LEGAL RISKS AS A PENSION ACTUARY April 15, 2008 - Le 15 avril 2008 Montr é al, Q uébec Jana...

LEGAL RISKS AS A

PENSION ACTUARY

April 15, 2008 - Le 15 avril 2008Montréal, Québec

Jana Steele, Goodmans LLP

CIA Pension Seminar

Overview

• The Role of the Actuary

• Bases of Legal Actions:– Negligence– Breach of Fiduciary Duty– Breach of Contract

• Quasi-criminal proceedings

• Limiting Your Liability


The Role of the Actuary

• Certain functions mandated by statute:– Actuarial valuation reports and cost certifications

• Other functions often performed by an actuary:– Plan design– Plan amendments– Regulatory filings– Employee communications– Funding policies


Claims in Negligence

• Civil action

• Tort at law

• A breach of a legal duty of care that results in damage to another person or his/her property


Claims in Negligence

• Jurisprudence– British Columbia Automobile Association et al. v.

Manufacturers Life Insurance Company et al.• Successful claim in negligence

– Wynne v. William M. Mercer Ltd.• Successful claim in negligence

– Givogue v. Burke• Claim alleging breach of fiduciary duty and negligence.

Class action certified.

– Fata v. Simon Fraser University Administrator/Union Staff Pension Plan

• Unsuccessful action in negligence


Standard of Care – Statutory (Ontario PBA)• 22(1) Administrator must 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.

• 22(2) Administrator must use all relevant skill and knowledge in administering the pension plan and fund and in investing the fund that the administrator possesses or, by reason of its business, calling or profession, ought to possess.

• 22(4) Administrator prohibited from knowingly permitting its interest to conflict with its duties and powers in respect of the pension fund.


Standard of Care – Statutory (Ontario PBA)

• 22(5) Administrator can 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 fund.

• 22(8) An employee or agent of an administrator is also subject to the standards that apply to the administrator under subsections 22(1), 22(2) and 22(4).


What is an “Agent” Generally?

• A person authorized by another person to act on his or her behalf.


Is an Actuary an “Agent”?

• Yes.


Is an Actuary an “Agent”?

• Jurisprudence– R. v. Norton case

“In my view, the meaning of “agent” as set out in Section 22 of the Act can and does embrace the actions and role of Norton, as an actuary, vis a vis the Administrator, as principal…”


Is an Actuarial Firm an “Agent”?

• R. v. Norton case (cont’d)– In this case, Aon, the firm that employed the

individual actuary, not an agent.– Involved preparation of actuarial reports –

under PBA the reports must be prepared by an actuary.

– Court found that Aon was not an actuary or an actuarial firm. Aon could not therefore be an agent with respect to this function.


Is an Actuarial Firm an “Agent”?

• There are many other functions actuarial or consulting firms are retained to perform.

• Could be an agent.


What is a Fiduciary?

• Certain characteristics of a relationship may indicate that it is fiduciary:– One person is vested with discretion or power.– That power can be exerted such that the interests of

some other person are affected.– That other person is particularly vulnerable to the

exercise of the power or discretion by the fiduciary.


Fiduciary Standards – Common Law

• Where a fiduciary relationship exists, certain standards are imposed: – Duty of loyalty.– Duty to act honestly and prudently.– Duty to not delegate decision making power.– Duty to not let own personal interests conflict with

duties as a fiduciary.– Duty to not profit.– Duty to maintain an even hand between competing

interests.


Could an Actuary be a Fiduciary?

• Need to examine nature of relationship

• Certainly possible

• Case by case determination



• Jurisprudence– Wynne v. William M. Mercer Ltd.

• Unsuccessful on basis of breach of fiduciary duty (successful on basis of negligence)

– McLaughlin v. Falconbridge Ltd.• Unsuccessful on claim for breach of fiduciary duty• Judge indicated that it could be found that the actuary in this

case was a fiduciary

– Givogue v. Burke• Class action alleging breach of fiduciary duty and

negligence. Certification granted



• Jurisprudence (cont’d)– Sadler v. Watson Wyatt and Co.

• Class action based on breach of fiduciary duty

– Askin v. Ontario Hospital Association• Lower court indicated actuary in this case not a

fiduciary or agent

– Langlois v. Roy• Allegations include breach of fiduciary duty by

actuary. Ongoing class action proceeding.


Claims for Breach of Contract

• Actuary retained by client to perform certain functions for consideration – contract

• If contract not fulfilled, potential action for breach of contract


Claims for Breach of Contract

• Jurisprudence– Froese v. Montreal Trust Co. of Canada

• Obiter statement – “It is obvious that the relationship between the Company with the investment manager, the actuary and the defendant is largely contractual…For example, both the investment manager and the actuary obviously owed a contractual duty to the Company, and possibly also to the beneficiaries although I need not decide that question in this case…”


Statutory Offences (Ontario PBA)

• s.109 Every person who contravenes the PBA or the regulations is guilty of an offence.

• s.110 Every person who is guilty of an offence under the PBA is liable on 1st conviction to a fine of up to $100,000, and on each subsequent conviction to a fine of up to $200,000.



• s.110(2) Every director, officer, official or agent of a corporation and every person acting in a similar capacity or performing similar functions in an unincorporated association is guilty of an offence if the person,

(a) causes, authorizes, permits, acquiesces or participates in the commission of an offence referred to in section 109 by the corporation or unincorporated association; or

(b) fails to take all reasonable care in the circumstances to prevent the corporation or unincorporated association from committing an offence referred to in section 109.



• JurisprudenceR. v. Norton


Vicarious Liability of Employer

• R. v. Norton– No primary duty under the PBA on the

company in this case (as it was not an actuary within definition in PBA)

– As no primary duty on the company under PBA, “employer cannot be vicariously liable in this quasi criminal context, for these strict liability offences, for the actions of its employees.”

– Court left open possibility of civil recourse


Quasi-criminal Offences

• Strict Liability Offences– No mens rea need to be established– Doing of act = offence– Can defend against these charges (e.g.

reasonable belief in mistaken facts, due diligence)


Limiting Liability

• Breach of contract – can contract to limit liability to gross negligence or willful misconduct (limitation of liability clause in contract)

• Fiduciary liability – this is liability imposed by nature of the relationship

• Statutory liability – cannot contract out of the liability – it is minimum standards law


Limiting Liability

• Practice Management Skills:– Retain notes– Retain draft reports– Continuing education– Confirmation of instructions/retainers– Compliance with Standards of Practice– Peer review


QUESTIONS?


LEGAL RISKS AS A PENSION ACTUARY April 15, 2008 - Le 15 avril 2008 Montr é al, Q uébec Jana...

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