An Ontario court has rejected a motion from Toronto-based AGF Management Ltd. (TSX:AGF.B) to stay defamation accusations between the firm and one of its former star fund managers, Patricia Perez-Coutts, over her departure from the firm last spring.
A decision from the Ontario Superior Court of Justice, handed down earlier this week, declined to stay accusations by Perez-Coutts that AGF defamed her, and the firm’s own claims that she defamed the firm in return, pending the resolution of AGF’s initial suit against her over her departure from the firm.
The legal tussle stems from several AGF employees, including Perez-Coutts, Thomas Pinto-Basto and Alice Popescu, leaving AGF in April 2012 in order to join Westwood Holdings Group, Inc., headquartered in Dallas and with offices in Toronto.
AGF suit alleges “unlawful conspiracy”
According to the court’s decision, in August last year, AGF sued, alleging that its ex-employees “breached various contractual and fiduciary duties they owed to it”, causing damages to the firm, which it seeks to recover from both the ex-employees and their new employer, Westwood.
The former employees and other defendants have defended the claim asserting that they did nothing wrong. They also brought a counterclaim for defamation, alleging that firm defamed them by contending they had engaged in ‘ethically wrong behaviour’ for the way they left AGF.
AGF also later brought its own action for defamation for comments that Perez-Coutts made in an investment presentation at the Toronto Board of Trade in October 2012, in which she quoted legendary investor, Warren Buffett, as saying, “In a chronically leaking boat, energy devoted to changing vessels is more productive than energy devoted to patching leaks.”
The decision indicates that the firm construed that statement as being directed at it, and so it brought an additional defamation claim against her.
The case has yet to be heard, and neither side’s allegations have been proven.
In the preliminary motions in the case, AGF sought to stay the counterclaim (and its own defamation action), pending the outcome of its initial claim, on the basis that it might not be necessary to hear the counterclaim once the initial claim is resolved.
However, judge D.M. Brown declined to grant a stay of the counterclaim, saying, “Although counsel for AGF submitted that efficiencies would be achieved by determining the issues in the claim first, since a successful result on the part of AGF might render moot most of the counterclaim, frankly I see that as a good reason not to grant a stay – if the issues are so intertwined, then they should be adjudicated together.”
As for the motion to stay its own defamation action, the court also denied that motion, saying that there’s no reason to delay that part of the case, too.
“Using the Goldilocks measurement scale, if the breadth of facts in the claim in the first action could be described as ‘poppa bear-sized facts’, then the incremental defamation-related facts in the counterclaim would rank as ‘momma bear-sized facts’, and the breadth of facts in dispute in the second action would fall into the category of ‘baby bear-sized facts’,” the court said in its decision.
The decision also notes that AGF’s claim links the alleged defamation with the circumstances of the departure that led to the initial lawsuit.
“Given that link, the overlap of parties between the first and second actions, the narrower legal issues raised by the second action and the narrow ambit of the Baby Bear-Sized Facts, I have difficulty in understanding why AGF, having commenced the second action, would suddenly wish to put it in hibernation,” judge D.M. Brown said. “Allowing the second action to continue will not unduly delay or complicate the conduct of the first action. I see no basis on which to grant a stay of the second action.”
The court did grant a cross-motion from the ex-employees and other defendants seeking an order for the common production of documents and common examinations for discovery in both proceedings.