Hudson's Bay: the executive pension trusts and the November 2005 line

On November 10, 2005, Hudson's Bay Company received an offer for all of its outstanding common shares, which under the company's supplementary executive retirement plan was a change in control, per the Affidavit of Rita De Fazio, July 17, 2026, para. 19. A change in control obliged the company to secure the supplementary pensions its executives had earned up to that day. It did so on or about January 6, 2006, wiring $24,984,329 to Royal Trust Corporation of Canada as trustee of a new retirement compensation arrangement. What the executives earned after that date never went into the trust: the company called it the "unfunded" portion and paid it from current revenues, through RBC Investor Services as its paying agent, per the Affidavit of Susannah B. Roth, Feb. 10, 2026, paras. 40, 45–46, 68, 125–126.

Both streams stopped after the CCAA filing on March 7, 2025. By a letter dated March 26, 2025, HBC told Royal Trust it had terminated all of the plans and that no further payments or benefits under any of them would be made or funded by the company, per the Affidavit of Susannah B. Roth, Feb. 10, 2026, para. 103. Nothing has been paid from any of the company's four executive retirement trusts since April 2025, per the Affidavit of Rita De Fazio, July 17, 2026, para. 25. On September 18, 2026, the monitor, Alvarez & Marsal Canada Inc., filed its Eighteenth Report supporting an order that would make the 2005 date the line deciding who shares in the 2006 trust, the HBC Main RCA, per the Eighteenth Report of the Monitor, Sept. 18, 2026, paras. 1.18, 3.10.

What remains of the estate

When it filed, Hudson's Bay described itself as the oldest company in North America, founded in 1670 with a grant of sole trade over Rupert's Land, and ran 80 Hudson's Bay stores, three Saks Fifth Avenue stores and 13 Saks OFF 5TH stores across Canada with approximately 9,364 employees, per the Affidavit of Jennifer Bewley, Mar. 7, 2025, paras. 7, 44, 102. By July 2026 the monitor could put the rest of the case in a sentence: "Aside from the remaining issues with respect to the Pension Plan and the Royal Trust Motion, the Applicants' wind-up has largely been completed." The company closed the five weeks to July 17, 2026 with approximately $15.9 million in cash; the principal still owed to the FILO lenders, excluding any make-whole, was approximately $29.5 million, per the Seventeenth Report of the Monitor, July 22, 2026, paras. 3.12, 5.4–5.5.

On July 27, Justice Kimmel granted a Transition Order giving the monitor enhanced powers over the applicants, whose directors intended to resign. A year earlier the applicants had opposed a FILO Agent motion for similar relief, which Justice Osborne dismissed; this time they agreed, and no one opposed. At Justice Kimmel's prompting, the draft's clause providing that the monitor is not, for purposes of the Income Tax Act, a legal representative or a person to whom s. 150(3) applies was reworded in light of One Bloor West Toronto Group (The One) Inc. (Re), 2026 ONSC 1854, per the Endorsement of Justice Kimmel (Transition Order), July 28, 2026, paras. 1, 3–4, 10, 16, 18.

Four trusts and no one to read the plans

Royal Trust holds four retirement compensation arrangements for the company's former executives. Counting cash in trust and the refundable tax the Canada Revenue Agency holds for each, their balances at October 31, 2025 were:

Of the Main RCA's balance, $24,262,165.43 was refundable tax at the CRA rather than cash in trust, and that tax comes back at $1 for every $2 of benefits paid out, per the Affidavit of Susannah B. Roth, Feb. 10, 2026, paras. 3, 37.

The trust agreements treat the insolvency as terminating the plans and contemplate payout within 60 days. On April 11, 2025, by Royal Trust's account, the company said it would not retain an actuary, pay wind-up fees or contribute further. Royal Trust engaged Mercer (Canada) Limited itself on May 5, 2025, and Mercer raised questions about the plan documents that, in the ordinary course, the company would have answered as plan administrator, a role HBC had renounced. "HBC's insolvency and relinquishment of its role as administrator of each SERP has created a ministerial vacuum," Susannah B. Roth, a consultant to Royal Trust, deposes. Mercer has told the trustee it does not expect enough in the trusts to pay every participant's benefits in full, per the Affidavit of Susannah B. Roth, Feb. 10, 2026, paras. 17–19, 23, 106, 108, 111.

Royal Trust moved on February 13, 2026 for advice and directions on twelve questions and took no position on any of them. By the monitor's count some 305 people participate in the plans, many in more than one. On June 26 Justice Kimmel split the motion: questions 1 to 8, 10 and 11, on which Employee Representative Counsel and the company expected to agree, were set down for a half-day hearing before Justice Steele on September 25, and the rest were left for later, per the Eighteenth Report of the Monitor, Sept. 18, 2026, paras. 1.4–1.9, 3.3, App. "B".

The line at November 10, 2005

The plan and the trust do not say the same thing. Read plainly, Royal Trust's affiant says, the plan calculates each participant's termination liability on all benefits accrued up to termination, with no mention of 2005, per the Affidavit of Susannah B. Roth, Feb. 10, 2026, paras. 127–128. Employee Representative Counsel reads art. 7.04 of the plan as giving every defined-benefit participant, on its face, a pro rata share of the trust. The trust agreement's recitals, however, say it was settled to secure benefits accrued to the 2005 change in control, and its art. 9.1.1 provides that where the two documents conflict, the trust agreement prevails, per the Eighteenth Report of the Monitor, Sept. 18, 2026, paras. 3.11–3.13.

Employee Representative Counsel, Ursel Phillips Fellows Hopkinson LLP, and the company agree on the trust agreement's reading, and support it with the company's own conduct: the "funded" and "unfunded" labels in its communications to executives, the separate payments from the trust and from the company's own account, and a 2022 Mercer valuation that valued the funded portion on pre-2005 service alone, per the Factum of the Employee Representative Counsel, July 24, 2026, paras. 39, 52, 54–55.

By the De Fazio affidavit's count, of 257 participants in the plan's defined-benefit component, 183 accrued benefits up to November 10, 2005 and would share in the trust, 141 of them only for the pre-2005 part of their service; 74 accrued benefits only on or after that date and would have no entitlement to the trust's assets. The 2022 valuation, as the affidavit reproduces it, put the funded defined-benefit component at $57,589,000 in trust, including the two executives' separate trust, against a shortfall of $6,208,000; the unfunded component had no trust assets and a shortfall of $115,615,000. Participation was a term of employment for designated executives, who were not permitted to contribute. The 29 participants in the defined-contribution component would take nothing from the trust either; no money was ever paid into an account for them, and their claims, the affidavit says, are unsecured debts "for which no recovery is expected," per the Affidavit of Rita De Fazio, July 17, 2026, paras. 22–23, 40–44, 50.

At a town hall on March 24, 2026, Employee Representative Counsel gave participants its assessment that those who accrued service only after November 10, 2005 had no valid legal claim on the Main RCA; the affidavit says no one has come forward to dispute that analysis, per the Affidavit of Rita De Fazio, July 17, 2026, paras. 61–65. The order would also fix the plans' termination date. Royal Trust had asked whether it was March 26, 2025, the date of HBC's letter; the answer proposed is March 7, 2025, "the date the Applicants commenced these very widely-publicized CCAA Proceedings," per the Eighteenth Report of the Monitor, Sept. 18, 2026, para. 5.7, App. "A".

Two executives and a plan no one can find

The second trust, the HBC Additional RCA, was settled in 2011 with a $359,236.50 contribution for two executives whose employment contracts went further than the plan. If either was terminated without cause, or resigned, within two years of a change of control, the company had to "immediately secure the supplementary pension benefits accrued" to them, to the extent money already in trust was actuarially inadequate. Their employment was terminated on July 17, 2008 and June 30, 2010, per the Eighteenth Report of the Monitor, Sept. 18, 2026, paras. 3.14–3.15 and the Affidavit of Susannah B. Roth, Feb. 10, 2026, para. 71.

The trust agreement refers to a "Hudson's Bay Company Additional Supplementary Executive Retirement Plan for Certain Executives," but no one has found it: the company's archives turned up no plan text, and the law firm that acted for HBC when the trust was settled told Royal Trust that nothing was in its files and that it did not believe a plan text was ever in existence, per the Affidavit of Susannah B. Roth, Feb. 10, 2026, paras. 47, 133–136. The proposed order directs Royal Trust and Mercer to proceed as though there is none, determines the two executives' benefits under the main plan, and gives them alone the Additional RCA, measured by what they accrued from November 10, 2005 to their change-of-control termination dates. Whether their combined recovery from both trusts should be capped at 100% of their termination liability, question 9, is deferred until Mercer has run the numbers, per the Eighteenth Report of the Monitor, Sept. 18, 2026, paras. 1.18(c)–(e), 5.2, 5.8.

The only other relief on the September 25 list concerns the two contracts, which Employee Representative Counsel wants to file with personal information redacted; it says it is not seeking a sealing order. Justice Kimmel found the justification "supported by the evidence" when the request reached her in writing in July, but a motion on notice to the media had no procedure to proceed in writing and no way for the media to make submissions, so on July 24 she adjourned it to September 25 and allowed the redacted contracts to be served and filed in the meantime. She added that such requests belong at a case conference: "It is inefficient and inconvenient for the court to be receiving piecemeal correspondence on files outside of scheduled events on the court docket," per the Eighteenth Report of the Monitor, Sept. 18, 2026, paras. 1.20, 6.1–6.2, App. "D", paras. 8–10, 12–13.

Paying out before the pension surplus is known

Article 7.08 of the main plan reduces each participant's benefit by any surplus the participant receives from the registered Hudson's Bay Company Pension Plan. That plan's wind-up valuation indicates that substantial surplus funds will remain once its liabilities are settled, and the company has notified the plan's administrator that it will claim them, per the Sixteenth Report of the Monitor, June 24, 2026, paras. 4.8, 4.11. Ownership is disputed and is going through negotiation, with mediation to follow if needed, under orders made on June 26, per the Factum of the Employee Representative Counsel, July 24, 2026, paras. 33–35.

Rather than wait for that result, the proposed order lets Royal Trust make interim distributions now and directs TELUS Health, as the pension plan's independent administrator, to pay no surplus to a Main RCA participant until a set-off amount has been calculated and deducted, with the set-off going to the company under whatever order governs the surplus. Any excess left in the trusts stays put pending a further order or an agreement between Employee Representative Counsel and the monitor, per the Eighteenth Report of the Monitor, Sept. 18, 2026, paras. 1.18(h), 5.11–5.12.

A revised draft is to add a power Royal Trust sought after the draft was served. The trust agreements require the assets to sit in 90-day Government of Canada Treasury Bills, and half of any net income they earn goes to the CRA as refundable tax, which comes back only after the annual returns are filed. With the monitor's and Employee Representative Counsel's consent, Royal Trust would be able to cash out and hold the balance in non-interest-bearing accounts once first distributions are made, ending what the monitor calls "a never-ending cycle" of shrinking returns, tax filings and refunds, per the Eighteenth Report of the Monitor, Sept. 18, 2026, paras. 1.19, 5.16–5.20.

The trusts also pay for the motion, and the order would approve how. Through May 31, 2026, Royal Trust's counsel, Blake, Cassels & Graydon LLP, had billed $266,781.30 in fees and Mercer $224,590, each before HST, with general work split by asset size, 96.65% of it to the Main RCA, per the Supplemental Affidavit of Susannah B. Roth, July 24, 2026, paras. 14–15, 19 and the Eighteenth Report of the Monitor, Sept. 18, 2026, paras. 1.18(i), 5.13–5.14.

September 25, and what it leaves

The protocol gave anyone outside the service list until August 24 to deliver a notice of intention to take a position. Employee Representative Counsel emailed notice of a July 29 town hall to the 128 participants for whom it had addresses, and 78 attended. Neither the monitor nor Employee Representative Counsel received a notice of intention, and no interested party served materials. The monitor describes the order as "heavily negotiated" among Employee Representative Counsel, Royal Trust and the company, supports it and the redaction order, and says it is not aware of any opposition, per the Eighteenth Report of the Monitor, Sept. 18, 2026, paras. 4.4–4.7, 5.22–5.23, 7.1.

The question left for a contested hearing concerns the two smaller trusts. From September 2022, with too little in the RAA and Zellers trusts to keep paying, HBC directed Royal Trust to borrow from HBC itself; the RAA loans outstanding total $1,691,368.56 and the Zellers loans $149,593.40, before interest. If the loans are repaid, Royal Trust's affiant says, neither trust will have anything left for its participants, per the Affidavit of Susannah B. Roth, Feb. 10, 2026, paras. 76, 83–85, 91, 98–100. Employee Representative Counsel's position is that the company should not be able to insist on the promissory notes behind those loans, and it expects the company to contest that on a date still to be set, per the Eighteenth Report of the Monitor, Sept. 18, 2026, para. 5.3, App. "G".

After the court's directions, Mercer is to calculate each participant's entitlement, and Royal Trust has said it intends to come back to the court for approval of distributions once those valuations are done, per the Affidavit of Susannah B. Roth, Feb. 10, 2026, para. 13.