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Summary Judgment Granted February 28, 2020: Click here for Court’s decision

Ontario court finds breach of trust by BMO Nesbitt Burns, BMO InvestorLine, and BMO Trust against their RRSP account holders and holders of similar registered accounts

An Ontario judge found BMO Nesbitt Burns Inc., BMO InvestorLine Inc., and BMO Trust Company (collectively “the BMO companies”) committed breach of trust and breach of fiduciary duty against a class of approximately 200,000 registered account holders by taking approximately $102.9 million in undisclosed fees. The Court has ordered the BMO companies to disgorge the profits generated on these fees.

The case involves undisclosed fees charged to customers of the BMO companies on currency conversions in registered accounts, such as RRSPs, RESPs, and TFSAs, over a 10-year period.

After almost 14 years of litigation, in January 2020, the Superior Court of Justice heard a summary judgment motion. The Court released its decision today, finding in favour of the Class and ordering disgorgement of profits. The precise amount is to be determined on a reference.

he Class includes individuals resident in Canada who held registered accounts, such as RRSPs, RESPs, and TFSAs, administered by BMO Trust and had a currency conversion performed in their account between June 14, 2001 and September 6, 2011 at BMO InvestorLine, and between October 1, 2002 and September 6, 2011 at Nesbitt Burns.

The Court found that BMO Nesbitt Burns and BMO InvestorLine systematically imposed an undisclosed mark up on the exchange rate they charged on currency conversions in the registered accounts.  The Court held that the failure to disclose the markup was a breach of the defendants’ own trust agreements and a breach of fiduciary duty.

As the Court said: “It is fundamental to the viability of trust law in general, and banking and investment relationships in particular, that trust and fiduciary duties be taken seriously…”

James R. MacDonald, one of the representative plaintiffs in the case, said of the result: “I see this as a real victory for customers of these BMO companies. These customers include hard working Canadians who were just trying to save for a better life, for their retirement or for their children’s education. They trusted these BMO companies with their hard-earned money. The decision is the result of over a decade of work to bring justice to the many people in the Class against these large financial institutions.”

The Class is represented by Paliare Roland Rosenberg Rothstein LLP.  Odette Soriano, one of the lawyers for the Class, said, “The decision underscores the importance of the BMO companies’ trust obligations, and shows the effectiveness of class actions in addressing such systematic breaches. As the judge made clear, financial institutions must take their trust and fiduciary obligations very seriously, particularly in the context of self-payment. They will be held to account if they don’t.”

For further information, please contact Odette Soriano and Jeff Larry at Paliare Roland Rosenberg Rothstein LLP. Ms. Soriano may be reached at 416-646-4306 or odette.soriano@paliareroland.com. Mr. Larry may be reached at 416-646-4330 or jeff.larry@paliareroland.com.

Background

In 2006, a class action was commenced on behalf of a proposed class of individuals with registered accounts administered by BMO Nesbitt Burns Inc., BMO Trust Company, and BMO InvestorLine Inc. in respect of foreign exchange transactions in registered accounts (the “MacDonald Action”).

The claim alleges that the defendants imposed an undisclosed fee on currency conversions in registered accounts and that doing so was in breach of trust, breach of fiduciary duty, and breach of contract.

This action has been certified, documents have been exchanged, and the parties have conducted examinations for discovery.

In January 2020, the court heard a motion for summary judgement on the certified common issues. The class sought a finding of liability and an aggregate monetary award.

The Class has been defined as:

1. All current and former clients of BMO InvestorLine Inc. (“InvestorLine”) and BMO Nesbitt Burns Inc. (“BMO NB”) resident in Canada, who held one or more registered accounts administered by BMO Trust, BMO NB and/or InvestorLine Inc. (the “Trust Accounts”) and purchased or sold investments denominated in foreign currency in their Trust Accounts or were paid dividends or interest in a foreign currency in their Trust Account(s), or otherwise received foreign currency into their Trust Account(s) which was then converted to Canadian dollars by the defendants during the period between:
2. June 14, 2001 and September 5, 2011 for:
   1. all clients and former clients of InvestorLine
   2. the 14 clients of BMO NB who opted out of the class proceeding entitled Skopit v. BMO Nesbitt Burns Inc., either entirely or with respect to the overlap period with this action; and
3. October 1, 2002 and September 5, 2011 for all other clients of BMO NB.

This action is receiving financial support from the Ontario Class Proceedings Fund.

The Fund pays for some of the disbursements incurred in the course of prosecuting this action, and it will pay any adverse court costs that might be ordered payable by the representative plaintiff.

There will be a levy payable to the Fund that will reduce the amount of any settlement or judgment award to which the class may become entitled.  The levy will be comprised of repayment of any disbursements paid by the Fund and 10% of the net award or settlement funds.

Last Updated February 2020