An Ontario court has denied an appeal of a lower court decision in a case in which a former fund representative wanted to sue the fund dealer he had once planned to join.
The former fund rep, Charles Leigh Hogg, whose dealer at the time was Assante Wealth Management, had planned to join Wealthsimple Inc. in 2019. To facilitate the move, Wealthsimple provided an online portal that reps could use to upload client data, with the expectation they could then more easily onboard those clients when the reps changed firms and the clients gave permission to upload their information to its systems.
Before the move could happen, Assante discovered the plan, immediately fired Hogg, and alerted regulators that Wealthsimple may have had access to clients’ confidential information.
According to a decision handed down in November 2023 by the Superior Court of Justice, Hogg claimed he was prevented from becoming registered with another dealer and suffered damages as a result, and that such damages were increased when Wealthsimple terminated its agreements with him. He sought $10.5 million in damages.
Those allegations were never tested in court.
Instead, the court set aside an order giving Hogg extra time to serve the lawsuit against Wealthsimple, after finding he failed to make “full and fair disclosure” of the circumstances surrounding the need for an extension.
Hogg appealed to the Court of Appeal for Ontario, but it sided with the lower court, finding that “there is no basis for this court to intervene.”
Specifically, it found the lower court had not erred when it said Hogg’s original disclosure should have included, among other things, the fact that regulators were investigating the conduct that is the subject of the legal action.
“It is incongruent for the plaintiff to at once have referred to the [Mutual Fund Dealers Association] investigation and its possible resolution (then still pending) as the basis for the request for the extension but yet have declined to disclose to the court the simultaneous investigation into the conduct of the defendants arising out of the very same facts,” the court said.
And it found that the firm suffered prejudice as a result of the extension and the insufficient disclosure it was based on.
“Here, the prejudice arises from the fact that the defendants entered into the MFDA settlement, voluntarily admitted facts and breaches of the MFDA rules, and those admitted facts and breaches materially impair their ability to defend this action,” the court said.
Hogg appealed the lower court’s ruling, arguing that the judge erred in finding that he was aware of the regulatory investigation into Wealthsimple’s conduct.
“We do not agree,” the Court of Appeal for Ontario said in its decision.
“It was open to the motion judge to infer that the appellant was aware of the MFDA’s investigation into the respondent’s conduct alongside its investigation into his own conduct arising out of the same facts. The motion judge’s finding reveals no error and is entitled to deference,” the court said.
Additionally, Hogg argued that “the motion judge failed to balance the prejudice to each of the parties,” the appeal court noted.
“Again, we do not agree. It was open to the motion judge to conclude that prejudice arose from [Wealthsimple’s] entry into the MFDA settlement, in that doing so materially impaired its ability to defend the appellant’s action,” the appeal court said.
“[The motion judge] recognized the desirability of having matters determined on the merits but found that the balance weighed in favour of the respondents. This was a discretionary decision that is entitled to deference,” it said in dismissing the appeal.