Trade group can’t be sued for alleged rep misconduct

By James Langton | March 3, 2023 | Last updated on March 3, 2023
2 min read

An aggrieved investor can sue their former advisor over allegedly missing money, but an Ontario court has dismissed the case against industry trade group Million Dollar Round Table (MDRT), which was also named in the lawsuit.

The Ontario Superior Court of Justice granted a motion brought by MDRT, which sought to have a claim against it dismissed in a case brought by an investor who is alleging that they were defrauded of $25,000 by an advisor that belonged to the MDRT.

According to the decision, the investor, John Shillington, is suing his advisor, Marty Stover, his firm, Empire Life, and MDRT, alleging that he was defrauded.

Those allegations have not been proven.

The lawsuit named MDRT as a defendant, alleging that, “Mr. Stover was a member of MDRT and that a fraudulent letter sent by Mr. Stover in 2019 contained the MDRT emblem.”

However, the court concluded that the claim against MDRT had no possibility of success.

While it’s one thing to sue an advisor and their firm, “Suing an organization such as MDRT is another thing altogether,” the court said. “Such a claim, even if properly pleaded, is objectively a difficult case.”

“It is difficult to make such a case because this is a claim for pure economic loss in which the plaintiff must first establish a duty of care on the basis of proximity, foreseeability and reliance,” the court said in its decision.

“Even if that hurdle is crossed, the courts have been reluctant to extend liability for individual losses to regulators or statutorily recognized organizations let alone voluntary associations,” it added.

The court also noted that, while the plaintiff didn’t try to claim that MDRT had any sort of regulatory obligation, the group’s defence did “demonstrate that MDRT did impose ethical obligations on its members and did purport to limit the use of its trademarks and logo to members in good standing.”

“Those facts might be ingredients for asserting a duty of care to the end user clients such as the plaintiff, but they do not go far enough,” the decision said.

Ultimately, the court dismissed the claim against MDRT, and ordered $6,500 in costs against the plaintiff in the case.

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James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.