Canada’s highest court rules on reimbursement of pension benefits paid to a missing person
In a recent decision¹, the Supreme Court of Canada upheld a pension plan’s right to recover pension benefits paid to a missing person under a legal presumption of life, which was reversed by the discovery of the retiree’s body.
On September 10, 2007, Mr. Roseme, a retiree of Carleton University and resident of Quebec, disappeared while receiving pension plan benefits from the University. The chosen form of his pension was a life annuity without reversion or applicable guarantee of payment following his death.
In Quebec, article 85 of the Civil Code of Quebec (“Civil Code”) stipulates that an absentee is presumed to be alive for seven years following their disappearance, unless proof of their death is made before then. Based on this presumption, Carleton University, as the pension plan administrator, decided to continue paying benefits to the retiree. His remains were discovered six years after his disappearance, thereby terminating the Civil Code’s presumption of life before the expiry of the seven-year period of absence. Furthermore, the death certificate produced by the Registrar of Civil Status recorded Mr. Roseme’s death as having occurred the day after his disappearance (“true date of death”), which was not contested.
Carleton University claimed to have made benefit payments in error since the true date of death. As such, it demanded that Ms. Threlfall, as Mr. Roseme’s tutor and the liquidator of his succession, repay the sum paid since that date. Ms. Threlfall argued that, instead, a prospective approach must be used such that the pension benefits paid up to the date Mr. Roseme’s remains were discovered had been rightly paid. Thus, no restitution would be admissible under the circumstances.
In this context, the following two questions arise:
- For the purposes of the pension plan, does the proof of death prior to the expiry of the seven-year presumption of life period retroact Mr. Roseme’s death to the true date of death?
- If so, are the pension benefits paid by the fund as of the true date of death susceptible to restitution under the Civil Code?
As with the Superior Court and the Quebec Court of Appeal, the majority of the Supreme Court of Canada answered yes to both questions.
Date of death retroactively set to the day following the retiree’s disappearance
On this issue, the Supreme Court found several grounds to support its conclusion, including—among other things—that the presumption of life set forth in the Civil Code is a rebuttable presumption that must inherently be replaced with reality once the presumption is rebutted. It also argued that, under the provisions of the Civil Code governing the absence, when the legislator dismisses reality in favour of alleged facts, it does so clearly, which is not the case of the applicable provision in this case.
Finally, the Supreme Court considered that retroactivity in such circumstances is consistent with the objectives of the presumption of life in that it helps to ensure the stability of legal reports regarding the absentee during a specific period should he return.
Admissibility of a claim for restitution of pension benefits under the Civil Code
For the purposes of the second question, the Supreme Court recalled that three essential elements must be met to provide restitution under the Civil Code, i.e.:
(1) there is the presence of a payment;
(2) it is made in the absence of debt between the parties; and
(3) it is made in error.
The Supreme Court considered that these elements were met and must be assessed retrospectively, i.e., when the claim for restitution is made, not at the time of each payment, depending on the true state of affairs. However, since the pension plan’s “debt” toward the retiree was now extinguished, the pension benefits paid between the retiree’s disappearance and the date on which his remains were discovered were paid “without right” and, as a result, are susceptible to restitution.
As such, the Supreme Court of Canada upheld Ms. Threlfall’s obligation to make restitution to the pension plan of close to $500,000, i.e., the value of the unduly paid pension benefits.
By putting reality over legal fiction, Carleton University was able to recover the benefits paid to the retiree “without right.” This case is good news for pension funds that might find themselves in a situation in which the absentee’s presumption of life applies to one of its members.
However, although the plan won this case, the efforts that have to be made to recover unduly paid benefits must not be underestimated. Therefore, special attention is required in situations involving the disappearance of a pension plan member. Depending on the circumstances, it would be wise for the pension plan administrator to take certain measures, contractual or otherwise, to reduce the risk of undue payments or, if that is not possible, to aid in the recovery of said payments.
¹ Threlfall c. Carleton University, 2019 CSC 50.
If you have any questions about this decision or any other questions regarding pension plan benefits payable, contact Normandin Beaudry’s legal team.