By Stewart Lewis

(October 24 – 16:30 ET) – Ten former employees of Royal Trust have launched a class action suit on behalf of an estimated 2,500 members of of the Royal Trust penion plan against Royal Trust and the Royal Bank of Canada, alleging that their pension fund has been improperly administered. RBC bought Royal Trust in 1993. The lawsuit is being instigated by the 200-member Association for Pension Enhancement at Royal Trust (APERT).

The employees will be bringing a motion before the court within the next few months, hoping to certify the action as a class action suit. Royal Bank is expected launch a strong opposition to the motion. The group’s lawyer, Paul Vogel, refused to speculate on the outcome of the motion. “I believe we have a good case for a class action suit,” he told Investment Executive.

At a press conference in Toronto, today, Paul Starita, former president and managing partner of Royal Trust Investment services presented the key points of the case. At issue is a $150 million surplus that developed in the fund during the 1980s and 1990s due to a combination of high interest rates and a bull market.

The pensioners argue that the fund properly belongs to them, contrary to the bank’s position. Furthermore, the group of pensioners contends that the amount of pension payments was reduced during a time — January 1985 — when the surplus was high. Royal Trust amended the formula without giving proper legal notice, says Vogel.

The plan was wound up in 1989, but re-opened in 1995 by the Royal Bank, to employees who weren’t part of the plan in 1989, thereby giving them access to the surplus. On that occasion, too, says Vogel, Royal Trust pensioners were not properly notified.

The pension fund is managed by RT Capital, the subject of recent scandal involving high closings. That is not an element in the case, at present, said Starita. The group has no knowledge of improprietiies committed by RT Capital.

Starita said “exploratory discussions” were held with bank representaitves, in recent months, in an attempt to settle the outstanding issues, but the bank’s reaction was it “would see us in court.” Now, they will, he said.

The Royal Bank said today in a statement that “APERT’s suit is without merit. APERT seeks access to a surplus in the Plan. A pension surplus stabilizes and strengthens the pension fund to provide, among other things, a cushion from the volatility of the financial markets, thereby ensuring the pension benefits are protected for all plan members. There is no reason to consider the distribution of the surplus from the plan and there is no requirement to negotiate a surplus splitting arrangement for a plan that continues to be in effect. Decisions of the courts and the Financial Services Commission of Ontario support these conclusions.”