Sears Canada Inc., August 15, 2017
August 15, 2017
On August 14, 2017, we filed a motion for an order directing Sears Canada Inc. to wind up the Sears Canada Registered Retirement Plan and to continue payment of monthly pension benefits, without interruption, during the wind up process.
While under CCAA protection, Sears Canada is running a sales process to sell itself, in whole or in parts, to potential purchasers. The company is also closing over 50 stores, conducting a liquidation sales process for those stores, and does not appear to be restructuring. In these circumstances, we do not believe that any purchaser will agree to take over the liabilities of the Sears Canada Pension Plan and that the wind up of the pension plan is inevitable. The wind up will need to be done either by the company or the provincial pension regulator, the Superintendent of Financial Services of Ontario (the “Superintendent”). As reported by the company the Sears Canada Pension plan is underfunded by $266.8 million on its wind up.
Under the Ontario Pension Benefits Act (“PBA“), there is a remedy for the members of an underfunded pension plan called the deemed trust in favour of the pension plan beneficiaries for the amount owing and not paid by the employer to a pension plan on its wind up. The PBA deemed trust, and the priority given to the deemed trust in the Ontario Personal Property Security Act (“PPSA”), is an vital remedy to help avoid pension benefit losses for members of an underfunded pension plan. The PBA/PPSA deemed trust was held by the Supreme Court of Canada in the 2013 Indalex decision to apply in CCAA proceedings (subject only to the doctrine of paramountcy). The PBA/PPSA wind up deemed trust operates as a priority in favour of pension plan beneficiaries over other creditors, including secured creditors, over certain assets of the company.
In the circumstances of the Sears Canada CCAA proceedings, we are concerned with the delays by the company and the Superintendent to wind up the Sears Canada Pension plan, which delays can put the PBA/PPSA wind up deemed trust priority for the pension plan members at risk. The main objective of our motion is to secure the deemed trust priority in favour of the pension plan beneficiaries as soon as possible. To view our motion materials, please click here.