Clients were allegedly shortchanged on tax. So why is the payout going to charity instead?
BMO will pay $1.95 million to settle claims it over-withheld tax on clients' retirement accounts - but most clients won't see a cent.
The settlement, approved by the Ontario Superior Court of Justice on June 5, 2026, ends a class action brought by Kenneth Greg Hunter against BMO Trust Company and BMO InvestorLine Inc. In Hunter v. BMO Trust Company, 2026 ONSC 3330, the court signed off on a deal first reached in principle in February 2025. InvestorLine is a registered investment dealer that offers Registered Retirement Income Fund (RRIF) accounts, structured as trusts with BMO Trust as trustee.
Hunter, who filed the action on March 30, 2022, alleged that the firms withheld more tax than the Income Tax Act required on certain RRIF withdrawals, leaving them at odds with the trust agreement governing client accounts. BMO calculates withholding tax on the total amount a client takes out over a year. Hunter argued it should be figured on each separate withdrawal, which he said would have left more money in the account to grow tax-free.
The amounts at stake per client were small. Court documents put individual losses at roughly $25 to $750, with Hunter's own figure at the top end because, at 54, he was far younger than the typical class member. The average age of the estimated 1,000 to 1,500 members is 81, and about a third of their accounts are already closed.
That demographic reality drove an unusual outcome. Rather than pay clients directly, the net settlement of just over $1 million will go to HelpAge Canada, a charity for older Canadians, in what is known as a cy-près distribution. Class Counsel estimated that running a claims process would cost more than $550,000 - close to a dollar in administration for every dollar reaching a client - and that depositing money straight into RRIFs would require an uncertain advance ruling from the Canada Revenue Agency.
Justice Glustein found the deal fair and reasonable. Had every assumption broken Hunter's way, the full claim was worth about $5 million; a more realistic range was $1 million to $2 million. At $1.95 million, the settlement is roughly 40 percent of the best-case figure, which the court called a substantial share of BMO's potential exposure. The bank denies liability and agreed to certification only for the purpose of settling.
For advisors and compliance teams, the practical lesson sits in what BMO agreed to change. The firm will add information to the InvestorLine client website explaining how RRIF holders can reduce withholding tax on their withdrawals, and will train call-centre staff on the rules. The court treated those operational fixes as part of what made the settlement worthwhile, since the withholding practice itself stays in place.
The case is also a reminder of how long these fights run. Class Counsel noted it had litigated against the same defendants for more than 15 years in an earlier matter. The approval also cleared a 30 percent contingency fee, cut from 33 percent because the firm secured outside litigation funding, along with disbursements of $187,881.82.
