Executive Summary: Key Legal and Evidentiary Issues

• Whether discontinuance of an uncertified class proceeding under the Class Proceedings Act, 1992 was appropriate and in the best interests of putative class members given the litigation risks and funding structure of any recovery.
• Impact of the Board’s lack of insurance coverage for the FTX loss, and the resulting reality that any damages award would be paid out of the pension fund itself rather than by a third-party insurer.
• Adequacy and reasonableness of non-monetary relief in the form of Board communications, disclosure of the FTX review, and enhancements to due diligence processes as a substitute for monetary compensation to class members.
• Justification for the quantum and source of class counsel’s fees and disbursements, including use of a U.S. cryptocurrency expert and payment of those amounts from the pension fund under the Board’s governing instruments.
• Scope of the Board’s statutory and contractual powers and duties under the partners’ agreement and pension legislation to authorize settlement and pay legal costs from the pension fund in order to avoid further expense and risk.
• Court’s supervisory role in deterring meritless class actions while ensuring that discontinuance and fee arrangements do not prejudice absent class members or undermine the integrity of the class proceedings regime.

Background and facts

The litigation arises from the Ontario Teachers’ Pension Plan Board’s decision to invest USD $95 million of pension plan assets in FTX, a now-collapsed global cryptocurrency exchange. Within roughly a year of the investment, FTX filed for bankruptcy. Subsequent investigations revealed that FTX managers had misappropriated billions of dollars in customer deposits, leading to catastrophic losses for investors, including the Ontario Teachers’ pension fund. In response, a proposed class action was commenced by plan member Lisa Bandola against the Ontario Teachers’ Pension Plan Board (the Board), on behalf of a putative class of pension plan members. The core allegation was that the Board failed to exercise adequate due diligence before approving the FTX investment and that it ought to reimburse the fund for the resulting loss. The action was framed under Ontario’s Class Proceedings Act, 1992, and proceeded as a proposed class proceeding that had not yet been certified. The plaintiff served her certification record, and the Board filed extensive responding materials contesting certification and liability. As the evidentiary record developed, it emerged that the Board did not have insurance coverage for the loss alleged, such that any damages awarded on a successful claim would be paid out of the pension fund itself rather than by an insurer. This reality significantly changed the litigation calculus. A judgment in favour of the plaintiff would effectively require the pension plan, through its fund, to pay itself, depleting the very fund the claim purported to protect and imposing substantial litigation costs on the plan.

Pension plan framework and governance provisions

The case engaged the structure and governance of the pension plan rather than traditional insurance policy wording. The Board’s authority flows from a partners’ agreement that governs the administration of the pension plan and management of the pension fund. Section 18 of that agreement gives the Board “every power necessary” to administer the plan and manage the fund, while section 19 sets out the Board’s responsibilities, including an obligation to manage the fund in a manner designed to ensure that the plan’s obligations to members will be met. These provisions, read together with the Board’s statutory duties under the Pension Benefits Act and common law fiduciary principles, framed the legal analysis of whether the Board could properly approve a settlement that included paying class counsel’s fees and disbursements from the pension fund and discontinuing the proposed class proceeding. The Board took the position that settling the matter at this stage, and paying reasonable legal costs to avoid protracted and expensive litigation, was consistent with its duties to manage the fund prudently and protect the plan’s long-term funded status.

Negotiations, non-monetary relief, and settlement structure

After receiving the Board’s certification materials, the plaintiff re-assessed the strength and practical consequences of continuing the claim. The fact that any court-ordered reimbursement would ultimately come from the pension fund itself undermined the benefit of pursuing damages on behalf of members. Against this background, the parties entered into settlement discussions which produced a negotiated discontinuance agreement. The settlement took a non-traditional form. First, the plaintiff agreed to discontinue the proposed class action before certification. There would be no release of individual claims by putative class members, preserving the theoretical ability of individual members to pursue their own claims, albeit recognising the practical limitations of doing so. Second, the Board undertook to publish a detailed statement in the Plan’s 2025 Annual Report addressing the FTX loss and governance responses. That statement was to: confirm that the FTX write-down had not led to any change in plan members’ contributions or benefit entitlements; confirm the plan’s continuing strong funded status; confirm that the Board had conducted a review of the FTX investment following the loss; describe the due diligence conducted in relation to the FTX investment and identify the types of third-party consultants and experts relied upon; provide an overview of findings from the FTX review and the enhancements made or to be made to the Board’s investment policies and procedures, including systemic changes to investment processes and functions; and confirm that the litigation had been resolved. In addition, subsequent Board communications in 2026 were contemplated regarding enhancements to processes, particularly around founder-managed companies. These commitments were designed to provide non-monetary but concrete benefits to plan members through transparency, learning from the loss, and institutional reform.

Court’s role and legal issues on the discontinuance motion

Because the proceeding was a proposed class action, the parties could not simply file a notice of discontinuance. Section 29(1) of the Class Proceedings Act, 1992 requires that a proposed or certified class proceeding may only be discontinued with leave of the court and on terms the court considers appropriate. The court’s role is protective and supervisory, ensuring that absent class members are not prejudiced and that the class action device is not abused. Justice Leiper emphasized that in determining whether to approve a discontinuance, the court asks whether the interests of the class will be harmed—whether a viable, beneficial action is being abandoned—or whether, given the risks and likely consequences, discontinuance on the terms proposed is a sound and fair outcome. The court also recognised that one objective of judicial oversight of class proceedings is to deter the bringing of meritless suits by ensuring they are not rewarded, though this must be balanced against providing a fair mechanism for collective redress. In this case, the fact that any damages would be paid by the pension fund itself was central. The plaintiff had initially advanced reimbursement of the fund as part of the relief, but the evidence showed that the Board was not insured for the claimed loss. The class, as beneficiaries of the fund, would not gain a net financial benefit from an order directing the Board to pay damages from that same fund. The litigation would impose additional costs and risks on the plan, with no realistic monetary upside for members. The court accepted that, in these circumstances, discontinuance on terms that produced governance transparency and process enhancements was a practical and proportionate solution.

Assessment of non-monetary relief and interests of class members

Justice Leiper considered whether the non-monetary relief—primarily the Board’s detailed public statement and process enhancements—was sufficient and reasonable. The planned communication in the 2025 Annual Report was to explain the outcome of the litigation, the Board’s response to the FTX loss, the review undertaken, and the enhancements to due diligence. This was characterized as an objectively reasonable response that informed and reassured plan members, acknowledged the loss, and demonstrated that lessons were being learned and embedded in improved processes. The court noted that a settlement may be a positive outcome even when its benefits are non-monetary, referencing authority recognising that not all class action resolutions must involve direct financial recovery. Here, the proposed arrangement resolved potentially complex and expensive litigation, avoided further erosion of the fund by legal costs, and produced meaningful governance-related benefits for members. In light of the litigation risk, the absence of insurance, and the fund-on-fund nature of any recovery, the court concluded that the interests of putative class members would not be prejudiced by approving the discontinuance.

Class counsel fees, disbursements, and expert evidence

A major component of the motion involved class counsel’s fees and disbursements. The settlement contemplated that the Ontario Teachers’ Pension Plan fund would pay class counsel’s reasonable fees and disbursements in an amount agreed by the parties and approved by the court, or fixed by the court under section 33 of the Class Proceedings Act if no agreement could be reached. Initially, the plaintiff sought approval of fees of $900,000 plus HST, based on docketed and anticipated fees of $647,640 with a 1.4 times multiplier, and disbursements of $112,915.72. The Board objected to this quantum and to paying fees beyond time spent on the file. When the matter first came before Justice Leiper in November 2025, the fees had not yet been agreed, and the motion was adjourned to allow further materials to be filed and for notice of the proposed fee to be posted on class counsel’s website for potential class members. By the adjourned hearing, the parties had reached a compromise. Class counsel reduced their fee request to $540,000, a figure that was lower than the total docketed time. Disbursements of $112,915.72 were maintained. The Board agreed to pay these amounts from the pension fund, though it took no position on whether the quantum should be approved, leaving that issue to the court’s discretion. Class counsel supported the reasonableness of their disbursements by explaining the need to retain a U.S. expert on cryptocurrency exchanges. They had attempted to identify Canadian experts with appropriate expertise and without “business conflicts,” but given that the Board is one of Canada’s largest asset managers, this proved challenging. The retained U.S. expert had years of experience in cryptocurrency investigations and due diligence issues and had served the Unsecured Creditors Committee in the FTX bankruptcy. Class counsel characterised him as the ideal expert for the issues in dispute. The court accepted that these disbursements were reasonable in the circumstances.

Board’s authority to fund the settlement and fees from the pension fund

The Board’s ability to pay these amounts from the pension fund raised governance and fiduciary considerations. Justice Leiper reviewed the partners’ agreement, which conferred on the Board “every power necessary” to administer the plan and manage the fund, and imposed obligations to manage the fund prudently so the plan’s obligations would be met. Counsel for the Board submitted that, in authorising payment of class counsel’s fees and disbursements to secure the discontinuance, the Board had conscientiously considered its duties under the Pension Benefits Act and common law. The rationale was that bearing these legal costs now avoided greater future expenditure in defending the claim and eliminated the risk of further fund depletion through ongoing litigation. The court accepted that this rationale fit within the Board’s broad management powers and fiduciary obligations. In approving the payment, Justice Leiper emphasised that the fees ultimately approved represented a significant reduction from the amounts previously sought and that class counsel had posted notice of the proposed fee without receiving any objections from plan members.

Outcome and successful parties

In the result, Justice Leiper approved the settlement in full. The court granted leave to discontinue the proposed class proceeding on the agreed terms, accepted the non-monetary relief and communications package as a reasonable and practical resolution that did not prejudice putative class members, and authorised the Board to pay class counsel’s fees and disbursements from the pension fund. The plaintiff’s substantive claim for reimbursement of the FTX loss was not adjudicated on the merits and no monetary damages were awarded to the plaintiff or to the proposed class. From a litigation-outcome perspective, the Ontario Teachers’ Pension Plan Board successfully avoided certification and a merits trial and resolved the case without paying compensatory damages or admitting liability, while class counsel obtained court-approved payment of their legal fees and disbursements. The court approved a total monetary amount of $540,000 in fees and $112,915.72 in disbursements, for an aggregate of $652,915.72 payable to class counsel from the pension fund, and this is the only quantified monetary order arising out of the case in favour of any party.