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10. What is reliance risk?

Reliance risk has to do with whether a claimant made the decision to convert from the DB to the DC plan because they relied on what Teck Metals/Cominco and Towers told them.

One of the plaintiffs’ main arguments in this case was Teck Metals/Cominco and Towers made some misleading statements in encouraging people to convert to the DC plan. These statements are called “misrepresentations”.

The plaintiffs also argued that if Teck Metals/Cominco and Towers had not made these misrepresentations, fewer people would have converted their pensions. This is called “reliance” – each class member must have relied on the misrepresentations to be entitled to any money for their losses.

The law also requires people to act reasonably. In the context of misrepresentations, it has to be reasonable for a person to have relied on the misrepresentations.

If this lawsuit had gone to trial, each class member would have had to prove that they relied on the misrepresentations. This also means that each class member would have had to prove that (acting reasonably) they would not have converted their pensions if there had been no misrepresentations. This is the reliance risk – the risk that class members would not be able to prove that they relied on the misrepresentations.

Class Counsel concluded that it would have been easier for some class members to prove this than others. For instance, for a class member who was young in 1992, it was reasonable to decide to convert. That is because a young class member is more likely to change careers or employers before retiring, and there are benefits to being in a DC plan if you expect to change careers or employers. This will make it harder for young class members to prove that they reasonably relied on the misrepresentations.

In contrast, for a class member who was nearing retirement in 1992, converting was much less reasonable. It would have been easier for older class members to prove that they relied on the misrepresentations.

Posted in: Questions about the Settlement Agreement, Teck/Cominco Class Action FAQs

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