An Ontario Superior Court judge is awarding Brewers Retail Inc. $210,000 in costs against the Financial Services Regulatory Authority of Ontario.

Justice Ed Morgan’s award followed his criticism of the regulator for defying a decision of its predecessor, the Financial Services Commission of Ontario.

One veteran pensions litigator — speaking on condition of anonymity as the case is still before the courts — says the decision is possibly the largest costs award against a pension regulator in Canadian history and the “most damning indictment of regulatory disregard of plan members’ rights” since 1986, when Dominion Stores Ltd. (now Metro Inc.) was ordered to return $37.9 million that it withdrew from its employee pension plan.

Read: Ontario judge cautions FSRA in certification of Brewers Retail pension class action

In March 2021, Brewers Retail brought a court application for certification of a class action following five years of negotiations with the FSCO over the company’s 2008 decision to de-index its defined benefit pension plan for salaried employees that concluded in early 2019.

The agreement stated the parties would use a class action to request court approval of a methodology to identify, compensate and bind individuals potentially affected by the indexing issue. The FSCO, which indicated it wouldn’t participate in the court action, confirmed it would accept Brewers Retail’s amendments for registration if the court approved the settlement.

When the FSRA took over as regulator in June 2019, it confirmed the FSCO’s support for the settlement and its implementation. But in October 2019, the FSRA — without providing any rationale — advised it would object to the settlement. But in February, Morgan certified the class, setting the stage for a settlement approval hearing.

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“In taking the position that FSCO’s approval and the parties’ reliance thereon amounted to nothing more than discretionary advice that can be changed at will, is itself a disregard of the class members’ interests,” he said.

Somewhat unusually, the FSRA sought costs even though it failed in its attempt to stop the certification. Morgan would have none of it. “With respect, I see no justification for making the other parties pay costs for FSRA’s erstwhile successful motion to intervene in a case in which none of FSRA’s positions were accepted by the court,” he said. “FSRA’s intervention is precisely what caused the other parties to incur costs above and beyond the costs of a motion on consent.”

Morgan had no difficulty, however, in awarding the $159,000 in costs claimed by Brewers Retail and an additional $51,000 sought by the pensioners’ counsel.

“The tone of the judge’s award was very matter of fact, refusing to entertain FSRA’s request for costs and acknowledging the high cost the other parties would have incurred to get to this point in the litigation,” says Cynthia Crysler, the leader of Toronto-based Cavalluzzo LLP’s pensions and benefits practice, who wasn’t involved in the case.

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The award wasn’t surprising given Morgan’s view of the FSRA’s position on the certification motion, says David Stamp, a pensions litigation partner at Osler, Hoskin & Harcourt LLP, who also wasn’t involved in the case. “There’s a strong culture in the courts of encouraging the parties settling their disputes,. I think a lesson coming out of this decision is that a non-party who intervenes in a court proceeding to challenge a settlement reached by the parties faces an uphill battle — even if the non-party is the regulatory authority.

“And Justice Morgan’s underlying decision placed emphasis on the difference between the position taken by FSRA versus the position taken by FSCO — which probably made FSRA’s position in court even more challenging.”

The FSRA has appealed Morgan’s February decision and the case is expected to be heard later this year.

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