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Factual background and the police pension regime
The litigation centres on the long-running defined benefit pension regime for police officers of the Ville de Montréal. The plan is funded by employer and member contributions, with the Fraternité des policiers et policières de Montréal acting as bargaining agent for all participants and the Association de bienfaisance et de retraite (ABR) administering the fund. Historically, the regime generated significant surplus, and a series of protocols of agreement in 1998 and 2007 allocated those surpluses between the City and plan members. Those protocols created “clauses banquier” that allowed the City to take contribution holidays and, where not fully used, to carry forward unused amounts as a sort of banked credit against future contributions. Over time, the City also paid additional amounts (cotisations d’équilibre and excess contributions) that were intended to be reimbursed from future surpluses. These mechanisms created substantial “créances” owed by the plan to the City – pension-fund debts whose value would later be central to the dispute. By 31 December 2016, the plan’s prior-service component alone showed City receivables estimated at 402 million dollars, and these receivables were contractually linked to the net investment performance of that prior-service fund.
Legislative reform: the Loi RRSM and plan split into two segments
In 2014, the provincial legislature adopted the Loi favorisant la santé financière et la pérennité des régimes de retraite à prestations déterminées du secteur municipal (Loi RRSM). The statute forced all affected municipal plans to split into two distinct “volets”: a prior-service segment covering service up to 31 December 2013, and a current-service segment from 1 January 2014 onwards. For the current segment, the statute mandates 50-50 sharing of normal costs and deficits, creation of stabilisation funds, and caps on contribution rates. For the prior-service segment, municipalities can suspend certain indexation and must share past-service deficits with active members. Critically, the Loi RRSM directly regulates use of surplus. Article 20 prohibits using actuarial surplus to pay contributions (i.e., contribution holidays) except where a tax rule compels it, and requires that surplus be used separately for each segment. For the prior-service segment, the statute sets a default order of uses if the parties do not agree otherwise: restoring retirees’ indexation, then repaying debts owed by the plan to the municipality and members, then funding further benefit improvements. These provisions were adopted in a context where prior practice of frequent contribution holidays had been identified as a structural risk to pension sustainability; the legislature deliberately sought to make contribution holidays the rare exception, not the rule.
Restructuring agreement and the 2017 Règlement global
Despite constitutional and other challenges launched by the Fraternité and others against the Loi RRSM, the City and the union proceeded with negotiations to restructure the police plan and renew the collective agreement. These negotiations culminated in October 2017 in a new collective agreement and a comprehensive restructuring document titled “Règlement global,” signed by the City’s chief negotiator and the union president. The Règlement global expressly implements the RRSM-mandated split into an “ancien volet” (prior-service) and “nouveau volet” (current service), and sets out the financial data of the fund as of the 31 December 2013 actuarial valuation. For the prior-service segment, the Règlement global first creates a “restructuring reserve” equal to the value of indexation eliminated for active members, and then addresses how future prior-service surpluses will be used. The key clause, at the heart of the case, provides an order of use of surplus “lors d’une évaluation actuarielle”: (1) fully fund the provision for adverse deviation (PED) to 100%; (2) “remboursement des créances envers la Ville établies au 31 décembre 2013, accumulées avec intérêt par la suite (voir l’annexe A)”; and (3) if surplus remains above a threshold (15% of actuarial liabilities or the PED), the parties will discuss options. Annex A describes three categories of City receivables – linked back to the 2007 “clauses banquier,” excess service-cost contributions, and the unused portion of surplus allocated to City contribution holidays – and specifies their estimated total of 402 million dollars at 31 December 2016. Crucially, Annex A states that those balances will be revised at the post-restructuring valuation and “seront accumulés avec intérêt selon [le] rendement net de l’ancien volet.” The parties also notified the ABR that the Règlement global was the sole document embodying their restructuring agreement and requested that the administrator apply its provisions going forward.
Emergence of surplus and the new dispute over method of repayment
Following the restructuring, actuarial valuations showed that the prior-service segment had moved into surplus. By late 2020, a full actuarial valuation as of 31 December 2019 revealed an excess of 368,043,000 dollars after fully funding the PED. In September–October 2020, this figure was confirmed and triggered the contractual mechanism requiring use of surplus. At that point, the ABR asked the City and the Fraternité for their positions on how the City’s receivables should be repaid from the surplus. The union responded that, in its view, the Loi RRSM left to the parties the choice of repayment methods provided they were lawful, and that the 2017 restructuring simply “reconduite” the 1998 and 2007 “clauses banquier.” On this reading, the only permissible method was through contribution holidays: surplus would indirectly repay City receivables by allowing the City to skip or reduce future contributions to the new, current-service segment. The Fraternité argued that any other mechanism would require a new negotiated agreement. The City strongly disagreed. Referring both to article 20 RRSM and the Règlement global, it asserted that once the PED was at 100%, it was entitled to a “remboursement” of its receivables in cash out of the prior-service assets, not to contribution holidays. The City stressed that contribution holidays from the prior-service segment were no longer conceptually possible – there are no ongoing service contributions to waive in a closed prior-service fund – and that the RRSM expressly forbids using surplus to “acquitter des cotisations” except for limited tax-driven reasons. The City advised that it intended to withdraw the entire 368,043,000-dollar surplus from the prior-service assets, although it volunteered to spread the cash decumulation over a year to allow orderly asset sales.
Administrator’s neutrality and recourse to declaratory proceedings
Faced with irreconcilable positions and threatened litigation from the Fraternité if it complied with the City’s demand, the ABR initially stayed neutral, indicating it would abide by whatever the court decided. In July 2021, the administrator filed an originating application for a declaratory judgment in the Superior Court. It laid out the history of the plan and restructuring, set out both the City’s and Fraternité’s readings of the Règlement global and RRSM, and asked the court to determine whether repayment had to be in cash or through contribution holidays (or another mechanism). The City responded with a reconventional demand seeking a money judgment: in addition to a declaratory ruling, it asked that the ABR be ordered to pay it the 368,043,000-dollar surplus in cash. The Fraternité, in its own reconventional pleading, sought a declaration that plan surplus must be used either to grant contribution holidays or in such other manner as the City and union might subsequently agree, but not via a unilateral cash withdrawal by the City.
Partial settlement: the first 368 million-dollar payment
Although the legal positions remained unchanged, the parties reached a pragmatic accommodation in early 2023. In May 2023, the Fraternité notified the ABR that it would no longer oppose disbursement of the 368,043,000-dollar surplus to the City, if paid in three equal instalments. The union explicitly preserved its legal arguments while waiving any claim against the ABR in relation to those payments. The City and ABR accepted that structure, and the three payments totalling 368,043,000 dollars were made in mid-2023. This did not, however, extinguish the City’s receivables. Because those receivables are pegged to the net investment return of the prior-service assets, their balance fluctuates over time. An actuary’s report in April 2024 showed that, after taking account of the 2023 payments, the City was still owed 226,088,000 dollars as at 31 December 2023. Meanwhile, a full actuarial valuation as at 31 December 2022 showed that, even after the 368-million withdrawal, the prior-service segment still had surplus of 226,887,000 dollars. The City’s reconventional demand was amended in late 2024 to claim this 226,088,000-dollar receivable, with legal interest and the statutory additional indemnity from April 2024.
Jurisdiction challenge: was this a matter for labour arbitration?
Just days before the merits trial, in December 2024, the Fraternité filed a declinatory exception, arguing that the Superior Court lacked jurisdiction. It contended that the Règlement global had been incorporated into the police collective agreement through the RRSM and the labour relations framework, and thus that disputes over its terms were labour grievances exclusively for an arbitrator to resolve. The exception was heard in November 2024 and forced an adjournment of the main trial. In March 2025, the same judge rejected the exception in a separate decision, holding that the grievance-arbitration machinery in the collective agreement did not cover this dispute. The court found that the pension plan itself, and the Règlement global governing its funding mechanics and surplus use, had not been incorporated into the collective agreement by the parties or by operation of the RRSM. Accordingly, questions about the ABR’s administration of the plan and the City’s status as creditor remained within the Superior Court’s civil jurisdiction. No appeal was taken, and the main trial proceeded in May 2025.
Positions of the parties at trial
When the case was heard on the merits, the controversy had narrowed but remained significant. The City maintained that under the Règlement global, every actuarial valuation that shows prior-service surplus after fully funding the PED automatically gives it the right to be repaid its receivables in cash up to the amount of that surplus. It emphasised that “remboursement des créances” must be given its ordinary meaning – the return of money previously advanced – and that article 20 RRSM flatly prohibits using surplus to fund contribution holidays, especially across the boundary between the prior-service and current-service segments. The City said it was open to negotiating practical payout schedules with the ABR and was prepared to waive interest and additional indemnity over the agreed schedule, but insisted that legally it was entitled to immediate payment in full each time surplus arises. The Fraternité argued that the Règlement global was silent on the mode and timing of repayment and that it had been negotiated on the tacit understanding that the 1998 and 2007 protocols continued to apply with respect to “clauses banquier.” On that view, surplus assigned to repayment of City receivables should still operate by way of contribution holidays in the current-service segment, with the City and union required to negotiate any alternate mechanism, possibly subject to RRSM-type arbitration if they deadlocked. The Fraternité took the position that the court could not, and should not, substitute its own payout terms for those the parties had or might bargain. The ABR, for its part, declined to take a side on the cash-versus-holiday question, but urged that any repayment had to be scheduled over a reasonable period (it suggested 12 months), arguing that a one-time cash withdrawal of a large nine-figure sum would force disadvantageous asset sales and could upset the fund’s liquidity and investment strategy.
Subsequent developments: agreement on the second major decumulation
After the hearing but before judgment was rendered, the parties again reached a partial accommodation. In August 2025, the ABR’s counsel wrote to the court confirming that the parties had agreed to a further cash disbursement of 226,887,000 dollars from the prior-service surplus. This amount corresponds to the entire surplus as at 31 December 2022, and it tracks the actuaries’ confirmation that the City’s receivables had increased from 226,088,000 dollars at the end of 2022 to 246,787,000 dollars by the end of 2024. Under the agreement, the ABR would pay 226,887,000 dollars to the City in twelve equal monthly instalments starting on 15 September 2025. The City agreed that computation of legal interest and the additional indemnity on its claim would cease as of that date and renounced any claim for such accessories beyond it. The Fraternité waived any claim against the ABR in relation to this decumulation. All parties asked the court to record these developments but stressed that they did not render the underlying legal questions moot: the City’s receivables would still not be fully extinguished and future surplus was likely, so a ruling on the proper repayment mechanism and on the City’s entitlement to interest and additional indemnity remained necessary.
Court’s analysis: admissibility of the declaratory claim
The City had argued that the ABR’s declaratory action was procedurally improper because there was supposedly no “real difficulty” under article 142 of the Code of Civil Procedure; in its view, the RRSM and Règlement global were clear, and the ABR should simply have exercised its judgment as administrator instead of “hiding” behind a neutral petition. The judge acknowledged that an administrator cannot become paralysed whenever stakeholders disagree, but found it unnecessary to rule on whether the ABR’s petition strictly met the article 142 standard. Since both the City and the Fraternité had filed reconventional demands that squarely raised the same interpretive questions and sought coercive relief, the court had to resolve those issues anyway. The existence or not of a “real difficulty” did not affect the court’s duty to adjudicate the merits of the reconventional claims, including the City’s request for a money judgment and the Fraternité’s request for a contrary declaration.
Interpretation of the Règlement global and the meaning of “remboursement”
On the central question of how the City’s receivables must be repaid, the court sided decisively with the City. It began by examining the ordinary meaning of “remboursement des créances envers la Ville,” drawing on dictionary and appellate authority to emphasise that “rembourser” and “remboursement” in legal and everyday French denote the return of money to someone who previously advanced or paid it. The judge stressed that in the Règlement global’s context, “remboursement” obviously referred to the return in cash of that portion of the pension assets which corresponded to the City’s earlier contributions or allocated surplus it had been unable to enjoy. Because the pensions law and the RRSM already distinguish between contribution holidays and actual payments, the court found it highly significant that the parties deliberately used the word “remboursement” rather than language of “utilisation” or “allocation” which had been used in the 1998 and 2007 protocols when surpluses were channelled into contribution holidays.
Consistency with the Loi RRSM and rejection of contribution-holiday repayment
The court then located the Règlement global’s language within the statutory framework. Article 20 RRSM contains two key rules: it prohibits using surplus to pay contributions, and it requires that surplus be used separately in each segment. The Règlement global’s clause on surplus mirrors the article 20 structure: first the PED, then “remboursement des dettes contractées par le régime à l’égard de l’organisme municipal,” and only thereafter discussion of any residual surplus above a high threshold. The judge noted that during committee hearings on the RRSM, the responsible minister had explicitly described the ban on contribution holidays as “impérative” and central to the policy of stabilising defined benefit municipal plans. The Fraternité argued that using prior-service surplus to offset some of the City’s current-service contributions was not, technically, a forbidden “contribution holiday” but rather a “compensation conventionnée” between two sets of obligations. The court rejected this “ingenious” but strained distinction, emphasising that the statute does not differentiate between sources of surplus; it simply forbids using any surplus to discharge contribution obligations. Moreover, the same article 20 that allows surplus to be applied to repay municipal debts also contains the ban on contribution holidays; to adopt the union’s interpretation would be to let the third paragraph of the article defeat the first. The court also held that using prior-service surplus to fund current-service contributions would violate the RRSM’s requirement that surplus be used “distinctement” for each segment. The legislative logic is that the prior-service and current-service segments are to be administered like separate plans; siphoning assets from one to subsidise contributions to the other cuts across that separation.
No survival or incorporation of pre-RRSM “clauses banquier” into the new regime
A major plank of the Fraternité’s argument was that by recognising the City’s receivables that arose from earlier contribution holidays and surplus allocations, the Règlement global implicitly carried forward the 1998 and 2007 “clauses banquier,” including the old rules for using future surplus through contribution holidays. The court dissected the text and context of both protocols and the Règlement global. It acknowledged that Annex A of the Règlement global mentions the protocols in describing the types of receivables (e.g., “solde du surplus alloué […] par le protocole de 2007”), but concluded that these references merely identify the origin and nature of the credits. There is nothing in the restructuring document to indicate that the parties intended to “incorporate by reference” the prior provisions on contribution holidays, which had been carefully drafted for a very different funding and regulatory environment. By contrast, the Règlement global uses the vocabulary of “remboursement” and is expressly crafted to align with the RRSM regime. The court also pointed out that the 2007 protocol’s contribution-holiday mechanics are highly specific: they assume a single, unsplit plan, particular formulas for service-cost calculations, and continued existence of plan-wide contributions against which holidays can be taken. These detailed mechanics neither map easily onto, nor appear tailored for, the post-RRSM split-plan environment. The judge found it implausible that sophisticated parties, assisted by actuaries and counsel, would have intended the old mechanisms to continue automatically without any attempt to adapt or restate them in light of the new statutory structure.
Rejection of the union’s request to send the parties back to negotiation
Once it concluded that the Règlement global grants the City a clear right to cash repayment and that contribution holidays are both statutorily barred and contractually unsupported, the court turned to the Fraternité’s alternative plea that the absence of explicit language on the mode and schedule of repayment created a “lacune” that must be filled by further bargaining. The judge held that there was no contractual gap: the obligation is plainly pecuniary, and under the Civil Code a debtor of a sum of money must discharge the full exigible debt in a single payment absent a contrary agreement. The fact that the parties might have negotiated a different schedule but did not do so does not authorise the court to retrofit such a schedule onto their bargain. Nor does it give the union a veto over the City’s right to demand payment or over the ABR’s performance of its obligations as administrator. Accordingly, the court refused to order any return to the bargaining table or to defer to some hypothetical future labour-relations process; the City is contractually entitled to call for full cash repayment from available prior-service surplus at each actuarial valuation.
Limits on judicial power to impose a payout schedule
The ABR’s separate request that the court impose a mandatory payout schedule, such as twelve monthly payments, was also declined. The judge accepted that large withdrawals must be managed prudently to protect liquidity and investment strategy, but emphasised that under the Civil Code, a court generally cannot force a creditor to accept partial or instalment payments where a money obligation is fully exigible, unless a statute expressly authorises such judicial modification. The obligation to pay the City is a divisible monetary debt but, as between a single debtor and single creditor, it is treated as indivisible for payment purposes: the creditor has a right to “rien que la chose, toute la chose.” The court noted that Quebec appellate authority has repeatedly reaffirmed that judges cannot unilaterally convert a lump-sum payment obligation into an instalment plan, even in sensitive areas like family support, absent specific legislative empowerment. The Règlement global does not confer any such power on the court, nor does any provision of the RRSM do so. In addition, the ABR had not offered concrete evidence to support a particular schedule: it had not shown, with financial analysis, why a 12-month spread was necessary or preferable, or how decumulation could be sequenced to minimise harm. The one figure it pointed to – roughly eight million dollars in interest incurred on short-term borrowing to facilitate the earlier 368-million withdrawal – could not, without more, be tied to an unduly compressed schedule rather than to normal financing costs or market conditions. For these reasons, while the judge recognised the administrator’s prudential concerns, he refused to re-write the repayment obligation to include timing conditions that the parties themselves had not stipulated.
Demeanour, default and entitlement to legal interest
The most financially significant legal issue was the City’s claim for legal interest and the additional statutory indemnity on unpaid receivables. The ABR argued that these monetary accessories should not be awarded because it had committed no “fault” in seeking judicial directions and had been threatened with litigation by the union; in its view, there was no unjustified default, only a prudent attempt to clarify its fiduciary duties. It also contended that because the City’s receivables already grow or shrink with the net investment return of the prior-service assets, the parties had effectively agreed on a contractual “interest” rate, leaving no room for the Code’s legal interest and indemnity. The court began by characterising the underlying obligation. It held that the Règlement global creates a pure monetary obligation: the plan owes the City a sum of money – here quantified by actuarial work – and nothing in the City’s claim resembles an action for damages arising from misadministration or other wrongful acts. Article 1617 C.c.Q., which governs delay in paying monetary obligations, therefore applies. Under that article, the creditor is automatically entitled to interest at the agreed or, failing that, the legal rate from the date of default (demeure), without having to prove any prejudice. The judge stressed that interest is not a sanction for fault but the codified measurement of the harm caused by the time-value loss and lost earning opportunities inherent in delayed payment.
Determining the dates of default and dismissing “good faith” arguments
On the evidence, the court found that the ABR had been in default as to part of the City’s claim from late October 2023. By that point, the actuaries had identified surplus of 226,887,000 dollars as at 31 December 2022; the City had formally demanded that all of that surplus be paid to it, and the ABR had responded on 25 October 2023 by explicitly declining to comply in light of the Fraternité’s opposition and the pending declaratory application, while at the same time confirming that the actuaries had quantified the City’s receivables at 196,000,000 dollars as at the end of 2022. From that exchange, the judge concluded that the ABR knew both that the City was calling for repayment and that, at minimum, 196,000,000 dollars was due; by making clear it would not pay, it placed itself in default of a pecuniary obligation as of that date. For the remaining 30,088,000 dollars – the increase in receivables between year-end 2022 and year-end 2023 – the court fixed the default date at 9 April 2024, when the ABR transmitted the actuaries’ detailed report confirming the total receivable of 226,088,000 dollars and thereby acquired full knowledge of its updated debt. The judge rejected the ABR’s position that no default could occur until the City formally amended its pleadings in October 2024 to adopt the actuaries’ figure; the debt flowed from the plan documents and actuarial calculations, not from the City’s acceptance of them, and the ABR had longstanding clarity on what the City was demanding. As to the ABR’s reliance on its own good faith and prudence in seeking the court’s guidance, the judge held that an absence of bad faith or negligence does not neutralise default under article 1590 C.c.Q. Default is “unjustified” in the sense that it is not covered by a recognised legal defence such as force majeure, set-off, novation or an exception of non-performance; doubts about legal interpretation, however understandable, do not in themselves immunise the debtor from the moratory consequences of delay.
No contractual “interest” rate and compatibility of legal interest with RRSM design
Turning to the argument that the City had already been given a contractual interest mechanism – the link between its receivables and the fund’s investment returns – the court carefully distinguished between economic participation and juridical interest. It found that the wording in Annex A, which states that receivables “seront accumulés avec intérêt selon [le] rendement net de l’ancien volet,” serves to align the value of the City’s claim with the economic fortunes of the prior-service asset pool, effectively giving the City a proportional share in both gains and losses. That feature predates any default and is neutral as to time of payment: a negative year reduces the receivables, a positive year increases them. By contrast, “interest” in the Code’s sense is the monetary compensation for being kept out of one’s money after it has become due. Because the City’s receivables can and do decrease in down markets, treating the RRSM-style accumulation as a contractual “interest” rate would yield paradoxical and unfair results; among other things, it would imply that in a negative-return year the “interest rate” is below zero, yet the debtor would still face no moratory charge for withholding payment. The court therefore held that the RRSM-linked adjustment is not a contractual substitution for legal interest on delayed payment. In the absence of an agreed rate on delay, the statutory legal rate of 5% applies to the principal amounts from the dates of default.
Award of additional indemnity and rejection of defences in equity
The City also sought the indemnité additionnelle under article 1619 C.c.Q., which is calculated by applying the difference between the higher rate charged on State claims under fiscal law and the legal interest rate to the unpaid sums. The ABR argued that awarding this uplift would overcompensate the City, given the RRSM-based growth of receivables, and that at a minimum the court should exercise its discretion to refuse it because the administrator had acted responsibly and in a complex environment. The court noted that the indemnity shares the same rationale as legal interest: it is designed to ensure that creditors are not under-compensated in periods when market or State interest rates exceed the legal rate, and to encourage timely payment. While article 1619 gives courts some room to withhold the indemnity in truly exceptional cases – for instance, where the claimant grossly inflates its demand or is responsible for serious procedural delays – appellate guidance has been consistent that the norm is to grant it. In this case, the City’s monetary claims tracked the actuarial data, and there was no suggestion of abusive litigation conduct or plaintiff-caused delay. The judge again declined to treat the RRSM growth formula as a substitute for moratory compensation; the indemnity is calculated on the principal in default, from the relevant dates, and any interaction between these sums and future actuarial valuations of the fund is a technical question outside the court’s remit in this proceeding. Accordingly, the court granted the additional indemnity on the same principal amounts and over the same periods as it granted legal interest.
Outcomes, costs and the overall financial effect
In its dispositive orders, the court accepted part of the ABR’s declaratory application and part of the City’s reconventional demand, while rejecting the Fraternité’s reconventional claims and defences. It declared that, under the 2017 restructuring agreement, actuarial surplus in the prior-service segment that is allocated to the City must be paid to it by way of cash remittance rather than contribution holidays, and it formally recorded the parties’ agreed 226,887,000-dollar decumulation schedule. It further condemned the ABR, as administrator, to pay the City legal interest at 5% plus the statutory additional indemnity on 196,000,000 dollars from 25 October 2023 to 15 September 2025, and on a further 30,088,000 dollars from 9 April 2024 to 15 September 2025, while awarding the City its costs of the action. Because the judgment does not plug in the changing State interest rate used to compute the indemnity, nor does it calculate tariffed or assessed costs, the total monetary amount of interest, indemnity and costs ultimately recoverable by the City cannot be precisely determined from the reasons alone; what can be said is that Ville de Montréal emerges as the successful party, with the court validating its right to cash repayment of substantial nine-figure receivables from the police pension plan and granting it all the legal accessories tied to the delayed payment of those sums, even though the precise aggregate dollar value of those accessories and costs must be computed subsequently.
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Quebec Superior CourtCase Number
500-17-117458-219Practice Area
Civil litigationAmount
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