CANADA - Ontario's appellate court has passed for trial the main substance of a claim arguing the CA$48bn (€32bn) Ontario Municipal Employees Retirement System (OMERs) pension scheme was duped into "unjust enrichment" of directors of its real estate management firm.
Appeal court judges ruled it was not "plain, obvious and beyond doubt" the plaintiffs - in a case concerning the 2002 transfer of its real estate fund management business to Borealis - would lose. An earlier court hearing had dismissed allegations brought against two individual defendants and Borealis.
Wyman MacKinnon, president of a local division of the Canadian Union of Public Employees (CUPE), had brought the case against not only the fund but infrastructure subsidiary Borealis and then Borealis head -now OMERS' ceo- Michael Nobrega. CUPE makes up 40% of the pension scheme's members.
Although the appeal judges struck out a claim made against Nobrega as "a bald statement, without facts to support it", they did not strike allegations made against what the claimant described as an "inadequately-informed" board.
The plaintiff had alleged Borealis Real Estate Management Inc (BREMI) paid a "grossly understated" CA$11m for OMERS' real estate management business before running up disproportionate asset management costs (CA$62m between June 2002 and December 2003), as well as CA$3.7m in start-up costs paid by OMERS.
"The fees were incommensurate with the services purported to have been rendered and grossly in excess of market rates or of the costs that OMERS would have incurred had it continued to manage its real estate assets internally," said MacKinnon. The result was allegedly "excessive compensation" for "unjustly enriched" defendants".
In a summing up what will allow the case to go to trial, the judges said: "While the respondents may defend the claims on the basis that the payments were received in good faith, for value, and without notice of the breach of trust, it cannot be said, on the facts as pleaded, that it is plain and obvious that the claims based on knowing receipt of trust property cannot succeed at trial."
OMERS was unavailable for comment at the time of publication.