The Court of Appeal for Ontario has allowed an appeal by Great-West Lifeco Inc. (TSX:GWO), reducing the amount that the company must pay following a class action suit concerning the financing for the Winnipeg-based financial services firm’s acquisition of London Life Insurance Co, back in 1997.

The appeal court handed down its decision Monday, allowing an appeal brought by the insurer from a judgment issued in January 2013, setting aside parts of the trial judge’s order, and recalculating the amount that the firm must pay from over $280 million to $51.6 million.

The judgment follows a class action suit over an aspect of the London Life acquisition known as the participating account transactions (PATs), which were created so that policyholders with policies that entitled them to share in the profits of the life insurer also benefited from anticipated cost savings produced by the acquisition. Following a class action suit, a judge ruled in favour of the plaintiffs in the case, finding that the PATs violated insurance legislation; and that finding was substantially upheld on appeal.

According to the appeal court decision, the trial judge required that the initial $220 million involved with these transactions, plus interest (approximately $390 million), be returned to the accounts, and that “litigation trusts” be created to distribute the amounts directly to the participating policyholders. The appeal court rejected this approach, and substituted an order unwinding the transactions and developed a formula for calculating the amount to be returned to the accounts.

The trial judge then released a second decision establishing the amount to be repaid, which the firm appealed. As a result, the appeal court has sharply reduced the amount payable by the company. The appeal court calculates that the original contribution, plus foregone investment income and interest at $371.8 million, but subtracts $320.2 million in merger expense savings, leaving an order for $51.6 million.

Great-West Life says that the financial impact of the decision will be reported in its fourth quarter financial results as a “subsequent event”. And, it says that “There will not be any impact on the capital position of the companies or on participating policy contract terms and conditions.”