Transamerica Life Canada and its parent company, AEGON Canada Inc., have filed a Notice of Application against ING Canada Inc. in the Ontario Superior Court of Justice Commercial List.

The notice, which was filed on January 25, seeks a declaration that ING breached representations and warranties in the Share Purchase Agreement arising from the sale by ING of its subsidiary, NN Life Insurance Company of Canada, to Transamerica in April 2000. Transamerica is claiming damages of at least $7.5 million from ING.

The litigation involves an interpretation of a 1969 Trust Agreement governing members of the Halifax Life Pension Plan. In 1989 Halifax Life merged with NN Life and NN Life sought to merge the pension plans of the two companies. The Pension Commission of Ontario approved the merger in 1994, but required that NN Life undertake to keep the assets and liabilities of the Halifax Life members separate and apart from the assets and liabilities of NN Life members. The commission required this undertaking as a condition for the merger, as the 1969 Trust Agreement stated that the assets in the Halifax Plan were for the sole benefit of the members.

Transamerica alleges that ING failed to fulfill these undertakings and breached the 1969 Trust Agreement. The 1969 Trust Agreement and undertakings given to the PCO were not disclosed to Transamerica prior to the closing of the transaction on April 12, 2000.

Transamerica claims that NN Life used the surplus pension assets of the former employees of Halifax Life to fund the pension deficit of NN Life between 1992 and 2000. Transamerica claims that this is in direct contravention of the Halifax Life Trust Agreement and undertakings given by NN Life to the PCO.

“We believe that NN Life inappropriately treated a pension surplus belonging solely to former employees of Halifax Life as a corporate asset in order to take a pension contribution holiday under the NN Life Employee Pension Plan. This action has resulted in an underfunding of the NN Life plan which will have to be corrected,” said Glenn Daniels, General Counsel for Transamerica Life Canada.

Transamerica alleges that these actions by NN Life have resulted in $3.8 million in unpaid past pension contributions for which Transamerica Life Canada is now liable.

Additionally, NN Life recorded as an asset of the company the pension surplus that was solely attributable to the former employees of Halifax Life, resulting in an overstatement of the value of NN Life’s assets of more than $3.7 million.

The application is scheduled to be heard on June 3 and 4.