Executive Summary: Key Legal and Evidentiary Issues

Trailing commissions were allegedly paid to discount brokers for services and advice never provided to class members on behalf of mutual fund unitholders. Statutory breaches of trust and fiduciary duty were asserted, along with contractual violations under the operative trust instruments. The defendants argued adequate disclosure in Fund Facts documents precluded liability under the Securities Act. Limitation period defences under the Limitations Act, 2002 posed significant risk to claims for units purchased before September 2016. Whether the trustee's duty of care extended to individual beneficiaries rather than solely to the funds themselves remained contested. Expert evidence regarding damages valuation required complex financial analysis of improper commission payments and resulting investment returns.

Background and the class definition

Stephen Pozgaj commenced a class action in September 2018 against Canadian Imperial Bank of Commerce and CIBC Trust Corporation, alleging that the defendants improperly paid trailing commissions to discount brokers on behalf of mutual fund unitholders. The plaintiff and class members were unitholders of CIBC mutual funds and Renaissance mutual funds, which are structured as trusts. Many of these "do it yourself" retail investors held their units through online discount brokers that provide only "order execution only services" and are prohibited from providing advice or recommendations. CIBC Trust Corporation served as trustee of the CIBC mutual funds, while Canadian Imperial Bank of Commerce managed those funds. CIBC Asset Management Inc., a wholly owned subsidiary of CIBC, functioned as both trustee and manager of the Renaissance mutual funds. The class was substantial, with defendants holding client information for approximately 140,000 class members who held mutual funds during the relevant period.

The substantive claims

The plaintiff alleged that the defendants improperly paid trailing commissions to discount brokers for services and advice that were never provided to or engaged in on behalf of the plaintiff and class members. These improper payments constituted breaches of trust, fiduciary duty, and contract. Additionally, the plaintiff asserted that the defendants misrepresented facts in the "Fund Facts" documents, violating section 130 of the Securities Act. The plaintiff sought recovery of the trailing commissions plus any investment returns or interest flowing from those payments. The claims raised complex issues of trust and fiduciary relationship law, which, while well-established in Ontario jurisprudence, had not previously been litigated in the context of trailing commissions and mutual fund trusts structured as commercial trusts.

Procedural history and parallel litigation

Prior to certification, the parties engaged in settlement discussions and conducted a mediation in 2021. On January 25, 2024, Justice Akbarali certified the action as a class proceeding, and the opt-out period expired on May 26, 2024. The litigation proceeded in a complex procedural landscape involving parallel actions. The Woodard action, filed in November 2022, sought relief for investors in CIBC mutual funds regarding trailing commissions paid to full-service brokers and was temporarily stayed pending resolution of the Pozgaj action. The Frayce action, commenced in March 2020 against discount brokers, resulted in a dismissal of certification in January 2023 and a dismissal of appeal in January 2024. Additionally, Siskinds LLP, as class counsel, was involved in six other 2018 actions against institutional trustees who similarly paid trailing commissions to discount brokers. Notably, Justice Akbarali approved a settlement in the Westwood action in December 2024 for $70,250,000 without admission of liability. When the parties executed the settlement agreement in the Pozgaj action on August 20, 2025, the action was in the documentary discovery stage, with Mr. Pozgaj having produced his documents and the defendants having delivered a first set of 2,211 documents.

Significant litigation risks

The defendants anticipated raising several substantial defences. They intended to argue that trailing commissions were repeatedly and adequately disclosed in Fund Facts and other disclosure documents accessible to class members, using language required by Canadian securities regulators. The defendants relied on a statutory limitation period defence, arguing that any losses suffered more than two years from September 2018 would be barred under the Limitations Act, 2002, and sought to apply this defence even to mutual fund units purchased before September 2016 that were held after the limitation period commenced. They also argued that Renaissance mutual fund holders, added to the class only on September 3, 2025, were statute-barred because the action was initiated in September 2018. The defendants further contended that their payment of trailing commissions was not illegal, as securities regulators recognized the need for discount brokers to charge for services and permitted such payments until June 1, 2022. Finally, they asserted a limited duty argument, claiming that any duty of care under the trust instruments was owed to the funds themselves rather than to individual beneficiaries, thereby precluding class members from enforcing such duties.

Settlement negotiations and expert analysis

After certification, the parties attended a second round of mediation in July 2025. The plaintiff engaged KSV Advisory to assist in valuing damages and informing the preparation of mediation briefs. The defendants gathered and produced payment information concerning the trailing commissions. On September 17, 2025, the settlement funds were paid into trust and invested in an interest-bearing GIC for the benefit of the class. This settlement was achieved in a negotiation the plaintiff characterized as "hard-fought," undertaken with knowledge of the litigation risks and informed by comparable outcomes in parallel proceedings.

Comparative settlement analysis

Class counsel provided comparative analysis with the Westwood settlement. While the Westwood action achieved an 11.3 percent recovery as a percentage of total trailers paid, the Pozgaj settlement achieved 17 percent when including both CIBC and Renaissance mutual fund claims, and 20 percent when considering CIBC mutual funds only. Regarding recovery as a percentage of trailers paid during two-year lookback windows, the Pozgaj action achieved 55 percent, compared to 41.1 percent in Westwood. These metrics demonstrated that the negotiated settlement in the Pozgaj action achieved results as favourable as, or more favourable than, those obtained in parallel litigation.

Settlement terms and distribution protocol

The settlement agreement included provisions regarding future 2018 actions. Class counsel committed to maximizing recovery in other pending trailing commission actions and to negotiating terms at least as favourable to class members in subsequent settlements. Any motion for court approval of a subsequent settlement was required to include counsel's opinion on whether the terms were at least as favourable as those achieved in the Pozgaj action, with various factors to be considered including the settlement as a percentage of trailing commissions paid, factual differences between actions, whether a material adverse litigation event occurred, and any other factors affecting recovery quantum. The distribution protocol provided for pro rata distribution of the net settlement amount based on trailing commissions calculated by either streamlined process using defendant-provided client information or through a full claims process. The protocol employed a 0.75 percent averaging formula for efficiency and administration, recognizing that trailing commission percentages ranged from 0.05 percent to 1.25 percent depending on the mutual fund series. Renaissance mutual fund claims, bearing higher litigation risks due to late assertion, received a 20 percent inclusion rate discount. No compensation was paid on units held after June 1, 2022, when the regulatory ban on trailing commissions took effect. Any uneconomical remainder was designated for cy-près distribution to the Osgoode Hall Law School Investor Protection Clinic, a pro bono clinic providing free legal advice to retail investors and undertaking research to aid regulators, policymakers, and courts in understanding issues unique to retail investors.

Court approval and related orders

Justice Leiper approved the settlement agreement as fair, reasonable, and in the class's best interests. The court also approved the appointment of Verita as claims administrator at an estimated cost of $513,530 to $1,045,111 (excluding notice costs and taxes), depending on claim volume and payment method. Class counsel fees were approved at 28 percent of the settlement, consistent with established jurisprudence supporting contingency retainers in the 20-30 percent range. The fee arrangement reflected work by two firms: Bates Barristers, which resigned in 2019, and Siskinds, which continued to resolution. An agreement reached in 2020 and amended in 2024 provided for an 80-20 fee split reflecting quantum meruit considerations of work performed and risk assumed. Disbursements totaling $95,881.90 were approved. An interim payment of $1,075,000 (approximately 92.95 percent of the funder's estimated entitlement) was approved to Claims Funding International, PLC, which had posted $400,015 as security for costs; the security was released forthwith. Representative plaintiff Stephen Pozgaj received an honorarium of $10,000, reflecting his exceptional engagement throughout the litigation, including active participation in mediations, independent analysis of settlement ranges, detailed discussions with counsel regarding settlement strategy, and willingness to serve as public face of the issue despite increased scrutiny.

Outcome

The plaintiff class achieved a successful settlement resulting in $26 million in compensation to be distributed pro rata among approximately 140,000 class members on the basis of trailing commissions paid during the relevant period. The defendants settled without admitting liability. After deduction of approved counsel fees of $7,280,000 plus tax ($2,329,600), disbursements of $95,881.90 plus applicable taxes, administration costs, and funder compensation, the net amount available for class member distribution represents a meaningful recovery from the trailing commission scheme that had benefited the defendants at the expense of retail investors utilizing discount brokers.