More than 200 pensioners who worked for Great-West Life Assurance Co. are poised to share more than $30 million after a Manitoba court ruled in their favour, bringing a 10-year-old class action lawsuit one step closer to resolution.

In a decision late last month, Court of Queen’s Bench Justice Gerald Jewers ruled that the retired employees are to be reimbursed for pension income they lost after the Winnipeg-based insurer changed an indexing formula without their permission two decades ago.

According to court documents, the original formula came into effect in 1972 but the company changed it more than a decade later, coincidentally at the same time as the fund was experiencing annual returns of more than 10%. The net result was lower overall pension income for the employees than under the original setup.

The trustees of the plan were advised that, although they had set the rate for pension indexing, the indexing was fixed in 1986 at 4%, rather than the 6.8% under the previous formula, because “the actual investment performance was higher than both the rate of inflation and staff salary increases. Thereafter, Great-West determined the rate for pension indexing purposes.”

Robert Tapper, founding partner of Winnipeg law firm Tapper Cuddy LLP, who along with Richard Swystun represented the former employees, says there is no longer any question of whether the company was in the wrong. (The pensioners won an original action in 2000 that determined Great-West was liable.) The final roadblock is determining the payout amount, which has to be agreed upon by both parties, then approved by the court.

“The culpability is over. The court of appeal dismissed Great-West’s appeal [last year]. Now it’s a matter of a simple calculation. My best guess is (the pensioners will receive) between $32 million and $35 million,” he says.

Tapper says Great-West changed the indexing formula to get rid of an “onerous” expense for the company. That caused the fund’s surplus to grow from $1 million to $114 million after the change.

“The money went straight into [Great-West’s] pocket,” he says.

Tapper says it is not possible to give an average of what will be received by each retired employee because payouts are tied to incomes. The positions of the employees involved ranged from clerks all the way up to executives.

Marlene Klassen, director of media and public relations for Great-West, says the company will not comment on the judge’s ruling. She says the company has until the last week in November to decide whether it will appeal, and it will spend that time evaluating the situation before reaching a decision.

Tapper predicted any appeal from Great-West would be based on how the payout formula is calculated. If that is the case, he says, “you won’t have to guess whether our side will cross appeal on the question of punitive damages.”

The class action had asked for $96 million in such damages in addition to the repayment of lost pension income.

The plaintiffs retired from Great-West between 1982 and 1990 but the class action lawsuit wasn’t launched until 1996, by which time many of them were well into their golden years. Statutes of limitations dictate that the pensioners will only be able to collect extra funds from 1990 until last year.

Tapper says 26 of 246 pensioners opted out of the class action proceedings, but the survivors of 45 who died since the suit was launched will be compensated accordingly. Although his clients are happy a decision has been made in their favour, he says, it does not resemble a lottery win.

“If I take your paycheque away from you and give it back 10 years later, is that a windfall?” he asks. “These people relied on their pensions and an indexing provision that was ensured. They’re entitled to the money.”

The bigger issue for many is that they are beyond the point in their lives when they can put the money to the best use.

“When can you most enjoy the money, in your 60s or in your 80s? Sure, there are people who golf and remain active in their 80s, but they are the exception rather than the rule. The older pensioners will have to take solace from the fact that they can pass it on to their children and grandchildren,” he says.

Meanwhile, on another legal matter, Great-West issued a statement of defence in late October in its case against two aggrieved investors in Winnipeg. Michel and Lorraine Mignault sued the company and their former financial advisor, Gary Palmer, for more than $436,000 they allege was withdrawn from their accounts without their consent. In a statement of claim filed in Court of Queen’s Bench in August, they alleged their portfolio, which they had been building for 15 years, had been reduced to less than $9,600.

@page_break@The couple alleged Palmer told them a number of times to withdraw funds from their Great-West accounts and move them into their personal bank accounts. The money was then to be deposited with Palmer’s firm, J.D. Raleigh & Company Ltd. , before being reinvested with Great-West.

Great-West denies nearly two dozen allegations as well as any association with Palmer in its statement of defence. Company officials, however, are on record as saying Great-West at one point sponsored Palmer’s insurance licence but terminated it this year following an investigation.

“If the defendant, Gary Palmer, was an agent of Great-West Life for any material purpose, which is denied, the negligence, breach of duty and/or misappropriation alleged in the statement of claim was not within the scope of any authority from Great-West. Great-West Life denies it is vicariously liable for the actions of Palmer, as alleged or at all,” the statement of defence says.

Great-West also made a cross claim that any loss or damage suffered by the plaintiffs was caused by “negligence, breach of duty, misappropriation or other fault” of Palmer and J.D. Raleigh. IE