The Ontario Court of Appeal has given the green light for certification in an investor class-action lawsuit centred around alleged misrepresentation in segregated fund disclosure documents.
The latest decision in Fantl v. Transamerica Life Canada, released in late August, enables the class action to proceed not only for claims of breach of contract, but also for claims of negligent misrepresentation.
That decision expands the scope of the class considerably, allowing tens of thousands of investors to seek damages for alleged misrepresentations about a seg fund in the information folder they received when they purchased the product.
“Now we have the authorization, effectively, to proceed with the case for the breach of contract claims and the negligent misrepresentation claims, and now we’ll proceed to evaluate and prosecute those claims on their merit,” says David O’Connor, partner with Roy O’Connor LLP in Toronto and lead lawyer representing the class. “This decision has been seen, and will be seen, as a strong decision and clear direction from the Court of Appeal that misrepresentation cases can be certified.”
The case involves Can-Am Fund, an investment vehicle offered within certain variable annuities and universal life policies sold between October 1992 and March 2001. The fund was sold by NN Life Insurance Co. of Canada and Transamerica Life Insurance Co. of Canada (now known as ivari), which acquired NN Life in 2000.
The allegations in the case revolve around statements in documents that investors received, which indicated that the goal of the fund was to replicate, on a “best efforts” basis, the performance of the S&P 500 total return index.
Representative plaintiff Joseph Fantl, an investor who bought units of the fund in 1996, alleges that Transamerica Life Canada failed to ensure that the Can-Am Fund performed as well as the S&P 500.
“The essence of the case focuses on the question of, in part, was Transamerica or its predecessor exercising best efforts to replicate the S&P 500 [total return index]?” says O’Connor.
ivari declined to comment when contacted by Investment Executive as the case is before the courts.
Altogether, the Can-Am Fund was available within 53 Transamerica Life Canada insurance contracts, and was selected by more than 90,000 policyholders. Of the insurance policies in which the fund was available, five of the contracts included the statement about the fund seeking to replicate the S&P 500 total return index on a best-efforts basis. The remaining insurance contracts did not contain this statement; however, for most of those policies, the best-efforts statement was included in the information folder that policyholders received when they signed the contract.
Under the original certification decision in 2013, the case received certification for the breach of contract claim, enabling those investors whose insurance contract included the best efforts statement to proceed with their claims as a class.
However, the judge determined that a class proceeding was not the preferable procedure for resolving the class members’ negligent misrepresentation claims. Specifically, the judge found that the “plethora of individual issues” with respect to the negligent misrepresentation claims “necessitate individual trials for virtually each class member.” He found that determining the extent to which each member of the class relied upon the disclosure document when deciding whether to invest in the fund, for instance, would need to be assessed on an individual basis.
Last year, the Divisional Court reversed that decision, finding that the plaintiff’s claim for negligent misrepresentation could, in fact, be certified as well. Specifically, the court found that as the alleged misrepresentation was contained within the information folder — a single uniform statutorily mandated disclosure document that was given to each class member — the negligent misrepresentation claim was appropriate for certification. The Court of Appeal’s latest decision confirms that finding.
“What it means in practical terms is that probably tens of thousands of people who had invested in the Can-Am Fund through Transamerica or its predecessor will now at least have a cause of action that can be prosecuted on their behalf,” says O’Connor. “Under the original decision, those people who did not have, as part of their insurance policy, an express best interests term, would not have had a cause of action in this class action.”
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