Court of Appeal Upholds Dismissal of Class Action in Mandeville v Manulife

by Bennett Jones LLP
Contact

In the most recent class action decision released by the Ontario Court of Appeal, Mandeville v The Manufacturers Life Insurance Company, 2014 ONCA 417, Justice Gillese, writing for a unanimous Court, upheld the trial decision dismissing the plaintiffs’ claim against one of Canada’s leading insurers. The plaintiff class alleged that Manulife owed them a duty of care to ensure that they would participate in the distribution of the value of Manulife when it converted from a mutual insurance company into a stock company — a process known as demutualization.

The certified class was comprised of approximately 8,000 residents of Barbados who had participating policies with Manulife that were transferred to Life of Barbados Limited (LOB), a Caribbean-based insurer, in 1996. In 1999, three years after the transfer of the policies to LOB, Manulife demutualized. Pursuant to the demutualization, a total of $9 billion in value was distributed to participating policyholders in the form of cash and shares in the company. However, due to the transfer of policies from Manulife to LOB, the class members were not participating policyholders at the time and, therefore, were ineligible to share in the value of Manulife on demutualization.

The class members’ action against Manulife was primarily based in negligence. The negligence claim was founded on a novel duty of care and was based on allegations that Manulife knew that it was going to demutualize when it transferred the policies to LOB and that it ought to have structured the transfer in such a way so as protect or preserve the class members’ rights to share in the value of Manulife on demutualization.

After a lengthy common issues trial, the trial judge dismissed the action. While the trial judge found that Manulife owed a prima facie duty of care to the class members on the bases of foreseeability and proximity, he ultimately declined to impose a duty of care due to certain policy factors, including the fact that the class members had no legal right to remain policyholders of Manulife since the statutory regimes of both Canada and Barbados expressly authorized the transfer.

The primary issue on appeal was whether the trial judge erred in failing to recognize the duty of care asserted by the class. The Court of Appeal ultimately answered this question in the negative. It found that the harm that the class members suffered was reasonably foreseeable. However, the Court held that the relationship between the class members and Manulife was not sufficiently proximate to give rise to a duty.

When assessing proximity in the first stage of the Anns test, the Court narrowly focused on the specific interests that the class members asserted were harmed — their claim for demutualization benefits. As large cap mutual companies like Manulife were not legally allowed to demutualize in 1996 — the time that the policies were transferred to LOB — the class members had no recognizable right to share in the benefits of demutualization. Accordingly, the Court of Appeal characterized the class members’ interest as “at most a hope or mere expectancy” that if and when Manulife could and did demutualize, they would still be participating policyholders and have a right to share in that value. The Court of Appeal concluded that the tenuous and inchoate nature of the class members’ interest militated against finding that it was “just and fair” in the circumstances to impose a duty of care upon Manulife.

At the second stage of the Anns test, the Court found that concerns regarding indeterminate liability and a multiplicity of inappropriate lawsuits further militated against imposing a duty of care. For instance, recognition of such a duty could lead to claims by participating policyholders in other mutual insurance companies who are similarly situated to the transferred policyholders. It could also lead to claims for economic loss by participating policyholders of mutual insurance companies that have decided not to demutualize.

The Court of Appeal’s decision reinforces the fact that, when deciding whether a duty of care will be recognized, claims for pure economic loss will be subject to greater scrutiny. The Court’s decision is reassuring for potential corporate defendants as it limits the imposition of a duty of care in such circumstances to instances where there is a tangible, legitimately vested legal interest, contemporaneous with the alleged negligence, rather than just a “hope or mere expectancy” of receiving a future financial benefit. Further, in the class actions context, where it is a novel duty of care that is being asserted, the court may be even more reluctant to recognize a duty. In this context, policy considerations on the second branch of the Anns test may figure more heavily and be heightened due to the potentially broad scope of the duty of care’s application and the palpable risk that the floodgates of liability could be opened if it is recognized.

On a more general level, the decision represents a welcome victory for defendants across the country. As the bar for certification (particularly in Ontario) has been lowered in recent years, trials on the merits are becoming more common. The Manulife case represents one of the rare instances to date where a defendant has successfully seen an action through from certification to trial and appeal.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Bennett Jones LLP | Attorney Advertising

Written by:

Bennett Jones LLP
Contact
more
less

Bennett Jones LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.
Feedback? Tell us what you think of the new jdsupra.com!