Weldon Allison had worked for Noranda Inc. (or its predecessor) since August 1963. In March 1990 his employment was terminated without cause. At that time, Mr. Allison was 53 years of age.
Upon his termination he was given two options for his separation pay. The first option was to receive a lump sum which would terminate his employment as of March 31, 1990, and result in a one-time payment that could be rolled into a tax sheltered retirement plan. The second installment option would have Mr. Allison’s employment continue but with no obligation to work over the next 16 months, at which time he would be 55 years old.
Mr. Allison sought the advice of a life insurance agent who advised him to take the lump sum payment and invest it in mutual funds. Based on this advice, Mr. Allison accepted the lump sum payment which was rolled into an RRSP. He signed a release in favour of Noranda upon acceptance of the lump sum payment.
When giving Mr. Allison the options for his separation pay, Noranda did not inform him of the impact on his pension benefits with the two options. Under the lump sum option, Mr. Allison became entitled to a monthly pension of $302. However, under the installment option, his monthly pension entitlement was $887.
When Mr. Allison turned 55 in October 1991, he applied for pension benefits. It was only then that he became aware of the difference in pension amounts resulting from his election of the lump sum option. Mr. Allison decided to sue Noranda for negligent misrepresentation for failing to disclose information that would have revealed the material difference between pension benefits payable under the two options.
The matter was originally heard before the New Brunswick Court of Queen’s Bench which dismissed his action. Mr. Allison then appealed that decision to the Court of Appeal.
There was evidence before the Court that Noranda was aware of the impact on Mr. Allison’s pension benefits. The mine manager received a memo from its corporate legal counsel that laid out a suggested procedure to be followed when terminating Mr. Allison. That memo also outlined that if Mr. Allison chose the installment option, he would receive monthly installments until he reached age 55.
At that time he could take early retirement. Early retirement would result in a reduction of Mr. Allison’s pension by 30 per cent, three per cent for each of the ten years prior to the normal retirement age under the pension plan of 65. The memo also referred to the lump sum option. Although the pension consequences of this option were not quantified, reference was made to an “actuarial reduction.”
The Court heard evidence that a person who leaves the employ of Noranda prior to turning 55 is entitled to receive a reduced pension at that age based on an actuarial reduction that climbs to more than 60 per cent of normal pension benefits available at age 65.
The termination letter provided to Mr. Allison did not inform him of the actuarial reductions that would result from the two severance payment options. It did not inform him that after 16 months the early retirement election would only be available to him if he elected the installment option.
The trial judge held that Mr. Allison failed to establish that representatives of Noranda had made any misrepresentation with respect to pension benefits. He found that Noranda made no positive representation to Mr. Allison that he would be entitled to the early retirement pension if he elected the lump sum. Mr. Allison appealed the trial judge’s decision to the Court of Appeal.
The Court of Appeal disagreed with the trial judge’s finding that Noranda did not fail to disclose important information to Mr. Allison relating to pension benefits under both separation pay options. It also did not accept the finding that even if Noranda had made a negligent misrepresentation, it would have been relieved from liability as a result of the release signed by Mr. Allison upon acceptance of the lump-sum payment.
Like the Eatons case, the Court laid out the five requirements to be met in establishing negligent misrepresentation. In this case all five requirements were met.
There was a special relationship between Mr. Allison and Noranda giving rise to a duty of care. That relationship was an employment contractual relationship. Furthermore, Noranda was the administrator of the pension plan and responsible for payment of the benefits Mr. Allison would receive on reaching age 55.
The termination letter did not accurately reflect the pension consequences relating from the selection of one separation pay option as opposed to the other. It did not specify that the lump sum option would trigger the application of the actuarial reduction as opposed to the normal reduction. This should have been disclosed to Mr. Allison.
Noranda had the pension information available to it yet provided no valid reason as to why it chose not to disclose the pension information to Mr. Allison, contrary to advice from its legal counsel. The Court of Appeal held this to be negligent.
On the issue of reliance, Mr. Allison testified that had he been fully informed about the financial impact of this election, he would have elected the installment option.
The Court held that Mr. Allison was entitled to succeed in his action for negligent misrepresentation. As the trial judge had not made an assessment of damages, the matter was remitted back to him for a determination on this issue.
For more information:
• Allison v. Noranda Inc., 2001 NBCA 67.
Upon his termination he was given two options for his separation pay. The first option was to receive a lump sum which would terminate his employment as of March 31, 1990, and result in a one-time payment that could be rolled into a tax sheltered retirement plan. The second installment option would have Mr. Allison’s employment continue but with no obligation to work over the next 16 months, at which time he would be 55 years old.
Mr. Allison sought the advice of a life insurance agent who advised him to take the lump sum payment and invest it in mutual funds. Based on this advice, Mr. Allison accepted the lump sum payment which was rolled into an RRSP. He signed a release in favour of Noranda upon acceptance of the lump sum payment.
When giving Mr. Allison the options for his separation pay, Noranda did not inform him of the impact on his pension benefits with the two options. Under the lump sum option, Mr. Allison became entitled to a monthly pension of $302. However, under the installment option, his monthly pension entitlement was $887.
When Mr. Allison turned 55 in October 1991, he applied for pension benefits. It was only then that he became aware of the difference in pension amounts resulting from his election of the lump sum option. Mr. Allison decided to sue Noranda for negligent misrepresentation for failing to disclose information that would have revealed the material difference between pension benefits payable under the two options.
The matter was originally heard before the New Brunswick Court of Queen’s Bench which dismissed his action. Mr. Allison then appealed that decision to the Court of Appeal.
There was evidence before the Court that Noranda was aware of the impact on Mr. Allison’s pension benefits. The mine manager received a memo from its corporate legal counsel that laid out a suggested procedure to be followed when terminating Mr. Allison. That memo also outlined that if Mr. Allison chose the installment option, he would receive monthly installments until he reached age 55.
At that time he could take early retirement. Early retirement would result in a reduction of Mr. Allison’s pension by 30 per cent, three per cent for each of the ten years prior to the normal retirement age under the pension plan of 65. The memo also referred to the lump sum option. Although the pension consequences of this option were not quantified, reference was made to an “actuarial reduction.”
The Court heard evidence that a person who leaves the employ of Noranda prior to turning 55 is entitled to receive a reduced pension at that age based on an actuarial reduction that climbs to more than 60 per cent of normal pension benefits available at age 65.
The termination letter provided to Mr. Allison did not inform him of the actuarial reductions that would result from the two severance payment options. It did not inform him that after 16 months the early retirement election would only be available to him if he elected the installment option.
The trial judge held that Mr. Allison failed to establish that representatives of Noranda had made any misrepresentation with respect to pension benefits. He found that Noranda made no positive representation to Mr. Allison that he would be entitled to the early retirement pension if he elected the lump sum. Mr. Allison appealed the trial judge’s decision to the Court of Appeal.
The Court of Appeal disagreed with the trial judge’s finding that Noranda did not fail to disclose important information to Mr. Allison relating to pension benefits under both separation pay options. It also did not accept the finding that even if Noranda had made a negligent misrepresentation, it would have been relieved from liability as a result of the release signed by Mr. Allison upon acceptance of the lump-sum payment.
Like the Eatons case, the Court laid out the five requirements to be met in establishing negligent misrepresentation. In this case all five requirements were met.
There was a special relationship between Mr. Allison and Noranda giving rise to a duty of care. That relationship was an employment contractual relationship. Furthermore, Noranda was the administrator of the pension plan and responsible for payment of the benefits Mr. Allison would receive on reaching age 55.
The termination letter did not accurately reflect the pension consequences relating from the selection of one separation pay option as opposed to the other. It did not specify that the lump sum option would trigger the application of the actuarial reduction as opposed to the normal reduction. This should have been disclosed to Mr. Allison.
Noranda had the pension information available to it yet provided no valid reason as to why it chose not to disclose the pension information to Mr. Allison, contrary to advice from its legal counsel. The Court of Appeal held this to be negligent.
On the issue of reliance, Mr. Allison testified that had he been fully informed about the financial impact of this election, he would have elected the installment option.
The Court held that Mr. Allison was entitled to succeed in his action for negligent misrepresentation. As the trial judge had not made an assessment of damages, the matter was remitted back to him for a determination on this issue.
For more information:
• Allison v. Noranda Inc., 2001 NBCA 67.
