An Ontario court has decided to allow a lawsuit brought by a pair of advisors against their former firm alleging that it intentionally defamed them in a regulatory filing.
On January 31, the Superior Court of Justice handed down a decision on a motion brought by Manulife Securities Inc., seeking to dismiss a suit against the firm by a couple of former advisors.
According to the decision, the advisors, Michael and Robert Sells, are suing Manulife claiming that it made false allegations against them in their uniform termination notices (UTNs), which has made them unemployable in the industry.
“The plaintiffs’ essential claim for their damages against Manulife is that Manulife made very serious but false and misleading statements on the UTN’s regarding the plaintiffs’ work and practices while with Manulife which Manulife knew or ought to have known would make it impossible for the plaintiffs to obtain new employment,” the decision says.
Those allegations have not been proven. Indeed, Manulife sought to have the case dismissed on the basis that it could not succeed, even if their allegations are proven to be true. The decision indicates that Manulife argues that this sort of action is barred by the Securities Act, which provides immunity for acts done in complying with securities law.
“Its position is that the plaintiffs have no cause of action against Manulife for what it is alleged to have done to the plaintiffs regardless of whether it acted in good faith or not and even if they filed intentionally false UTN’s with the [Ontario Securities Commission],” the decision says, adding that the firm argues that “their only remedy is to apply for a review hearing at the [Investment Industry Regulatory Organization of Canada] under the dealer member rules.”
Next: The court gives its reasons
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The court gives its reasons
The court disagreed with Manulife, and declined to dismiss the case out of hand for several reasons. For one, it found that there is a significant dispute between the firm and the advisors about the facts in the case. “In my view, given this significant factual dispute and this court’s discretion not to decide a question of law raised in the pleading which is dependent upon an adequate factual foundation, there is no realistic advantage achieved in deciding this question without a trial,” Judge Robert Nightingale said in the decision.
The court also found that Manulife did not meet the high burden of proof required to establish that an action cannot succeed even if the facts alleged in the statement of claim are proven; and, that an Investment Industry Regulator Organization of Canada (IIROC) hearing would not give the advisors to claim damages against the firm, as they are seeking in their suit.
Additionally, the court notes that the Securities Act may only take away rights of action for acts done in compliance with Ontario securities law; but that the plaintiffs are alleging that Manulife didn’t comply with securities law by filing UTNs that, they claim, are false.
“I am not prepared to find that it is plain and obvious, given the nature of the plaintiffs’ allegations, that … the Securities Act is a bar to the plaintiffs’ action against Manulife at this stage,” Nightingale said.
“The law is not fully settled and the applicability of that statute to the alleged actions of Manulife’s intentional and deliberate acts of filing false UTN’s involving the plaintiffs with IIROC, its actions being independent of the Act or in bad faith or simply negligent conduct should be resolved at trial on a complete evidentiary record.”