Andriuk et al. v. Merrill Lynch Canada Inc., 2013 ABQB 422

• Judge: Martin, J.
• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: July 25, 2013
• Citations: 2013 ABQB 422;(2013), 578 A.R. 40 (QB)

Andriuk v. Merrill Lynch Can. Inc. (2013), 578 A.R. 40 (QB)

MLB headnote and full text

Temp. Cite: [2013] A.R. TBEd. AU.066

John Andriuk, John Andriuk Investments Ltd. and John Andriuk as Representative Plaintiff (plaintiffs) v. Merrill Lynch Canada Inc. (defendant)

(1001 04055; 2013 ABQB 422)

Indexed As: Andriuk et al. v. Merrill Lynch Canada Inc.

Alberta Court of Queen's Bench

Judicial District of Calgary

Martin, J.

July 25, 2013.

Summary:

The plaintiffs, John Andriuk and Andriuk Investments Ltd., sought certification of a class action against Merrill Lynch Canada (Merrill) for how it conducted itself in relation to its clients' investments in a speculative biotech stock known as Oncolytics Biotech Inc. (ONC). The plaintiffs alleged that Merrill breached a variety of duties owed to its clients, including statutory, contractual, tort, and fiduciary duties when it found that its clients collectively held too much ONC stock at its Calgary branch. The plaintiffs alleged that, instead of complying with regulatory standards and acting in the best interests of its client investors, Merrill embarked on a course of conduct that preferred its own interests to those of its clients. The plaintiffs alleged that this course of conduct lead to, among other damages, the artificial depression of ONC's share price.

The Alberta Court of Queen's Bench dismissed the application for certification.

Editor's Note: An appeal from this decision was dismissed by the Alberta Court of Appeal in a decision reported at 575 A.R. 208; 612 W.A.C. 208.

Brokers - Topic 3084

Duties of broker to principal - Stockbrokers (incl. commodity brokers) - Fiduciary duties - [See fourth Practice - Topic 209.3 ].

Equity - Topic 3718

Fiduciary or confidential relationships - Commercial relationships - Broker (incl. agent) and principal - [See fourth Practice - Topic 209.3 ].

Practice - Topic 208

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class or representative actions - For damages - [See Practice - Topic 208.4 ].

Practice - Topic 208.4

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class actions - Aggregate damages - The plaintiffs sought certification of a class action against Merrill Lynch Canada (Merrill) for how it conducted itself in relation to its clients' investments in a speculative biotech stock known as Oncolytics Biotech Inc. (ONC) - The plaintiffs alleged that Merrill breached a variety of duties owed to its clients when it found that its clients collectively held too much ONC stock at its Calgary branch - The plaintiffs alleged that Merrill embarked on a course of conduct that preferred its own interests to those of its clients and that this course of conduct lead to, among other damages, the artificial depression of ONC's share price - The Alberta Court of Queen's Bench stated that to certify the share price depreciation theory as a common issue for causation and damages, the plaintiffs were required to show that it was possible they could meet the burden to prove loss apart from other market forces and to link such loss with Merrill's impugned actions - It was up to the plaintiffs to show that the necessary calculations could actually be done on a class-wide basis - They failed to meet their burden - The court stated that "On balance, it would simply not promote efficiency or judicial economy to permit certification when there is no basis in fact to show that the primary but novel form of class-wide loss asserted by the Plaintiffs could ever be established" - The absence of any methodology similarly prevented the court from accepting aggregate damages as a common issue on this record - See paragraphs 130 to 140.

Practice - Topic 209.1

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class actions - Members of class - General - The plaintiffs sought certification of a class action against Merrill Lynch Canada (Merrill) for how it conducted itself in relation to its clients' investments in a speculative biotech stock known as Oncolytics Biotech Inc. (ONC) - The plaintiffs alleged that Merrill breached a variety of duties owed to its clients when it found that its clients collectively held too much ONC stock at its Calgary branch - The plaintiffs alleged that Merrill embarked on a course of conduct that preferred its own interests to those of its clients and that Merrill's course of conduct lead to, among other damages, the artificial depression of ONC's share price - The Alberta Court of Queen's Bench held that the proposed class was overbroad - Expanding the class to investors holding ONC in all Merrill branches across Canada meant there was no rational connection between Merrill's alleged wrongdoing in carrying out the mandate in the Calgary office and a person who held ONC elsewhere - Even if limited to Calgary investors subject to the mandate, the proposed class included persons who bought ONC after the class period began and was not limited to those holding shares at the start of the alleged mandate who, presumably, would have been most affected by it - This was problematic because purchasers after December 2000 might have benefited to some extent from the depreciated value of ONC - There was some appearance of conflict and their inclusion made any class-wide damage calculation much more complex - A further appearance of conflict and complexity arose from the different times certain investors were solicited to sell - The plaintiffs also proposed that the class include Merrill brokers who held ONC - There was too great a potential for conflicts of interest to include Merrill employees and brokers in the class definition - See paragraphs 109 to 121.

Practice - Topic 209.3

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class or representative actions - Certification - Considerations (incl. when class action appropriate) - The plaintiffs sought certification of a class action against Merrill Lynch Canada (Merrill) for how it conducted itself in relation to its clients' investments in a speculative biotech stock - The plaintiffs alleged that Merrill breached a variety of duties owed to its clients - The Alberta Court of Queen's Bench held that while it found several possible foundations for the plaintiffs' claims in which it was not plain and obvious that the cause of action would fail, the pleadings as a whole did not provide properly detailed statements of the material facts to form the proper basis for those claims - With respect to the claim in contract, while the pleadings referred to contractual duties, none of the contractual terms grounding those duties were referenced or mentioned therein - Further, the plaintiffs did not place any such contracts into evidence for the contract/agency claim and there was no plea or assertion as to the existence of a contract that was common to all class members - See paragraphs 81 to 85.

Practice - Topic 209.3

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class or representative actions - Certification - Considerations (incl. when class action appropriate) - The plaintiffs sought certification of a class action against Merrill Lynch Canada (Merrill) for how it conducted itself in relation to its clients' investments in a speculative biotech stock - The plaintiffs alleged that Merrill breached a variety of duties owed to its clients - The Alberta Court of Queen's Bench held that while it found several possible foundations for the plaintiffs' claims in which it was not plain and obvious that the cause of action would fail, the pleadings as a whole did not provide properly detailed statements of the material facts to form the proper basis for those claims - With respect to the tort claim, the plaintiffs allegations based in tort were properly pleaded and gave rise to a duty of care which may have been breached if the claimed facts were assumed to be true - The damages sought in relation to the negligence claim, however, were novel and exceptional given the traditionally limited recovery in tort for pure economic loss - In relation to the allegations of negligent misrepresentation, the plaintiffs had not specified the negligent misrepresentations in their pleadings - See paragraphs 88 to 90.

Practice - Topic 209.3

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class or representative actions - Certification - Considerations (incl. when class action appropriate) - The plaintiffs sought certification of a class action against Merrill Lynch Canada (Merrill) for how it conducted itself in relation to its clients' investments in a speculative biotech stock known as Oncolytics Biotech Inc. (ONC) - The plaintiffs alleged that Merrill breached a variety of duties owed to its clients when it found that its clients collectively held too much ONC stock at its Calgary branch - The plaintiffs alleged that Merrill embarked on a course of conduct that preferred its own interests to those of its clients and that this course of conduct lead to, among other damages, the artificial depression of ONC's share price - The Alberta Court of Queen's Bench held that the plaintiffs' claim for unjust enrichment was not adequately particularized - The pleadings did not address the absence of juristic reason for the enrichment - Even if there was a correlation between the defendant's gain and the plaintiffs' losses, the fee agreements and the Margin Agreements likely constituted the juristic reason for those charges - The pleadings made no reference to those agreements - See paragraph 91.

Practice - Topic 209.3

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class or representative actions - Certification - Considerations (incl. when class action appropriate) - The plaintiffs sought certification of a class action against Merrill Lynch Canada for how it conducted itself in relation to its clients' investments in a speculative biotech stock - The Alberta Court of Queen's Bench held that the brief reference in the pleadings to a claim for breach of fiduciary duty was insufficient in presenting the facts necessary to found a cause of action for breach of fiduciary duty - The broker-client relationship was not a fiduciary relationship per se, but might became one depending on the circumstances - With nothing in the pleadings setting out the requisite elements of trust, vulnerability, and discretion in this specific broker-client relationship, particularly in relation to sophisticated investors owning speculative stock in margin accounts, the pleadings did not make out a cause of action for breach of fiduciary duty - See paragraphs 92 to 93.

Practice - Topic 209.3

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class or representative actions - Certification - Considerations (incl. when class action appropriate) - The plaintiffs sought certification of a class action against Merrill Lynch Canada for how it conducted itself in relation to its clients' investments in a speculative biotech stock - The Alberta Court of Queen's Bench agreed overall with the defendant's observations regarding the weaknesses in the plaintiffs' litigation plan - It was inadequate - There were significant individual issues that prevented counsel from developing a realistic scheme - See paragraphs 171 to 177.

Practice - Topic 209.3

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class or representative actions - Certification - Considerations (incl. when class action appropriate) - The plaintiffs sought certification of a class action against Merrill Lynch Canada (Merrill) for how it conducted itself in relation to its clients' investments in a speculative biotech stock known as Oncolytics Biotech Inc. (ONC) - The plaintiffs alleged that Merrill breached a variety of duties owed to its clients, including statutory, contractual, tort, and fiduciary duties when it found that its clients collectively held too much ONC stock at its Calgary branch - The plaintiffs alleged that, instead of complying with regulatory standards and acting in the best interests of its client investors, Merrill embarked on a course of conduct that preferred its own interests to those of its clients - The plaintiffs alleged that this course of conduct lead to, among other damages, the artificial depression of ONC's share price - The Alberta Court of Queen's Bench held that in the absence of a clear articulation of this case as a whole and on the current record, it was unable to find that a class proceeding was the most practical and most efficient means of bringing this claim forward - The administration of this claim as a class proceeding would create undue difficulty for the courts in its current formulation - See paragraphs 148 to 162.

Practice - Topic 209.4

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class actions - Certification - Appointment or replacement of representative plaintiff - The plaintiffs, John Andriuk and Andriuk Investments Ltd., sought certification of a class action against Merrill Lynch Canada (Merrill) for how it conducted itself in relation to its clients' investments in a speculative biotech stock - The Alberta Court of Queen's Bench held that on balance the proposed representative plaintiffs would be suitable to bring the action - Andriuk did not have a personal cause of action against Merrill since he held his Merrill account through his investment corporation, AIL - Yet Andriuk and AIL came forward together to be the representative plaintiffs - The court stated that "this works to overcome any criticism that Mr. Andriuk may not have had a personal account at Merrill. While the courts normally are reluctant to pierce the corporate veil, in the case at bar, the Plaintiffs themselves put both the individual and the corporation forward. I do not see how having the personal liability of Mr. Andriuk in addition to that of AIL would prejudice Merrill" - See paragraph 168.

Practice - Topic 209.4

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class actions - Certification - Appointment or replacement of representative plaintiff - The plaintiffs, John Andriuk and Andriuk Investments Ltd., sought certification of a class action against Merrill Lynch Canada (Merrill) for how it conducted itself in relation to its clients' investments in a speculative biotech stock - The Alberta Court of Queen's Bench, in considering the issue of an adequate representative plaintiff, stated, inter alia, "the Defendant suggests that the Plaintiffs' close links with multiple financial advisors at Merrill place them in an inherent conflict with the interests of the proposed class. I do not accept this proposition, even recognizing that Mr. Andriuk's son worked at Merrill and played some role in his investment decisions and the holdings of AIL" - See paragraph 179.

Practice - Topic 209.7

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class actions - Certification - Evidence and proof - [See Practice - Topic 208.4 ].

Practice - Topic 210.5

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class or representative actions - Procedure - Pre-certification matters (incl. particulars, production, pleadings, etc.) - The plaintiffs sought certification of a class action against Merrill Lynch Canada (Merrill) for how it conducted itself in relation to its clients' investments in a speculative biotech stock - The Alberta Court of Queen's Bench considered the cause of action requirement and concluded that "While I have found several possible foundations for the Plaintiffs' claims, in which it is not plain and obvious that the cause of action will fail, the pleadings as a whole do not provide properly detailed statements of the materials facts to form the proper basis for these claims. If all other aspects of this application for certification were in order, the pleadings may have been amenable to amendment. As the discussion on the other certification requirements will demonstrate, however, I have been unable to work through or beyond the combination of complexities and deficiencies to find in favour of certification on the record before me" - See paragraph 108.

Restitution - Topic 64

Unjust enrichment - General - Juristic reason for enrichment - [See third Practice - Topic 209.3 ].

Cases Noticed:

Owners-Condominium Plan No. 0020701 v. Investplan Properties Inc. et al., [2006] A.R. Uned. 192; 57 Alta. L.R.(4th) 310; 2006 ABQB 224, refd to. [para. 28].

Harrington v. Dow Corning Corp. et al. (2000), 144 B.C.A.C. 51; 236 W.A.C. 51; 82 B.C.L.R.(3d) 1; 2000 BCCA 605, refd to. [para. 28].

Frohlinger v. Nortel Networks Corp. et al., [2007] O.T.C. 85; 40 C.P.C.(6th) 62 (Sup. Ct.), refd to. [para. 29].

Sauer v. Canada (Attorney General) et al., [2008] O.T.C. Uned. I57 (Sup. Ct.), refd to. [para. 29].

Hollick v. Metropolitan Toronto (Municipality) et al., [2001] 3 S.C.R. 158; 277 N.R. 51; 153 O.A.C. 279; 2001 SCC 68, refd to. [para. 32].

Chopik v. Mitsubishi Paper Mills Ltd., [2002] O.T.C. 472; 26 C.P.C.(5th) 104 (Sup. Ct.), refd to. [para. 43].

Ragoonanan et al. v. Imperial Tobacco Canada Ltd. et al., [2000] O.T.C. 873; 51 O.R.(3d) 603 (Sup. Ct.), refd to. [para. 67].

Martin et al. v. AstraZeneca Pharmaceuticals plc et al., [2012] O.T.C. Uned. 2744; 2012 ONSC 2744, refd to. [para. 67].

Healey v. Lakeridge Health Corp. et al., [2006] O.T.C. 981; 38 C.P.C.(6th) 145 (Sup. Ct.), refd to. [para. 68].

Fakhri et al. v. Capers Community Markets, [2003] B.C.T.C. 1717; 26 B.C.L.R.(4th) 152; 2003 BCSC 1717, affd. (2004), 203 B.C.A.C. 227; 332 W.A.C. 227; 34 B.C.L.R.(4th) 201; 2004 BCCA 549, refd to. [para. 68].

Cerqueira v. Ontario et al., [2010] O.T.C. Uned. 3954; 2010 ONSC 3954, refd to. [para. 68].

Elder Advocates of Alberta Society et al. v. Alberta et al., [2011] 2 S.C.R. 261; 416 N.R. 198; 499 A.R. 345; 514 W.A.C. 345; 2011 SCC 24, refd to. [para. 68].

Hunt v. T & N plc et al., [1990] 2 S.C.R. 959; 117 N.R. 321; 74 D.L.R.(4th) 321, refd to. [para. 69].

Saskatchewan Wheat Pool v. Canada, [1983] 1 S.C.R. 205; 45 N.R. 425, refd to. [para. 77].

Khan v. Canada (Attorney General), [2009] O.J. No. 715 (Sup. Ct.), affd. [2009] O.A.C. Uned. 495 (C.A.), refd to. [para. 89].

Murphy v. BDO Dunwoody LLP et al., [2006] O.T.C. 630; 32 C.P.C.(6th) 358 (Sup. Ct.), refd to. [para. 89].

Green et al. v. Canadian Imperial Bank of Commerce et al., [2012] O.T.C. Uned. 3637; 29 C.P.C.(7th) 225; 2012 ONSC 3637, refd to. [para. 90].

Eaton et al. v. HMS Financial Inc. et al. (2008), 458 A.R. 282; 2008 ABQB 631, refd to. [para. 90].

Samos Investments Inc. v. Pattison et al., [2001] B.C.T.C. 1790; 2001 BCSC 1790, affd. (2003), 178 B.C.A.C. 298; 292 W.A.C. 298; 10 B.C.L.R.(4th) 234; 2003 BCCA 87, refd to. [para. 90].

Carom et al. v. Bre-X Mineral Ltd. et al. (2000), 138 O.A.C. 55; 51 O.R.(3d) 236 (C.A.), refd to. [para. 90].

Cooper v. Merrill Lynch Canada Inc., [2006] B.C.T.C. Uned. C55; 2006 BCSC 1905, refd to. [para. 92].

Varcoe v. Sterling (1992), 7 O.R.(3d) 204 (Gen. Div.), refd to. [para. 92].

British Columbia v. Imperial Tobacco Canada Ltd. et al., [2011] 3 S.C.R. 45; 419 N.R. 1; 308 B.C.A.C. 1; 521 W.A.C. 1; 2011 SCC 42, refd to. [para. 103].

Dumoulin v. Ontario et al., [2005] O.T.C. 797; 19 C.P.C.(6th) 234 (Sup. Ct.), refd to. [para. 104].

Pacific Western Airlines Ltd. v. British Columbia Federation of Labour (1986), 70 B.C.L.R. 108 (C.A.), refd to. [para. 104].

Whiten v. Pilot Insurance Co. et al., [2002] 1 S.C.R. 595; 283 N.R. 1; 156 O.A.C. 201; 2002 SCC 18, refd to. [para. 105].

Caputo et al. v. Imperial Tobacco Ltd. et al., [2004] O.T.C. 112; 236 D.L.R.(4th) 348 (Sup. Ct.), refd to. [para. 107].

Pilot Homes Ltd. et al. v. Seagreen Construction & Developments Inc. et al., [2008] B.C.T.C. Uned. H11; 75 C.P.C.(6th) 221; 2008 BCSC 1871, refd to. [para. 109].

Bywater v. Toronto Transit Commission (1998), 82 O.T.C. 1; 27 C.P.C.(4th) 172 (Gen. Div.), refd to. [para. 110].

Cloud et al. v. Canada (Attorney General) et al. (2004), 192 O.A.C. 239; 73 O.R.(3d) 401 (C.A.), refd to. [para. 111].

Ayrton v. PRL Financial (Alta.) Ltd. et al. (2006), 370 A.R. 141; 52 Alta. L.R.(4th) 106; 2005 ABQB 311, affd. (2006), 384 A.R. 1; 367 W.A.C. 1; 2006 ABCA 88, refd to. [para. 112].

Mouhteros v. DeVry Canada Inc. (1998), 70 O.T.C. 138; 41 O.R.(3d) 63 (Gen. Div.), refd to. [para. 113].

Western Canadian Shopping Centres Inc. et al. v. Dutton et al., [2001] 2 S.C.R. 534; 272 N.R. 135; 286 A.R. 201; 253 W.A.C. 201; 2001 SCC 46, refd to. [para. 122].

Chadha v. Bayer Inc. et al. (2003), 168 O.A.C. 143; 63 O.R.(3d) 22 (C.A.), refd to. [para. 130].

Steele et al. v. Toyota Canada Inc. et al. (2011), 306 B.C.A.C. 132; 516 W.A.C. 132; 14 B.C.L.R.(5th) 271; 2011 BCCA 98, refd to. [para. 131].

Fanshawe College of Applied Arts and Technology v. LG Philips LCD Co. et al., [2011] O.T.C. Uned. 2484; 9 C.P.C.(7th) 184; 2011 ONSC 2484, refd to. [para. 131].

Fulawka v. Bank of Nova Scotia (2012), 293 O.A.C. 204; 111 O.R.(3d) 346; 2012 ONCA 443, refd to. [para. 136].

Rumley et al. v. British Columbia, [2001] 3 S.C.R. 184; 275 N.R. 342; 157 B.C.A.C. 1; 256 W.A.C. 1; 2001 SCC 69, refd to. [para. 141].

Chalmers v. AMO Canada Co. et al. (2010), 297 B.C.A.C. 186; 504 W.A.C. 186; 13 B.C.L.R.(5th) 37; 2010 BCCA 560, refd to. [para. 141].

Gariepy et al. v. Shell Oil Co. et al., [2002] O.T.C. 459; 23 C.P.C.(5th) 360 (Sup. Ct.), refd to. [para. 141].

Sylvan Lake Golf & Tennis Club Ltd. v. Performance Industries Ltd. and O'Connor (No. 2), [2002] 1 S.C.R. 678; 283 N.R. 233; 299 A.R. 201; 266 W.A.C. 201; 2002 SCC 19, refd to. [para. 142].

Wright et al. v. United Parcel Service Canada Ltd., [2011] O.T.C. Uned. 5044; 2011 ONSC 5044, refd to. [para. 144].

Price et al. v. Panasonic Canada Inc., [2002] O.T.C. 426; 22 C.P.C.(5th) 379 (Sup. Ct.), refd to. [para. 153].

Singer v. Schering-Plough Canada Inc., [2010] O.T.C. Uned. 42; 87 C.P.C.(6th) 276; 2010 ONSC 42, refd to. [para. 153].

Bouchanskaia v. Bayer Inc., [2003] B.C.T.C. 1306; 2003 BCSC 1306, refd to. [para. 164].

Paron et al. v. Alberta (Minister of Environmental Protection) et al. (2006), 402 A.R. 85; 2006 ABQB 375, refd to. [para. 172].

MacDonald (Litigation Guardian of) v. Dufferin-Peel Catholic District School Board (2000), 20 C.P.C.(5th) 345 (Ont. Sup. Ct.), refd to. [para. 176].

Statutes Noticed:

Class Proceedings Act, S.A. 2003, c. C-16.5, sect. 5(1) [para. 24]; sect. 5(2) [para. 25].

Authors and Works Noticed:

Halsbury's Laws of England (5th Ed.), vol. 11, para. 21 [para. 67].

Linden, Allen M., and Feldthusen, Bruce, Canadian Tort Law (8th Ed. 2006), pp. 442, 443 [para. 88].

Counsel:

Kevin P. McGuigan and Byron Nelson, for the plaintiffs;

Tristram J. Mallett and Lauren Tomasich, co-counsel for the defendant;

Lillian Y. Pan, co-counsel for the defendant.

This application was heard on January 22 and 25, 2013, before Martin, J., of the Alberta Court of Queen's Bench, Judicial District of Calgary, who delivered the following reasons for judgment on July 25, 2013.