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Characterization of Unfunded Pension Liability Claims

In Re Walter Energy Canada Holdings, Inc, 2017 BCSC 709 (available here) the British Columbia Supreme Court had to consider the validity of a large claim (over $1 billion) filed in restructuring proceedings underway in the province under federal legislation.  The claim was for unfunded pension liabilities and was based on an American statute, the Employee Retirement and Income Security Act of 1974, 29 U.S.C. § 1001.  So the court had to consider whether that statute could apply to a claim in British Columbia against entities organized in Canada (mostly in British Columbia).

Starting at para. 93 the court considered whether the claim against the entities being restructured was governed by Canadian or American law (in each case the relevant law was either federal rather than provincial or state or did not vary as between provinces).  This is a choice of law question which raises the issue of the characterization of the claim.  Canadian courts do not often analyze characterization in detail, but the court did so in this case, making the decision notable.  The claimant argued that the claim was one in the law of obligations and sought to identify the proper law of the obligation.  The entities being restructured in contrast argued the claim went to a point of corporate law, namely their separate existence from other entities in an international corporate group.  The court referred to several of the main general authorities about the characterization process but considered the specific issue before it to be one of first instance.  It sided with the entities being restructured – the claim went to the issue of separation of corporate personality and status.  The American statute was imposing liability by “lifting the corporate veil” (paras. 137-38) between international corporate entities.