in financial loss to

that person. Part of that exercise would involve satisfying oneself that: (1) Loba

was a private consulting company for whom the person could work; (2) Loba had

a valid pension plan into which pension monies could be transferred; (3) Loba had

a valid RTA with the government; (4) the pre-requisites for using the RTA existed;

and (5) the financial ramifications that would flow from becoming one of Loba’s

consultants and transferring pension monies from the PSSP to Loba’s pension plan

would be favourable, taking into account both the impact on income and the

impact on the value of pension entitlements.

- 375 -

[1198]

The real question is whether the steps taken by each Plaintiff satisfied

the requirement for due diligence. Before each Plaintiff is considered individually,

some general comments can be made.

[1199]

All relevant government publications or government-sponsored

publications directed those in the Plaintiffs’ position to consult their compensation

advisors for information about RTAs. All of the Plaintiffs consulted their

compensation advisors before they decided to resign from the public service, or

immediately thereafter. All were told of the procedure to be followed in order to

access an RTA. All followed that procedure. There was no reason for any of the

Plaintiffs to have thought that they needed to consult anyone other than whom the

Treasury Board and PWGSC told them to consult to determine the prerequisites to

use the Loba RTA. The Treasury Board was responsible for RTAs. It had

negotiated and signed the Loba RTA. It was the Plaintiffs’ employer. It was the

plan sponsor for the PSSP and it had oversight responsibilities for the PSSP. As I

have already found under the section dealing with Reasonable Reliance, it was

reasonable for the Plaintiffs to believe that they could rely on Treasury Board

directions and information regarding the Loba RTA without their having to make

independent inquiries elsewhere.

[1200]

Compensation advisors were instructed to check in the SAM as to

whether an employer in question was an approved employer with an RTA. Collier,

Shepherd, Luck and Nobert consulted the SAM and learned that Loba was an

approved employer with a valid RTA. All of the Plaintiffs were advised by their

compensation advisors that this was the case. Inherent in the assurance that Loba

had a valid RTA was the assurance that Loba was an existing company with at

least one employee and with a registered pension plan for that employee. The

Plaintiffs did not have to check these facts elsewhere in order to exercise due

diligence.

[1201]

None of the Plaintiffs was told by their compensation advisors that

there were any other prerequisites to utilizing the Loba RTA aside from the

Plaintiff resigning from the public service, becoming an employee of Loba and

signing Appendix B and related documentation. None of the compensation

advisors suggested that a Plaintiff should contact the TBS to see if it had any

concerns about Loba. None suggested that a Plaintiff should contact the CRA to

confirm that the Loba pension plan met the registration requirements for pension

plans under the Income Tax Act.

- 376 -

[1202]

In any event, the evidence falls short of establishing the likelihood

that, had the Plaintiffs contacted the Pensions Division of the TBS prior to joining

Loba, they would have been advised of the serious concerns on the part of the

CRA about pension plans such as Loba’s in terms of whether they could meet the

primary purpose rule under the Income Tax Act.

[1203]

Gravelle’s evidence was that, over the summer and early fall of 2000,

numerous public servants called the Pensions Division with questions respecting

Loba. Macpherson received the bulk of the calls; Gravelle responded to

approximately 12 to 15. Gravelle testified that she advised her staff to tell those

calling that: (1) the Treasury Board had had a number of similar RTAs with other

private companies; (2) many of those agreements had been cancelled; (3) the

approach set out in the reciprocal transfer arrangement with Loba, as with those

other companies, was not one of which the government approved; (4) the

government had a number of concerns about the employer/employee relationship

that needed to be satisfied; (5) the Loba RTA would be in effect until October 15,

2000; (6) the employer/employee relationship was a central issue from the point of

view of the pension plan being registered under the Income Tax Act; and (7) no

transfer would occur until the employment relationship first had been confirmed.

Macpherson did not testify; and therefore there is no evidence as to what she may

have said to the bulk of the public servants who called the Pensions Division for

information.

[1204]

Although Gravelle provided a copy of Godwin’s letter to some

individuals inquiring about Loba, she did not do so systematically. I have already

described Gravelle’s September 19, 2000 response to Bryden, a public servant

seeking information about the Loba RTA. Gravelle advised her that she

understood the Loba pension plan met the requirements of the Pension Benefits Act

of Ontario and the Income Tax Act. Gravelle advised that, although the Treasury

Board had cancelled other RTAs like Loba’s, it had done so for policy reasons, not

due to any concerns about the legality of such arrangements. She stated that the

Loba RTA was still in place, and as long as the departing public servant met the

eligibility requirements of the agreement, the transfer would occur.⁹⁰⁸

[1205]

On September 19, 2000, another public servant considering the Loba

option, Maurice VanWelter (“VanWelter”), e-mailed Gravelle with specific

questions regarding the nature of the TBS’s concern that led to the request for

employment information by the Superannuation Directorate, whether this

- 377 -

information was required for only Loba employees, and whether there was any

intention at that time, or in the future, to legally challenge requests for transfer

under the Loba RTA. He stressed that this information was very important to his

decision making and asked for a speedy response.⁹⁰⁹

[1206]

On September 20, 2000, Gravelle responded to VanWelter:⁹¹⁰

The information being requested by the Superannuation Branch, at our direction,

relates specifically to the employer-employee relationship between the individual

and Loba.

This detailed information is not sought routinely in all pension transfer

agreements. The Loba agreement, like all others, apply (sic) only to “employees”,

and in recent months, some questions have arisen about the relationships

established in the Loba situation. For this reason, we have sought detailed

information in each case, and are proceeding with transfers only upon receipt of

such information.

I should mention that officials in CCRA who are responsible for pension plan

registration have also expressed concern about the employer-employee

relationship. While I am no expert on registration rules, my understanding is that

where an individual is not engaged in a bona fide employee-employee (sic)

relationship, CCRA might raise questions about whether the pension plan exists

for the “primary purpose” of providing retirement income; this primary purpose

must exist or the plan could face revocation of its tax-registered status. In such an

instance, contributions in the plan would not be tax-sheltered. You may be aware

that we had a number of agreements with other employers who provided

arrangements similar to those available under the Loba plan. All of those

agreements, except Loba, were cancelled; at the time of the cancellation of the

other agreements, we were not aware that the Loba plan included a similar

provision. While we had, and continue to have, serious concerns from a policy

perspective about these particular arrangements, (and it was these policy

concerns that motivated the cancellation) we have no reason to believe that they

are in any way illegal.

As far as the Loba agreement is concerned, it remains in force until October 15,

when it, like most of our other pension transfer agreements, will expire. So long

as an individual meets the requirements of the agreement (including the

requirement that he or she must be an “employee”) a transfer can proceed.

I hope this is helpful. [italics added]

[1207]

Gravelle testified that this response was representative of the

information she gave people who called with questions about Loba, but the Bryden

response was not. I am not convinced. In this instance, VanWelter had asked

specific questions about why the Superannuation Directorate was asking for

- 378 -

confirmation of employment status. Bryden had asked more general questions and

had been given a more general answer with no reference to the importance of an

employment relationship. I find that the nature of Gravelle’s replies varied with

the nature of the questions posed to her.

[1208]

On October 9, 2000, Tim Leah (“Leah”) from Environment Canada e-

mailed Gravelle to ask if there were any outstanding issues (possibly delays)

regarding the transfer of his pension to Loba, as he was thinking of leaving the

public service imminently to join Loba.⁹¹¹Gravelle responded on October 12,

2000 advising that the transfer could take up to 18 months. She volunteered that

there were other issues of concern with the Loba agreement, most notably the

existence of an employer/employee relationship. She stated:

…The Superannuation Directorate, at my request, documents the existence of

such a relationship very scrupulously, because of some concerns we have had that

in some instances, this relationship does not exist. I should mention that this is

also of concern to CCRA, the agency responsible for registering pension plans

under the Income Tax Act. The Loba agreement is a contract that remains in

force until October 15, and provided people meet the eligibility requirements,

they can initiate transfers prior to that date. However, you should be aware that

on policy grounds at least, the government has major problems with this

agreement (witness the cancellation of 6 other similar agreements) and the

manipulation of pension funds that it allows.

[1209]

Gravelle acknowledged that she thought that this was information that

Leah should have before he made his decision to join Loba. Despite this, she had

not provided Leah with a copy of the September 7, 2000 letter she had received

from Godwin, nor had she specifically alerted Leah to the contents of that letter.

She could not account for why she had not done so. She considered this an

oversight on her part.

[1210]

What is significant in the communications with Bryden, Van Welter

and Leah is that Gravelle either explicitly or implicitly conveyed the message that

the Treasury Board had no reason to believe that the Loba agreement was in any

way illegal.

[1211]

Gravelle’s explanation for not telling individuals like Van Welter that

the government had concerns relating to the legality of the Loba arrangements was

that it was not within her organizational authority or her knowledge to state that the

Loba arrangements were illegal. While that was no doubt the case, it was within

- 379 -

her knowledge that the Pensions Division had concerns about the legality of the

Loba arrangement. Gravelle explained that she did not express those concerns

because based on the information she had, it would not have stood the test of

reasonability. According to Gravelle, her role was to pass on to public servants

what she knew as certainty only. Therefore, although she acknowledged that, as a

prudent plan administrator she had responsibility to PSSP members transferring to

the Loba pension plan, and one aspect of that responsibility was to provide

information to plan members so that they would be properly informed before they

made a decision about their pension, that responsibility did not extend to sharing

the TBS’s concerns about the legality of the Loba arrangements. In essence

Gravelle’s evidence was that the policy and legal concerns regarding the Loba

arrangements were cogent enough for her to instruct PWGSC to suspend payments

under the Loba RTA; however, the legal concerns in any event were not clear

enough to justify her advising transferring PSSP members that there were legal

concerns. This further undermines the Defendant’s submission that, had the

Plaintiffs contacted Gravelle as part of exercising due diligence, they would have

learned of significant government concerns about the Loba arrangements.

[1212]

In regard to the Defendant’s argument that in exercising due

diligence, the Plaintiffs should have contacted the CRA, I find that public servants

in the Plaintiffs’ position could not be expected to realize that this would have been

a fruitful inquiry to make. Gravelle, who had worked most of her career in the

pension field, did not realize the significance of the primary purpose rule in the

context of these cases until Godwin explained it to her. Why would the average

public servant have any notion of this potential pitfall? One cannot be expected to

ask questions about highly technical matters of which one has no appreciation. A

public servant, acting reasonably, would assume that the government would have

put into place a system to monitor whatever needed to be monitored regarding

registration of a pension plan and would not invite its employees to consider the

option of moving their pension assets to such a pension plan when the government

realized that there was a significant risk that the pension plan would be de-

registered.

[1213]

It was argued that the Plaintiffs should have scoured the CRA website

for any relevant information regarding RTAs and that, if they had done so, they

would have discovered FAQ 11. They would or should have realized that the

concerns raised in FAQ 11 regarding IPPs applied equally to the Loba RTA. I

reject this. FAQ 11 was inadequate to alert the Plaintiffs of the CRA’s serious

- 380 -

concerns regarding Loba’s RTA and pension plan, and the very real risk that the

CRA might take steps to have Loba’s pension plan de-registered. First, interested

public servants could not be expected to realize that, before making a decision to

join Loba, they should search the CRA website to see if there would be anything of

relevance to their decision. They certainly could not be expected to suspect that

the CRA might have serious concerns about the Loba pension plan when the

Treasury Board advertised that it had a valid, outstanding RTA with Loba that was

premised on Loba having a registered pension plan. Secondly, the FAQ refers

specifically to IPPs, not RTAs. It could not be expected that the average public

servant would realize that FAQ 11 might be applicable to RTAs as well as IPPs.

[1214]

Throughout the trial, the Defendant’s counsel suggested that the

Plaintiffs should have been put on guard that something was not legitimate about

the Loba arrangements simply because the Plaintiffs stood to increase significantly

the value of their pension entitlement. I do not accept this. The government

structured RTAs with payments based on twice contributions plus interest that

made them financially attractive to public servants in the position of the Plaintiffs.

That in and of itself cannot be a reason to impose a higher standard of due

diligence.

[1215]

I reject the notion that, in order to exercise due diligence, all Plaintiffs

should necessarily have obtained legal advice prior to resigning from the public

service due to the nature of the RTA itself. There was nothing in the context

placed before the Plaintiffs by the government which suggested that the decision

they had to make had legal, in addition to financial, overtones. None of the

government publications suggested that interested public servants should seek

independent legal advice. Gravelle acknowledged that, in September 2000, she

never considered whether public servants who were contemplating moving to Loba

should obtain independent legal advice about whether to make this decision.⁹¹²

When she received inquiries from individuals, although she told them that one of

the Pensions Division’s concerns was about the employer/employee relationship,

she did not advise anyone to seek legal advice. Nor did the Pensions Division

instruct compensation advisors in individual departments or agencies to advise

interested public servants to get legal advice.

[1216]

All of the Plaintiffs spoke directly with Parent and were advised that

he was an actuary, the President of Loba and the consulting actuary for the Loba

pension plan. So again, they were dealing with the person with the most

- 381 -

information about Loba and the Loba pension plan. He was a professional bound

by a professional duty of care. The Plaintiffs were reassured that the monies held

in the Loba pension plan were held in trust by Clarica. With the government

oversight of RTAs, and in the absence of any red flag raised by the government

about Loba or Parent, I would not impose an obligation on a Plaintiff to obtain an

independent reference for Loba or Parent in order to exercise due diligence.

[1217]

That being said, Parent himself, in his interview with some of the

Plaintiffs, raised some red flags.

[1218]

First, Parent was wearing many hats in his dealings with the Plaintiffs.

It was apparent to all of the Plaintiffs that Parent had a financial interest in the

Loba arrangements, even though it was not clear to any of them the extent to which

Parent might benefit financially if that Plaintiff joined Loba. In my view, this

realization on the part of the Plaintiffs should have put them on notice that it would

be prudent for them to have a second opinion as to the financial impact on them of

resigning from the public service to join Loba. Some of the Plaintiffs sought that

second opinion; others did not. I do not conclude, however, that due to the various

hats Parent was wearing, in order to exercise due diligence, the Plaintiffs should

have obtained independent legal advice.

[1219]

Secondly, I find that Parent explained to all of the Plaintiffs the

importance of an employer/employee relationship as the underpinning of their use

of the Loba RTA. There was nothing in Parent’s role as an actuary or as President

of Loba that provided him with any expert knowledge as to what an employment

relationship entailed from the government’s perspective. Therefore, considering

Parent’s financial interest in the arrangements, it would not have been reasonable

or prudent for the Plaintiffs to rely solely on the assurance of Parent in regard to

the existence of an employment relationship. All of the Plaintiffs knew that the

relationship they were entering with Loba had aspects that were uncommon in

many employment situations in that they had to find work with third parties,

negotiate contractual terms with those third parties, perform the work for the third

parties normally offsite from Loba, be paid through Loba only once the third party

paid Loba, and otherwise receive minimal value through their affiliation with

Loba, aside from access to the Loba RTA and pension plan. Depending on what

additional information Parent provided to the Plaintiffs regarding the government’s

acceptance of the Loba arrangements as constituting an employment relationship, a

prudent person would have made further inquiries about whether the proposed

- 382 -

arrangements at Loba constituted an employment relationship. This was especially

the case for those Plaintiffs who had advance warning that the Superannuation

Directorate would be making inquiries of them regarding their relationship with

Loba and for those Plaintiffs who were advised by Parent that they should show

their response to Loba first because the employment issue was a “sensitive issue”.

[1220]

That being said, the evidence falls short of establishing the likelihood

that, had the Plaintiffs contacted the Superannuation Directorate or the Pensions

Division prior to joining Loba to inquire whether the arrangement they anticipated

having with Loba was an employment relationship, they would have been told that

the relationship likely would not be considered an employment relationship by the

government. There is no evidence as to what those calling the Superannuation

Directorate were told. As for those, including Parent, communicating with the

Pensions Division, I find that in the majority of situations Gravelle conveyed the

message that the Treasury Board had policy concerns, not legal concerns,

regarding Loba, and that the documentation that Loba and its first few workers had

submitted to the Superannuation Directorate had sufficed to satisfy the Pensions

Division that an employment relationship existed.

[1221]

I reject the Defendant’s argument that, because some of the Plaintiffs,

such as Findlay, did not intend to continue in Loba’s employ beyond the time when

their monies were transferred from the PSSP, this means that their employment

relationship with Loba was suspect and they should have realized that it was

suspect. The concept of employment does not incorporate mandatory minimum

time for the relationship of employer/employee to exist.

[1222]

Finally, the Defendant argues that it was reasonably foreseeable to all

of the Plaintiffs that, if they were unable to find contract work after leaving the

public service, they would suffer financial loss. Despite this, prior to resigning

from the public service, some of them did not research the consulting opportunities

available to them or the costs of the benefit package they were foregoing. Some

left on very short notice, with no experience in the field of consulting and with no

contacts lined up. In these circumstances, it was reasonably foreseeable to them

that they might not be able to secure contract work up to the date of their planned

retirement. I accept this reasoning and will deal with this argument when

discussing individual Plaintiffs.

(i)

Findlay

- 383 -

[1223]

Prior to resigning from the public service, Findlay learned some

information from Parent that suggested that it might be wise to seek further

clarification regarding the availability of the Loba option.

[1224]

First, Parent advised him that although the Loba RTA was valid and

transfers would proceed under it, the TBS had not been happy with Parent’s use of

RTAs, as evidenced by the exchange of correspondence between Hamilton and

Parent in 1997. Findlay learned through Shantora and Shimizu that Buccini had

spoken to someone at the TBS and had been told that although the Loba RTA was

a legal agreement, the Pensions Division did not like it. Finally, Findlay knew that

six other RTAs negotiated by Parent had been cancelled. These bits of information

suggested that further inquiries would be reasonable.

[1225]

Findlay did not inquire of Parent about the correspondence between

himself and Gravelle that pre-dated Gravelle’s August 22^nde-mail, nor did he ask

Parent why the other RTAs that he had negotiated had been cancelled. He did not

inquire as to why the TBS was not happy with the Loba RTA. Although Findlay’s

reliance on Gravelle’s August 22^nde-mail was reasonable, further inquiries about

the correspondence that pre-dated the e-mail would have given Findlay a better

understanding of government concerns about the Loba arrangements.

[1226]

A reasonable person acting prudently may have sought further

clarification from Gravelle as to what had pre-dated her e-mail. That being said,

the evidence is insufficient to persuade me that, had Findlay contacted Gravelle or

the Superannuation Directorate, he would have been provided with information

that would have led a reasonable person to reject the Loba option.

[1227]

Secondly, Parent emphasized to Findlay the importance of an

employer/employee relationship between Loba and Findlay. This was reinforced

by Gravelle’s e-mail stating that the Superannuation Directorate would be

verifying the employment situation for each person applying to transfer monies

under the Loba RTA. At this stage, Findlay was working on an Interchange

Canada Agreement with Pollution Probe and understood that the agreement with

the government could be replaced by an agreement with Loba incorporating the

same terms. Even though he had no specific knowledge or information as to what

the Superannuation Directorate would consider an employment relationship,

Findlay was confident that this would meet employment requirements. Again,

although a reasonable person acting prudently would have contacted the

- 384 -

Superannuation Directorate in advance to inquire whether his relationship with

Loba would constitute an employment relationship, I am not convinced on the

evidence that, had Findlay made an inquiry in this regard, he would have been

provided with any warning about the Loba arrangements. There was no evidence

of what the Superannuation Directorate routinely said to public servants inquiring

about the Loba option prior to October 15^th. After October 15^th, the

Superannuation Directorate accepted the honest responses from the Plaintiffs to the

questions posed in the Directorate’s standard employment confirmation letter as

meaning that the Plaintiffs were employees of Loba.

[1228]

Findlay did exercise due diligence in terms of the financial aspects of

the Loba option. In order to verify the financial information Parent had provided

him, Findlay obtained a second opinion from Jemus. Findlay had originally been

introduced to Jemus at a pre-retirement course offered through the public service.

Following that course, he had personally consulted Jemus and had been satisfied

with his services. Findlay was unaware that Jemus had a financial interest in his

going to Loba. I find that Findlay acted reasonably in choosing Jemus for a second

financial opinion. Jemus confirmed the financial information that Parent had

provided to Findlay and raised no concerns about a transfer under the Loba RTA.

[1229]

In conclusion, the evidence does not persuade me that any negligent

conduct on Findlay’s part caused or contributed to the damages that he suffered.

(ii) Ault

[1230]

[1231]

The same comments apply to Ault as applied to Findlay

(iii) Shepherd

Before meeting with Parent, Shepherd sought advice from Jemus

regarding the financial benefits to him of a transfer under the Loba RTA. Jemus

had come highly recommended. Shepherd did not know that Jemus would benefit

financially if Shepherd joined Loba. It was reasonable for Shepherd to have

consulted Jemus and to have relied on his financial advice. When Shepherd met

with Parent, he already had the benefit of Jemus’ opinion, and the financial

information Parent provided accorded with what Jemus had said. Thus, even

though the fact of Parent wearing different hats may have called for greater

vigilance on Shepherd’s part, he was already armed with Jemus’ advice and it

corroborated what Parent was saying. I do not find that it was negligent on

- 385 -

Shepherd’s part not to have sought further professional advice on the financial

aspects of the Loba option. There was nothing in the government documents

Shepherd saw or in his communications with his compensation advisors that would

reasonably have led him to believe that the Loba RTA was anything other than a

legitimate opportunity for him.

[1232]

During his meeting with Parent, Shepherd was alerted to the

importance of an employment relationship and of his putting as much contract

work as possible through Loba. Before Shepherd resigned from the public service,

he confirmed with his superior that Loba could enter an Interchange Canada

Agreement with NCR JCTC to enable Shepherd to continue to work there for at

least a year on the same terms as he was working there in October 2000. This

provided reassurance to Shepherd that he could easily meet the requirements of an

employment relationship with Loba. At the time, Shepherd was unaware of any

concerns on the part of the CRA regarding Loba.

[1233]

Based on the representations made to Shepherd by the Defendant and

Parent, and based on Shepherd not having any notice of any concerns on the part of

the Treasury Board, the Superannuation Directorate or the CRA, I find that it was

reasonable for Shepherd to believe that a transfer under the Loba RTA would occur

in the normal course, as long as he became an employee of Loba. Subject to my

comments below, I do not consider it negligent for Shepherd not to have contacted

the TBS, the Superannuation Directorate, the CRA or a lawyer for further

information or advice about the legitimacy of the Loba arrangements as he was

unaware of any red flags suggesting that such inquiries were called for in the

circumstances.

[1234]

The one area where more care should have been taken was in regard

to the establishment of an employment relationship. Shepherd was advised by

Parent that an employment relationship had to exist for monies to be transferred to

his credit under the Loba RTA. Prior to joining Loba, Shepherd had seen the

Superannuation Directorate letter that talked about the existence of an

employee/employer relationship being “a critical pre-condition” to transferring

funds under a pension transfer agreement. Shepherd knew that the Superannuation

Directorate would be confirming the existence of an employment relationship after

he joined Loba. Even though he had no specific knowledge or information as to

what the Superannuation Directorate would consider an employment relationship,

Shepherd concluded that his putting contract income through Loba would meet

- 386 -

employment requirements. Although a reasonable person acting prudently would

have contacted the Superannuation Directorate in advance to inquire whether his

relationship with Loba would constitute an employment relationship, I am not

convinced on the evidence that, had Shepherd made an inquiry in this regard, he

would have been provided with any warning that his proposed relationship with

Loba might not be considered an employment relationship or with any more

generalized warning about Loba.

[1235]

Even if Shepherd was negligent in not seeking further verification that

his relationship with Loba would be an employment relationship, the evidence

does not persuade me that this negligence on Shepherd’s part caused or contributed

to the damages that he suffered.

(iv) Collier

[1236]

The same comments made in regard to Shepherd apply to Collier,

subject to these minor differences.

[1237]

Unlike Shepherd, Collier did not have any particular work lined up

before resigning from the public service; however, he was confident he would be

able to obtain work. History has proven him right. His quick decision to resign

from the public service without any concrete job to go to did not result in an

increase in his damages for loss of salary.

[1238]

Despite never having heard about Loba prior to late September 2000,

following his meeting with Parent, Collier did not seek any further professional

advice about the Loba option before deciding to resign from the public service to

join Loba. He spoke with Shepherd and with his family, but he did not speak to his

public service colleagues or colleagues in the wider community. He did not ask

Parent how many employees and clients Loba had, nor did he seek any references.

I do not consider this to have been negligent. There was nothing in the

government documents Collier saw or in his communications with his

compensation advisor that would reasonably have led him to believe that the Loba

RTA was anything other than a legitimate opportunity for him.

[1239]

Prior to joining Loba, Collier did not see the standard employment

confirmation letter from the Superannuation Directorate, and therefore he had less

notice of an employment relationship being a critical pre-condition to transferring

funds under the Loba RTA. Nevertheless, I find that Collier had been advised by

- 387 -

Parent that an employment relationship had to exist for monies to be transferred

under the Loba RTA, and had he been acting prudently, he would have contacted

someone within the government in an attempt to confirm what would be

considered an employment relationship. That being said, I am not convinced that,

had he made such inquiries, he would have been warned about the Loba

arrangements.

[1240]

Therefore, even if Collier was negligent in not seeking further

verification that his relationship with Loba would be an employment relationship,

the evidence does not persuade me that this negligence on Collier’s part caused or

contributed to the damages that he suffered.

(v) Temple

[1241]

Temple exercised minimal due diligence before deciding to resign

from the public service. Initially, he sent YTemple to gather information, rather

than meeting personally with Parent. He did not do any independent research

regarding Loba. He did not discuss with colleagues their experience with Loba,

aside from having one casual conversation with a colleague at a social gathering.

He did not speak to his compensation advisor before deciding to submit his

resignation to join Loba, even though as someone who had worked in the Human

Resources field all of his career, he would have realized that his compensation

officer might have information concerning an RTA. He did not seek confirmation

from another professional, such as Jemus, of the accuracy of Parent’s calculations.

That being said, YTemple did seek financial advice from the head of the estate

planning and taxation department at Trimark and from her own branch manager

and another colleague at Cartier Planners, all of whom advised her that the Loba

RTA option sounded very good.⁹¹³This amounted to due diligence in terms of the

financial aspects of the Loba option.

[1242]

Gravelle’s August 22^nde-mail, though reassuring in some respects,

raised the only red flag in the documents provided to Temple by either the

Defendant or Parent. Gravelle referred to having spoken to a legal advisor. She

also highlighted that Loba workers would have to provide documentation

substantiating their employment relationship. Temple knew that the employment

relationship was key to the Loba arrangements. This was especially the case after

Parent advised Temple, before the effective date of his resignation, that he should

expect a letter from the Superannuation Directorate seeking to confirm his

- 388 -

employment status. In that letter, Parent referred to the employment issue as a

sensitive one. Considering the dearth of information Temple had concerning Loba,

it would have been reasonable and prudent for him to make inquiries of the TBS or

the Superannuation Directorate to ask if his relationship with Loba would be

considered an employment relationship by the TBS and the Superannuation

Directorate.

[1243]

However, as already stated, I am not convinced on the evidence that,

had Temple made an inquiry in this regard, he would have been provided with any

warning about the Loba arrangements. Consequently, even if Temple was

negligent in not seeking further verification that his relationship with Loba would

be an employment relationship, the evidence does not persuade me that this

negligence on Temple’s part caused or contributed to the damages that he suffered.

[1244]

I find that in another respect Temple was negligent. Temple had no

contract work lined up before he resigned from the public service and had not

spoken to any colleagues within the public service to reassure himself that contract

work would be available. It was foreseeable to Temple that, since he had no

specific prospects, he could earn considerably less as a consultant than he would

earn as a public servant. A reasonable and prudent person who intended to work

for another two and a half years would not have resigned from the public service

without more concrete plans as to what income would replace his public service

salary. Had Temple done his homework in this regard prior to leaving the public

service, he would have realized the limited contractual work available to him and

could have decided not to take the Loba option or to make further and better efforts

in advance so as to secure more lucrative contracts before leaving the public

service. Any damages payable to Temple shall be reduced by 10% to reflect his

contributory negligence in this regard.

(vi) Armstrong

[1245]

Armstrong exercised considered due diligence before resigning from

the public service. He knew that several senior Environment Canada colleagues

were resigning to join Loba. He spoke to Buxton who provided him with

information regarding Loba and told him that he had done some research into Loba

and the Loba RTA and it passed the “stink test”. Armstrong spoke with another

Environment Canada colleague in Ottawa who had looked into Loba and advised

that, as far as he was aware, Loba was “okay”. Buxton referred him to Jemus. He

- 389 -

not only received a financial analysis from Jemus, but also spoke to him on two

occasions to make sure he understood the information. He spoke on at least three

occasions with his compensation advisor, and posed specific questions to her about

Loba. He and his wife sought independent advice at meetings with two respected

financial advisors – Armstrong’s investment and insurance advisor at Clarica and a

senior financial advisor at CIBC Wood Gundy. Both advised Armstrong and his

wife that the Loba option was a good arrangement for Armstrong. Armstrong also

spoke with a reference for Jemus.

[1246]

No red flags were brought to Armstrong’s attention, aside from the

references in Gravelle’s e-mail about her having spoken to her legal advisor and

there being a standard request to Loba workers for confirmation of employment.

Parent did not tell Armstrong that he had been involved with six RTAs with the

government, and that they had been cancelled. In the context of Armstrong’s

compensation advisor, Parent, Burnside, Jemus, Environment Canada colleagues

and two independent financial advisors not raising any red flags about Loba, Parent

or Jemus, I do not consider Armstrong to have been negligent for not having

sought any additional information from government sources.

(vii) Luck

[1247]

Although I have decided that no damages are payable to Luck, in case

I am in error, I will make findings of fact respecting any contributory negligence

on Luck’s part.

[1248]

Luck exercised the least due diligence of all before deciding to resign

from the public service to join Loba. Although he had seen the PWGSC personnel

bulletin and had checked the government website regarding RTAs, he did no

further research on Loba. The person who told him about Loba was not a public

servant, but a consultant working with the public service. Luck did speak to two

senior people at INAC who were considering the Loba option, but there is no

evidence that they had researched Loba or had any special knowledge about Loba.

Luck and his wife met for only one-half hour with Parent on October 12, 2000. It

was clear that Luck did not fully understand the financial aspects of the Loba

arrangements, the relationship between Loba and WBP or the financial

arrangements between Parent, Loba and WBP. There is no evidence that Luck

asked Parent any questions to clarify these points.

- 390 -

[1249]

Despite the limited information Luck had about Loba, he decided on

the spot to join Loba. He went back to work after the meeting and by noon had

submitted his resignation from the public service. He made that decision without

any consultation with his compensation advisor, a financial advisor, a legal

advisor, or anyone else who had joined Loba. It was foreseeable to Luck that,

making such a significant decision in such a hasty fashion and with minimal

information could result in a financial loss to himself.

[1250]

Despite Luck acting negligently in not seeking further advice before

making such an important decision, the evidence does not persuade me that, had

Luck consulted his compensation advisor, the Pensions Division, or the

Superannuation Directorate, he would have been warned of the significant risks he

faced joining Loba. As well, there is no evidence supporting the conclusion that,

had Luck consulted Jemus or another financial advisor for a second opinion or if

he had consulted a lawyer, he would have been steered away from Loba.

Consequently, it has not been proven that any negligence on Luck’s part in this

regard caused or contributed to his damages.

[1251]

I find that in another respect Luck was negligent. Luck had no

contract work lined up before he resigned from the public service. He was

confident that he would be able to get contract work because of his expertise with

the financial software being used for a number of government departments;

however, he had no independent corroboration that this would be the case. It was

foreseeable to Luck that, since he had no specific prospects, he could earn

considerably less as a consultant than he would earn as a public servant. A

reasonable and prudent person who intended to work for another two and a half

years would not have resigned from the public service without more concrete plans

as to what income would replace his public service salary. Had Luck done his

homework in this regard prior to leaving the public service, he could have decided

not to take the Loba option or to make further and better efforts in advance so as to

secure more lucrative contracts before leaving the public service.

[1252]

Had I found that damages were payable to Luck, I would have reduced

them by 10%, representing his contributory negligence in this regard.

(viii) Nobert

[1253]

Nobert took four steps in order to do due diligence. She e-mailed her

compensation advisor with specific questions relating to her pension entitlement

- 391 -

and options, advising that she was considering an RTA. When her compensation

officer did not respond, she sought the advice of two individuals who were more

senior in the Compensation Community. They were aware of RTAs, but were

unaware of any warnings or concerns relating to the Loba RTA. Nobert’s husband

reviewed the Loba arrangements with a certified management accountant whose

wife had joined Loba. His feedback was that the Loba option was a very good

deal. Nobert’s husband also confirmed that Loba was an approved employer with

an RTA. Finally, Nobert confirmed with her Director the extent to which contract

work would be available to her if she went to Loba. Considering the significance

of the decision being taken, I find the level of Nobert’s efforts to confirm the

availability of the Loba arrangements to be lacking.

[1254]

First, Nobert had not done any independent research on Loba through

the government Intranet. She did not speak directly to her own compensation

advisor. Although the two compensation experts she consulted were more senior

than her compensation advisor, they were speaking to her informally as her sister

and as her friend. Nobert had the Parent/Hamilton exchange of correspondence,

Parent told her about the other six RTAs that had been cancelled, and prior to the

effective date of her resignation she had a copy of Gravelle’s August 22^nde-mail.

For the same reasons given in regard to Findlay, in order to exercise due diligence,

Nobert should have made further inquiries to clarify the history of government

concerns and to confirm that her anticipated relationship with Loba would be an

employment relationship. That being said, the evidence falls short of persuading

me that, had Nobert actually spoken with her compensation advisor or had she

independently called the Pensions Division or the Superannuation Directorate, she

would have been apprised of the significant concerns the government had

regarding the Loba arrangements so that, had she been acting reasonably, she

would not have joined Loba.

[1255]

Secondly, in order to act reasonably, Nobert also should have obtained

a second financial opinion. The certified management accountant Nobert’s

husband consulted was acting not in his professional capacity, but as a friend with

some experience with Loba. Nobert did not seek a second opinion from a

professional, such as Jemus or another financial analyst. Nevertheless, there is no

evidence that, had Nobert obtained a second financial analysis, it would have been

any different than the one provided to her by Parent. Consequently, I cannot find

that any negligence on Nobert’s part in not inquiring further into the Loba option

caused or contributed to her damages.

- 392 -

(ix) Dufour

Dufour exercised due diligence prior to resigning from the public

[1256]

service. She met with Jemus on six occasions to discuss pension and retirement

options. She met with Parent on four to five occasions to discuss the Loba option.

As far as she knew Jemus and Parent were independent professional advisors; she

was unaware of any financial relationship between them. Dufour told her

compensation advisor that she would be joining Loba. Dufour had arranged for

full-time employment at the Illinois State Geological Survey starting in October

2000, and was confident that she would also be able to secure contract work for

Loba during her period of employment with Loba. She was unaware of any issues

that would require her to get legal advice or to seek out specialized knowledge

from other government departments, such as Treasury Board or the CRA.

(c) Did the Plaintiffs act reasonably and prudently after December 21,

2001?

[1257]

All of the Plaintiffs, and Dufour, first learned of the RCMP

investigation in December 2001when they received an update from Loba advising

of the execution of the search warrant on December 12, 2001, or in Temple’s case,

saw a newspaper article in January 2002 referring to the charges. At the same time

they learned that at least since February 2001, the TBS had been refusing to

transfer funds under the Loba RTA until it received confirmation from the CRA

that it had no concerns regarding the ongoing registration of the Loba pension plan.

They realized that Parent had kept this information from them until December

2001.

[1258]

The Defendant submits that once the Plaintiffs became aware of the

RCMP investigation of Parent, Loba and WBP, the hold on transfers imposed by

the TBS, and CRA’s concerns about the Loba pension plan, the Plaintiffs should

have immediately severed their relationship with Loba and should have taken

remedial action, such as seeking employment with the public service or some other

employer. The Defendant submits that upon receipt of this information, the

Plaintiffs should have contacted the government agencies involved to seek out

information about government concerns and the potential impact on their pensions.

The Defendant asks that the Plaintiffs be held responsible for any losses after

January 2002.

- 393 -

[1259]

Before considering each Plaintiff individually, I note that the

Defendant has not adduced any evidence to support the conclusion that, had the

Plaintiffs severed their relationship with Loba and Parent immediately upon receipt

of the December 2001 newsletter, their losses arising from the negligent

misrepresentations would have been less. No evidence was adduced as to any

employment opportunities available to any of the Plaintiffs – either in the public

service or with another employer – other than the opportunities which the Plaintiffs

pursued.

[1260]

I also note that there is no evidence that, had the Plaintiffs cut their

ties with Parent and had attempted to get information directly from government

sources or to discuss their situation directly with the responsible government

agencies, they would have been any further ahead. The evidence is that Parent

tried his best to resolve matters with the TBS and the CRA in a way so as to

benefit the Plaintiffs and, after December 2001, he kept the Plaintiffs informed of

all relevant communications between himself, the TBS and the CRA. There is no

evidence that, had the Plaintiffs tried to interact directly with the TBS and the CRA

regarding their position with Loba, they would have received any different or any

better information than they received via Parent. On the contrary, when different

Plaintiffs tried to revoke their application for a transfer under the Loba RTA, they

were met with an extremely aggressive response from the Defendant’s lawyer,

requiring them to sign a Release and Indemnification Agreement that was

draconian.

[1261]

I note that in September 2001, the Plaintiffs learned that Parent had

obtained a favourable ruling from the CPP/EI Rulings Section to the effect that

those in the position of the Plaintiffs were employees of Loba. It was not

unreasonable for the Plaintiffs to put some faith in these rulings.

[1262]

The Defendant cannot criticize the Plaintiffs for not having revoked

their request for a transfer under the Loba RTA prior to November 2003, because it

was the unreasonable demand of the Defendant for the Plaintiffs to sign its Release

and Indemnification Agreement that prevented some of the Plaintiffs from

requesting the revocation earlier.

(i)

Findlay

[1263] I find that, at least commencing in November 2000, Findlay

understood that the Superannuation Directorate would be investigating whether

- 394 -

there was a legitimate employer/employee relationship between Loba and its

workers and, if it concluded that no such relationship existed, the transfer of his

pension monies under the Loba RTA was in jeopardy. Parent advised members of

the EC Group that as much work as possible for as long as possible should be put

through Loba to bolster the employment relationship. I consider it reasonable that

this caution did not cause Findlay concern in that he was working full-time for

Pollution Probe at a salary comparable to what he had been earning prior to joining

Loba, and all of his earnings came through Loba. It was reasonable for him to

conclude that this would satisfy employment requirements for the Superannuation

Directorate.

[1264]

The Defendant faults Findlay for continuing to work for Loba

throughout 2001 despite transfers under the Loba RTA not being processed. I do

not consider Findlay to have been negligent in doing so. He was first advised that

delays were due to the heavy workload at the Superannuation Directorate – and

that is what he would have been told had he contacted the Superannuation

Directorate directly. In the fall of 2001, Findlay learned that both the Treasury

Board and the CRA were looking into the employment issue at Loba. However, by

October 2001, Findlay knew that the CPP/EI Eligibility Rulings Section had

determined that Loba workers were employees. Findlay was not negligent in

staying with Loba at this time.

[1265]

In December 2001, Findlay learned of the RCMP investigation and

the hold that had been placed on transfers under the Loba RTA. He immediately

consulted counsel and has been receiving legal advice ever since. He did not rely

solely on Parent or Loba for information or advice, as alleged by the Defendant.

[1266]

Findlay continued to work for Pollution Probe under a Loba contract

until September 2002, when he started to work directly on contract with Pollution

Probe. I have not been persuaded that this was an unreasonable course of action.

The parties’ respective legal rights were not easily discernible at that time. The

CPP/EI ruling stated that he was in an employment situation with Loba. The TBS

was taking the position that he was not. Parent had received legal advice to the

effect that an employment relationship existed. It must be remembered that,

although the Federal Court of Appeal ruled that the Minister of Revenue acted

reasonably in revoking the registration of Loba’s pension plan, the Court did not

decide that at law the Plaintiffs were not employees of Loba or that the Loba

pension plan did not meet the primary purpose rule under the Income Tax Act. It

- 395 -

was difficult to predict which course of action would be most advantageous for

Findlay in the long-run.

[1267]

I reject the Defendant’s argument that, since Findlay showed loyalty

to Parent from 2000 forward until trial, likely he would have joined Loba in

October 2000 even if prior to doing so he had been aware of the significant

concerns of the CRA regarding the Loba arrangements and the real possibility that

the Loba pension plan would be de-registered. Findlay continued to seek actuarial

advice from Parent in regard to the establishment of an IPP and the transfer of his

Loba pension monies into the IPP. The evidence at trial does not suggest that

Findlay should have considered Parent and Burnside incompetent to provide him

with this type of advice. That does not mean that in 2000, without any previous

relationship with Parent, Findlay would have placed blind faith in his opinion in

the face of information from the government that it had significant concerns about

the Loba arrangements that could result in the de-registration of the Loba pension

plan and the suspension of all transfers under the Loba RTA.

(ii) Ault

[1268]

When Ault received the December 18, 2000 employment

confirmation letter from the Superannuation Directorate,⁹¹⁴she believed that the

government was taking an unusual action to deal with unusual circumstances;

namely, 120 public servants leaving to join the same consulting company. I do not

fault her for her lack of concern at that time because she honestly and reasonably

believed that by actively seeking consulting work and putting all of that through

Loba, she was an employee of Loba.

[1269]

The same analysis as applied to Findlay’s behaviour in 2001 applies

to Ault. Although she learned that the Treasury Board was delaying transfers due

to concerns about the existence of an employment relationship, she was also aware

of Parent’s action plan, which was reasonable, to get a ruling from the CPP/EI

Eligibility Rulings Section. Ault participated in that exercise and I find that she

answered questions as honestly and accurately as she could. She was reassured by

the results of the investigation.

[1270]

Immediately upon learning of the criminal charges, Ault contacted the

RCMP for information. She obtained a copy of the Information to Obtain Search

Warrant. In January 2002 she retained counsel and has had the benefit of legal

advice ever since. She has not relied solely on information or advice from Parent

- 396 -

or Loba. Ault did not put any more contracts through Loba after a November 2001

contract.

[1271]

In September 2002, Ault advised the Treasury Board that she wished

to revoke her request for a transfer under the Loba RTA. She was told by

Macpherson that she would have to sign a Release and Indemnification

Agreement. Ault, with the benefit of legal advice, refused. She brought an

application for judicial review in the Federal Court⁹¹⁵which resulted in her not

being required to sign the Release and Indemnification Agreement. In November

2003, she again asked to revoke her transfer, and this time, the revocation

proceeded without condition.

[1272]

The Defendant faults Ault for having continued to put her investments

through Fletcher at RocheBanyan right up to the present time and to seek his

advice about when to start collecting her pension. There is no evidence of any

wrongdoing or negligence on the part of Fletcher or RocheBanyan. If Ault was

satisfied with the services she was being provided, it was not negligent of her part

to continue seeking those services.

[1273]

I have not been persuaded that the way Ault handled herself once she

learned of the criminal investigation was unreasonable and contributed to her

losses.

(iii) Shepherd

[1274]

In January 2002, the EC Group, of which Shepherd had become a

member, retained a lawyer. From that point forward, Shepherd had the benefit of

legal advice. He did not rely solely on Parent or Loba for information or advice.

[1275]

Shepherd continued to work for the NCR JCTC through Loba until

April 2004 when his contract was ended, not by NCR JCTC but by direction from

the National JCTC leadership. By this time, the criminal charges had been

withdrawn against Parent, Loba and WBP and the appeal to the Federal Court of

Appeal from the Minister’s Notice of Intent to Revoke was still pending. In the

absence of evidence that other, more favourable, options were available to

Shepherd, I have not been persuaded that Shepherd’s decision to continue his work

through Loba until this point was unreasonable.

- 397 -

(iv) Collier

The same comments made in this section in regard to Findlay and

[1276]

Ault apply to Collier, subject to the following differences.

[1277] Collier learned as early as March 2001 that the Superannuation

Directorate would not complete transfers under the Loba RTA until such transfers

had been approved by the CRA. However, in May and August 2001, when he

again consulted the Superannuation Directorate, he was simply told that the

transfers were being processed – albeit slowly as a result of the volume. In neither

conversation was Collier advised that a hold had been placed on Loba transfers or

that the CRA had significant concerns about the continuing registration of the Loba

pension plan. In May 2001, Parent advised Collier that Loba’s lawyer was making

a submission to CRA to deal with their concerns. By October 2001, Collier was

aware of the ruling of the CPP/EI Eligibility Rulings Section that his relationship

with Loba was an employment relationship. Collier was entitled to rely on that

ruling.

[1278]

The Defendant is critical of Collier continuing to work through Loba

following March 2001; however, matters were unclear at that time, and I do not

consider it negligent for Collier not to have “jumped ship” immediately. As the

year progressed, he received more reassurance that his transfer would be

processed. By this time Loba had entered an Interchange Canada Agreement

which ran to December 2001 and subsequently was renegotiated in January 2002,

running to the end of 2002. By early 2002, Collier was learning second-hand

through Shepherd of the legal advice the EC Group was receiving from its lawyer.

I am not persuaded that Collier’s continuing to work through Loba was an

unreasonable course of action at the time. No evidence was adduced as to other

courses of action then open to Collier that would have resulted in a reduction in his

damages.

[1279]

Collier stopped working through Loba in December 2002 and entered

his own five-year contract with the University of Ottawa as a lecturer. As soon as

the Federal Court released its ruling in October 2003 to the effect that the Loba

workers seeking to revoke their transfers did not have to sign the Release and

916

Indemnification Agreement,

Collier revoked his request for a transfer and

started to receive his PSSP pension effective October 11, 2002. That was the most

reasonable date for him to have chosen as the commencement date.

- 398 -

(v) Temple

Temple was unaware of the hold that had been placed on the Loba

[1280]

transfers pending confirmation from the CRA that it did not have concerns about

the continued registration of the Loba pension plan. When he inquired about the

delay in getting his pension monies transferred, he was advised that the delay was

due to backlogs. There was no reason why Temple should not have accepted this

at face value. This was the official party line that Gravelle had instructed the

Superannuation Directorate to give to those inquiring about Loba transfers.

[1281]

Temple learned of the criminal charges from a newspaper article in

January 2002. He did not consult a lawyer. Instead he continued to look to Parent

and Burnside for information regarding the status of Loba’s action against the

federal Crown. When in February 2002 Temple learned that the action would be

heard in a few months, but there could be an appeal thereafter, Temple took steps

to revoke his request for a transfer under the Loba RTA.⁹¹⁷He could not proceed

with that due to the Defendant’s demand for the Release and Indemnification

Agreement. In October 2003, after the Federal Court decision to the effect that the

Plaintiffs did not have to sign such an agreement,⁹¹⁸Temple again requested a

revocation.

[1282]

Temple put work through Loba until January 2003. Thereafter, he

worked as a casual employee in the public service until his retirement. There was

no evidence that, had Temple sought employment with the public service or with

another employer prior to January 2003, it would have been available for him, nor

was there evidence that he could have generated a higher income if he had entered

contracts directly or used another consulting firm. Therefore there is no evidence

that any negligence on Temple’s part in continuing to work with Loba and look to

Parent and Burnside for assistance caused or contributed to the damages he

sustained.

(vi) Armstrong

[1283]

There is no evidence that, when Armstrong learned of the criminal

investigation, he consulted a lawyer or other advisor. However, although he was

not a member of the EC Group, he received regular updates from them and would

have been aware of the advice the EC Group was receiving from its lawyer. He

did not simply continue to rely on information and advice from Parent.

- 399 -

[1284]

Armstrong decided to complete his then current Loba contract with

Cleanit Greenit, but commencing in February 2002, to put any new contracts

through Armstrong Engineering. No evidence was tendered as to when Armstrong

revoked his request for a transfer under the Loba RTA, but that was done at some

point. In July 22, 2005, in response to a letter from the Superannuation

Directorate, Armstrong chose to start receiving a deferred annuity under his PSSP

commencing on May 2, 2010. It cannot be suggested that Armstrong acted

negligently in any respect following December 2001, or that had he been acting

reasonably, he would have chosen another course of conduct that would have been

more advantageous to him.

(vii) Luck

[1285]

When Luck learned of the criminal investigation, he was out of work

and did not have the financial resources to hire a lawyer. Parent advised him that

he had retained a lawyer and was pursuing matters with the Treasury Board and

that Luck would not have to pay legal fees while Parent’s lawyer was attempting to

get a favourable resolution for all of the Plaintiffs.

[1286]

Luck attempted to get information from other sources. He tried to

speak to former colleagues at INAC; however, his impression was that they were

avoiding him. In March 2002, Luck notified Pellerin that Parent and Burnside had

authorization to make inquiries on his behalf. On April 29, 2002, Luck again

contacted Pellerin seeking information directly regarding an advance on his

pension transfer. His letter was acknowledged but never responded to in

substance. Finally in October 2004, once the Federal Court ruled that the Plaintiffs

did not have to sign the Release and Indemnification Agreement, Luck rescinded

his request for a transfer.

[1287]

I do not fault Luck for not seeking other professional advice between

January 2002 and October 2004 when he could not afford it. The evidence was

that after December 2001, Parent was keeping the Plaintiffs well-informed of the

status of litigation with the government and of the steps that were being taken to

get a resolution. Luck was waiting for the outcome of the litigation with the

government.

[1288]

Luck continued to be associated with Loba until October 2004,

although he did not have any contract work to put through Loba from 2002 to

2004. There was evidence of various efforts Luck took to find contract work or

- 400 -

employment between 2001 and 2004, without success. No evidence was adduced

that, had Luck handled himself differently, severed his ties with Loba, and applied

elsewhere for work, he would have obtained it – aside from the one contract that

was offered to him and that he rejected in order to stay with Loba. I have already

dealt with that under the heading of Mitigation. I have not been persuaded that

Luck was contributorily negligent following December 2001.

(viii) Nobert

[1289]

When Nobert learned of the criminal investigation, she reviewed the

Information to Obtain Search Warrant sworn by Desnoyers and then she consulted

a lawyer. She did not rely solely on information or advice from Parent or

Burnside. In fact in June 2002, Nobert e-mailed Pellerin for information

concerning the status of the transfer of her pension entitlements under the Loba

RTA. Macpherson responded only on October 24, 2002, providing minimal

information, aside from stating that if Nobert wanted to revoke her request for

transfer, she would have to sign the Release and Indemnification Agreement.

Understandably, Nobert refused to sign that document.

[1290]

With the benefit of legal advice, Nobert decided to continue working

for Loba until the legal procedures initiated by Loba against the government were

completed. For the same reasons indicated with Findlay, I have not been

persuaded that this was an unreasonable course of action. In any event, no

evidence was adduced that, had Nobert sought full-time employment with the

public service or with another employer prior to September 2004, it would have

been available for her, nor was there evidence that she could have generated a

higher income if she had entered contracts directly or used another consulting firm.

(ix) Dufour

[1291]

No argument was advanced that Dufour was contributorily negligent

in how she conducted herself once she became aware of the criminal investigation.

Apportioning Fault Between the Defendant and Parent/Loba/WBP

[1292]

For numerous reasons, I find that the Defendant’s conduct is more

culpable than that of Parent, WBP and Loba.

- 401 -

[1293]

The Defendant put into place the RTA option for departing public

servants. As the October 15, 2000 deadline approached, the Defendant issued

numerous bulletins and notices directed to the Compensation Community in the

various government departments and agencies to ensure that all members of the

PSSP who could potentially benefit through use of an RTA were aware of the

existence of RTAs and of the approaching deadline for their use. RTAs were held

out as an opportunity. No warnings were issued regarding factors that could limit a

public servant’s access to an RTA or regarding potential risks associated with

relying on an RTA. Public servants were simply advised to check with their

compensation advisors as to whether a prospective employer was an approved

employer with an available RTA.

[1294]

At all times, the Defendant identified Loba as being an approved

employer even though, as of May 2000, the Pensions Division believed that it

should have cancelled the Loba RTA when it had cancelled other RTAs negotiated

by Parent, and even though starting in May 2000 the Pensions Division was

looking for reasons for which it could deny transfers under the Loba RTA.

[1295]

The Defendant was aware as early as May 2000 that Loba was

embarking on an aggressive advertising campaign aimed at departing public

servants that focused on the availability of its RTA. The Defendant realized

through its experience with Cryptic Web and AMB, and through the numerous

requests compensation advisors, the Superannuation Directorate and the Pensions

Division were receiving from individual public servants, that many public servants

were considering the Loba option.

[1296]

By May 10, 2000 the Defendant understood that there were features of

the Loba pension plan that were similar to those of other companies, such as

Cryptic Web and AMB, with whom the Defendant had had RTAs that it had

cancelled. The Defendant had the same concerns regarding the existence of a

legitimate employment relationship at Loba as it had had with those other

companies. Those concerns were so strong that it initially put on hold any

transfers under the Loba RTA and then reluctantly lifted the hold, but only on the

understanding that the Superannuation Directorate would take the unusual step of

checking the employment status of each individual Loba worker. By June 2, 2000

the Superannuation Directorate had a copy of Loba’s standard form employment

agreement. The Pensions Division had it on June 15, 2000. This document clearly

identified Loba workers as being commissioned employees who had to find their

- 402 -

own work – a factor the Pensions Division and the CRA subsequently relied on in

deciding Loba workers were not employees.

[1297]

By May 17, 2000, the Pensions Division knew that the RCMP would

be investigating Parent, Loba and WBP for fraud. The Pensions Division was of

the view that Parent, Loba and WBP were committing a fraud on the Defendant.

The Pensions Division knew that, if criminal charges were laid against Parent,

Loba and WBP, transfers under the Loba RTA would be stayed. By early October

2000, the Pensions Division knew that the RCMP was collecting undercover

evidence for the purpose of laying criminal charges.

[1298]

Throughout the summer of 2000, Gravelle alerted the CRA of the

possibility that the relationship Loba had with its workers was not an employment

relationship. Gravelle realized that such a finding could result in the de-

registration of the Loba pension plan. Through the discussions of Gravelle and

Godwin, which culminated in Godwin’s letter to Gravelle of September 7, 2000,

the Pensions Division knew that the CRA had serious concerns as to whether a

valid employment relationship existed at Loba and as to whether the Loba pension

plan could meet the primary purpose test under the Income Tax Act.

[1299]

By August 30, 2000, the Pensions Division understood that WBP was

receiving a 10% commission for processing a transfer under the Loba RTA – a

factor the Pensions Division and the CRA relied on in deciding that the Loba RTA

and pension plan was being used as a conduit for the transfer of pension monies

and not for the provision of pensions to Loba workers.

[1300]

Despite having all of this information, the Defendant issued no

warnings or qualifiers to public servants about circumstances that could result in a

company pension plan, to which the public servants might transfer pension monies

under an RTA, being de-registered in the future.

[1301]

There are other factors which augment the Defendant’s culpability.

The Treasury Board was the Plaintiffs’ long-term employer and was the

administrator of the PSSP. It was reasonable for the Plaintiffs to assume that the

TBS would deal with them in an open and honest fashion, and would not withhold

highly relevant information from them that the TBS realized was material to their

decision to join Loba and apply for a transfer under the Loba RTA. Gravelle,

Macpherson and Charko all realized that public servants in the position of the

Plaintiffs would expect to be treated fairly and in good faith. Nevertheless, their

- 403 -

strongly-held belief that the Plaintiffs were participating in or at the very least were

benefiting from a fraud being perpetrated on the Defendant resulted in their

prompting and supporting the RCMP’s criminal investigation of Parent and the

CRA’s investigation of the Loba pension plan at the expense of their duties to the

Plaintiffs.

[1302]

What is particularly disturbing is that both before and after October

15, 2000, the TBS, the CRA and the RCMP openly shared information and

strategies regarding Parent, Loba, WBP and the Plaintiffs, with little consideration

being given to the differing mandates of these three arms of the government and

the different responsibilities each had vis-à-vis the Plaintiffs and the Third Parties.

All colluded in keeping highly relevant information from the Plaintiffs, as well as

Parent, Loba and WBP.

[1303]

Relevant information that could easily have been disseminated to

those in the position of the Plaintiffs prior to October 15, 2000 was not shared.

After November 16, 2000, relevant information that could have impacted the

Plaintiffs’ ability to mitigate their losses was consciously withheld from those

making inquiries. This intentional deception was particularly egregious. When

Parent, Burnside or one of the Plaintiffs contacted the Superannuation Directorate

or the Pensions Division for an update regarding the transfers, they were

intentionally misled by Gravelle, Macpherson, or someone at the Superannuation

Directorate acting under their instructions. On many occasions, letters or

telephone calls were not answered or were answered only after a lengthy delay.

When the Plaintiffs finally asked to revoke their applications for a transfer under

the Loba RTA, they were faced with a totally unreasonable Release and

Indemnification Agreement to sign before the Treasury Board would accept the

revocation.

[1304]

This is not behaviour which one expects of one’s government, one’s

employer or one’s pension plan administrator.

[1305]

Parent, Loba and WBP must bear some of the responsibility for the

Plaintiffs’ losses.

[1306]

Parent conceptualized the use of private consulting companies like

Loba as prospective employers for public servants seeking to take advantage of the

favourable pension valuations associated with RTAs. Loba and WBP actively

marketed the Loba RTA and pension plan to departing public servants as part of

- 404 -

their business plans. Parent orchestrated this knowing that the Pensions Division

did not approve of the way RTAs were being used in the context of consulting

companies such as Cryptic Web, AMB and Loba. He knew that the Cryptic Web

and AMB RTAs had been cancelled due to these policy concerns on the part of the

TBS. He knew that Gravelle and Macpherson at the Pensions Division were

highly sceptical about the Loba arrangements and were keeping a close eye on

them.

[1307]

Parent knew that the existence of an employer/employee relationship

was a critical pre-condition to transferring funds under the Loba RTA. He realized

that there were some aspects of the relationship between Loba and at least some of

its workers that could bring into question whether that worker would be considered

an employee under the law. Despite this knowledge, Parent did not adequately

convey to prospective Loba workers the uncertainty surrounding this issue.

[1308]

Parent did not adequately explain to all of the Plaintiffs the chain of

events that resulted in a hold being placed on transfers under the Loba RTA in the

summer of 2000. Some received only a copy of Gravelle’s e-mail of August 22,

2000 indicating that transfers would be processed as long as the proper

documentation was provided to confirm the existence of an employment

agreement. Others did not even receive that e-mail. Parent did not inform the

Plaintiffs that the letter they would receive from the Superannuation Directorate

was an extraordinary measure on its part in monitoring RTAs.

[1309]

Any culpability attaching to Parent’s behaviour up to this stage was

reduced by other actions taken on his part.

[1310]

As soon as Parent became aware in 1997 of the concerns of the

Pensions Division with the use of RTAs by private consulting companies, he

attempted to enter an active dialogue with Hamilton and Gravelle in an effort to

assuage those concerns and explain the legitimacy of the arrangements. In 1998 he

offered to meet with someone at the Pensions Division to work through any

differences; that offer went ignored.

[1311]

When Loba and WBP were actively marketing the Loba arrangements

to public servants, the message given in all of the advertisements was that a public

servant should only explore the Loba option if he or she was considering leaving or

retiring from the public service at that time or in the near future. When Parent met

with the Plaintiffs, he did not strong-arm the Plaintiffs into leaving the public

- 405 -

service. On the contrary, he gave the message that if there were reasons why the

Plaintiffs were contemplating leaving the public service, they should consider the

financial advantages that could flow to them through use of the Loba RTA. He did

not encourage them to leave the public service simply because the Loba RTA

existed and might be available to them.

[1312]

Although Parent did not specifically tell prospective Loba workers

about the hold in the summer of 2000, by August 22^ndhe honestly and reasonably

believed that the hold had been lifted because the TBS was satisfied that the

relationship that Loba had with its workers was an employment relationship. He

was never told anything to the contrary by Gravelle or Macpherson from August

22^ndto October 15^th. Parent did not realize that the CRA might come to a different

conclusion based on the same facts.

[1313]

I have found that the most significant negligent misrepresentation

made by Parent, Loba and WBP was their failure to advise the Plaintiffs and

Dufour about the contents of Godwin’s September 15, 2000 letter to Loba and

WBP and Godwin’s September 7, 2000 letter to Gravelle. As the Loba pension

plan administrator or third party administrator, and as an actuary, Parent had a

professional duty to disclose this information. Parent let his own wishful thinking

and certainty about the legitimacy of the Loba arrangements get in the way of his

obligation to make full disclosure to the Loba pension plan members. He put the

financial interests of himself, Loba and WBP ahead of those of the Plaintiffs and

Dufour in not disclosing this information.

[1314]

Although culpability definitely attaches as a result of this omission,

there are some factors which soften the degree of culpability. Before receipt of

Godwin’s September 15^thletter, Parent had not appreciated that the federal Crown

might not be considered a participating employer for the purpose of calculating

benefits under the Loba pension plan. He needed legal advice on this point before

he could appreciate the significance of this concern raised by Godwin. In August

2000, Parent had already sought legal advice from one taxation lawyer. After

receipt of Godwin’s letter, he sought a formal legal opinion from another taxation

expert. Both legal opinions supported Parent’s view that the Loba arrangements

were legitimate and the Loba pension plan should meet all requirements under the

Income Tax Act.

- 406 -

[1315]

After October 15, 2000, Parent’s culpable acts consisted of not

advising the Plaintiffs and Dufour about the hold the Pensions Division had placed

on transfers under the Loba RTA when he became aware of it in February 2001,

and of not advising the Plaintiffs and Dufour that the Pensions Division was

awaiting CRA approval before it would resume transfers. Culpability for these

omissions is reduced by other factors.

[1316]

Parent’s failure to advise the Plaintiffs and Dufour of the hold did not

impact their losses arising from the misrepresentations prior to October 15, 2000.

As well, from February to December 2001, Parent and Burnside tried repeatedly to

get matters resolved with the Pensions Division and the Registered Plans Division

so that transfers under the Loba RTA would be processed. To put it colloquially,

they were given the run around. They were not dealt with in a fair or honest

fashion. Since Parent was getting no cooperation from either the Pensions

Division or the Registered Plans Division, he took the constructive step of getting

the CPP/EI rulings.

[1317]

Finally, the culpability inherent in Parent’s behaviour must be

considered in the context of what he knew at the time. He did not know that the

RCMP, the Pensions Division and the Registered Plans Division were operating

under the belief that Parent, Loba and WBP were committing a fraud on the federal

Crown. He did not know that representatives from these three arms of government

had been working together for close to a year to build a case against Parent, Loba

and WBP. He did not realize the extent of the risk that the Loba pension plan

would be de-registered and the transfers under the Loba RTA would never occur.

Both before and after October 15, 2000, the Defendant was in the best position to

assess the extent of the risk faced by the Plaintiffs and Dufour. It was in the best

position to realize the impact its actions could have on the Plaintiffs and Dufour.

[1318]

The Defendant advances numerous arguments as to why any

culpability on its part was far less than the culpability associated with Parent, Loba

and WBP.

[1319]

The Defendant submits that Loba, WBP and Parent deliberately

withheld information about the Loba arrangements and that impacted on the

decisions of the TBS regarding transfers under the Loba RTA prior to the expiry

date.

- 407 -

[1320]

Parent did not notify the Pensions Division when Syglam purchased

Martin’s interest in Loba; however, not only was Parent under no legal obligation

to do so, but also the fact that Loba was owned by Syglam and not Martin was not

directly related to the concerns of the Pensions Division regarding the existence of

an employment relationship, the retention of PSSP pension monies for the benefit

of Loba, the Loba RTA acting as a conduit for PSSP pension monies, and the

questionable registration status of the Loba pension plan.

[1321]

There is no real dispute that most of the individuals who left the

public service to join Loba did not intend to continue being employed by Loba for

any significant period beyond the receipt of their PSSP pension monies in the Loba

pension plan. The Loba arrangements were structured in such a way to make early

resignation from Loba the most likely scenario. The Defendant submits that this

meant that there was never any intention on the part of Loba and the Plaintiffs to

have a “real, long-lasting employment relationship”.

[1322]

First, I reject the notion that the length of time a person works for an

employer defines whether or not a legitimate employment relationship exists

between them. I find that Loba and the Plaintiffs always intended to have a

legitimate employment relationship, and despite the decision of the Minister of

Revenue, it is certainly arguable that they did have a legitimate employment

relationship. The CPP/EI Eligibility Rulings Section of the CRA thought that they

did. Secondly, the Pensions Division was aware by May 2000 that by all

appearances the Loba arrangements seemed the same as the Cryptic Web and

AMB arrangements. The Pensions Division had formed the opinion as early as

1997 that the Cryptic Web and AMB RTAs were not being used in a legitimate

way.

[1323]

The evidence simply does not support the Defendant’s contention that,

due to Parent, Loba and WBP withholding information from the Pensions Division,

it was unaware of the nature of the Loba arrangements in August 2000 when it

lifted the hold on all Loba transfers. As I have already reviewed, the Pensions

Division had sufficient information by this date to have serious concerns and to

enable it to identify the significant risks to which the Plaintiffs and Dufour were

being exposed.

[1324]

I also reject the Defendant’s submission that, since the vast majority

of requests for transfers under the Loba RTA were only faxed to the

- 408 -

Superannuation Directorate on October 14, 2000, the TBS had no indication of the

number of requests that were involved until after the expiry date. As I have

already reviewed, the TBS was aware in the late summer and early fall of 2000 that

many public servants were interested in the Loba option.

Conclusion Regarding Fault

[1325]

Damages must be recalculated based on my findings of fact and the

actuarial and economic assumptions that would apply to an up-to-date calculation.

[1326] Responsibility for those damages is apportioned as follows in regard

to the different actions.

Plaintiff/Dufour

Defendant

80%

72%

80%

72%

80%

Parent/Loba/WBP

Findlay

Ault

20%

18%

20%

18%

20%

Shepherd

Collier

Temple

Armstrong

Luck

10%

Nobert

Dufour

100%

[1327]

The Defendant is liable to each Plaintiff for that portion of the

Plaintiff’s damages not covered by contributory negligence. Although I have

found that no damages are payable to Luck, I have included a breakdown of

responsibility had such damages been payable in case it is of assistance to a

reviewing court.

[1328]

The liability of Parent, Loba and WBP to the Defendant for

contribution is a joint and several liability. During his interactions with the

Plaintiffs and Dufour, Parent represented both Loba and WBP, without making it

clear which he was representing at any given time. No effort was taken during the

trial to differentiate the liability that might attach to Parent, Loba and WBP (aside

from the arguments advanced regarding the corporate veil). I will not attempt to

differentiate that liability now.

[1329]

The evidence at trial was inadequate to enable me to apportion fault

between the Defendant, Parent, Loba and WBP in regard to Dufour. More

- 409 -

particularly, the interactions that Dufour had with representatives of the Defendant

prior to her resigning from the public service was not canvassed, nor was her

awareness of government communications relating to RTAs. Consequently I make

no order for contribution in regard to the third party claim in the Dufour action and

need not hear further submissions regarding the reasonableness of the settlement

between Dufour and the Defendant.

Prejudgment Interest

[1330]

The Plaintiffs are not seeking prejudgment interest in regard to their

pension loss in that Christie, in his original calculations, took prejudgment interest

into account and presumably will do so again in the updated calculations. If the

Plaintiffs are seeking prejudgment interest in regard to other aspects of their losses,

further submissions may be made at the time of costs submissions.

Costs

[1331]

Once new calculations have been prepared regarding damages, a

hearing may be scheduled for costs submissions. As well, should any clarification

be required before the new calculations can be undertaken or costs submissions

made, an appointment may be arranged through the Trial Coordinator.

___________________________

Aitken J.

Released: September 3, 2008

Appendix A: Acronyms and Abbreviations

• AMB = AMB Automation Inc.

• Appendix B = Application for transfer under a reciprocal transfer agreement

• APEX = Association of Professional Executives of the Public Service

• Aubin = L’expert des Parcs J. Aubin Inc.

- 410 -

• CAC = Consulting and Audit Canada

• CIA = Canadian Institute of Actuaries

• Citizen = Ottawa Citizen newspaper

• Clarica = Clarica Life

• CLPA = Crown Liability and Proceedings Act, R.S.C. 1985, c. C-50.

• CPP = Canada Pension Plan

• CRA = Canada Customs and Revenue Agency; Canada Revenue Agency

• Cryptic Web = Cryptic Web Information Technology Security Inc.

• EPS = Environmental Protection Service

• FAQ 11 = Question 11, Frequently Asked Questions, CRA website

• FOC = Fisheries and Oceans Canada

• Frechette = L. Paul Frechette Consulting Services Inc.

• Horler = Horler Information Inc.

• HR = Human Resources

• HRDC = Human Resources Development Canada

• INAC = Indian Affairs and Northern Development

• IPP = individual pension plan

• JCTC = Joint Career Transition Committee

• Komokoa = Komokoa Corporation

• Lafleur = Lafleur de la Capitale Inc.

• Loba = Loba Ltd.

• NCR = National Capital Region

• NMG = NMG Canada Inc.

• PIPS = Professional Institute of the Public Service

• Prosource = Prosource Plus Inc.

• PSPF = Public Service Pension Fund

• PSSA = Public Service Superannuation Act, R.S.C. 1970, c. P-36.

• PSSP = Public Service Superannuation Plan

• PTA = pension transfer agreement

• PWGSC = Public Works and Government Services Canada

• RCMP = Royal Canadian Mounted Police

• RocheBanyan = RocheBanyan Inc.

• RRSP = registered retirement savings plan

• RTA = reciprocal transfer agreement

• SAM = Superannuation Administration Manual

- 411 -

• Syglam = Syglam Inc.

• Systematix = Systematix IT Solutions Inc.

• Terrapro = Terrapro Corporation

• TBS = Treasury Board Secretariat

• WBN = Welton Beauchamp, Nixon Inc.

• WBP = Welton Beauchamp, Parent Inc.; Welton Parent Inc.

- 412 -

Appendix B: Names and Titles

• Armstrong, Bryan (“Armstrong”). Plaintiff.

• Ault, Margaret (“Ault”). Plaintiff.

• Benoit, Josée (“Benoit”). Bookkeeper for Loba after October 2000.

• Burnside, Laura (“Laura”). Parent’s administrative assistant. Employee of both

Loba and WBP.

• Charko, Philip (“Charko”).

Prior to April 2000: Director General,

Compensation Sector, Government Operational Service, PWGSC. From April

2000 to date: Assistant Secretary, Pension Division, Treasury Board Secretariat.

Ann Gravelle’s manager.

• Claydon, Frank (“Claydon”). From April 2000 to April 2002: Secretary of the

Treasury Board (Deputy Minister).

• Collier, Robert (“Collier”). Plaintiff.

• D’Aurelio, Robert (“D’Aurelio”). Director, Registered Plans Division, CRA.

• Desnoyers, Denis (“Desnoyers”). Corporal and then Sergeant, “A” Division,

Commercial Crime Unit, RCMP.

• Desrochers, Claude (“Desrochers”). General Manager of Loba after October

2000.

• Dufour, Marie-France (“Dufour”). Originally a plaintiff; following a settlement

between Dufour and Defendant, a witness.

• Findlay, Richard (“Findlay”). Plaintiff.

• Godwin, Michael (“Godwin”). From 1998 to February 2006: Chief, Technical

Services Section, Policy Division, Registered Plans Division, CRA. From

February 2006 to date: Issues Manager, Legislative Policy and Regulatory

Affairs Branch, CRA.

- 413 -

• Gravelle, Ann (“Gravelle”). From 1997 to 2003: Manager, Portability Policies,

Pensions Division, Treasury Board Secretariat. Reported to Philip Charko.

Heather Macpherson’s manager. From 2003 to 2004: Acting Director and then

Director, Program Management and Regulatory Policy, Treasury Board

Secretariat.

• Hamilton, Sharon (“Hamilton”). Prior to April 2000: Assistant Secretary,

Pensions Division, Treasury Board Secretariat. Ann Gravelle’s manager.

• Harder, Peter (“Harder”). Prior to April 2000: Secretary of the Treasury Board

(Deputy Minister).

• Jemus, Raymond (“Jemus”). Third Party, financial advisor, President of

Pension Positive.

• Joseph, Sylvie (“Joseph”). Senior Advisor, Compensation, Fisheries and

Oceans Canada.

• Leger, Eugene (“Leger”). Director, Superannuation Directorate, PWGSC.

• Ron Lepine (“Lepine”). Co-owner of Cryptic Web. Marketer for Cryptic Web.

• Luck, David (“Luck”). Plaintiff.

• Macpherson, Heather (“Macpherson”). Portability Policies, Pensions Division,

Treasury Board Secretariat. Reported to Ann Gravelle.

• Martin, Debrah (“Martin”). Original owner and President of Loba.

• Massé, Marcel (“Massé”). President of the Treasury Board. (Minister)

• McCloskey, Bill (“McCloskey”).

Assistant Commissioner, Policy and

Legislation Branch, CRA

• Menard, Larry (“Menard”). Director, Compensation Division, CRA.

• Merrigan, Lori-Lynn (“Merrigan”). Auditor, Compliance Division, Registered

Plans Division, CRA.

• Nobert, Lucie (“Nobert”). Plaintiff.

- 414 -

• Nouvet, Marcel (“Nouvet”). Chief Human Resources Officer, Human

Resources Branch, Treasury Board Secretariat. Reported to the Secretary of the

Treasury Board.

• O’Meara, John (“O’Meara”). Director, Compliance Division, Registered Plans

Division, CRA.

• O’Riordan, Fred (“O’Riordan”). Director General, Registered Plans Division,

CRA.

• Parent, Sylvain (“Parent”). Third Party, actuary with Welton Beauchamp,

Parent Inc. (now Welton Parent Inc.), President of Loba, shareholder in Syglam.

• Paquette, Claude (“Paquette”). Rulings Officer, CPP/EI Eligibility Rulings,

Taxpayers Service Debt Management Branch, CRA.

• Pellerin, Doris (“Pellerin”). Superannuation Directorate, PWGSC.

• Rémillard, Paul (“Remillard”). Director of Rulings, CPP/EI Eligibility Rulings,

Taxpayers Service Debt Management Branch, CRA.

• Richardson, Annelisa (“Richardson” or “Gillespie”). Director, Registration

Division, Registered Plans Division, CRA. Then Director-General, Registered

Plans Division, CRA.

• Robusky, Allan (“Robusky”). Technical Services Advisor, Technical Services

Section, Policy Division, Registered Plans Division, CRA.

• Royer, Paul (“Royer”). Senior Counsel, Legal Services, Treasury Board.

• Shepherd, Rod (“Shepherd”). Plaintiff.

• Shields, Renée (“Shields”). Technical Services Advisor, Technical Service

Section, Policy Division, Registered Plans Division, CRA.

• Soucoup, Val (“Soucoup”). Statutory Interpretation Section, Superannuation

Directorate, PWGSC.

• Spice, Patricia (“Spice”). Director, Policy Division, Registered Plans Division,

CRA.

- 415 -

• Swan, Glenda (“Swan”). Statutory Interpretation Section, Superannuation

Directorate, PWGSC.

• Temple, Robert (“Temple”). Plaintiff.

• Touchette, Leon (“Touchette”). General Manager of Loba up to October 2000.

• Tremblay, Ginette (“Tremblay”).

Pensions Division, Treasury Board

Secretariat. Reported to Heather Macpherson.

• Turley, Anne (“Turley”). Counsel, Department of Justice.

• Vermes, Eniko (“Vermes”). Director General, Registered Plans Division, CRA.

• White, Leslie (“White”). Special Investigations Unit, Compliance Division,

CRA.

• Wright, Rob (“Wright”). Commissioner, CRA.

- 416 -

Endnotes

In preparing these Reasons I found it essential to maintain references to the evidence relied on in

making factual findings. Although unusual, I have maintained these references in the form of

end notes in case they are of assistance to counsel or to a reviewing court.

¹In this judgment, I use the terms federal government, government, federal Crown and Crown interchangeably and

all refer to the Defendant.

²For simplicity, throughout this judgment when I refer to a federal public servant, I refer to anyone who is a

contributor under the PSSA whether they are employed by the federal public service or by a Crown corporation or

agency.

³R.S.C. 1970, c. P-36.

⁴Now the Canada Revenue Agency.

⁵R.S.C. 1985 (5^thSupp.), c. 1.

⁶Exhibit 3 Tab 16.

⁷Exhibit 4 Tab 12.

⁸Exhibit 5 Tab 7.

⁹Exhibit 6 Tab 16.

¹⁰Exhibit 7 Tab 10.

¹¹Exhibit 8 Tab 13.

¹²Exhibit 9 Tab 17.

¹³Nobert had worked in the public service from 1972 to 1982, left from 1982 to 1985, then rejoined in 1986.

¹⁴Exhibit 57; Exhibit 10 Tab 6 says January 31, 1979.

¹⁵Exhibit 11 Tab 15.

¹⁶R.S.C. 1985, c. C-50.

¹⁷Royal Canadian Mint and Defence Construction Canada.

¹⁸Throughout this judgment, WBP shall be used to refer to both Welton Beauchamp, Parent Inc. and Welton Parent

Inc.

¹⁹Examination for discovery of Jemus, September 29, 2005, Q. 64.

²⁰Superannuation Administration Manual (“SAM”) 1.3, p. 1, Exhibit 1 Tab 28.

²¹Examination for discovery of Gravelle, January 11, 2005, Qs. 25-26.

²²SAM 1.3, p. 1. Exhibit 1 Tab 28.

²³SAM 1.3, p. 3. Exhibit 1 Tab 28.

²⁴This term refers to those public servants working in the roles of compensation advisors, pay and benefits officers

and such like in the various departments and agencies of the Federal Government.

²⁵Examination for discovery of Gravelle, January 11, 2005, Qs. 27-28; SAM 1.3, p. 1, Exhibit 1 Tab 28.

²⁶SAM 1.3, p. 3, Exhibit 1 Tab 28. Emphasis added.

²⁷Exhibit 12 Tab 6.

²⁸C.R.C., c. 945.

²⁹Exhibit 12 Tab B, para. 1.

³⁰R.S.O. 1990, c. P.8.

³¹Jack Patterson, Pension Division and Valuation, (2d ed.) (Aurora: Canada Law Book Inc., 1995) at 63.

³²Ibid. at 61.

³³C.R.C. c. 945 SOR/96-311, s. 5; SOR/99-9, s. 3.

³⁴John Sopinka, Sidney N. Lederman & Alan W. Bryant, The Law of Evidence in Canada, 2d ed. (Toronto:

Butterworths Canada Ltd., 1999), at para. 6.321.

³⁵Now Inspector Desnoyers.

³⁶Statute Law (Superannuation) Amendment Act, 1966 , 14 & 15 Eliz. II, c. 44, s. 18(1).

³⁷PSSA, s. 40(1).

³⁸Currently s. 40(2) reads: Authority to enter into agreement – The Minister may, with the consent of the

Governor in Council and on terms approved by the Treasury Board, enter into an agreement with any approved

- 417 -

employer under which, in consideration of the agreement of that employer to pay into the Superannuation Account

or the Public Service Pension Fund an amount determined in accordance with the agreement in respect of any

employee of that employer who becomes or has become employed in the public service, the Minister will pay to that

employer, for the purpose of any superannuation or pension fund or plan established for the benefit of employees of

that employer, an amount determined in accordance with subsection (3) or (4) in respect of any contributor who has

ceased or ceases to be employed in the public service to become employed by that employer.

³⁹Exhibit 1 Tab 10; Examination for discovery of Gravelle, January 11, 2005, Q. 253.

⁴⁰PSSA, s. 40(3): Authority to transfer contributions – Where a contributor ceases to be employed in the Public

Service to become employed by any approved employer with whom the Minister has entered into an agreement

pursuant to subsection (9), and if the agreement so provides, pay to that employer out of the Superannuation

Account

(a)

except any portion thereof so paid by Her Majesty in right of Canada;

(b) such amount paid into the Superannuation Account in respect of that employee by Her Majesty inright of

Canada as the Minister determines; and

an amount equal to the total amount paid into the Superannuation Account in respect of that employee,

(c)

such amount representing interest as the Minister determined.

⁴¹PSSA, s. 40(7).

⁴²Budget Implementation Act, 1996, S.C. 1996, c. 18, s. 33.

⁴³PSSA, s. 40.2(3) Where a contributor ceases to be employed in the Public Service and is or becomes employed by

an eligible employer with whom the Minister has entered into an agreement pursuant to subsection 92), the Minister

may, subject to such terms and conditions as the agreement provides and if the agreement so provides, pay to that

employer out of the Superannuation Act

(a)

amounts equal in the aggregate to

(i) an amount not exceeding the value, actuarially calculated in accordance with the

agreement, of all benefits accrued under this Part and Part III in respect of the pensionable service of the

contributor, and …

⁴⁴PSSA, s. 40.3(1).

⁴⁵PSSA, s. 40.3(2).

⁴⁶Public Sector Pension Investment Board Act, S.C. 1999, c. 34, s. 87.

⁴⁷Exhibit 8 Tab 6.

⁴⁸Exhibit 1 Tab 9.

⁴⁹Exhibit 1 Tab 10.

⁵⁰Exhibit 74 Tab 3.

⁵¹Exhibit 8 Tab 6.

⁵²Exhibit 74 Tab 3.

⁵³Exhibit 1 Tab 228, pp. 39-40.

⁵⁴Exhibit 134.

⁵⁵Exhibit 1 Tab 24.

⁵⁶Examination for discovery of Parent, November 25, 2004, QS. 390-394.

⁵⁷Examination for discovery of Parent, November 25, 2004, Qs. 320-331.

⁵⁸Exhibit 74 Tab 3.

⁵⁹The corporate name of the Retirement Planning Institute was L. Paul Frechette Consulting Services Inc., a wholly-

owned subsidiary of WBP in 2000.

⁶⁰Exhibit 1 Tab 4.

⁶¹Exhibit 1 Tab 35.

⁶²APEX is the Association of Professional Executives of the Public Service.

⁶³Exhibit 13.

⁶⁴Exhibit 1 Tab 63.

⁶⁵E.g. Exhibit 139.

⁶⁶Exhibit 1 Tab 116.

⁶⁷Exhibit 1 Tab 32.

- 418 -

⁶⁸Examination for discovery of Parent, September 26, 2005, Qs. 2078-2080.

⁶⁹Exhibit 1 Tab 116.

⁷⁰Exhibit 1 Tab 33.

⁷¹Geoff Baars, Nick Sennett, Mark Myerson, Mark Pritchard who subsequently incorporated NMG Canada Inc. on

November 13, 2001.

⁷²Exhibit 1 Tab 252.

⁷³Exhibit 1 Tab 8.

⁷⁴Memorandum of Agreement, August 8, 1996, Exhibit 1 Tab 11.

⁷⁵Exhibit 1 Tab 11, para.16(b).

⁷⁶Paragraph 21 of the Loba RTA.

⁷⁷Exhibit 138 Tab 11.

⁷⁸Exhibit 138 Tab 11, article 2.

⁷⁹Exhibit 138 Tab 11, article 4.4, 4.5.

⁸⁰Exhibit 138 Tab 11, article 2.

⁸¹Exhibit 138 Tab 11, article 4.7.

⁸²Exhibit 138 Tab 11, articles 4.8-4.10.

⁸³Exhibit 138 Tab 11, article 5.3.

⁸⁴Exhibit 138 Tab 11, articles 5.5-5.7.

⁸⁵Exhibit 138 Tab 11, article 2.

⁸⁶Exhibit 138 Tab 11, article 10.

⁸⁷Exhibit 138 Tab 11, article 11.

⁸⁸Exhibit 138 Tab 12.

⁸⁹Exhibit 1 Tab 38.

⁹⁰Exhibit 138 Tab 12, article 2.

⁹¹Exhibit 138 Tab 12, article 2.

⁹²Exhibit 138 Tab 12, article 5.5 3.

⁹³Exhibit 138 Tab 12, articles 5.11 and 6.8.

⁹⁴Exhibit 138 Tab 12, article 11.2.

⁹⁵Exhibit 138 Tab 12, article 12.4.

⁹⁶Exhibit 138 Tab 11, article 12.2; Exhibit 138 Tab 12, article 13.2.

⁹⁷Exhibit 138 Tab 12, article 14.

⁹⁸Exhibit 1 Tab 23.

⁹⁹Examination for discovery of Parent, November 25, 2004, Qs. 314-317.

¹⁰⁰Exhibit 138 Tab 13.

¹⁰¹Exhibit 138 Tab 14.

¹⁰²Exhibit 1 Tab 38.

¹⁰³See Exhibit 3 Tab 20 as example.

¹⁰⁴See Exhibit 3 Tab 23 as example.

¹⁰⁵Exhibit 3 Tab 26; Exhibit 138 Tab 16.

¹⁰⁶Exhibit 138 Tab 16.

¹⁰⁷Exhibit 1 Tab 94.

¹⁰⁸Exhibit 1 Tab 113.

¹⁰⁹Exhibit 1 Tab 113.

¹¹⁰Exhibit 1 Tab 119.

¹¹¹September 1, 1993 version. See Exhibit 138 Tab 9. Revised Recommendations were issued in February 2005.

¹¹²Exhibit 138 Tab 11, article 11.2; Exhibit 138 Tab 12, article 12.2.

¹¹³s. 147.3(4)(c).

¹¹⁴s. 8517(1).

¹¹⁵Exhibit 138 Tab 15, article 12.5.

¹¹⁶See Exhibit 3 Tab 16 as example.

¹¹⁷Jemus did his calculations as of April 2001.

- 419 -

¹¹⁸Exhibit 138 Tab 16, para. 3.

¹¹⁹PSSA, s. 13.01(1)-13.01(2).

¹²⁰PSSA, s. 12(4).

¹²¹PSSA, s. 27(2).

¹²²Exhibit 138 Tab 12, article 14.3.1.

¹²³Exhibit 1 Tab 106.

¹²⁴Examination for discovery of Gravelle, January 11, 2005, Q. 293.

¹²⁵Exhibit 12 Tab 1.

¹²⁶Exhibit 1 Tab 17.

¹²⁷Exhibit 12 Tab 1.

¹²⁸Exhibit 1 Tab 95; Exhibit 1 Tab 27.

¹²⁹Examination for discovery of Gravelle, January 11, 2005, Qs. 300-301.

¹³⁰Exhibit 1 Tab 23.

¹³¹Exhibit 134.

¹³²Exhibit 12 Tab 1.

¹³³Examination for discovery of Gravelle, January 11, 2005, Q. 307-308.

¹³⁴Exhibit 1 Tab 36.

¹³⁵Examination for discovery of Gravelle, January 11, 2005, Qs. 377-380.

¹³⁶Examination for discovery of Gravelle, January 11, 2005, Q. 308.

¹³⁷Exhibit 1 Tab 37.

¹³⁸Exhibit 1 Tab 36.

¹³⁹By this, she admitted to meaning Parent, Zeithammel, MacGillivray and Lepine.

¹⁴⁰Exhibit 1 Tab 44; Exhibit 74 Tab 2.

¹⁴¹Exhibit 1 Tab 45.

¹⁴²Examination for discovery of Gravelle, January 11, 2005, Qs. 428-429.

¹⁴³Examination for discovery of Gravelle, January 11, 2005, Qs. 390-392.

¹⁴⁴Examination for discovery of Gravelle, January 11, 2005, Q. 399, January 12, 2005, Q. 640.

¹⁴⁵See Exhibit 1 Tab 55, p. 2.

¹⁴⁶Examination for discovery of Gravelle, January 11, 2005, Qs. 437-449.

¹⁴⁷Exhibit 1 Tab 53.

¹⁴⁸Exhibit 1 Tab 46.

¹⁴⁹Exhibit 1 Tab 51.

¹⁵⁰Exhibit 1 Tab 52.

¹⁵¹Exhibit 1 Tab 54.

¹⁵²Exhibit 1 Tab 56.

¹⁵³Exhibit 1 Tab 68.

¹⁵⁴Exhibit 1 Tab 74.

¹⁵⁵Memorandum from Charko to Claydon September 11, 2000, Exhibit 1 Tab 95; Examination for discovery of

Gravelle, January 12, 2005, Q. 842.

¹⁵⁶Exhibit Tab 55.

¹⁵⁷Exhibit 1 Tab 80.

¹⁵⁸Exhibit 110.

¹⁵⁹Exhibit 1 Tab 62.

¹⁶⁰Exhibit 1 Tab 62.

¹⁶¹Examination for discovery of Gravelle, January 11, 2005, Qs. 497-499.

¹⁶²Examination for discovery of Gravelle, January 11, 2005, Qs. 500-503.

¹⁶³Examination for discovery of Gravelle, January 12, 2005, Qs. 672-679.

¹⁶⁴Exhibit 1 Tab 78.

¹⁶⁵Exhibit 1 Tab 88.

¹⁶⁶Exhibit 1 Tab 83.

¹⁶⁷Exhibit 1 Tab 89.

- 420 -

¹⁶⁸Exhibit 1 Tab 103.

¹⁶⁹Examination for discovery of Gravelle, January 12, 2005, Qs.689-692.

¹⁷⁰Exhibit 1 Tab 89.

¹⁷¹Exhibit 1 Tab 83.

¹⁷²Exhibit 1 Tab 92.

¹⁷³Exhibit 1 Tab 27; Exhibit 1 Tab 228, para. 12, 13; Exhibit 74 Tab 2.

¹⁷⁴Exhibit 74 Tab 2; Exhibit 1 Tab 27; Exhibit 12 Tab 1; Examination for discovery of Gravelle, January 11, 2005,

Qs. 338-339.

¹⁷⁵Exhibit 1 Tab 27; Exhibit 12 Tab 1.

¹⁷⁶R.S.C. 1985, c. P-21.

¹⁷⁷Exhibit 1 Tab 49; Exhibit 74 Tab 2.

¹⁷⁸Exhibit 74 Tab 2.

¹⁷⁹Exhibit 74 Tab 2.

¹⁸⁰Exhibit 12 Tab 10.

¹⁸¹A co-owner of and marketer for Cryptic Web.

¹⁸²Exhibit 129.

¹⁸³Exhibit 1 Tab 95.

¹⁸⁴Examination for discovery of Gravelle, January 12, 2005, Qs. 707-710,715-716,720-729.

¹⁸⁵Memorandum from Charko to Claydon September 11, 2000, Exhibit 1 Tab 95; Examination for discovery of

Gravelle, January 12, 2005, Qs. 829-841.

¹⁸⁶Exhibit 1 Tab 90.

¹⁸⁷See “Treasury Board Information Bulletin” above. Exhibit 1 Tab 5, Exhibit 1 Tab 90.

¹⁸⁸Exhibit 1 Tab 109.

¹⁸⁹Exhibit 1 Tab 119.

¹⁹⁰Exhibit 1 Tab 117.

¹⁹¹Exhibit 1 Tab 76, last page.

¹⁹²Exhibit 1 Tab 76, last page.

¹⁹³Exhibit 1 Tab 76, second to last page.

¹⁹⁴Exhibit 1 Tab 76, third and fourth to last page.

¹⁹⁵Exhibit 1 Tab 2; Exhibit 1 Tab 159.

¹⁹⁶Exhibit 1 Tab 69; Exhibit 12 Tab 9; Exhibit 13.

¹⁹⁷Examination for discovery of Gravelle, January 11, 2005, Q. 546.

¹⁹⁸Examination for discovery of Gravelle, January 11, 2005, Qs. 56-59, 69, 77

¹⁹⁹Examination for discovery of Gravelle, January 11, 2005, Q. 77.

²⁰⁰Examination for discovery of Gravelle, January 11, 2005, Q. 48.

²⁰¹Exhibit 12 Tab B.

²⁰²Exhibit 1 Tab 29.

²⁰³Examination for discovery of Gravelle, January 11, 2005, Q 126.

²⁰⁴Examination for discovery of Gravelle, January 11, 2005, Qs. 140-141.

²⁰⁵Exhibit 1 Tab 29.

²⁰⁶Examination for discovery of Gravelle, January 11, 2005, Qs 129-136.

²⁰⁷Examination for discovery of Gravelle, January 11, 2005, Q. 142.

²⁰⁸Examination for discovery of Gravelle, January 11, 2005, Q. 146.

²⁰⁹Exhibit 1 Tab 14; Exhibit 12 Tab 8.

²¹⁰Exhibit 1 Tab 24.

²¹¹Exhibit 1 Tab 31.

²¹²Exhibit 1 Tab 31.

²¹³Exhibit 1 Tab 86; Examination for discovery of Gravelle, January 12, 2005, Qs. 662-663.

²¹⁴Exhibit 1 Tab 5; Exhibit 1 Tab 90; Exhibit 12 Tab 11.

²¹⁵Exhibit 12 Tab 15; Exhibit 1 Tab 258.

²¹⁶Exhibit 1 Tab 258.

- 421 -

²¹⁷Exhibit 1 Tab 101; Exhibit 75.

²¹⁸Exhibit 1 Tab 13. Letter was actually drafted by Ann Gravelle.

²¹⁹Exhibit 1 Tab 13.

²²⁰In a letter from Parent to Gravelle regarding the creation of a transfer agreement for Canada Communication

Group Inc., Parent summarized his views on what the Government policy should be regarding pension portability.

²²¹Exhibit 1 Tab 76.

²²²Exhibit 1 Tab 18.

²²³Exhibit 1 Tab 19.

²²⁴Exhibit 1 Tab 26.

²²⁵Nicholas Todd, Yves St. Arnaud, Patricia Magee.

²²⁶Exhibit 1 Tab 46.

²²⁷Exhibit 1 Tab 51. Michael Keller also referred to.

²²⁸Exhibit 1 Tab 52.

²²⁹Exhibit 1 Tab 54.

²³⁰Exhibit 1 Tab 66.

²³¹Exhibit 1 Tab 67.

²³²Exhibit 1 Tab 57.

²³³Exhibit 1 Tab 58.

²³⁴Exhibit 1 Tab 64.

²³⁵Exhibit 1 Tab 76.

²³⁶Exhibit 1 Tab 108; Exhibit 1 Tab 110. See also Exhibit 1 Tab 71.

²³⁷Exhibit 1 Tab 114.

²³⁸Exhibit 1 Tab 136.

²³⁹Exhibit 1 Tab 84.

²⁴⁰Exhibit 1 Tab 103.

²⁴¹Exhibit 1 Tab 103.

²⁴²Exhibit 1 Tab 23.

²⁴³Exhibit 1 Tab 115.

²⁴⁴Examination for discovery of Parent, November 25, 2004, Qs 666-668.

²⁴⁵Exhibit 1 Tab 76.

²⁴⁶The Pensions Division arranged for dummy pension files to be provided to the two undercover officers.

²⁴⁷Exhibit 132.

²⁴⁸Examination for discovery of Parent, November 25, 2004, Qs 1172-1179.

²⁴⁹Exhibit 2 Tab 28; Exhibit 2 Tab 29.

²⁵⁰Examination for discovery of Parent, November 25, 2004, Qs. 895-896.

²⁵¹Examination for discovery of Parent, November 25, 2004, Qs. 807-826.

²⁵²Examination for discovery of Parent ,November 25, 2004, Qs. 889-894.

²⁵³Exhibit 1 Tab 128.

²⁵⁴Exhibit 1 Tab 129; Exhibit 28.

²⁵⁵Exhibit 28.

²⁵⁶Exhibit 1 Tab 46; Exhibit 1 Tab 52.

²⁵⁷Exhibit 1 Tab 145; Examination for discovery of Parent, November 25, 2004, Qs. 910-915.

²⁵⁸Exhibit 1 Tab 133.

²⁵⁹Exhibit 111.

²⁶⁰Exhibit 1 Tab 138.

²⁶¹Exhibit 1 Tab 223.

²⁶²Exhibit 128.

²⁶³Exhibit 1 Tab 223, p. 2.

²⁶⁴Exhibit 1 Tab 223.

²⁶⁵Exhibit 1 Tab 140.

²⁶⁶Exhibit 1 Tab 146.

- 422 -

²⁶⁷Exhibit 1 Tab 149.

²⁶⁸Exhibit 1 Tab 143.

²⁶⁹Shantora, Buxton, Shimizu, Findlay, Ault and eventually Shepherd were members of the EC Group.

²⁷⁰Exhibit 1 Tab 144.

²⁷¹Exhibit 1 Tab 144.

²⁷²Exhibit 1 Tab 144.

²⁷³Exhibit 1 Tab 153.

²⁷⁴See for example Exhibit 1 Tab 158.

²⁷⁵Exhibit 1 Tab 151.

²⁷⁶Exhibit 1 Tab 157.

²⁷⁷Exhibit 1 Tab 157.

²⁷⁸Exhibit 1 Tab 160.

²⁷⁹Exhibit 112.

²⁸⁰Exhibit 112.

²⁸¹Exhibit 1 Tab 164.

²⁸²R.S.C. 1985, c. A-1.

²⁸³Exhibit 172.

²⁸⁴Exhibit 1 Tab 177.

²⁸⁵Exhibit 1 Tab 177; Examination for discovery of Parent, November 26, 2004, Qs. 1723-1724, 1729-1732, 1735-

1737, 1745-1750.

²⁸⁶Exhibit 1 Tab 171.

²⁸⁷Examination for discovery of Parent, November 26, 2004, Qs. 1679-1687.

²⁸⁸Exhibit 1 Tab 174.

²⁸⁹Exhibit 1 Tab 103.

²⁹⁰Exhibit 1 Tab 176.

²⁹¹Exhibit 1 Tab 187.

²⁹²Exhibit 1 Tab 191.

²⁹³Exhibit 1 Tab 190.

²⁹⁴Exhibit 111.

²⁹⁵Exhibit 1 Tab 195.

²⁹⁶Exhibit 1 Tab 196.

²⁹⁷Exhibit 1 Tab 200; Exhibit 1 Tab 201; Exhibit 1, Tab 202.

²⁹⁸Exhibit 124, Exhibit 125.

²⁹⁹Exhibit 1 Tab 207.

³⁰⁰Exhibit 1 Tab 210.

³⁰¹Exhibit 1 Tab 208.

³⁰²Exhibit 1 Tab 214.

³⁰³Exhibit 1 Tab 213.

³⁰⁴Exhibit 1 Tab 215.

³⁰⁵Exhibit 1 Tab 219.

³⁰⁶Exhibit 1 Tab 224.

³⁰⁷Exhibit 74 Tab 3.

³⁰⁸These e-mail interchanges, which were written in a manner that suggested that the CRA had concluded as early

as March 2001 and certainly by November 2001 that Parent, Loba and WBP were perpetuating a fraud on the

Crown, were not included in the materials submitted by the CRA to the Federal Court of Appeal when Loba

appealed the revocation of registration of its pension plan.

³⁰⁹Exhibit 1 Tab 228.

³¹⁰Exhibit 1 Tab 65.

³¹¹Exhibit 1 Tab 231.

³¹²Exhibit 122.

³¹³Exhibit 1 Tab 235.

- 423 -

³¹⁴Exhibit 1 Tab 234.

³¹⁵Exhibit 1 Tab 240.

³¹⁶Exhibit 114.

³¹⁷Exhibit 128.

³¹⁸Exhibit 115.

³¹⁹Exhibit 173.

³²⁰Exhibit 141.

³²¹Exhibit 74 Tab 3.

³²²Exhibit 2 Tab 49.

³²³Exhibit 120.

³²⁴Exhibit 1 Tab 256.

³²⁵Exhibit 123.

³²⁶Exhibit 119.

³²⁷Exhibit 8 Tab 3.

³²⁸Exhibit 1 Tab 69; Exhibit 13.

³²⁹Exhibit 8 Tab 8.

³³⁰Exhibit 8 Tab 9.

³³¹Exhibit 8 Tab 10.

³³²Exhibit 8 Tab 9.

³³³Exhibit 8 Tab 11.

³³⁴Exhibit 8 Tab 6.

³³⁵Exhibit 8 Tab 2.

³³⁶Exhibit 8 Tab 7.

³³⁷Exhibit 8 Tab 13.

³³⁸Exhibit 8 Tab 14.

³³⁹Exhibit 8 Tab 15.

³⁴⁰Exhibit 8 Tab 22.

³⁴¹Exhibit 8 Tab 18.

³⁴²Exhibit 8 Tab 19.

³⁴³Exhibit 8 Tab 20.

³⁴⁴Exhibit 8 Tab 21.

³⁴⁵Exhibit 8 Tab 26.

³⁴⁶Exhibit 8 Tab 25.

³⁴⁷Exhibit 8 Tab 27.

³⁴⁸Exhibit 8 Tab 29.

³⁴⁹Exhibit 8 Tab 34.

³⁵⁰Exhibit 8 Tab 30.

³⁵¹Exhibit 8 Tab 32.

³⁵²Exhibit 8 Tab 48.

³⁵³Exhibit 1 Tab 69; Exhibit 13.

³⁵⁴Exhibit 3 Tab 18.

³⁵⁵Exhibit 3 Tab 18.

³⁵⁶Exhibit 3 Tab 5.

³⁵⁷Exhibit 3 Tab 2.

³⁵⁸Exhibit 3 Tab 6.

³⁵⁹Exhibit 12 Tab 15; Exhibit 1 Tab 258.

³⁶⁰Exhibit 75.

³⁶¹Exhibit 3 Tab 9.

³⁶²Exhibit 3 Tab 11.

³⁶³Exhibit 3Tab 16.

³⁶⁴Exhibit 3 Tab 16.

- 424 -

³⁶⁵Exhibit 3 Tab 4.

³⁶⁶Exhibit 3 Tab 21.

³⁶⁷Exhibit 3 Tab 22.

³⁶⁸Exhibit 3 Tab 25.

³⁶⁹Exhibit 3 Tab 20.

³⁷⁰Exhibit 3 Tab 24.

³⁷¹Exhibit 3 Tab 26.

³⁷²Exhibit 3 Tab 28.

³⁷³Exhibit 76 Tab 3.

³⁷⁴Exhibit 3 Tab 32.

³⁷⁵Exhibit 3 Tab 36.

³⁷⁶Exhibit 3 Tab 34; Exhibit 3 Tab 35.

³⁷⁷Exhibit 1 Tab 164.

³⁷⁸Exhibit 3 Tab 40.

³⁷⁹Exhibit 3 Tab 58.

³⁸⁰Exhibit 125.

³⁸¹Exhibit 4 Tab 41.

³⁸²Exhibit 77.

³⁸³Exhibit 1 Tab 210.

³⁸⁴Exhibit 3 Tab 45; Exhibit 3 Tab 47.

³⁸⁵Exhibit 1 Tab 231.

³⁸⁶Exhibit 1 Tab 228.

³⁸⁷Exhibit 3 Tab 53.

³⁸⁸Exhibit 3 Tab 54.

³⁸⁹Exhibit 34.

³⁹⁰Ault v. Canada (Attorney General), [2004] 1 F.C.R. 410 (T.D.), Snider J.

³⁹¹Exhibit 3 Tab 56; Exhibit 3 Tab 57.

³⁹²Exhibit 5 Tab 3; Exhibit 1 Tab 5.

³⁹³Exhibit 5 Tab 2; Exhibit 1 Tab 5; Exhibit 1 Tab 69.

³⁹⁴Exhibit 1 Tab 258.

³⁹⁵This evidence was admitted to prove information available to Shepherd at the time, and what was told to him by

various government representatives, not for the truth of its contents.

³⁹⁶Exhibit 5 Tab 9.

³⁹⁷Exhibit 5 Tab 5.

³⁹⁸Exhibit 5 Tab 7.

³⁹⁹See Exhibit 8 Tab 6.

⁴⁰⁰Exhibit 21.

⁴⁰¹Exhibit 5 Tab 15.

⁴⁰²Exhibit 5 Tab 15.

⁴⁰³Exhibit 5 Tab 15.

⁴⁰⁴Exhibit 5 Tab 18.

⁴⁰⁵Exhibit 19.

⁴⁰⁶Exhibit 5 Tab 10.

⁴⁰⁷Exhibit 5 Tab 19.

⁴⁰⁸Exhibit 5 Tab 32.

⁴⁰⁹Exhibit 28.

⁴¹⁰Exhibit 5 Tab 21.

⁴¹¹Exhibit 5 Tab 22.

⁴¹²Exhibit 4 Tab 28.

⁴¹³Exhibit 5 Tab 28.

⁴¹⁴Exhibit 1 Tab 231.

- 425 -

⁴¹⁵Exhibit 5 Tab 43.

⁴¹⁶Exhibit 5 Tab 46.

⁴¹⁷Exhibit 4 Tab 9.

⁴¹⁸Exhibit 13.

⁴¹⁹Exhibit 90.

⁴²⁰Exhibit 4 Tab 2; Exhibit 4 Tab 12.

⁴²¹Exhibit 4 Tab 12.

⁴²²Exhibit 4 Tab 2.

⁴²³Exhibit 4 Tab 3.

⁴²⁴Exhibit 4 Tab 12.

⁴²⁵Exhibit 93.

⁴²⁶See Exhibit 8 Tab 6.

⁴²⁷Exhibit 4 Tab 17.

⁴²⁸Exhibit 4 Tab 14.

⁴²⁹Exhibit 4 Tab 15.

⁴³⁰Exhibit 4 Tab 16.

⁴³¹Exhibit 4 Tab 20.

⁴³²Exhibit 4 Tab 13.

⁴³³Exhibit 4 Tab 24.

⁴³⁴Exhibit 4 Tab 25.

⁴³⁵Exhibit 4 Tab 26.

⁴³⁶Exhibit 4 Tab 23.

⁴³⁷Exhibit 4 Tab 27.

⁴³⁸Exhibit 4 Tab 28.

⁴³⁹Exhibit 4 Tab 28.

⁴⁴⁰Exhibit 4 Tab 29.

⁴⁴¹Exhibit 4 Tab 35.

⁴⁴²Exhibit 4 Tab 34.

⁴⁴³Exhibit 4 Tab 38.

⁴⁴⁴Exhibit 4 Tab 53.

⁴⁴⁵Exhibit 4 Tab 41.

⁴⁴⁶Exhibit 1 Tab 231.

⁴⁴⁷Exhibit 4 Tab 44.

⁴⁴⁸Exhibit 4 Tab 50.

⁴⁴⁹Ault, supra note 390.

⁴⁵⁰Exhibit 6 Tab 13.

⁴⁵¹Exhibit 6 Tab 15.

⁴⁵²Exhibit 6 Tab 7.

⁴⁵³Exhibit 6 Tab 16.

⁴⁵⁴Exhibit 6 Tab 17.

⁴⁵⁵Exhibit 1 Tab 76.

⁴⁵⁶Exhibit 1 Tab 76.

⁴⁵⁷Exhibit 6 Tab 1.

⁴⁵⁸This evidence was admitted not for the truth of its contents but as evidence of the steps YTemple took to check

out the Loba option and the information that was available to her as a result.

⁴⁵⁹Exhibit 6 Tab 12.

⁴⁶⁰Exhibit 6 Tab 20.

⁴⁶¹Exhibit 6 Tab 16.

⁴⁶²Exhibit 6 Tab 21.

⁴⁶³Exhibit 6 Tab 24.

⁴⁶⁴Exhibit 6 Tab 34.

- 426 -

⁴⁶⁵Exhibit 6 Tab 25.

⁴⁶⁶Exhibit 6 Tab 27.

⁴⁶⁷Exhibit 6 Tab 23.

⁴⁶⁸Exhibit 6 Tab 33.

⁴⁶⁹Exhibit 6 Tab 26.

⁴⁷⁰Exhibit 6 Tab 30.

⁴⁷¹Exhibit 6 Tab 6.

⁴⁷²Exhibit 6 Tab 32.

⁴⁷³Exhibit 6 Tab 35.

⁴⁷⁴Exhibit 6 Tab 36.

⁴⁷⁵Exhibit 6 Tab 37.

⁴⁷⁶Exhibit 6 Tab 39.

⁴⁷⁷Exhibit 31.

⁴⁷⁸Exhibit 32.

⁴⁷⁹Exhibit 6 Tab 55; Exhibit 33.

⁴⁸⁰Exhibit 6 Tab 41.

⁴⁸¹Exhibit 6 Tab 42.

⁴⁸²Exhibit 6 Tab 44.

⁴⁸³Exhibit 6 Tab 46; Exhibit 6 Tab 47.

⁴⁸⁴Exhibit 6 Tab 48.

⁴⁸⁵Exhibit 6 Tab 49.

⁴⁸⁶Exhibit 6 Tab 51; Exhibit 34.

⁴⁸⁷Exhibit 6 Tab 53.

⁴⁸⁸Exhibit 6 Tab 53.

⁴⁸⁹[2004] 1 F.C.R. 410.

⁴⁹⁰Exhibit 6 Tab 58.

⁴⁹¹Exhibit 6 Tab 60.

⁴⁹²Exhibit 10 Tab 4.

⁴⁹³Exhibit 10 Tab 7 last 12 pages.

⁴⁹⁴Exhibit 1 Tab 7.

⁴⁹⁵Exhibit 10 Tab 8.

⁴⁹⁶Exhbit 10 Tab 14.

⁴⁹⁷Exhibit 10 Tab 8.

⁴⁹⁸Exhibit 10 Tab 9.

⁴⁹⁹Exhibit 10 Tab 10; Exhibit 10, Tab 11.

⁵⁰⁰Exhibit 10 Tab 15.

⁵⁰¹Exhibit 10 Tab 18.

⁵⁰²Exhibit 10 Tab 19.

⁵⁰³Exhibit 10 Tab 20; Exhibit 10 Tab 21.

⁵⁰⁴Exhibit 10 Tab 23.

⁵⁰⁵Exhibit 10 Tab 25.

⁵⁰⁶Exhibit 10 Tab 26.

⁵⁰⁷Exhibit 1 Tab 196.

⁵⁰⁸Exhibit 10 Tab 33.

⁵⁰⁹Exhibit 7 Tab 11.

⁵¹⁰Exhibit 7 Tab 12.

⁵¹¹Exhibit 7 Tab 9.

⁵¹²Exhibit 7 Tab 14.

⁵¹³Exhibit 7 Tab 2.

⁵¹⁴Exhibit 7 Tab 3.

⁵¹⁵Exhibit 7 Tab 4.

- 427 -

⁵¹⁶Exhibit 7 Tab 5.

⁵¹⁷Exhibit 7 Tab 6.

⁵¹⁸Exhibit 7 Tab 7.

⁵¹⁹Exhibit 7 Tab 8.

⁵²⁰Exhibit 7 Tab 15.

⁵²¹Exhibit 7 Tab 16.

⁵²²Exhibit 7 Tab 19.

⁵²³Exhibit 7 Tab 19.

⁵²⁴Exhibit 7 Tab 13.

⁵²⁵Exhibit 7 Tab 21.

⁵²⁶Exhibit 7 Tab 17.

⁵²⁷Exhibit 7 Tab 22.

⁵²⁸Exhibit 7 Tabs 23, 24.

⁵²⁹Exhibit 7 Tab 26.

⁵³⁰Exhibit 7 Tab 27.

⁵³¹Exhibit 7 Tabs 28, 29.

⁵³²Exhibit 1 Tab 232.

⁵³³Exhibit 7 Tab 44.

⁵³⁴Exhibit 7 Tab 46.

⁵³⁵Exhibit 7 Tab 49.

⁵³⁶Exhibit 7 Tabs 62.

⁵³⁷Exhibit 27 Tab 63.

⁵³⁸Exhibit 7 Tab 64.

⁵³⁹Exhibit 9 Tab 2.

⁵⁴⁰Exhibit 9 Tab 10.

⁵⁴¹Exhibit 9 Tab 12.

⁵⁴²Exhibit 9 Tab 11.

⁵⁴³Exhibit 9 Tab 13.

⁵⁴⁴Exhibit 9 Tab 14; Exhibit 9 Tab 16.

⁵⁴⁵Exhibit 9 Tab 4.

⁵⁴⁶Exhibit 9 Tab 6.

⁵⁴⁷Exhibit 9 Tab 7.

⁵⁴⁸Exhibit 9 Tab 8.

⁵⁴⁹Exhibit 9 Tab 9.

⁵⁵⁰Exhibit 9 Tab 17.

⁵⁵¹Exhibit 9 Tab 21.

⁵⁵²Exhibit 9 Tab 24.

⁵⁵³Exhibit 9 Tab 26.

⁵⁵⁴Exhibit 9 Tab 27.

⁵⁵⁵Exhibit 9 Tab 20.

⁵⁵⁶Exhibit 9 Tab 28.

⁵⁵⁷Exhibit 9, Tab 33.

⁵⁵⁸Exhibit 9 Tab 31, Tab 32.

⁵⁵⁹Exhibit 9 Tab 35.

⁵⁶⁰Exhibit 9 Tab 55.

⁵⁶¹Exhibit 9 Tab 54.

⁵⁶²Exhibit 9 Tab 56.

⁵⁶³Exhibit 1 Tab 171.

⁵⁶⁴Exhibit 1 Tab 210.

⁵⁶⁵Exhibit 1 Tab 231.

⁵⁶⁶Exhibit 1 Tab 228.

- 428 -

⁵⁶⁷Exhibit 84.

⁵⁶⁸Exhibit 9 Tab 49.

⁵⁶⁹Exhibit 9 Tab 50.

⁵⁷⁰Exhibit 9 Tab 58.

⁵⁷¹Exhibit 9 Tab 59.

⁵⁷²Exhibit 9 Tab 61.

⁵⁷³Exhibit 85; Exhibit 9 Tab 52; Exhibit 9 Tab 62; Exhibit 9 Tab 64.

⁵⁷⁴Exhibit 11 Tab 14.

⁵⁷⁵Exhibit 11 Tab 15.

⁵⁷⁶Exhibit 11 Tab 18.

⁵⁷⁷Exhibit 11 Tab 21, Tab 22.

⁵⁷⁸Exhibit 11 Tab 24.

⁵⁷⁹Exhibit 11 Tab 25.

⁵⁸⁰Exhibit 11 Tab 30.

⁵⁸¹Exhibit 11 Tab 32.

⁵⁸²Exhibit 1 Tab 231.

⁵⁸³Exhibit 11 Tab 5.

⁵⁸⁴Exhibit 11 Tab 5.

⁵⁸⁵Exhibit 11 Tab 8.

⁵⁸⁶Salomon v. Salomon and Company, [1897] A.C. 22.

⁵⁸⁷[1992] 3 S.C.R. 299 at paras. 185-187.

⁵⁸⁸(1995), 26 O.R. (3d) 481 (C.A.) at 491.

⁵⁸⁹See also Normart Management Ltd. V. West Hill Redevelopment Co. (1998), 37 O.R. (3d) 97 (C.A.) per

Finlayson J.A. at 102.

⁵⁹⁰(1998), 38 O.R. (3d) 785 (C.A.).

⁵⁹¹(1999), 43 O.R. (3d) 101 (C.A.).

⁵⁹²ScotiaMcLeod v. Peoples Jewellers Ltd. (1995), 26 O.R. (3d) 481 at 490-491.

⁵⁹³[1993] 1 S.C.R. 87 at para. 33.

⁵⁹⁴[1978] A.C. 728 (H.L.) at 751-752.

⁵⁹⁵[1984] 2 S.C.R. 2.

⁵⁹⁶[2001] 1 S.C.R. 298.

⁵⁹⁷[2001] 3 S.C.R. 537.

⁵⁹⁸[2003] 3 S.C.R. 263.

⁵⁹⁹[2006] 1 S.C.R. 643.

⁶⁰⁰[2007] 2 F.C.R. 191 (C.A.).

⁶⁰¹Cooper, supra note 597 at paras. 30-31; Odhavji Estate, supra note 598 at paras. 45-51.

⁶⁰²Hedley Byrne & Co. v. Heller & Partners Ltd., [1964] A.C. 465, [1963] 2 All E.R. 575 (H.L.); Cooper, supra

note 597 at para. 36.

⁶⁰³See also Haskett v. Equifax Canada Inc. (2003), 63 O.R. (3d) 577 (C.A.).

⁶⁰⁴Childs, supra note 599 at para. 13.

⁶⁰⁵[1997] 2 S.C.R 165.

⁶⁰⁶Cooper, supra note 597 at para. 37.

⁶⁰⁷Hercules Managements, supra note 605, at paras. 31 and 41.

⁶⁰⁸Ibid. at para. 37.

⁶⁰⁹Cooper, supra note 597 at para. 38. See also Goddard v. Canada, [2001] F.C.J. No. 1708 (T.D.); Gauthier v.

Canada (Attorney General) (2000), 185 D.L.R. (4th) 660 (N.B.C.A.)

⁶¹⁰Allison v. Noranda Inc. (2001), 239 N.B.R. (2d) 211 (C.A.) at para. 20; H.B. Nickerson & Sons Ltd. v.

Wooldridge (1980), 115 D.L.R. (3d) 97 (N.S.S.C. (A.D.)); Stacey Reginals Ball, Canadian Employment Law,

looseleaf (Aurora, Ont.: Canada Law Book Inc., 1997) at 20-45.

⁶¹¹Hembruff v. Ontario Municipal Employees Retirement Board (2005), 78 O.R. (3d) 561 (C.A.); Allison v.

Noranda Inc., ibid.; Gauthier, supra note 609; Deraps v. Labourer’s Pension Fund of Central & Eastern Canada

- 429 -

(Trustee of) (1999), 179 D.L.R. (4th) 168 (Ont. C.A.); Bratowski v. Ontario Teachers’ Pension Plan Board (1997),

16 C.C.P.B. 182 (Ont. Ct. Gen. Div.); Spinks v. Canada (1996), 134 D.L.R. (4^th) 223 (F.C.A.).

⁶¹²Hembruff, ibid. at para. 67.

⁶¹³Spinks, supra note 611.

⁶¹⁴Ibid. at para 23.

⁶¹⁵Exhibit 11 Tab 22.

⁶¹⁶Exhibit 1 Tab 69; Exhibit 12 Tab 9; Exhibit 13; Exhibit 1 Tab 24; Exhibit 1 Tab 86; Exhibit 1 Tab 5; Exhibit 1

Tab 90; Exhibit 12 Tab 11; Exhibit 12 Tab 15; Exhibit 1 Tab 258; Exhibit 1 Tab 101; Exhibit 75.

⁶¹⁷Examination for discovery of Gravelle, January 11, 2005, Qs 60-62.

⁶¹⁸Exhibit 103.

⁶¹⁹Examination for discovery of Gravelle, January 11, 2005, Qs 107-108.

⁶²⁰Exhibit 1 Tab 247.

⁶²¹Loba Limited v. The Queen, 2004 FCA 342.

⁶²²Examination for discovery of Gravelle, January 11, 2005, Q. 592.

⁶²³Examination for discovery of Gravelle, January 12, 2005, Qs 698-699.

⁶²⁴[2007] 1 S.C.R. 333 at para. 11.

⁶²⁵Supra note 599 at paras. 31, 34.

⁶²⁶Ibid. at paras. 35-38.

⁶²⁷Exhibit 61.

⁶²⁸Cognos, supra note 593.

⁶²⁹Ibid at paras. 74-75.

⁶³⁰Spinks, supra note 611 at 230.

⁶³¹Hembruff, supra note 611 at para. 76.

⁶³²See also Allison., supra note 610 at para. 21; Deraps, supra note 611 at para. 55; and Nuxoll v. Inco Ltd., [1997]

O.J. No. 4680 (Gen. Div.) at paras. 47, 49.

⁶³³Fletcher v. Manitoba Public Insurance Co., [1990] 3 S.C.R. 191.

⁶³⁴Gallant v. Central Credit Union Ltd., [1994] P.E.I.J. No. 111 (S.C. (T.D.)).

635

Williams v. School District No. 63 (Saanich), [1986] B.C.J. No. 2303 (S.C.) (“a remark by a defendant

concerning the outcome of a future event” at para. 29); Datile Financial Corp. v. Royal Trust Corp. of Canada

(1991), 5 O.R. (3d) 358 (Gen. Div.), var. 11 O.R. (3d) 224 (C.A.) (“a representation … as to future occurrences” at

379); Foster Advertising Ltd. V. Keenberg (1987), 35 D.L.R. (4^th) 521 (Man. C.A.) leave to appeal refused [1987]

S.C.C.A. 177, 80 N.R. 314n (S.C.C.) (“a statement of intention or forecast of the future” at 525-526); Andronyk v.

Williams (1985), 35 C.C.L.T. 38 (Man. C.A.) (“forecasting” at para. 54). See also Hembruff, supra note 611; Deep

v. M.D. Management, [2007] O.J. No. 2392 (Sup. Ct.).

⁶³⁶Cognos, supra note 593 at paras. 71-72.

⁶³⁷Supra note 611.

⁶³⁸Supra note 632.

⁶³⁹Exhibit 1 Tab 29.

⁶⁴⁰Exhibit 1 Tab 24.

⁶⁴¹Exhibit 1 Tab 31.

⁶⁴²Exhibit 1 Tab 69; Exhibit 12 Tab 9; Exhibit 13.

⁶⁴³Examination for discovery of Gravelle, January 11, 2005, Qs. 547-557.

⁶⁴⁴Exhibit 1 Tab 86.

⁶⁴⁵Exhibit 1 Tab 90.

⁶⁴⁶Exhibit 1 Tab 101; Exhibit 75.

⁶⁴⁷Exhibit 1 Tab 258.

⁶⁴⁸Exhibit 12, para. 53. Also see Examination for discovery of Gravelle, January 11, 2005, Qs. 204-207, 213, 218.

⁶⁴⁹Exhibit 3 Tab 18.

⁶⁵⁰Examination for discovery of Gravelle, January 11, 2005, Qs. 409-410.

⁶⁵¹This finding relates to the Plaintiffs but not to Dufour prior to her resignation from the public service on May 26,

2000 effective June 9, 2000. As of that date, Parent would not have been aware of the CRA concerns about the

- 430 -

Loba pension plan. Parent made it clear to Dufour that she should not leave the public service for Loba unless she

was thinking of leaving in any event. He also made it clear that she had to have an employment relationship with

Loba and that she would be responsible for finding her own work.

⁶⁵²Exhibit 1 Tab 57.

⁶⁵³See Exhibit 6 Tab 36 regarding Temple.

⁶⁵⁴Examination for discovery of Parent November 25, 2004, Qs. 762-772.

⁶⁵⁵Exhibit 1 Tab 109.

⁶⁵⁶Exhibit 1 Tab 84.

⁶⁵⁷Exhibit 1 Tab 103.

⁶⁵⁸Exhibit 1 Tab 23.

⁶⁵⁹Exhibit 1 Tab 151; Exhibit 1 Tab 157.

⁶⁶⁰Exhibit 1 Tab 160.

⁶⁶¹See Exhibit 1 Tab 171, though I note that information about the hold was shared with Steve Hart, a member of

the Environment Canada group. See Exhibit 1 Tab 178.

⁶⁶²Exhibit 1 Tab 25.

⁶⁶³Exhibit 172.

⁶⁶⁴Exhibit 1 Tab 177.

⁶⁶⁵Supra note 593 at para. 55.

⁶⁶⁶Lewis N. Klar, Tort Law (Toronto: Thomson Professional Publishing Canada, 1991), 600.

⁶⁶⁷Cognos, supra note 593 at paras. 51-54; Allison, supra note 610 at para. 22.

⁶⁶⁸Cognos, supra note 593 at para. 62. See also Nuxoll, supra note 632 at para. 60.

⁶⁶⁹Cognos, supra note 593 at para. 59. See also Nuxoll, supra note 632 at para. 49.

⁶⁷⁰(1985), 10 C.C.E.L. 276 (F.C.).

⁶⁷¹Supra note 611 at 238.

⁶⁷²This summary is taken from Hugh O’Reilly and Katrina Wyman, “Sticks and Stones: A Legal Analysis of

Employer Liability for Communications to Employees About Benefit Plans” (2000) 19:2 E.T.P.J. 145.

⁶⁷³Supra note 610.

⁶⁷⁴Ibid. at paras. 33-34.

⁶⁷⁵Supra note 609.

⁶⁷⁶Ibid. at para. 16.

⁶⁷⁷Examination for discovery of Gravelle, January 12, 2005, Qs. 877-878.

⁶⁷⁸Exhibit 1 Tab 117.

⁶⁷⁹Examination for discovery of Gravelle, June 8, 2006, Qs. 17-19.

⁶⁸⁰Examination for discovery of Gravelle, January 12, 2005, Qs. 922-925.

⁶⁸¹Examination for discovery of Gravelle, January 11, 2005, Qs. 173-175.

⁶⁸²Examination for discovery of Gravelle, January 11, 2005, Qs. 176-179.

⁶⁸³See Claydon Memorandum to President of the Treasury Board October 5, 2000, Exhibit 1 Tab 117.

⁶⁸⁴Exhibit 1 Tab 51.

⁶⁸⁵Exhibit 1 Tab 65.

⁶⁸⁶Exhibit 1 Tab 45.

⁶⁸⁷Examination for discovery of Gravelle, January 12, 2005, Qs. 647-650, 652-654.

⁶⁸⁸Examination for discovery of Gravelle, January 11, 2005, Qs 535-541.

⁶⁸⁹Examination for discovery of Gravelle, January 11, 2005, Qs. 156-169, 172.

⁶⁹⁰Income Tax Act, supra note 5, s. 241(5)(b).

⁶⁹¹Exhibit 1 Tab 88. See Menard e-mail to Godwin September 6, 2000 Exhibit 1 Tab 91.

⁶⁹²Exhibit 1 Tab 107; Exhibit 1 Tab 109.

⁶⁹³Exhibit 1 Tab 107; Exhibit 1 Tab 109; Exhibit 12 Tab C and D.

⁶⁹⁴Examination for discovery of Gravelle, January 12, 2005, Qs. 751-754.

⁶⁹⁵Exhibit 1 Tab 83.

⁶⁹⁶Exhibit 1 Tab 88.

⁶⁹⁷Exhibit 1 Tab 95.

- 431 -

⁶⁹⁸Exhibit 1 Tab 14.

⁶⁹⁹Examination for discovery of Gravelle, January 12, 2005, Qs 759-766

⁷⁰⁰Examination for discovery of Gravelle, June 8, 2006, Qs. 60-67.

⁷⁰¹Examination for discovery of Gravelle, January 12, 2005, Qs 916-919.

⁷⁰²Examination for discovery of Gravelle, June 8, 2006, Qs. 68-69.

⁷⁰³Examination for discovery of Gravelle, January 11, 2005, Qs. 477-479.

⁷⁰⁴Examination for discovery of Gravelle, January 11, 2005, Qs 515-520.

⁷⁰⁵Exhibit 12 Tab 12.

⁷⁰⁶Exhibit 1 Tab 123.

⁷⁰⁷Exhibit 12 Tab B.

⁷⁰⁸Exhibit 12.

⁷⁰⁹Exhibit 12.

⁷¹⁰Exhibit 1 Tab 92.

⁷¹¹Examination for discovery of Gravelle, August 17, 2007, Q. 62, 64.

⁷¹²Exhibit 103.

⁷¹³Defendant’s written submissions, para. 218.

⁷¹⁴Exhibit 1 Tab 23.

⁷¹⁵Exhibit 164.

⁷¹⁶Spinks, supra note 611 at 239.

⁷¹⁷Philip Osborne, The Law of Torts (Toronto: Irwin Law, 2000) at 162-165. See also Bruce Feldthusen, Economic

Negligence: The Recovery of Pure Economic Loss, 2^nded. (Toronto: Carswell, 1994).

⁷¹⁸Doherty v. Allen (1988), 94 N.B.R. (2d) 74 (C.A.).

⁷¹⁹[1991] 3 S.C.R. 3 at para. 24.

⁷²⁰Exhibit 1 Tab 89.

⁷²¹Exhibit 1 Tab 103.

⁷²²Exhibit 1 Tab 109.

⁷²³Exhibit 1 Tab 258.

⁷²⁴Exhibit 1 Tab 69.

⁷²⁵Exhibit 1 Tab 86 or Exhibit 1 Tab 90.

⁷²⁶Exhibit 6 Tab 30.

⁷²⁷Exhibit 6 Tab 6.

⁷²⁸Exhibit 7 Tab 9.

⁷²⁹Exhibit 1 Tab 76.

⁷³⁰Exhibit 1 Tab 57.

⁷³¹Exhibit 1 Tab 58.

⁷³²Exhibit 11 Tab 8.

⁷³³Exhibit 1 Tab 57.

⁷³⁴Exhibit 1 Tab 58.

⁷³⁵Exhibit 21.

⁷³⁶Exhibit 1 Tab 103.

⁷³⁷Exhibit 8 Tab 13.

⁷³⁸Exhibit 3 Tab 16.

⁷³⁹Exhibit 5 Tab 7.

⁷⁴⁰Exhibit 4 Tab 12.

⁷⁴¹Exhibit 6 Tab 16.

⁷⁴²Exhibit 10 Tab 6.

⁷⁴³Exhibit 7 Tab 10.

⁷⁴⁴Exhibit 9 Tab 17.

⁷⁴⁵Subject to Loba’s right of appeal to the Federal Court.

⁷⁴⁶Subject to a right of action for breach of contract.

⁷⁴⁷R.S.O. 1990, c. N.1.

- 432 -

⁷⁴⁸[1992] O.J. No. 1399 (Gen. Div.).

⁷⁴⁹Exhibit 1 Tab 34, Exhibit 1 Tab 106.

⁷⁵⁰[1975] Q.B. 326 at 341 (C.A.).

⁷⁵¹[1994] 3 S.C.R. 377 at para. 25.

⁷⁵²Ibid. at para. 26.

⁷⁵³Supra note 751 at para. 27; G.H.L. Fridman, The Law of Contract in Canada, 2d ed. (Toronto: Carswell, 1986) at

301-311.

⁷⁵⁴Supra note 751 at para. 31.

⁷⁵⁵Supra note 75 at paras 31-32.

⁷⁵⁶Supra note 75 at paras. 33, 35.

⁷⁵⁷Supra note 75 at para. 33.

⁷⁵⁸P.D. Finn, “The Fiduciary Principle” in T.G. Youdan, ed., Equity, Fiduciaries and Trusts (Toronto: Carswell,

1989) at 50-51.

⁷⁵⁹Supra note 751 at para. 39.

⁷⁶⁰Supra note 751 at para. 43; Fedirchuk v. Levitz, [1998] O.J. No. 831 (Gen. Div.); Madhani v. Pirani, [1997]

B.C.J. No. 2280 (S.C.); Varcoe v. Sterling (1992), 7 O.R. (3d) 204 (Gen. Div.); McBean v. Bank of Nova Scotia,

[1981] O.J. No. 2444 (H.C.).

⁷⁶¹Varcoe, ibid. at 234-236.

⁷⁶²Hodgkinson, supra note 751 at para. 73.

⁷⁶³Supra note 751 at para. 80; Canson Enterprises Ltd. v. Boughton & Co., [1991] 3 S.C.R. 534.

⁷⁶⁴Martin v. Goldfarb (1998), 41 O.R. (3d) 161 (C.A.).

⁷⁶⁵Exhibit 8 Tab 8.

⁷⁶⁶Exhibit 9 Tab 2, Exhibit 9 Tab 10.

⁷⁶⁷Exhibit 8 Tab 18.

⁷⁶⁸Exhibit 3 Tab 20.

⁷⁶⁹Exhibit 5 Tab 15.

⁷⁷⁰Exhibit 4 Tab 15.

⁷⁷¹Exhibit 6 Tab 23.

⁷⁷²Exhibit 10 Tab 9.

⁷⁷³Exhibit 7 Tab 19.

⁷⁷⁴Exhibit 9 Tab 24.

⁷⁷⁵Exhibit 11 Tab 24.

⁷⁷⁶Exhibit 61.

⁷⁷⁷Exhibit 61.

⁷⁷⁸Hodgkinson, supra note 751 at paras. 32-33.

⁷⁷⁹Michael Ng, Fiduciary Duties Obligations of Loyalty and Faithfulness, looseleaf (Aurora, Ont.: Canada Law

Book, 2007) c. 2; Mark Vincent Ellis, Fiduciary Duties in Canada, looseleaf (Toronto, Ont.: Thomson Carswell,

2004) c. 1.

⁷⁸⁰Hodgkinson, supra note 751 at para. 51; Madhani, supra note 760 at paras. 46-47, 51; McBean, supra note 760 at

para. 13.

⁷⁸¹Exhibit 1 Tab 151, Exhibit 1 Tab 157.

⁷⁸²Exhibit 1 Tab 160.

⁷⁸³Exhibit 1 Tab 116.

⁷⁸⁴Exhibit 1 Tab 116.

⁷⁸⁵Fine’s Flowers Ltd. v. General Accident Assurance Co. of Canada (1975), 5 O.R. (2d) 137 (Ont. H.C.), aff’d

(1977), 17 O.R. (2d) 529 (C.A.).

⁷⁸⁶Michael Ng, Fiduciary Duties Obligations of Loyalty and Faithfulness, supra note 779 at para. 5:30.20.

⁷⁸⁷Ibid. at para. 5:30.10.

⁷⁸⁸Exhibit 3 Tab 1.

⁷⁸⁹See Exhibit 1 Tab 30.

⁷⁹⁰See McBean, supra note 760 at para. 13.

- 433 -

⁷⁹¹Resurfice Corp. v. Hanke, [2007] 1 S.C.R. 333 at para. 21; Blackwater v. Plint, [2005] 3 S.C.R. 3 at para. 78.

⁷⁹²Resurfice, ibid..at paras. 21-28.

⁷⁹³Rainbow Industrial Caterers Ltd., supra note 719 at paras. 20-22; BG Checo International Ltd. v. British

Columbia Hydro and Power Authority, [1993] 1 S.C.R. 12 at para. 39.

⁷⁹⁴S.M. Waddams, The Law of Damages, looseleaf (Aurora, Ont.: Canada Law Book, 2007) at 13-1-13-3.

⁷⁹⁵Athey v. Leonati, [1996] 3 S.C.R. 458 at paras. 32-36; Blackwater v. Plint, supra note 791 at paras. 78-80.

⁷⁹⁶Rainbow Industrial Caterers Ltd., supra note 719 at paras. 23-24. See also Gauthier, supra note 609 at para. 21;

Allison, supra note 610 at para. 46; Ruxton v. Kelly, Peters & Associates Ltd., [1985] W.W.R. 66 (B.C.S.C.) at

paras. 21-22.

⁷⁹⁷Vern Krishna, The Fundamentals of Canadian Income Tax, 8^thed. (Toronto:Carswell, 2004) at 411.

⁷⁹⁸[1967] 2 All E.R. 124 (C.A.) at 134.

⁷⁹⁹Supra note 797 at 413.

⁸⁰⁰Exhibit 72.

⁸⁰¹Actuarial Report on the Pension Plan for the Public Service of Canada as of March 31, 2005.

⁸⁰²Actuarial Report on the Pension Plan for the Public Service of Canada as of March 31, 1999. Exhibit 73.

⁸⁰³Exhibit 3 Tab 6.

⁸⁰⁴Actuarial Report on the Pension Plan for the Public Service of Canada as of March 31, 2005.

⁸⁰⁵Actuarial Report on the Pension Plan for the Public Service of Canada as of March 31, 1999. Exhibit 73.

⁸⁰⁶Actuarial Report on the Pension Plan for the Public Service of Canada as of March 31, 2005.

⁸⁰⁷Actuarial Report on the Pension Plan for the Public Service of Canada as of March 31, 1999. Exhibit 73.

⁸⁰⁸Actuarial Report on the Pension Plan for the Public Service of Canada as of March 31, 2005.

⁸⁰⁹Actuarial Report on the Pension Plan for the Public Service of Canada as of March 31, 1999. Exhibit 73.

⁸¹⁰In Exhibit 10 Tab 7, his start date in the PSSP is stated as January 31, 1979 and July 31, 1978. Christie used the

latter date in his calculations.

⁸¹¹Actuarial Report on the Pension Plan for the Public Service of Canada as of March 31, 2005.

⁸¹²Actuarial Report on the Pension Plan for the Public Service of Canada as of March 31, 1999. Exhibit 73.

⁸¹³Exhibit 9 Tab 54.

⁸¹⁴Actuarial Report on the Pension Plan for the Public Service of Canada as of March 31, 2005.

⁸¹⁵Actuarial Report on the Pension Plan for the Public Service of Canada as of March 31, 1999. Exhibit 73.

⁸¹⁶Exhibit 7 Tab 40.

⁸¹⁷Exhibit 7 Tabs 36, 41, 43, 48, 51, 52.

⁸¹⁸Exhibit 9 Tabs 31, 32.

⁸¹⁹Exhibit 9 Tab 35.

⁸²⁰Exhibit 9 Tab 55.

⁸²¹Exhibit 9 Tab 54.

⁸²²Exhibit 8 Tab 57. Exhibit 14 Tab 4.82.

⁸²³Exhibit 15.

⁸²⁴[2005] C.P.S.L.R.B. No. 31.

⁸²⁵R.S.C. 1985, c. P-35.

⁸²⁶[2006] F.C.J. No. 806 (C.A.)

⁸²⁷Not including capital gains, rental income.

⁸²⁸Not including interest.

⁸²⁹Not including interest and pension payments.

⁸³⁰Exhibit 14 Tab 2.

⁸³¹Exhibit 76 Tab 5.

⁸³²Exhibit 76 Tab 4.

⁸³³Exhibit 76 Tab 4.

⁸³⁴Exhibit 20 Tab 8.

⁸³⁵Exhibit 25.

⁸³⁶Exhibit 22.

⁸³⁷Exhibit 22.

- 434 -

⁸³⁸Exhibit 22.

⁸³⁹Exhibit 26.

⁸⁴⁰Exhibit 20 Tab 4.

⁸⁴¹Exhibit 20 Tab 1, Exhibit 20 Tab 2.

⁸⁴²Exhibit 20 Tab 1, Exhibit 20, Tab 2.

⁸⁴³Exhibit 20, Tab 5.

⁸⁴⁴Exhibit 20, Tab 6.

⁸⁴⁵Exhibit 20 Tab 7.

⁸⁴⁶Exhibit 60A.

⁸⁴⁷Exhibit 91 Tab 18.

⁸⁴⁸Exhibit 91 Tab 14.

⁸⁴⁹Exhibit 91 Tab 15.

⁸⁵⁰Exhibit 91 Tab 18.

⁸⁵¹Exhibit 91 Tab 7.

⁸⁵²Exhibit 91 Tab 8.

⁸⁵³Exhibit 91 Tab 8.

⁸⁵⁴Exhibit 9 Tab 11.

⁸⁵⁵Exhibit 91 Tab 2.

⁸⁵⁶Exhibit 9 Tab 2, subject to correction for 2000-2001 made at trial.

⁸⁵⁷Exhibit 91 Tab 5.

⁸⁵⁸Exhibit 91 Tab 5.

⁸⁵⁹From Loba after October 15, 2000.

⁸⁶⁰Exhibit 91 Tab 7, Exhibit 91.

⁸⁶¹Exhibit 91 Tab 8.

⁸⁶²Exhibit 91 Tab 9.

⁸⁶³Exhibit 91 Tab 10.

⁸⁶⁴Exhibit 91 Tab 11.

⁸⁶⁵Exhibit 91 Tab 7.

⁸⁶⁶Exhibit 91 Tab 12.

⁸⁶⁷Exhibit 91 Tab 13.

⁸⁶⁸Exhibit 6 Tab 61, Exhibit 35 Tab 4.

⁸⁶⁹Exhibit 37.

⁸⁷⁰Exhibit 38.

⁸⁷¹Exhibit 39.

⁸⁷²Exhibit 40.

⁸⁷³Exhibit 35 Tab 2.

⁸⁷⁴Exhibit 35 Tab 3.

⁸⁷⁵Exhibit 37.

⁸⁷⁶Exhibit 35 Tab 5.

⁸⁷⁷Exhibit 82. In April 2007, Armstrong received a return of contributions from the Loba pension plan in the

amount of $3,197. Exhibit 82 Tab 4.

⁸⁷⁸Exhibit 82 Tab 3.

⁸⁷⁹Exhibit 82 Tab 2.

⁸⁸⁰Exhibit 82 Tab 3.

⁸⁸¹On his 2001 income tax return, Armstrong had an entry of ($7,797) for net commission income. This was not

adequately explained. I will consider his income as being his gross earnings from Loba.

⁸⁸²Exhibit 83 Tab 1.

⁸⁸³Exhibit 83 Tab 2.

⁸⁸⁴I assume this was a retroactive adjustment and does not relate to the period from October 2000 forward.

⁸⁸⁵Exhibit 83 Tab 3.

⁸⁸⁶Exhibit 83 Tab 2.

- 435 -

⁸⁸⁷Exhibit 83 Tab 4.

⁸⁸⁸Exhibit 86 Tabs 3, 4 and 5.

⁸⁸⁹Exhibit 86 Tab 6. The total refund is twice this amount.

⁸⁹⁰Exhibit 86 Tab 2.

⁸⁹¹Exhibit 9 Tab 15.

⁸⁹²Exhibit 86 Tab 1.

⁸⁹³Exhibit 86 Tab 1.

⁸⁹⁴Exhibit 86 Tab 2, Exhibit 87, Exhibit 98, Exhibit 99, Exhibit 100, Exhibit 101, Exhibit 102.

⁸⁹⁵Exhibit 11 Tab 47.

⁸⁹⁶[2000] O.J. No. 4015 (C.A.).

⁸⁹⁷Ibid. at para. 48.

⁸⁹⁸[1997] 3 S.C.R. 1210 at para. 76.

⁸⁹⁹[2003] O.J. No. 1255 (C.A.) at para. 30.

⁹⁰⁰Ibid. at para. 27.

⁹⁰¹(1982), 32 O.R. (2d) 757 (H.C.).

⁹⁰²(1980), 40 N.S.R. (2d) 388 (S.C.(A.D.))

⁹⁰³(1994), 125 Nfld. & P.E.I.R. 66 (P.E.I.S.C. (T.D.))

⁹⁰⁴[2001] F.C.J. No. 1708 (T.D.).

905

Sirois and Therrien v. New Brunswick Teachers Federation (N.B.T.F.) and L’Association des Enseignants

Francophones du Nouveau-Brunswick (A.E.F.N.B.), (1984), 56 N.B.R.(2d) 50 (N.B.Q.B.T.D.).

⁹⁰⁶Supra note 611.

⁹⁰⁷Rothwell, supra note 670 at 282; Spinks, supra note 611 at 241.

⁹⁰⁸Exhibit 1 Tab 108; Exhibit 1 Tab 110. See also Exhibit 1 Tab 71.

⁹⁰⁹Exhibit 1 Tab 111.

⁹¹⁰Exhibit 1 Tab 111.

⁹¹¹Exhibit 1 Tab 124.

⁹¹²Examination for discovery of Gravelle, January 12, 2005, Q. 824.

⁹¹³This evidence was admitted not for the truth of its contents but as evidence of the steps YTemple took to check

out the Loba option and the information that was available to her as a result.

⁹¹⁴Exhibit 3 Tab 32.

⁹¹⁵Ault, supra note 390.

⁹¹⁶Ibid.

⁹¹⁷Exhibit 6 Tab 43.

⁹¹⁸Ault, supra note 390.