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ONTARIO SUPERIOR COURT OF JUSTICE
STEPHEN JOHN GRIGGS Plaintiff and –
MAURICE GABAY, SCOTT CAMPBELL, TRACIE CROOK, ALICIA CZEKIERDA, RON LANGER, PATRICIA LI, VICKI RINGELBERG, TONY ROSS, and RANDY MARIE SLOAT, Trustees of the OPSEU PENSION PLAN TRUST FUND (c.o.b. as OPSEU PENSION TRUST or OPTrust) Defendants
STATEMENT OF DEFENCE 1. The Defendants, hereinafter referred to as “OPTrust”, admit the allegations in paragraphs 3, 9, 10 and 11 of the statement of claim. 2. OPTrust denies the allegations in paragraphs 4 – 8 and 12 – 63 of the statement of claim. About OPTrust 3. OPTrust administers the OPSEU Pension Plan (“the Plan”), one of Canada's largest pension funds, a defined benefit plan with almost 84,000 members and retirees. 4. OPTrust is jointly sponsored by the Ontario Public Sector Employees’ Union (“OPSEU”) and the Government of the Province of Ontario. Each sponsor appoints one half of the
members of the 10-member Board of Trustees (“OPTrust Board”), which governs the Plan. 5. The OPTrust is one of five Jointly Sponsored Pension Plans (“JSPP’s”) in the province of Ontario. All JSPP’s are governed by Boards of Trustees half of whose members are appointed by participating employers and half of whom are appointed by unions whose members participate in the particular pension plan. Ontario’s JSPP’s constitute some of the largest and most successful public sector pension plans in the world. 6. OPTrust is subject to federal and Ontario laws and regulations governing registered pension plans. As the plan administrator, the role of the OPTrust Board is to prudently invest and manage the Plan’s assets, ensure that members and retirees receive the pension benefits to which they are entitled. 7. Pursuant to the terms of the Pension Benefits Act (Ontario) and applicable trust law principles, the Board of Trustees is permitted to delegate certain of its authorities to agents. 8. OPTrust’s range of investments fall into the following five categories: a. public equities; b. fixed income investments; c. private equities; d. infrastructure; and e. real estate. 9. In order for OPTrust to be successful, it is necessary to accord reasonable attention to each category of its investments.
10. Over the course of its history, OPTrust has reliably earned excellent rates of return, and the Plan is fully funded and not in deficit. Immediately prior to the plaintiff
commencing employment, in respect of its 2010 year end, the Plan achieved an investment return of 13.9%, significantly outperforming its 10.9% benchmark and exceeding the Plan’s 6.75% funding target return for the second year in a row. Creation of CEO Position and Hiring of the Plaintiff 11. OPTrust, like all successful organizations, periodically reviews its activities in order to determine if it can more effectively perform its functions. The OPTrust Board undertook a strategic review, with the assistance of McKinsey, a world renowned consulting firm, which recommended as a matter of good governance, that it was desirable to revise the executive structure at OPTrust. As a result of this review and the new direction that the OPTrust Board formulated, a decision was made to hire OPTrust's first President and Chief Executive Officer ("CEO"). 12. OPTrust denies the plaintiff’s allegation (paragraphs 13-14) that the OPTrust Board acted as CEO. The previous OPTrust approach jointly vested authority equivalent to a CEO in its Chief Administrative Officer and its Chief Investment Officer. The previous approach was based on function. Under OPTrust’s new direction, the goal was to create a more unified structure. 13. In addition, because the asset mix of the Plan was evolving from more traditional holdings (public markets and fixed income) to alternative asset classes (private equity, infrastructure and real estate), this required more direct strategic oversight, which the OPTrust Board felt would best be exercised by appointment of a professional CEO.
14. OPTrust denies that that the CEO position was created in order to introduce good governance practices, as there were already good governance practices in place at OPTrust. 15. OPTrust further denies that OPTrust was lacking in sufficient management and financial experience. OPTrust’s members possessed a wealth of experience and expertise, led by its chair who performs a role equivalent to a CFO position, and whose credentials include being a Certified Management Accountant, with an honours degree in Economics and Business and who has completed the Canadian Securities Course, with honours. 16. OPTrust undertook a rigorous search process to select its first CEO. The OPTrust Board retained an executive search firm and as a result was introduced to the plaintiff. In respect of paragraph 2 of the statement of claim, the search process, and the plaintiff himself admitted that he had no experience in the running or the administration of a major pension plan. OPTrust denies that the plaintiff was a veteran executive in the pension industry. 17. In respect of paragraph 15 of the statement of claim, prior to first meeting with the plaintiff, OPTrust was informed that the plaintiff was finishing a 3-year contract with CCGG, which had not been renewed as of then. OPTrust denies that the plaintiff was recruited from a secure position of employment. 18. OPTrust hired the plaintiff to become its President and CEO, commencing in that role June 1, 2011, and reporting to the OPTrust Board. As OPTrust’s highest level executive employee, it was of critical importance for the plaintiff to possess and exercise a wide
range of capabilities, talents and sensitivities in order for OPTrust to be able to successfully perform its mandate. 19. The plaintiff and OPTrust entered into an employment contract (“Employment Contract”) dated May 25, 2011. The terms of the plaintiff’s employment were subject to OPTrust’s policies and procedures, including its Conflict of Interest Policy (updated November 3, 2010), which the plaintiff acknowledged in writing to have been provided to him prior to entering into his Employment Contract. Overview of Reasons for Termination of Employment 20. The termination of employment was in fulfilment of reasonable and necessary business objectives and not for any improper motive or reason. 21. In summary, the termination of the plaintiff’s employment, which was for just cause, was due to the following issues: a. Incompetence of the plaintiff; b. Breaches of fiduciary duty by the plaintiff; c. To prevent the plaintiff from further acting out on his personal vendettas; d. To halt and reverse the plaintiff’s destruction of workplace morale; e. Failure on the part of the plaintiff to develop and implement a strategic plan; f. Generally poor performance on the part of the plaintiff; g. To prevent the plaintiff’s further wasting of financial resources and inappropriate expenditures; and h. In order to ensure that OPTrust would be able to continue the administration of the Plan in accordance with the OPTrust’s Board’s fiduciary duties.
Plaintiff’s Performance Issues 22. The plaintiff failed to meet the standard required of him in numerous ways. Examples of the plaintiff's incompetence include: a. bringing forward a report that the plaintiff had prepared on the issue of managing private equity and infrastructure investments for third parties ("3PC") that was riddled with errors; b. providing a draft of a new strategic plan that he had written that was poorly written, poorly conceived and poorly explained; c. after receiving comment on his draft strategic plan, the plaintiff produced a new draft that was no more than a rewrite of the first draft, as well as generally disorganized; and d. during his tenure, the plaintiff consistently failed to provide materials of the quality reasonably expected by the Board of Trustees. 23. Discussions took place with the plaintiff regarding his performance. In the Fall of 2011 Vice Chair Campbell had an informal coaching session with Mr Griggs. The Vice Chair indicated that one of the plaintiff’s major weaknesses was the lack of delegation to his senior team. This was a problem because it disempowered his executive team and furthermore it would be impossible and inappropriate for the CEO to do all the actual work. The job of a CEO was to lead the work and see that it was done to high quality standards. Vice Chair Campbell indicated that OPTrust would be prepared to pay for a coach if Mr Griggs wanted one. Mr Griggs said that he had had a coach in one previous position and that he would think about the idea. This idea was never pursued by Mr Griggs. 6
24. Throughout the course of the plaintiff’s brief period of employment, stresses and tensions began to develop and fester in OPTrust’s workplace. This situation came to the attention of the OPTrust Board. As a result, OPTrust retained the services of an
independent consultant to perform a review of the plaintiff’s leadership at OPTrust. 25. OPTrust states that the results of the leadership review exposed numerous inadequacies in respect of the plaintiff’s performance, including: a. demonstrates biased or preconceived conclusions when presenting ideas; b. obsession and negative focus with respect to PMG; c. makes public inflammatory statements; d. refuses to listen to input or advice; e. unable to establish trust from the executive team; f. unable to motivate executive team and unable to obtain buy-in from executive team; and g. makes decisions without seeking input from or discussion with others, and without analysis, and without consideration of strategic plan. 26. Apart from the facts which came to light as a result of the leadership review, there were other reasons why OPTrust came to be concerned as to the plaintiff’s competency to perform in his position. 27. No Strategic Plan - One of the chief responsibilities the plaintiff had claimed that he was pursuing was to create and implement a strategic plan. The plaintiff was charged with this mandate in a meeting in October 2011, where the OPTrust Board laid out the basic framework of the plan. Since that meeting, very little progress was made. As revealed by the Leadership Review, the plaintiff had discussed initiatives, but had no
detailed plans, made no attempts to solicit consensus for any initiatives, had no details of what the initiatives meant, how the plan would work, when it would be rolled out, thereby causing a raft of uncertainty and angst among OPTrust staff at all levels. 28. Vindictive Audit - In early 2012, the plaintiff singled out two members of the Private Markets Group (“PMG”) for a comprehensive and expensive audit by a prominent accounting firm in relation to their expense submissions, which expenses were later reviewed by a prominent outside law firm. 29. OPTrust states that the need or purpose behind such audit was difficult to ascertain, in that: a. OPTrust already had very comprehensive and well controlled systems and policies of expense reporting, requiring detailed reporting of expenses, which policies had all been apparently complied with; b. the expense statements of the individuals whose expenses were being reviewed had already been vetted and reviewed by the manager of those individuals; c. where there was missing information about certain expense items, the plaintiff had deliberately avoided making inquiries with the manager of those individuals to obtain any information as to why certain expenses had been approved; d. any concerns the plaintiff may have had about supposed discrepancies were never considered by the plaintiff in the context of the individuals in question, and the industry in which they operated. The plaintiff showed no regard to the principle of proportionality;
e. the plaintiff’s actions in seeking a legal opinion as to the propriety of the expenses was demonstrably premature, as neither the individuals in question nor others with knowledge of the matters in issue, had ever been questioned or notified; f. the singling out of the two individuals in question was arbitrary and a result of the plaintiff acting out an obsessive, personal vendetta he held against the PMG; g. the allegations he pursued in relation to the two individuals were simply a naked attempt to sully their reputations in order for the plaintiff to manufacture a basis to terminate their employment; and h. the costs of the investigation into the expenses were grossly disproportionate to the amounts actually requiring further consideration. 30. Disparagement of and Attacks against PMG - The plaintiff's activities with respect to the PMG were unprofessional and damaged the reputation of PMG, PMG employees and OPTrust itself. The plaintiff disparaged the work of the PMG within OPTrust as well as to employees of other pension funds. These disparaging remarks were reported back to members of the PMG by third parties on numerous occasions. 31. The plaintiff' also sought to impose reductions to the compensation of PMG staff after he had repeatedly assured them that there would be no changes in the 2011 compensation year. In pursuing this aspect of his vendetta against the PMG, the plaintiff authorized the expenditure of tens of thousands of dollars on an outside consultant and third party law firm for the purpose of slightly reducing the bonus entitlement of certain members of the PMG. Not only were these costs far out of proportion to the savings being sought, but as well these activities were undertaken in breach of the plaintiff's assurance that he would not change the PMG’s 2011 compensation.
32. The PMG is one of the top performing private equity and infrastructure investment teams in the industry. PMG's performance has consistently exceeded its benchmarks. 33. Despite the stellar performance of the PMG, the plaintiff described its performance as "average" at best. When concerns were raised about the plaintiff's activities leading to members of the PMG team walking out, the plaintiff advised that he could "replace the PMG overnight". These comments suggest that the plaintiff has no understanding of investment performance or the role of talented individuals in the creation of investment performance. 34. The plaintiff constantly complained about the expense of PMG operations. Such
complaints disclosed a fundamental ignorance about private equity and infrastructure investments and the expenses associated with such investments. 35. Overall Effects of the Plaintiff’s Performance Deficiencies - The inadequacies in the plaintiff’s performance, as confirmed by the Leadership Review, had a profound effect on OPTrust’s operations, particulars of which include: a. disempowerment of the executive team; b. negatively affected OPTrust’s external reputation; c. creation of internal disruption, confusion, tensions and divisiveness within OPTrust’s organization; d. OPTrust employees became fearful; e. drove the PMG into complete disarray; f. destabilized the investment team as a whole; and g. he had increased the risk profile to the OPTrust.
36. In addition to the above-stated inadequacies, the plaintiff’s knowledge level in respect of a number of investments had proven to be subpar, and the plaintiff’s complete lack of experience with pension plans was also seriously hindering his ability to hold a leading role with OPTrust. Decision to Terminate Employment 37. Due to the many inadequacies identified in respect of the plaintiff’s performance, as particularized above, a serious question arose relating to the plaintiff’s ability to perform his essential duties of employment. The problems associated with the plaintiff’s
inadequacies were so severe and workplace morale had fallen so low, that unless immediate action was taken, OPTrust would be unable to fulfill its fiduciary responsibilities to administer the Plan and invest its assets. 38. In addition, and in the course of and subsequent to the plaintiff’s termination of employment, several additional issues have come to OPTrust’s attention, which indicate that the plaintiff has committed acts of misconduct and that combined with his previous misconduct as pleaded above, there is just cause to terminate his employment. The further acts of misconduct are as follows: a. shortly after he commenced employment, the plaintiff directed the PMG to meet with representatives of Investeco, for the purpose of determining if there would be an opportunity for PMG to cooperate with Investeco. The plaintiff failed to disclose his relationship with Investeco to PMG and failed to disclose his intention to pursue the opportunity to the OPTrust Board; b. shortly before the plaintiff’s termination, without the plaintiff providing disclosure to the OPTrust Board, the plaintiff directed a non-management IT 11
employee to perform a substantial amount of copying of OPTrust’s electronic records, for his personal use and for reasons which do not appear to be business related, and which copying was in breach of privacy and confidentiality practices; c. the plaintiff has been holding himself out as operating Underwood Capital Partners Inc., a corporation apparently engaged in the investment of private funds. OPTrust would consider this to be a potential conflict of interest, and potentially contrary to its Conflict of Interest Policy, but lacks details as to the nature of the plaintiff’s involvement; d. the plaintiff and his spouse entered into an arrangement whereby she purported to make a donation of artwork to OPTrust, which artwork the plaintiff hung at OPTrust. The plaintiff put in for reimbursement to the plaintiff’s wife in respect of this donation, in an amount totalling approximately $6,800.00. The plaintiff obtained this reimbursement by instructing a junior accounting employee, and without disclosing this to the OPTrust Board. These actions on the part of the plaintiff were a violation of OPTrust’s Conflict of Interest Policy. It further appears that the plaintiff or his spouse may have derived additional benefits from this donation of art, in the form of favourable income tax treatment of the donation. Regardless, the plaintiff’s actions violated the very governance
principles he purported to espouse.
Response to the Plaintiff’s Specific Allegations of Improper Motives and to Other Issues Raised by the Plaintiff a) Alleged Dysfunctionality 39. In respect of paragraphs 4 – 5 of the statement of claim, OPTrust denies that OPTrust was fundamentally dysfunctional, and denies there were any problems with largesse. 40. The decision to hire a CEO was based on the strategic review that recommended that the Board become more policy oriented and less operationally oriented. Consistent with the strategic review, the OPTrust Board delegated significant authority to the plaintiff and granted him the authority to make the operational changes he deemed appropriate. 41. The allegations made in paragraph 12 concerning the "limited training or experience" in managing large investment and pension funds are untrue. The OPSEU-appointed
Trustees are long serving and have received training from reputable organizations in a manner that is in conformance with accepted practices of JSPP's in Ontario. The
appointees of the Province include individuals who have extensive private sector experience that is more extensive than that of the plaintiff. 42. The allegations made in paragraph 12 ignore the fact that the OPTrust has a strong record of investment performance and client service. It is an accepted precept in the pension world that strongly performing plans are well governed plans. OPTrust's track record supports the view that it has always been well governed. 43. The statements made in paragraph 13 are untrue. Day to day management has always been delegated to appropriate staff and professional investment managers. 44. As stated earlier in this statement of defence, at the time of the plaintiff’s commencement of employment, the Plan was highly successful, earning excellent rates
of return, which belies the plaintiff’s claim of dysfunctionality as a scurrilous and false accusation. 45. In respect of paragraph 20 of the statement of claim, OPTrust denies that the plaintiff was informed that his initial pay rates were set lower to appease OPSEU Trustees. The plaintiff’s pay rate was set based on consultation with outside consultants at the time of hiring and through further consultation post-hiring. 46. Also contrary to the plaintiff’s allegations in paragraph 22 of the statement of claim, OPTrust had an investment plan and established policies and procedures, including a conflict of interest policy. b) Allegations that OPTrust was Attempting to Suppress Good Governance 47. In respect of paragraphs 21 – 28 of the statement of claim, OPTrust denies being opposed to appropriate requests for improvements in its governance policies. In fact, the OPTrust Board fully supported numerous changes being requested or implemented by the plaintiff. c) Alleged Improper Expenses 48. In respect of paragraph 25 of the statement of claim, the assertion that Mr. Walsh claimed expenses for dinners with the three named individuals is patently false. Further, all of Mr. Walsh’s expenses, like those of all OPTrust employees are approved by three separate levels of authority, including the OPTrust Finance Group, all in accordance with OPTrust’s rigorous expense policies. Mr. Walsh has fully complied with these expense policies. The Plaintiff is fully aware of this fact as his wasteful investigation into this matter did not find there to be any breach.
d) Allegations against PMG 49. In respect of paragraph 26 of the statement of claim, the plaintiff’s claim that PMG operated without controls over its investments is patently false. The PMG was required to work within stipulated parameters set out in OPTrust’s Statement of Investment Policies and Procedures, which had been reviewed and approved by the OPTrust Board, and other processes which had been reviewed by OPTrust’s Chief Investment Officer, which were consistent with prevailing standards for investment policies and processes among Canadian pension funds. 50. In further respect of paragraph 26, OPTrust denies that the PMG was autonomous; the aforementioned controls ensured that the PMG’s actions were restricted and confined by the controls which OPTrust had in place. In addition, they were subject to regular reporting requirements, with ongoing required reporting to the OPTrust Investment Committee and to the OPTrust Board. 51. In respect of the remuneration paid to PMG employees, there was a systematic approval process followed, which first involved a review and recommendations by independent compensation advisers, followed by a referral to the OPTrust Board for its consideration and approval. 52. In respect of paragraph 27 of the statement of claim, the plaintiff did not uncover anything which was being kept a secret. The plaintiff “learned of the 3PC plan” because it had been expressly disclosed to him by members of the PMG. The OPTrust Board accepted the plaintiff’s recommendation on this issue, and rejected the 3PC plan at its November 2011 board meeting.
53. In respect of paragraph 28 of the statement of claim, the plaintiff is creating a false impression by insinuating that he introduced reforms which were opposed by OPTrust. The fact is that on the recommendation of the plaintiff, the OPTrust Board approved the retention of the Boston Consulting Group to review the private markets program at OPTrust. Boston Consulting Group was selected after a competitive process, and on the recommendation of the plaintiff. 54. The Boston Consulting Group’s review of the items mentioned in paragraphs 28(b), (c) and (d) of the statement of claim are still in process, and are scheduled to be completed in July, 2012. The OPTrust Board fully welcomes any proposed changes which are being developed in a fair, objective, comprehensive, rigorous and inclusive manner, with the assistance of the Boston Consulting Group. There is no basis for the claim by the plaintiff that his termination of employment was a result of any concerns or opposition to the changes described in paragraph 28. e) Alleged Board Approval of Terminations 55. In or about November, 2011, the plaintiff communicated to Mr. O’Reilly that he had decided to terminate the employment of two PMG employees. 56. In respect of paragraph 31 of the statement of claim, this is a misrepresentation of the truth. When Mr. O’Reilly was advised by the plaintiff of this desire to terminate the employment of members of the PMG, Mr. O’Reilly recommended to the plaintiff that he retain a crisis communications firm. Mr. O’Reilly did not retain a crisis communications firm. 57. In respect of paragraph 32 of the statement of claim, the plaintiff contended that it was within his authority as President and CEO, and no Board approval was required. Mr.
O’Reilly advised that the plaintiff should obtain Board approval, and that if that was the decision, it should proceed quickly, by no later than two weeks. 58. No Board or other approval had been given for the termination of any PMG employees, and the plaintiff’s assertion in this regard is a fabrication. 59. In respect of paragraph 33 of the statement of claim, OPTrust further denies that they were met with any ultimatums regarding the stoppage of the changes being introduced at the recommendation of the Boston Consulting Group. 60. The plaintiff never proceeded further with terminations of employment, despite having had six months before his employment came to an end. OPTrust denies that there were any terminations in process when the plaintiff’s employment was terminated. 61. In respect of paragraph 34 of the statement of claim, OPTrust denies that its decisions concerning access to the PMG’s corporate technology were inappropriate. It was the professional opinion of Vice-Chair Campbell who was previously the first Corporate Information Officer of the Province of Ontario, and whose experience included responsibility for the entire Information Technology function for the Province of Ontario, that the reversal of the plaintiff’s decision would not create any security issues for OPTrust. f) Alleged Bad Faith Investigation – Navigant 62. In respect of paragraph 36 of the statement of claim, the plaintiff has failed to disclose the events leading up to the Navigant investigation, and has given a distorted and misleading account of what actually happened.
63. Based on security records, it came to the attention of OPTrust that someone had used the plaintiff’s security access card to gain access to OPTrust’s PMG offices late on a Sunday afternoon (February 26, 2012). 64. Security records including video, appeared to show that it was the plaintiff who had entered the Private Markets Group offices by using his security access card. The
OPTrust General Counsel contacted Mr. Walsh and advised him that the OPTrust General Counsel had sought access in order to review documents that he claimed had been set aside for his review. 65. When the OPTrust General Counsel was asked about his apparent use of the plaintiff’s security access card, it was clear that his initial story about the document review was untrue. 66. Only after Navigant had conducted its investigation, OPTrust’s General Counsel disclosed the actual reason for his using the plaintiff’s security access card, which apparently was that the plaintiff had asked him to see if his card worked at the Private Markets Group offices. 67. Had the plaintiff come forward to explain the true reason to begin with, no further investigation would have taken place. 68. With respect to the allegations in paragraph 38 of the statement of claim, the plaintiff fails to note that the PMG had brought the Brookfield security records to the attention of the OPTrust Board and that it was the plaintiff's own actions in attempting to gain access to the PMG offices had given rise to the rumours he now complains of. The purpose of the Navigant review was to quickly clear the air and protect the reputation of the plaintiff.
69. The allegations contained in paragraph 39 of the statement of claim are a misrepresentation of the facts. 3PC had already been rejected by the time of the
Navigant investigation. Moreover, the upgrade certificates were given to Mr. O'Reilly by an old friend who worked at PMG. Finally the certificates were valueless because they were about to expire. These allegations are simply a vexatious attempt by the plaintiff to sully the reputation of Mr. O'Reilly. g) Allegations that the Leadership Review was not Required 70. In respect of paragraphs 29 – 44 of the statement of claim, OPTrust denies that the leadership review was unwarranted or undertaken due to any improper motive. 71. Contrary to the allegations now expressed in the statement of claim, OPTrust states that the plaintiff supported the leadership review process pursued by OPTrust, and did not dispute its findings. 72. The leadership review was required due to serious conflict and morale problems, as referenced in paragraphs 23 – 25 and 35 of the statement of defence, which problems had arisen only after the plaintiff had attained his position. 73. The purpose of the leadership review was to determine the nature of the problems and find solutions. 74. The organization retained to conduct the leadership review (The Ranson Group) specializes in “executive coaching”. It is a prominent and well-respected consulting firm in the field of executive coaching and its mandate with OPTrust was to devise ways to improve the relationship between the plaintiff and other OPTrust employees. It was not the intention of the leadership review to devise a reason to terminate employment, but to devise ways for the plaintiff to succeed.
75. Only after a review of the Ranson Group’s findings was it concluded that the plaintiff’s further employment was untenable. 76. In respect of paragraph 24 of the statement of claim, OPTrust denies that the decision to terminate the plaintiff’s employment was an attempt to cover anything up. OPTrust states that this issue has been reviewed above in paragraph 48 of this statement of defence. At the conclusion of the audit, it was ultimately determined that there was no evidence of any breaches of expense policies. h) General Allegations of Board Interference 77. OPTrust denies that there were inappropriate actions on the part of the OPTrust Board, or that OPTrust interfered with the plaintiff’s performance of his duties, or that the decision to terminate the plaintiff’s employment was an act of inappropriate interference on the part of the OPTrust Board. Contrary to the plaintiff’s allegations, the OPTrust delegated all operational authority to the plaintiff. 78. However, it is the case that the plaintiff, on a number of occasions, revealed that he misapprehended the fact that he reported to and was accountable to the OPTrust Board, and that the OPTrust Board was entitled to exercise oversight of the plaintiff as part of its fiduciary responsibilities to OPTrust. The involvement of the OPTrust Board or its members in respect of the plaintiff’s employment was in fulfilment of these fiduciary responsibilities.
i) Allegations against Hugh O’Reilly (“Mr. O’Reilly”) 79. In respect of Mr. O’Reilly’s involvement with this matter, Mr. O’Reilly is a widely respected practitioner of pension law, and as independent legal counsel to OPTrust, he at 20
all times acted under direction from the OPTrust Board, and performed his responsibilities with a view to ensuring that the OPTrust Board properly fulfilled its fiduciary duties to the Plan.
j) Resignation and Announcement of the Plaintiff’s Cessation of Employment 80. OPTrust acknowledges that it delivered a letter dated April 13, 2012, as quoted in paragraph 48 of the statement of claim. Prior to delivering that letter, while OPTrust was considering what decision to make following the results of the leadership review, the plaintiff approached the Chair and Vice-Chair of OPTrust, and issued them the ultimatum: "If I don't have your confidence, I'm leaving." OPTrust reasonably
interpreted the plaintiff’s words as an expression of intent to resign. Therefore, the reference to not accepting the plaintiff’s resignation was appropriate. 81. In respect of the OPTrust’s communications that the plaintiff resigned, that has been the very position which the plaintiff took himself. In particular, on or about April 24, 2012, the plaintiff called up a Globe and Mail reporter and told her that he “left” OPTrust on Monday due to an inability to agree with the OPTrust Board on strategic matters, and stated that “it was clear it was time for me to leave”; both statements being suggestive that the plaintiff had resigned. 82. Moreover, the plaintiff’s then counsel was given the opportunity to comment on the plaintiff’s cessation of employment being expressed as a resignation, and the plaintiff’s then counsel expressed no concern about this decision, which was made in order to assist the plaintiff in preserving his reputation.
83. Had the plaintiff preferred to have it announced that he was terminated from his employment, he is the author of his own misfortune. 84. In any event, according to the plaintiff’s own version of the facts at paragraph 52 of the statement of claim, he suffered no consequences from having been portrayed as having resigned, in that he alleges that the announcement that he had left “to pursue other interests” was well known to mean that he had in fact been terminated from his employment. k) Punitive Damages Claim 85. OPTrust states that the claim for punitive damages and the plaintiff’s attempt to impugn the motives of OPTrust for terminating his employment constitutes a colourable attempt to advance a claim based on “bad faith discharge”, which does not constitute a valid cause of action. OPTrust states that the allegations of improper motive are a calculated and deliberate attempt to plead irrelevant and vexatious allegations which the plaintiff knows to be untrue, pleaded solely in an attempt to pressure OPTrust to pay the plaintiff monies which OPTrust legitimately disputes as owing to the plaintiff. l) Special Damages Claim 86. OPTrust denies that the plaintiff has any entitlement to special damages. Any obligation of OPTrust is confined to that which is set out in the Employment Contract. 87. In any event, the plaintiff has not held long term employment with any of his prior employers. The plaintiff’s employment history is one of short-term relationships with each of his prior employers. As a result, there is no basis for the plaintiff’s claim for special damages.
Propriety of OPTrust’s Actions 88. OPTrust denies that the reasons or motives for terminating the plaintiff’s employment, were in any way related to improper or unlawful reasons, including the allegations set out in paragraphs 29 - 46 of the statement of claim. OPTrust states that the plaintiff had already been counselled about his performance by the Vice Chair, as pleaded earlier in this statement of defence, but the plaintiff disregarded the discussion. 89. OPTrust further states that the decision to terminate the plaintiff’s employment was a decision it was lawfully entitled to make as an aspect of its prerogative to terminate the plaintiff’s employment for any reason. 90. OPTrust states that the allegations as to the reasons or motives behind its decision to terminate the plaintiff’s employment are entirely irrelevant to any determination of the plaintiff’s rights. 91. In the alternative, in the event that OPTrust’s motives or reasons for termination of the plaintiff’s employment are relevant, which is denied, OPTrust states that its decision to terminate the plaintiff’s employment was entirely legitimate, and that OPTrust followed a fair and reasonable process. Terms of the Employment Contract 92. OPTrust acknowledges that certain payments are required under the Employment Contract in the event of the Plaintiff being terminated without cause. OPTrust disputes the plaintiff’s calculations as to the liability under the Employment Contract. OPTrust states that the correct accounting under the Employment Contract for a termination without cause is as follows:
Nature of Obligation 18 months “base salary continuance”, based on termination prior to 1st year anniversary
Source Employment Contract (“EC”) – par 5(a)
Total Amount Payable $622,500.00
Short Term Incentive Plan (“STIP”) for 2011 2011 Long Term Incentive Plan “LTIP”
Prorated from June 1, 2011 to December 31, 2011 Based on Target of 45% Payment representing “the notional initial grant levels for all LTIP cycles in process or completed, but not yet paid or vested” 80% of base salary Prorating is based on 36 month period of accrual
Owing for 2011
EC – par 5 (c)
Item 2012 STIP to date of term’n
Nature of Obligation
Source EC – par 5 (b) 2012 LTIP Plan
60% of Target Prorated to termination date 2012 LTIP 2012 LTIP Plan does not provide for any payment on termination and overrides any terms of EC STIP (over 18 Prorated from June months’ 1, 2011 to December severance 31, 2011 period) Based on Target of 45% Group Insurance Continuance of group insurance benefits for 18 months, excluding long term disability insurance and out of country Pension Continuance of pension contributions for 18 months Law Society Reimbursement over 18 Fees & club months dues to date of termination
Total Amount Payable $77,769.85
EC – par 5(b)
EC, middle of page 3
as per terms of insurance policy
EC, middle of page 3 EC, middle of page 3
as per terms of pension plan Unknown
93. In further respect of the above chart, and in particular the plaintiff’s claim in respect of item number 5, 2012 LTIP, OPTrust states that at the plaintiff’s initiative, he introduced a new form of long term incentive compensation beginning 2012, which was to apply to all employees of OPTrust, including the plaintiff. In that respect, in accordance with the terms of the 2012 LTIP, and the directions of the plaintiff himself, there was to be no accrual or payout of any amount on account of 2012 LTIP.
94. In respect of paragraph 55 of the statement of claim, OPTrust states that the items pleaded relate to privileged negotiations with plaintiff’s counsel and are improperly pleaded in the statement of claim. 95. In the alternative, if any amount is to be paid on account of 2012 LTIP, which is denied, the amount payable accrues only to the date of termination, prorated over an accrual period of 48 months. 96. OPTrust states that the damages claimed by the Plaintiff are remote, excessive and not recoverable at law.
97. In respect of the allegations in paragraphs 25 and 39 of the statement of claim, OPTrust states that these allegations are scandalous, frivolous and vexatious and an abuse of process of this Honourable Court. This statement of defence has been filed out of practical necessity to respond speedily to the plaintiff's claim; and accordingly OPTrust reserves the right to move to strike these allegations from the claim.
98. OPTrust therefore submits that this action be dismissed with costs.
May 13, 2012
SHERRARD KUZZ LLP Barristers & Solicitors 250 Yonge St., Suite 3300 Toronto ON MB 2L7 THOMAS J. GORSKY LSUC No. 21668M Telephone: Fax: (416) 603-6241 (416) 603-6035
Lawyers for the Defendants
Shields O’Donnell MacKillop 65 Queen Street West, 18th Floor Toronto, ON, M5H 2M5 Maclolm MacKillop LSUC No. 290870 Hendrik Nieuwland LSUC No. 53127S Telephone: Fax: (416) 304-6417/6427 (416) 304- 6406
Lawyers for the Plaintiff
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