A lawsuit alleging that a key unit of Manulife Financial Corp. wrongly excluded thousands of former policy holders in Barbados from payouts worth about $100-million when the company went public in 1999 has been certified as a class action by an Ontario judge.
In a ruling released Monday, Mr. Justice Ian Nordheimer of the Ontario Superior Court said the case "raises an issue" as to whether Manufacturers Life Insurance Co. "actively misled a regulator" about its plans to demutualize or go public when it won approval to sell its Barbadian business in 1996.
The action, launched last December on behalf of four representative plaintiffs by Windsor, Ont., lawyer Harvey Strosberg, also raises questions about "the degree, if any, to which a corporation has a duty to protect individuals who have a financial interest" in it "regarding future plans of the corporation," Judge Nordheimer said.
"It's a monster win," Mr. Strosberg said yesterday of the ruling.
"Until this, Manulife was facing a lawsuit by four individuals; now it's facing a lawsuit by 8,043 individuals."
Mr. Strosberg said that the case, in which the plaintiffs are seeking $150-million in damages -- including $50-million of the punitive variety -- on behalf of about 8,000 former policy holders, will now proceed to trial, likely in about a year.
Reached in Barbados, policy holder Wismar Greavey, a former supervisor of insurance for the Caribbean country who is one of the representative plaintiffs, said he was not surprised by Judge Nordheimer's decision. "I thought we had a good case, and that it was a position Manufacturers Life could not defend," he said.
However, Manulife spokeswoman Donna Morrison said the company considers the case "without merit" and will defend against it "vigorously."
When Manulife of Toronto went public in the fall of 1999 -- one of five Canadian life insurers to do so in a nine-month period -- it distributed a total of about $9-billion in cash and shares to its approximately 671,000 policy holder-owners.
The action revolves around allegations that the company had misled regulators in Barbados in 1996 when, seeking permission to sell its business there to Life of Barbados, it said it had no plans to demutualize -- even though it had allegedly been lobbying the Canadian government for permission to do so for about four years, and even though Manulife's board of directors publicly declared that this was the goal less than a year after the Barbadian deal.
It made no provision for any payout to the Barbadian policy holders in the event that it did go public, even though it protected the rights of U.S. policy holders in a transaction the same year, and the plaintiffs allege this amounted to negligence and breach of fiduciary duty.