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Court File No. CV–12 -453483

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

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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.

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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.

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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

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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.

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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.

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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

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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;

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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.

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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.

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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

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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.

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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

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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.

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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.

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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.

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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.

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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.

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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.

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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

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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.

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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.

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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:

24

No. Item Nature of Obligation Source Total Amount

Payable

1. Salary 18 months “base

salary continuance”,

based on termination

prior to 1st year

anniversary

Employment

Contract

(“EC”) – par

5(a)

$622,500.00

2. Short Term

Incentive Plan

(“STIP”) for

2011

Prorated from June 1,

2011 to December 31,

2011

Based on Target of

45%

Owing for

2011

$108,980.13

3. 2011 Long

Term Incentive

Plan “LTIP”

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

EC – par 5

(c)

$99,448.37

25

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.

No. Item Nature of Obligation Source Total Amount

Payable

4. 2012 STIP to

date of term’n 60% of Target

Prorated to

termination date

EC – par 5

(b)

$77,769.85

5. 2012 LTIP 2012 LTIP Plan does

not provide for any

payment on

termination and

overrides any terms

of EC

2012 LTIP

Plan

$0

6. STIP (over 18

months’

severance

period)

Prorated from June

1, 2011 to December

31, 2011

Based on Target of

45%

EC – par 5(b) $373,500.00

7. Group Insurance Continuance of group

insurance benefits for 18

months, excluding long term

disability insurance and out

of country

EC, middle

of page 3

as per terms of

insurance policy

8. Pension Continuance of pension

contributions for 18 months

EC, middle

of page 3

as per terms of

pension plan

9. Law Society

Fees & club

dues to date of

termination

Reimbursement over 18

months

EC, middle

of page 3

Unknown

26

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: (416) 603-6241

Fax: (416) 603-6035

Lawyers for the Defendants

27

TO: 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: (416) 304-6417/6427

Fax: (416) 304- 6406

Lawyers for the Plaintiff