Montreal Trust Co. of Canada et al. v. ScotiaMcLeod Inc. et al.,

• Jurisdiction: Ontario
• Judge: Finlayson, Galligan and Doherty, JJ.A.
• Citation: (1995), 87 O.A.C. 129 (CA),1995 CanLII 1301 (NS CA),1995 CanLII 1301 (ON CA),26 OR (3d) 481,129 DLR (4th) 711,23 BLR (2d) 165,[1995] CarswellOnt 1203,[1995] OJ No 3556 (QL),59 ACWS (3d) 213,87 OAC 129
• Court: Court of Appeal (Ontario)
• Date: 30 October 1995

Montreal Trust v. ScotiaMcLeod (1995), 87 O.A.C. 129 (CA)

MLB headnote and full text

ScotiaMcLeod Inc. and William Wood (defendants/appellants) v. Peoples Jewellers Limited, Irving R. Gerstein, Charles F. Gill, Bertrand Gerstein, Marvin Gerstein, James M. Gillies, Nicholas I. White, Howard P. Berkowitz, Anna M. Porter, Michael G. Shulman, Leighton W. McCarthy, and Henry N.R. Jackman (third parties/respondents in appeal)

(C198151)

Indexed As: Montreal Trust Co. of Canada et al. v. ScotiaMcLeod Inc. et al.

Ontario Court of Appeal

Finlayson, Galligan and Doherty, JJ.A.

November 22, 1995.

Summary:

The plaintiffs purchased issued senior unsecured debentures of Peoples Jewellers. The plaintiffs subsequently sued, inter alia, ScotiaMcLeod (a firm of underwriters) and its president, alleging an intentional or neg­ligent material misrepresentation because it was not disclosed to the plaintiffs that, at the time of the purchase, Peoples was conditionally liable for certain obligations of two other companies. The defendants com­menced third party proceedings against the directors of Peoples, claiming contribution and indemnity. The defendants did not allege negligence by the directors, except by the directors Charles Gill and Irving Gerstein, who were also the vice president and the president and chief executive officer of Peoples. The defendants claimed against Gill and Gerstein for contribution and indemnity and for negligent misrepresentation. The third parties' motion to dismiss the defen­dants' amended third party claim was granted on the basis that it failed to disclose a rea­son­able cause of action. The defendants appealed.

The Ontario Court of Appeal dismissed the appeal with respect to all of the third parties except Charles Gill and Irving Gerstein. The appeal was allowed with respect to Charles Gill and Irving Gerstein.

Company Law - Topic 4181

Directors - Liability of directors - General - The plaintiffs purchased issued senior unsecured debentures of Peoples Jewellers - The plaintiffs subsequently sued ScotiaMcLeod (a firm of underwriters) and its president, alleging an intentional or negli­gent material misrepresentation because it was not disclosed to the plaintiffs that, at the time of the purchase, Peoples was conditionally liable for certain obligations of two other companies - The defendants commenced third party proceedings against the directors of Peoples - The defendants relied on s. 130(1)(c) of the Securities Act as imposing liability on every director of an issuer of a prospectus - The Ontario Court of Appeal held that s. 130(1) had no application to the purchasers of debentures which were the subject of a private place­ment - See paragraphs 33 and 34.

Company Law - Topic 4183

Directors - Liability of directors - For torts - The plaintiffs purchased issued senior unsecured debentures of Peoples Jewellers - The plaintiffs subsequently sued ScotiaMcLeod (a firm of under­writ­ers) and its president, alleging an inten­tional or negligent material misrepre­senta­tion because it was not disclosed to the plaintiffs that, at the time of the pur­chase, Peoples was conditionally liable for certain obligations of two other companies - The defendants commenced third party pro­ceedings against the directors of Peoples, claiming contribution and indem­nity - The defendants did not allege negli­gence by the directors, except by the dir­ectors Gill and Gerstein, who were also the vice president and the president and chief executive officer of Peoples, and against whom the defendants also claimed for negligent misrepresentation - The Ontario Court of Appeal affirmed a dismissal of the third party claim against all of the directors except Gill and Gerstein.

Practice - Topic 1121

Parties - Third party procedure - When available - Claim for contribution or in­demnity - [See Company Law - Topic 4183].

Cases Noticed:

Queen (D.J.) v. Cognos Inc., [1993] 1 S.C.R. 87; 147 N.R. 169; 60 O.A.C. 1, consd. [para. 20].

London Drugs Ltd. v. Brassart and Vanwinkel, [1992] 3 S.C.R. 299; 143 N.R. 1; 18 B.C.A.C. 1; 31 W.A.C. 1, refd to. [para. 23].

London Drugs v. Kuehne & Nagel - see London Drugs Ltd. v. Brassart and Van­winkel.

Ontario Store Fixtures Inc. v. Mmmuffins Inc. (1989), 70 O.R.(2d) 42 (H.C.), refd to. [para. 25].

Lennard's Carrying Co. v. Asiatic Petro­leum Co., [1915] A.C. 705 (H.L.), consd. [para. 28].

Tesco Supermarkets Ltd. v. Nattrass, [1972] A.C. 153 (H.L.), refd to. [para. 29].

British Thomson-Houston Co. v. Sterling Accessories Ltd., [1924] 2 Ch. 33, refd to. [para. 30].

R. v. Canadian Dredge & Dock Co. et al., [1985] 1 S.C.R. 662; 59 N.R. 241; 9 O.A.C. 321, consd. [para. 31].

Mentmore Manufacturing Co. et al. v. National Merchandise Manufacturing Co. et al. (1978), 22 N.R. 161; 89 D.L.R.(3d) 195 (F.C.A.), refd to. [para. 32].

White Horse Distillers Ltd. et al. v. Gregson Associates Ltd. et al., [1984] R.P.C. 61 (Ch. D.), refd to. [para. 32].

Belanger (R.D.) & Associates Ltd. et al. v. Stadium Corp. of Ontario Ltd. and Bitove Corp. (1991), 57 O.A.C. 81; 5 O.R.(3d) 778 (C.A.), refd to. [para. 39].

Hanson v. Bank of Nova Scotia et al. (1994), 74 O.A.C. 145; 19 O.R.(3d) 142 (C.A.), refd to. [para. 39].

Hunt v. T & N plc et al., [1990] 2 S.C.R. 959; 117 N.R. 321; 4 C.C.L.T.(2d) 1; 43 C.P.C.(2d) 105; 49 B.C.L.R.(2d) 273; 74 D.L.R.(4th) 321, refd to. [para. 39].

Statutes Noticed:

Securities Act, R.S.O 1990, c. S-5, sect. 58(1), sect. 130(1)(c) [para. 33].

Counsel:

Dennis R. O'Connor and Benjamin T. Glustein, for the appellants;

Brian G. Morgan and Jennifer Dolman, for the respondent, Charles Gill;

Robert P. Armstrong, Q.C., and Steven J. Tenai, for the respondents, James M. Gillies, Howard P. Berkowitz, Anna M. Porter, Michael G. Shulman, Leighton W. McCarthy and Henry N.R. Jackman;

Allan Sternberg, for the respondent, Nicholas I. White;

Robert J. Morris and David D. Conklin, for the respondents, Irving R. Gerstein and Bertrand Gerstein;

Kevin R. Aalto, for the respondent, Marvin Gerstein.

This appeal was heard on October 30, 1995, before Finlayson, Galligan and Doherty, JJ.A., of the Ontario Court of Appeal. The following judgment of the Court of Appeal was delivered by Finlayson, J.A., and was released on November 22, 1995.