A judge in Ontario’s Superior Court of Justice has ordered a trio of Bank of Montreal subsidiaries to disgorge profits generated on $102.9 million in undisclosed fees charged to about 200,000 holders of registered accounts such as RRSPs, RESPs and tax-free savings accounts over a 10-year period.
The order, which the bank intends to appeal, is the result of a class action lawsuit brought against BMO Nesbitt Burns, BMO InvestorLine Inc., and BMO Trust Company, which alleged breach of trust and breach of fiduciary duty in connection with undisclosed fees on currency conversions in the registered accounts.
“After almost 14 years of litigation… (the) Court released its decision today, finding in favour of the class and ordering disgorgement of profits,” law firm Paliare Roland Rosenberg Rothstein LLP said in a statement Friday.
The fees were charged between 2001 and 2011 at BMO InvestorLine, and between 2002 and 2011 at Nesbitt Burns.
We pride ourselves on being transparent with our clients
The court found that the BMO companies had breached their trust and fiduciary duties by failing to disclose the amount of the markup fees they charged on currency conversions in the registered accounts, and paying themselves out of the trust accounts without authorization.
However, Justice Edward P. Belobaba declined to impose punitive damages.
“There is no evidence of any malicious, oppressive or high-handed conduct that offends the courts sense of decency,” he wrote in his decision Friday.
A spokesman for BMO said the bank does not agree with the court’s interpretation of its agreements.
“We intend to appeal,” said Paul Gammal. “We pride ourselves on being transparent with our clients and work hard to provide them with the clear and relevant information they deserve.”
Odette Soriano, one of the lawyers for the plaintiffs in the class action, said the court’s decision Friday “shows the effectiveness of class actions in addressing… systematic breaches.”
The judge made clear that financial institutions must take their trust and fiduciary obligations very seriously, he said, “particularly in the context of self-payment.”