Hunt v. TD Securities, (2003) 175 O.A.C. 19 (CA)

• Judge: Simmons, Gillese and Armstrong, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: August 26, 2003
• Jurisdiction: Ontario
• Citations: (2003), 175 O.A.C. 19 (CA)

Hunt v. TD Securities (2003), 175 O.A.C. 19 (CA)

MLB headnote and full text

Temp. Cite: [2003] O.A.C. TBEd. AU.023

A. Melville Hunt and Marion M. Hunt (plaintiffs/respondents) v. TD Securities Inc. c.o.b. as TD Evergreen and TD Financial Services and Mark Schram (defendants/appellants)

(C37797)

Indexed As: Hunt v. TD Securities Inc. et al.

Ontario Court of Appeal

Simmons, Gillese and Armstrong, JJ.A.

August 26, 2003.

Summary:

In March 1997, an investment broker sold his elderly clients' BCE shares without authorization. The price of BCE shares dropped for two months after the sale, then rose. In July 1998, the clients sued the broker and his employer.

The Ontario Superior Court, in a decision reported [2002] O.T.C. 93, allowed the action and ordered the defendants to pay the plaintiffs $59,319 plus interest and costs. The court ruled that a fiduciary relationship existed between the broker and the clients and that the broker breached it. The employer was held vicariously liable. The defendants were ordered to pay solicitor and client costs. The defendants appealed on the merits and applied for leave to appeal the costs award. The plaintiffs cross-appealed, seeking an increase in the damage award.

The Ontario Court of Appeal allowed the appeal on the merits in part, granted leave to appeal the costs award and allowed the costs appeal. The court dismissed the cross-appeal. The court ruled that there did not exist a fiduciary relationship between the parties but that the defendants had committed a breach of contract. The court awarded damages that flowed directly from the breach. The court also ruled that the proper basis for costs was party and party.

Agency - Topic 1903

Ratification - General principles - What acts constitute ratification - The defendant investment broker sold his clients' (the plaintiffs) BCE shares without their authorization - The plaintiffs used the sale proceeds to purchase shares in other companies and continued to deal with the broker for a certain time while continuously complaining to the broker and his employer about the unauthorized sale - The Ontario Court of Appeal ruled that the plaintiffs did not ratify the sale - While continued dealings could be evidence of ratification, it was not determinative - Ratification could not be implied in the face of continuing repudiation even when the investor continued to use the broker for other transactions - See paragraphs 65 to 77.

Brokers - Topic 2210

Employment and authority - Authority - Stockbrokers - Sales - Nature of relationship - The defendant broker was in a position to conduct an unauthorized sale of his clients' (the plaintiffs) shares but was not allowed to make transactions on behalf of the plaintiffs without their authorization - The trial judge ruled that a fiduciary relationship existed between the parties where the broker had the discretion or power to unilaterally affect the plaintiffs' interests - The Ontario Court of Appeal held that the trial judge had committed a palpable and overriding error - The court, after an analysis based on the criteria of vulnerability, trust, reliance, discretion and professional rules or codes of conduct, ruled that the relationship was contractual in nature - See paragraphs 31 to 64.

Contracts - Topic 4023

Remedies for breach - Damages - Extent of liability - Losses attributable to breach - On March 3, 1997, the defendant broker made an unauthorized sale of his clients' (the plaintiff husband and wife) BCE shares - The BCE share price dropped for two months thereafter but then rose again - By April 2, 1997, the plaintiff husband had used the sale proceeds to purchase shares in Chrysler and CIBC - On July 8, 1998, the plaintiffs issued a statement of claim against the broker and his employer - After ruling that the unauthorized sale was a breach of contract and that the plaintiffs had a duty to mitigate by purchasing like shares by April 2, 1997, the Ontario Court of Appeal held that the plaintiffs were entitled to damages arising from the breach - As the price of BCE shares fell in the two months following their sale, there was no loss in their value - The plaintiffs were to be compensated for the other losses that flowed directly from the breach, namely: (1) capital gains tax paid on the sale of the BCE shares; (2) transaction costs and commissions paid on the sale of the shares; and (3) transaction costs and commissions paid on the purchase of Chrysler and CIBC shares - See paragraphs 82 to 106.

Damages - Topic 1038

Mitigation - In contract - Time for mitigation - On March 3, 1997, the defendant broker made an unauthorized sale of his clients' (the plaintiff husband and wife) BCE shares - The BCE share price dropped for two months thereafter but then rose again - By April 2, 1997, the proceeds of the sale had been used to purchase shares in Chrysler and CIBC - On July 8, 1998, the plaintiffs issued a statement of claim against the broker and his employer - The Ontario Court of Appeal ruled: (1) the unauthorized sale was a breach of contract; (2) the plaintiffs had a duty to mitigate; (3) the mitigation period, during which the plaintiffs were obliged to purchase replacement shares, ran from March 3, 1997, date of the unauthorized sale, to April 2, 1997, latest date at which the husband plaintiff was in a position to reacquire BCE shares - The plaintiff husband knew that shares had been sold, the proceeds were available and he was making decisions on how to use the proceeds - To impose a duty to mitigate on the plaintiffs at a date later would be to permit them to speculate at the broker's expense - The court added that the same result would have been obtained had the appeal been decided on the basis that the unauthorized sale was a breach of fiduciary duty - See paragraphs 82 to 105, 107 to 119.

Damages - Topic 1066

Mitigation - In particular matters - Sale of shares - [See Damages - Topic 1038 ].

Damages - Topic 6302

Contracts - Sale of shares - Unauthorized sale - [See Contracts - Topic 4023 ].

Equity - Topic 3655

Fiduciary or confidential relationships - Breach of fiduciary relationship - Damages - Mitigation - [See Damages - Topic 1038 ].

Practice - Topic 7020.1

Costs - Party and party costs - Entitlement to party and party costs - Successful party - Quantum - The defendants appealed the solicitor and client costs award in favour of the plaintiffs - The plaintiffs' legal work had been done by their lawyer son and then by lawyers Wellhauser and Neeb - After ruling that the costs should have been on a party and party basis, the Ontario Court of Appeal, with respect to quantum, ruled: (1) the trial judge erred in awarding costs for the legal work done by the plaintiffs' son because the plaintiffs had no obligation to pay him; (2) there was no excessive duplication of work; (3) there was no basis to award costs for work done by Neeb beyond his usual hourly rate where the trial judge ruled that the "new" costs grid did not apply; (4) the trial judge erred in applying a $350 hourly rate for Wellhauser's work where the evidence indicated a rate of $150; (5) disbursements were not excessive; and (6) the quantum of costs exceeded the quantum of damages awarded to the plaintiffs but the court would not have interfered with the determination of the costs quantum solely because it was excessive - See paragraphs 157 to 186.

Practice - Topic 7408

Costs - Solicitor and client costs - General principles - Solicitor and client costs as damages or punishment - The defendant broker made an unauthorized sale of his elderly clients' (the plaintiffs) BCE shares - The value of BCE shares eventually went up and the plaintiffs sued the broker and his employer - The trial judge allowed the action and awarded the plaintiffs solicitor and client costs - The defendants successfully appealed on the costs issue - The Ontario Court of Appeal held: "If the trial judge relied on the principle that the party ought not to be put to any expense as a free standing ground upon which to award solicitor and client costs, he erred. Thus, if the solicitor and client costs is justified, it must be due to the appellants' misconduct and not the desire to indemnify the [plaintiffs]" - See paragraphs 121 to 127.

Practice - Topic 7454

Costs - Solicitor and client costs - Entitlement to solicitor and client costs - Improper, irresponsible or unconscionable conduct - The defendant broker made an unauthorized sale of his elderly clients' (the plaintiff husband and wife) BCE shares - The value of BCE shares eventually went up and the plaintiffs sued the broker and his employer - The trial judge allowed the action and awarded the plaintiffs solicitor and client costs - The defendants successfully appealed on the costs issue - The Ontario Court of Appeal ruled that there was no basis on which to conclude that the defendants were attempting to use the justice system to harass the plaintiffs or that they committed an abuse of process - The fact that the plaintiffs were elderly and that the husband was in poor physical health were factors to which a defendant might properly be sensitive in the conduct of its defence - However, they were not factors that, of themselves, could operate to deprive a defendant of its right to defend the action or that compel settlement - The trial judge's conclusion that the defendants "adopted the role of the bully" and attempted to take advantage of the plaintiffs' vulnerability was premised on the improper assumption that they had a positive duty to capitulate to the plaintiffs' demands in the first place - See paragraphs 128 to 156.

Practice - Topic 8800

Appeals - General principles - Duty of appellate court regarding findings of fact - [See Brokers - Topic 2210 ].

Cases Noticed:

Housen v. Nikolaisen et al. (2002), 286 N.R. 1; 219 Sask.R. 1; 272 W.A.C. 1; 211 D.L.R.(4th) 577 (S.C.C.), refd to. [para. 31].

Chesebrough v. Willson et al. (2002), 166 O.A.C. 119 (C.A.), consd. [para. 36].

Hodgkinson v. Simms et al., [1994] 3 S.C.R. 377; 171 N.R. 245; 49 B.C.A.C. 1; 80 W.A.C. 1, consd. [para. 36].

Frame v. Smith and Smith, [1987] 2 S.C.R. 99; 78 N.R. 40; 23 O.A.C. 84, refd to. [para. 39].

Kent et al. v. May et al. (2001), 298 A.R. 71 (Q.B.), affd. (2002), 317 A.R. 381; 284 W.A.C. 381 (C.A.), consd. [para. 42].

Dyck et al. v. Roulston et al. (1997), 92 B.C.A.C. 279; 150 W.A.C. 279; 36 B.C.L.R.(3d) 126 (C.A.), refd to. [para. 43].

Varcoe v. Sterling (1992), 7 O.R.(3d) 204 (Gen. Div.), affd. (1992), 10 O.R.(3d) 574 (C.A.), refd to. [para. 43].

Zraik et al. v. Levesque Securities Inc. et al. (2001), 153 O.A.C. 186 (C.A.), consd. [para. 45].

Zivadinovich v. Mehta et al. (1999), 117 O.A.C. 328 (C.A.), consd. [para. 54].

Grenkow v. Merrill Lynch Royal Securities Ltd., MacFadden and Smith (1983), 23 Man.R.(2d) 54 (Q.B.), consd. [para. 71].

Forrest v. Gairdner & Co. (1962), 33 D.L.R.(2d) 575 (B.C.C.A.), dist. [para. 72].

Baud Corp., N.V. v. Brook, [1979] 1 S.C.R. 633; 23 N.R. 181, refd to. [para. 83].

Asamera Oil Corp. v. Sea Oil & General Corp. - see Baud Corp., N.V. v. Brook.

Placements Armand Laflamme Inc. v. Roy et al. (2000), 253 N.R. 155 (S.C.C.), consd. [para. 86].

Hongkong Bank of Canada v. Richardson Greenshields of Canada Ltd. (1990), 72 D.L.R.(4th) 161 (B.C.C.A.), consd. [para. 90].

Secord v. Global Securities Corp. et al. (2003), 179 B.C.A.C. 12; 295 W.A.C. 12; B.C.L.R.(4th) 62 (C.A.), refd to. [para. 92].

Chesebrough v. Willson, [2001] O.J. No. 940 (Sup. Ct.), refd to. [para. 94].

Canson Enterprises Ltd. et al. v. Boughton & Co. et al., [1991] 3 S.C.R. 534; 131 N.R. 321; 6 B.C.A.C. 1; 13 W.A.C. 1, consd. [para. 108].

Mortimer et al. v. Cameron et al. (1994), 68 O.A.C. 332; 17 O.R.(3d) 1 (C.A.), refd to. [para. 123].

McBride Metal Fabricating Corp. v. H & W Sales Co. (2002), 158 O.A.C. 214; 59 O.R.(3d) 97 (C.A.), refd to. [para. 123].

Stonehocker et al. v. King et al. (1992), 113 O.A.C. 239; 41 O.R.(3d) 389 (C.A.), consd. [para. 125].

Church of Jesus Christ of Latter Day Saints - see Stonehocker et al. v. King et al.

Gerula v. Flores (1995), 83 O.A.C. 128; 126 D.L.R.(4th) 506 (C.A.), consd. [para. 132].

Foulis v. Robinson (1979), 21 O.R.(2d) 769 (C.A.), consd. [para. 133].

Roberts v. Willson (1997), 10 C.P.C.(4th) 188 (B.C.S.C.), refd to. [para. 147].

Chan Estate v. Hwang et al. (1999), 10 B.C.T.C. 224 (S.C.), refd to. [para. 147].

Dical Investments Ltd. v. Morrison et al. (1989), 68 O.R.(2d) 549 (H.C.), revd. (1990), 43 O.A.C. 90; 75 O.R.(2d) 497 (C.A.), leave to appeal refused [1991] 3 S.C.R. v; 136 N.R. 419; 50 O.A.C. 159; 4 O.R.(3d) xi, refd to. [para. 149, footnote 2].

Clark v. Nash, [1990] B.C.J. No. 727 (C.A.), consd. [para. 159].

Genah v. Reg Quinn Ltd., [2002] O.J. No. 2832 (Sup. Ct.), consd. [para. 181].

Murano et al. v. Bank of Montreal et al. (1998), 111 O.A.C. 242; 41 O.R.(3d) 222 (C.A.), refd to. [para. 186].

Tri-S Investments v. Vong, [1991] O.J. No. 2292 (Gen. Div.), refd to. [para. 186].

Kopij v. Metropolitan Toronto (Municipality) (1998), 123 O.A.C. 106 (C.A.), refd to. [para. 188].

Authors and Works Noticed:

Orkin, Mark M., The Law of Costs (2nd Ed.) (1993 Looseleaf Ed.), pp. 2-91 to 2-92 [para. 123].

Counsel:

James W.W. Neeb, Q.C., and Julie C. Aldred, for the respondents;

Stephen Finch, Q.C., for the appellants.

This appeal was heard on December 19, 2002, by Simmons, Gillese and Armstrong, JJ.A., of the Ontario Court of Appeal.

The decision of the Court of Appeal was delivered by Gillese, J.A., and released on August 26, 2003.