After three days of hearings and arguments in the Ontario Court of Appeal, Paul Pape, the Toronto attorney who is representing about 8 000 Barbadians in an ongoing legal class action battle with Manulife Financial Corporation, was reflecting on his expectations as he awaits a decision.
“In this game nothing is certain and you wait until the decision comes down,” said the legal counsel on whom the Bajans are pinning their hopes of getting at least CAN$81 million in damages plus interest in a case that has been on the Ontario court docket since 2002.
“I am quietly optimistic because I wrote the argument, I wrote the appeal. Manulife was found by the [initial)] trial judge not to have been forthright with the Supervisor [of Insurance] of Barbados and I think that affects how a court will look at the entire case. We believe we have a good case but ultimately it’s going to be up to the Court of Appeal to decide the matter.”
Pape has good reason to keep his optimism in check. That’s because after ten years of litigation, Justice Frank Newbould of the Ontario Superior Court handed the Barbadians a crushing defeat, finding that Manulife wasn’t compelled to prevent policyholders in the Caribbean country from suffering any unreasonable harm when it sold its policies and business in 1996 to Life of Barbados, which is now Sagicor, the Caribbean’s largest insurance company.
But Manulife did more than that just dispose of its business back then. Three years after leaving the Caribbean it converted itself from a company owned by its policy holders in Canada, the United States, the Caribbean and Hong Kong to a corporation owned and controlled by shareholders.
In a CAN$2.5 billion initial
public offering on the stock market in Canada and elsewhere, Manulife used some of the new investment to pay compensation to policyholders in 1999, excluding Barbadians. It was part of a carefully choreographed process of demutualization that benefited existing policyholders who received CAN$ 8.3 billion in cash and shares. By then, Barbadians had lost their ownership in Manulife.
Hence, the class action suit filed by the Barbadians and their attorney Harvey Strossberg, a prominent Canadian litigator. In the appeal, Pape had argued earlier this month that “Manulife had a duty of care to act reasonably to avoid the real risk of foreseeable harm that befell the Barbadian policyholders on the sale of their policies”.
That’s not all. He argued that Manulife • knew that the thousands of Barbadians as individuals and as a group who lost their proprietary interest when their policies were sold by Manulife should have been compensated on demutualization;
• was well aware that the Bajan interest had value, contrary to what policyholders had previously been told.
“There were ownership rights in Manulife that enabled policyholders to share in the profits of Manulife and share in the governance of the company. Thus, while Manulife had the right to transfer par policies, it could not do it without ensuring that the transfer was fair to the policy holders who were losing their rights.”
Back in the early 1990s when it was planning to transfer its Caribbean business, it “bent over backwards to avoid harm to the US and Hong Kong policyholders who were losing their par rights in these transfers” but it didn’t provide the Barbadians with similar treatment;
• went ahead with the 1990s transfer on the grounds that Barbados had approved the sale believing, based on expert advice, that the Bajan interest didn’t have any material value and the transfer was fair to the par policyholders.
But nothing could be further from the truth, the Bajans contended in the original trial and a few weeks ago. In essence, Pape told BARBADOS BUSINESS AUTHORITY, that Manulife “honoured its self-proclaimed duty of care” to Barbadians by “breaching it.” That’s why they should be compensated for the damages they suffered, plus interest.
“We are asking the Court[of Appeals] to establish a duty of care which is a claim in tort, a claim in negligence,” he explained.
“In this case Manulife owed a duty of care to its prior policyholders at the time they sold those policies to Life of Barbados.”
As legal analysts and insurance executives see it, Manulife is vigorously defending its actions because of what effect an adverse court decision can have on the company going forward and on the insurance industry as a whole.
“In Canada, there [are] a relatively high number of property and casualty insurers structured as mutuals, all of whom will be watching this ruling carefully,” stated the Toronto Globe & Mail, a major newspaper.
As a matter of fact, Pape contends a CAN$ 81.4 million settlement to the Barbadians would be a “mere rounding error” to Manulife but each of the Bajans stands to receive CAN$10 000 – which, while not a “windfall”, would “make a difference”.
The trouble is, though, that the duty of care which the Barbadians are demanding can run counter to recent trends in which courts were reluctant to go the extra mile to grant that level of care.
“Courts are conservative bodies and are not rushing out to change the law unless they decide it’s absolutely necessary,” Pape observed.
“In this case it is necessary because the system in Canada and the system in Barbados were weak systems. The weakness was demonstrated by the fact that Manulife was able to do what it did before the end [of its business] in Barbados. That’s why we are quietly optimistic.”
