Matheson v. CIBC World Markets, (2015) 356 N.S.R.(2d) 324 (CA)

Judge:Beveridge, Scanlan and Bourgeois, JJ.A.
Court:Nova Scotia Court of Appeal
Case Date:November 26, 2014
Jurisdiction:Nova Scotia
Citations:(2015), 356 N.S.R.(2d) 324 (CA);2015 NSCA 22
 
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Matheson v. CIBC World Markets (2015), 356 N.S.R.(2d) 324 (CA);

    1126 A.P.R. 324

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Temp. Cite: [2015] N.S.R.(2d) TBEd. MR.007

CIBC World Markets Inc./Marches Mondiaux CIBC Inc. carrying on business as CIBC Wood Gundy (appellant) v. Donald Matheson and Carolyn Matheson (respondents)

(CA 427111; 2015 NSCA 22)

Indexed As: Matheson v. CIBC World Markets Inc.

Nova Scotia Court of Appeal

Beveridge, Scanlan and Bourgeois, JJ.A.

March 6, 2015.

Summary:

The Mathesons held a number of investment accounts with CIBC World Markets carrying on business as CIBC Wood Gundy (CIBC). Between July 24, 2008 and November 30, 2008 (the error period), they lost a substantial part of their investments. They asserted that they suffered damages as a result of CIBC's erroneous calculation of the margin available in their accounts in relation to the EEM investment fund and the error prevented them and their investment advisor from making sound investments decisions. CIBC admitted that it was responsible for the error, reversed certain trades in the Mathesons' accounts and reimbursed them more than $643,000. CIBC asserted that the compensation provided represented a reversal of trades that required margin and that that was all that the Mathesons were entitled to. The Mathesons commenced an application, alleging breach of fiduciary duty, negligence, breach of contract and negligent misrepresentation. They sought damages for all of their losses in their investment accounts and reversal of every non-EEM option trade made during the error period.

The Nova Scotia Supreme Court, in a decision reported at 339 N.S.R.(2d) 295; 1073 A.P.R. 295, dismissed the claim for damages relating to the remainder of the non-margin portion of their portfolio and refused to reverse every non-EEM option trade made in their accounts during the error period. However, the Mathesons were entitled to recover "clawback" damages (amounts that CIBC had deducted from their compensation that represented transactions that had occurred prior to the error period). The court refused the Mathesons' request for compound interest at 10% and awarded them the default rate of 5% simple interest. CIBC appealed the award of clawback damages. The Mathesons' cross-appealed, asserting that the judge erred in failing to apply the modified "but for" analysis to their entire portfolio.

The Nova Scotia Court of Appeal allowed CIBC's appeal and dismissed the Mathesons' cross-appeal.

Fraud and Misrepresentation - Topic 2508

Misrepresentation - Negligent misrepresentation - The Mathesons lost a substantial part of their investments with CIBC Wood Gundy (CIBC) - They sued CIBC, alleging negligent misrepresentation - They asserted that they suffered damages as a result of CIBC's erroneous calculation of the margin available in their accounts respecting the EEM investment fund (investments requiring margins); the error prevented them and their investment advisor from making sound investments decisions; and all of their losses in their EEM and non-EEM accounts for the error period should be reversed - CIBC admitted responsibility for the error, reversed certain trades in the Mathesons' accounts and reimbursed them more than $643,000 - The Mathesons asserted that a modified "but for" causation test applied, and that once they had established reliance, the burden shifted to CIBC to dispel causation - The presiding judge rejected the assertion and held that the burden remained on the Mathesons to establish that their losses were caused by their reliance on the margin misstatement - That burden was not met - However, they were entitled to recover certain "clawback" damages respecting the EEM accounts - The Nova Scotia Court of Appeal held that the judge correctly rejected the application of a modified "but for" test - However, he erred in awarding the clawback damages - His clawback analysis failed to recognize that the Mathesons had to establish causation and ignored his earlier findings respecting the lack of evidence - Rather, after concluding that the Mathesons had relied on the margin misstatement in relation to the EEM accounts, he shifted the burden to CIBC to establish why the reimbursement of $643,000 was appropriate - Based on his own findings, there was nothing which established that the Mathesons had suffered any detriment due to their reliance on the margin misstatements - See paragraphs 34 to 78.

Fraud and Misrepresentation - Topic 2535

Misrepresentation - Elements - Reliance - [See Fraud and Misrepresentation - Topic 2508 ].

Fraud and Misrepresentation - Topic 2825

Misrepresentation - Defences - Lack of reliance - [See Fraud and Misrepresentation - Topic 2508 ].

Fraud and Misrepresentation - Topic 2830

Misrepresentation - Defences - No detrimental reliance (damages) - [See Fraud and Misrepresentation - Topic 2508 ].

Torts - Topic 54

Negligence - Causation - Test for (incl. "but for" test and "material contribution" test) - [See Fraud and Misrepresentation - Topic 2508 ].

Cases Noticed:

Can-Euro Investments Ltd. v. Industrial Alliance Insurance and Financial Services Inc. (2013), 331 N.S.R.(2d) 341; 1051 A.P.R. 341; 2013 NSCA 76, refd to. [para. 32].

Awalt v. Blanchard (2013), 326 N.S.R.(2d) 189; 1033 A.P.R. 189; 2013 NSCA 11, refd to. [para. 33].

Queen (D.J.) v. Cognos Inc., [1993] 1 S.C.R. 87; 147 N.R. 169; 60 O.A.C. 1, refd to. [para. 40].

Clements v. Clements, [2012] 2 S.C.R. 181; 431 N.R. 198; 331 B.C.A.C. 1; 565 W.A.C. 1; 2012 SCC 32, refd to. [para. 41].

Rainbow Industrial Caterers Ltd. et al. v. Canadian National Railway Co. et al., [1991] 3 S.C.R. 3; 126 N.R. 354; 3 B.C.A.C. 1; 7 W.A.C. 1, refd to. [para. 44].

Chan v. GMS Datalink International Corp. et al., [1998] B.C.T.C. Uned. 895 (S.C.), refd to. [para. 50].

Northey-Taylor et al. v. Casey et al. (2007), 414 A.R. 318; 2007 ABQB 113, additional reasons (2007), 414 A.R. 339; 2007 ABQB 306, affd. (2008), 429 A.R. 302; 421 W.A.C. 302; 2008 ABCA 149, refd to. [para. 55].

First Majestic Silver Corp. et al. v. Davila et al., [2013] B.C.T.C. Uned. 717; 2013 BCSC 717, refd to. [para. 60].

National Bank Financial Ltd. v. Potter et al. (2013), 333 N.S.R.(2d) 60; 1055 A.P.R. 60; 2013 NSSC 248, refd to. [para. 63].

Authors and Works Noticed:

Klar, Lewis N., Tort Law (5th Ed. 2012), p. 257 [para. 43].

Counsel:

John A. Keith, Q.C., and Jack Townsend, for the appellant/respondent by cross-appeal;

George W. MacDonald, Q.C., and Jane O'Neill, for the respondent/appellant by cross-appeal.

This appeal and cross-appeal were heard at Halifax, Nova Scotia, on November 26, 2014, by Beveridge, Scanlan and Bourgeois, JJ.A., of the Nova Scotia Court of Appeal. Bourgeois, J.A., delivered the following reasons for judgment for the court on March 6, 2015.

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