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Court compensates retiree for negligent misrepresentation of benefits

A recent decision of the Alberta Court of Appeal in Calder v. Alberta affirmed the decision of the trial judge granting a retired member of a public sector pension plan compensation for the negligent misrepresentation of the member’s future benefits. However, the Court declined to award the retired member the full value of the pension benefits that he had been erroneously promised at retirement.


The case stems from a pension plan reorganization for managers working in Alberta’s public service. Two new pension plans were created. The Public Service Management Closed Membership Pension Plan (the “Closed Plan”) was created for managers who ceased employment prior to August 1, 1992 (the “Inception Date”). The Management Employees Pension Plan (“Management Plan”) was created for managers who continued in employment.

This particular case related to managers in the Closed Plan who returned to employment at a later date, and how to calculate their benefit under the Closed Plan. A legislative provision stated that pensionable service after the Inception Date could be considered in calculating benefits under the Closed Plan. A cost of living adjustment was also provided in respect of the past benefits under the Closed Plan.

The Alberta Pensions Services Corporation (APSC), which administers both the Closed Plan and the Management Plan, determined in 2009 that it would take into account salary earned after returning to employment when calculating the benefit under the Closed Plan. However, in 2012, the APSC changed its mind and determined that it should only take into account salary earned between the Inception Date and January 1, 1994, when the previous management pension plan was divided into the two new plans.

Facts of the case

The plaintiff, Dr. Calder, worked for Alberta from 1978 to 1986, and subsequently returned to a management position in 1995, making him a member of both the Closed Plan and the Management Plan. Dr. Calder made several inquiries about his pension entitlements after being skeptical of the pension estimates given to him prior to his retirement, which showed a pension of approximately $8,000 per month. However, after meeting with APSC, he was given assurances that his Closed Plan pension would be determined in accordance with the 2009 interpretation. Relying on these assurances, Dr. Calder retired on September 1, 2011 and commenced receiving $8,000 per month in pension benefits.

Upon the release of the APSC’s new interpretation, Dr. Calder’s pension was reduced to approximately $2,000 per month. He sued the Province of Alberta and APSC, seeking to restore the 2009 interpretation.

The decision

The trial judge’s decision, which was upheld by the Court of Appeal, agreed with the 2012 interpretation and refused to restore the 2009 interpretation. The 2009 interpretation would lead to “double-dipping” by both recognizing the later salary and by providing cost of living adjustments for the change in the cost of living since the previous termination of employment. This would put a returning manager in a much better position than managers who worked continuously for the province. In Dr. Calder’s case, his highest average annual salary prior to his departure in 1986 was $40,000, and his highest average annual salary after returning to work for Alberta from 1995 to 2011 was approximately $140,650. The 2009 interpretation resulted in a significant, and erroneous, upward adjustment in pension benefits.

The trial judge and Court of Appeal refused to restore the 2009 interpretation of the APSC. They held that a pension plan must always be administered correctly in accordance with the legislation, even if the mistake was longstanding. Therefore, the APSC was correct to adjust the pension downwards, despite what was promised to Dr. Calder prior to his retirement. His pension was not restored to $8,000 per month and he was not compensated for the loss of $6,000 per month of pension, which would have been worth approximately $1.5 million.

The trial judge held that if Dr. Calder had been properly advised in 2011, he would have deferred retirement for three additional years. The trial judge ruled that Dr. Calder should be placed in the same position with respect to his retirement that he would have been in had he worked for those additional three years. This amounted to a lump sum of $265,017, including a gross-up for taxes.

The decision was based on the tort of negligent misrepresentation, which requires the following elements:

  1. A duty of care existed based on a special relationship between the representor and the representee.
  2. A representation was made that was untrue, inaccurate or misleading.
  3. The representor acted negligently in making the representation.
  4. The representee relied, in a reasonable manner, on the representation.
  5. The reliance was detrimental to the representee in the sense that damages resulted.

The compensation was due for the damage done by the mistaken representation, rather than providing Dr. Calder with what he was promised prior to retiring.


The Court of Appeal and trial judge decisions demonstrate the importance of careful plan interpretation, particularly when members are relying on such interpretations in making financial planning and retirement decisions. Incorrect interpretations can result in liability for negligent misrepresentation, which can result in the requirement to put the recipient of such negligent misrepresentation in the same position they would have been had the representation not been made. However, this case demonstrates that a pension plan and administrator may not be liable for the full amount that the individual was promised, even if the individual has already started to receive a pension based on an incorrect interpretation.

News & Views - February 2020 (PDF)