National Bank Financial Ltd. v. Potter et al., 2013 NSSC 248

• Judge: Warner, J.
• Court: Supreme Court of Nova Scotia (Canada)
• Case Date: Tuesday April 17, 2012
• Jurisdiction: Nova Scotia
• Citations: 2013 NSSC 248;(2013), 333 N.S.R.(2d) 60 (SC)

Nat. Bk. v. Potter (2013), 333 N.S.R.(2d) 60 (SC);

    1055 A.P.R. 60

MLB headnote and full text

Temp. Cite: [2013] N.S.R.(2d) TBEd. AU.011

National Bank Financial Ltd. (plaintiff/defendant by counterclaim) in Hfx. No. 174294 v. Daniel Frederick Potter, Gramm & Company Incorporated, Starr's Point Capital Incorporated, 2532230 Nova Scotia Limited, 3020828 Nova Scotia Limited, Ronald D. Richter, Solutioninc Limited, John Francis Sullivan, Linda Fay Sullivan, Calvin W. Wadden, Craig Anthony Dunham, Douglas George Rudolph, Gerard B. McInnis, Janine M. McInnis, Lowell R. Weir, Blackwood Holdings Incorporated, and Staffing Strategists International Inc. (defendants/plaintiffs by counterclaim) in Hfx. No. 174294 and Daniel Potter, Starr's Point Capital Incorporated, Fiona Imrie, Gramm & Company Incorporated, 2532230 Nova Scotia Limited, 3020828 Nova Scotia Limited, Ronald Richter, Donald Snow, Meg Research.com Limited, 3027748 Nova Scotia Limited, Calvin Wadden, Raymond Courtney, Bernard Schelew, Blois Colpitts, Stewart McKelvey Stirling Scales, Bruce Clarke, 2317540 Nova Scotia Limited, Knowledge House Inc., The Estate of the Late Michael Barthe, represented by his Executrix Barbara Barthe, Lutz Ristow, Derek Banks and Plastics Maritime Ltd. (third parties) in Hfx. No. 174294

And Between: Calvin Wadden, 3019620 Nova Scotia Limited and Andrea Wadden (plaintiffs) in Hfx. No. 216059 v. BMO Nesbitt Burns (defendant) in Hfx. No. 216059; (Hfx. 174294 (Debt Action); Hfx. 206439 (Main Action); Hfx. 208293 (Barthe Action); Hfx. 246337 (National Bank/Weir Action); Hfx. 216059

(Wadden/BMO Action); 2013 NSSC 248)

Indexed As: National Bank Financial Ltd. v. Potter et al.

Nova Scotia Supreme Court

Warner, J.

August 7, 2013.

Summary:

A complex series of multi-party actions arose out of the collapse of a publicly-traded technology company, Knowledge House Inc. (KHI). National Bank Financial Ltd. (NBFL) started a number of actions against clients and former clients for unpaid margin debt arising from the collapse. Some of NBFL clients defended those claims by alleging that they had been the victims of a conspiracy by NBFL's employee, Clarke, and others to manipulate KHI share prices. NBFL issued a statement of claim, in what became the main action, against Potter (a lawyer), Clarke, and others, alleging that they conspired to manipulate the price of KHI shares and that the conspiracy resulted in a fraud being committed against NBFL. Several of the respondents in the main action started actions against NBFL, including Dunham, the Weirs, Blackwood Holdings (a Weir company), Barthe and Wadden (collectively referred to as the "Dunlop clients" as they were all represented by a lawyer named Dunlop). Wadden commenced a separate action against BMO Nesbitt Burns Inc. respecting the handling of his margin accounts. By the time of trial, the only remaining parties were the Dunlop clients, NBFL and its parent the National Bank of Canada, and BMO Nesbitt Burns Inc.

The Nova Scotia Supreme Court allowed the claims by Dunham, the Weirs and Blackwood Holdings and assessed damages, including punitive damages. Barthe's claim was allowed in part, for the time up to when he became aware of the stock manipulation scheme. The court dismissed Wadden's claim against NBFL and BMO Nesbitt Burns Inc. considering him to be an insider who actively participated in the stock manipulation scheme. NBFL's third party claim against Wadden was allowed.

Brokers - Topic 2665

Liability of broker to principal - Stockbrokers - Ratification of stockbroker's activity by client - The Nova Scotia Supreme Court noted that in Connolly v. Walwyn (NSCA 1993), the court held that a failure by the plaintiff investor to repudiate unauthorized trading on the part of his stockbroker meant that the plaintiff had acquiesced to the trading, and as a result of that ratification, could not claim against the brokerage firm for failure to supervise - In Walwyn, the court stated also that when the plaintiff "first discovered the unauthorized trading, his only option so far as [the brokerage firm] was concerned was to terminate the contract ..." - The court also noted that in Forrest v. Gairdner (BCCA 1962), the court held that the time period in which an investor was required to repudiate a transaction began to run when the investor knew or ought to have known of the transaction - See paragraphs 709 and 710.

Brokers - Topic 2665

Liability of broker to principal - Stockbrokers - Ratification of stockbroker's activity by client - The Nova Scotia Supreme Court noted that there were two general situations where silence or apparent consent would not amount to ratification: (1) where the investor lacked knowledge of the transactions or the legal significance of those transactions; and (2) where there was a fiduciary relationship between the broker and the investor, and the broker's actions breached that relationship to the extent that it corroded the very nature of the relationship itself - See paragraphs 709 to 715.

Brokers - Topic 2665

Liability of broker to principal - Stockbrokers - Ratification of stockbroker's activity by client - A complex series of multi-party actions arose out of the collapse of a publicly traded technology company, Knowledge House Inc. (KHI), including a claim by parties represented by Dunlop (the "Dunlop clients"), against National Bank Financial Ltd. (NBFL) - The Dunlop clients, which included Dunham, the Weirs, Wadden and Barthe, alleged that NBFL failed to adequately supervise its employee (Clarke), a broker/investment advisor, who engaged in market manipulation respecting KHI, which resulted in their losses - NBFL raised the defence of ratification, arguing that the Dunlop clients' failure to complain about the transactions in their respective accounts meant that they acquiesced, and therefore ratified, the transactions - The Dunlop clients argued that they could not ratify that of which they were unaware - The Nova Scotia Supreme Court held that Clarke's market manipulation was a material circumstance that the Dunlop clients would have had to have been aware of in order to find that acquiescence amounted to ratification - Dunham and the Weirs were not aware of Clarke's market manipulation activities - That defeated NBFL's ratification argument with respect to their claims - The situation was different with regard to the Barthe and Wadden claims - See paragraphs 708 to 730.

Brokers - Topic 3081

Duties of broker to principal - Stockbrokers (incl. commodity brokers) - General - The Nova Scotia Supreme Court reviewed the law respecting the broker (investment advisor)-client relationship - The court stated that "The relationship between an investment advisor and their clients is one of agent and principal, but the precise nature of the duties owed by an investment advisor to his or her principal depends on the circumstances. Most investment advisor-client relationships fall in the middle of a spectrum between the investment advisor as a mere 'order taker' and the investment advisor as a fiduciary ... A fiduciary relationship is not presumed and must be established based on evidence" - The court elaborated on the test to determine when an investment advisor-client relationship would give rise to a fiduciary relationship - See paragraphs 213 to 236.

Brokers - Topic 3083

Duties of broker to principal - Stockbrokers (incl. commodity brokers) - Contractual duties - A complex series of multi-party actions arose out of the collapse of a publicly traded technology company, Knowledge House Inc. (KHI), including a claim by the Weirs (part of the "Dunlop clients" group) against National Bank Financial Ltd. (NBFL) - The Dunlop clients alleged that NBFL failed to adequately supervise its employee (Clarke), their broker/investment advisor, who engaged in market manipulation respecting KHI, which resulted in the Dunlop clients' losses - The Weirs based their claim on breach of contract, negligence and fraud (i.e., that Clarke failed to execute their sell orders such that they were left holding KHI shares when the stock collapsed) - The Nova Scotia Supreme Court held that Clarke's actions constituted fraudulent misrepresentation with respect to the Weirs - See paragraphs 371 to 452 and 681.

Brokers - Topic 3083

Duties of broker to principal - Stockbrokers (incl. commodity brokers) - Contractual duties - A complex series of multi-party actions arose out of the collapse of a publicly traded technology company, Knowledge House Inc. (KHI), including a claim by Barthe Estate (one of the "Dunlop clients") against National Bank Financial Ltd. (NBFL) - The Dunlop clients alleged that NBFL failed to adequately supervise its employee (Clarke), who engaged in market manipulation respecting KHI, which resulted in the Dunlop clients' losses - Barthe did not seek advice from Clarke - Rather, Barthe claimed that before Clarke received instructions to execute purchases on the market, Clarke was part of a conspiracy with KHI insiders to manipulate the public stock price - The Nova Scotia Supreme Court found NBFL liable, both vicariously for Clarke, and by reason of its own negligence and breach of contract to Barthe, respecting the Barthe investment in August 2001 of $1,700,000.00 in KHI shares - See paragraphs 453 to 572.

Brokers - Topic 3083

Duties of broker to principal - Stockbrokers (incl. commodity brokers) - Contractual duties - [See first Brokers - Topic 3084 and first Brokers - Topic 3091].

Brokers - Topic 3084

Duties of broker to principal - Stockbrokers (incl. commodity brokers) - Fiduciary duties - A complex series of multi-party actions arose out of the collapse of a publicly traded technology company, Knowledge House Inc. (KHI), including a claim by Dunham (one of the "Dunlop clients") against National Bank Financial Ltd. (NBFL) - The Dunlop clients alleged that NBFL failed to adequately supervise its employee (Clarke), a broker/investment advisor, who engaged in market manipulation respecting KHI, which resulted in the Dunlop clients' losses - Dunham claimed that Clarke breached his fiduciary duty, was negligent in his misrepresentations and acted in breach of contractual duties - The Nova Scotia Supreme Court held that Clarke was a fiduciary, and breached his fiduciary duty, thus, it was unnecessary to determine any other basis for liability - However, the court opined that Clarke's conduct constituted a breach of his contractual duty to Dunham, a duty created when Dunham retained Clarke as his investment advisor - The court found that Clarke did not make negligent misrepresentations to Dunham - He intentionally failed to disclose, and by his silence, intentionally misrepresented the circumstances of KHI and the trading of KHI shares, because of his conflict of interest - See paragraphs 310 to 370.

Brokers - Topic 3084

Duties of broker to principal - Stockbrokers (incl. commodity brokers) - Fiduciary duties - The Nova Scotia Supreme Court stated that "Causation in the context of secondary liability securities litigation is an evolving area of the law. Where there is a fiduciary relationship and the fiduciary breaches that relationship by failing to disclose a material fact, there is no need to establish what the plaintiff would have done with the information. Liability is established and proving causation is unnecessary ..." - See paragraph 685.

Brokers - Topic 3084

Duties of broker to principal - Stockbrokers (incl. commodity brokers) - Fiduciary duties - [See Brokers - Topic 3081 and Brokers - Topic 3096].

Brokers - Topic 3091

Duties of broker to principal - Stockbrokers (incl. commodity brokers) - Negligence - Standard of care - A complex series of multi-party actions arose out of the collapse of a publicly traded technology company, Knowledge House Inc. (KHI) - In one action, Wadden, a KHI shareholder and director, sued BMO Nesbitt Burns (investment/brokerage type company), alleging, inter alia, that BMO's handling of his accounts between March and August 2000 was negligent and in breach of its contractual obligations causing him financial losses respecting KHI stock - Wadden claimed that BMO breached its standard of care in not advising of restrictions placed on its margin accounts and improperly freezing his accounts - The Nova Scotia Supreme Court found that Wadden was aware of the conditions on his account - Freezing the accounts was consistent with BMO's gatekeeping functions, having regard to the fact that Wadden was an insider of KHI with insider information about the stock manipulation scheme - BMO was not liable in contract or negligence - See paragraphs 760 to 856.

Brokers - Topic 3091

Duties of broker to principal - Stockbrokers (incl. commodity brokers) - Negligence - Standard of care - [See second Brokers - Topic 3083].

Brokers - Topic 3093

Duties of broker to principal - Stockbrokers (incl. commodity brokers) - Fraud - What constitutes - [See first Brokers - Topic 3083, first Brokers - Topic 3084 and sixth Securities Regulation - Topic 5203].

Brokers - Topic 3096

Duties of broker to principal - Stockbrokers (incl. commodity brokers) - Causation - A complex series of multi-party actions arose out of the collapse of a publicly traded technology company, Knowledge House Inc. (KHI), including a claim by Dunham (one of the "Dunlop clients") against National Bank Financial Ltd. (NBFL) - The Dunlop clients alleged that NBFL failed to adequately supervise its employee (Clarke), who was broker/investment advisor to several of the clients, and who engaged in market manipulation respecting KHI, which resulted in the Dunlop clients' losses - Several causes of action were alleged by the various clients, including breach of fiduciary duty, breach of contractual obligations, negligent misrepresentation and fraud - The Nova Scotia Supreme Court discussed the issue of causation in this context having regard to the different causes of action - See paragraphs 671 to 707.

Company Law - Topic 2661

Shareholders - Liability of shareholders - General - A complex series of multi-party actions arose out of the collapse of a publicly traded technology company, Knowledge House Inc. (KHI), including a claim by Dunham (one of the "Dunlop clients") against National Bank Financial Ltd. (NBFL) - The Dunlop clients alleged that NBFL failed to adequately supervise its employee (Clarke), a broker/investment advisor, who engaged in market manipulation respecting KHI, which resulted in the Dunlop clients' losses - NBFL third-partied Barthe (one of the Dunlop clients and a shareholder in KHI), claiming that Barthe was treated as a director with knowledge that the share price was being supported and took no steps to disclose the manipulation - The Nova Scotia Supreme Court found that Barthe was never a director of KHI - The court was not aware of any principle of law or relevant legislation or case law, that supported the proposition that a shareholder in a company, who had been provided with some of the memoranda to the directors, had an obligation to a third party like NBFL to blow the whistle when that shareholder becomes aware of a stock manipulation scheme - See paragraphs 733 to 746.

Courts - Topic 103

Stare decisis - Authority of judicial decisions - English, American and foreign authorities - American decisions - The Nova Scotia Supreme Court discussed the issue of stock market manipulation - The court stated that "Given the paucity of Canadian jurisprudence on what constitutes market manipulation, it is also helpful to consider the comparatively rich US jurisprudence on this subject. In doing so, one must be cautious to recognize that in the US, the basis for civil claims alleging damages from market manipulation is frequently statutory. This means that the US jurisprudence is not immediately portable to Canada, but it does not mean that it is irrelevant" - See paragraph 251.

Damage Awards - Topic 2018.1

Exemplary or punitive damages - Breach of contract - [See Damage Awards - Topic 2030.5].

Damage Awards - Topic 2027.5

Exemplary or punitive damages - Outrageous conduct - [See Damage Awards - Topic 2030.5].

Damage Awards - Topic 2030.5

Exemplary or punitive damages - Breach of fiduciary duty - A complex series of multi-party actions arose out of the collapse of a publicly traded company, Knowledge House Inc., including a claim by a group referred to as the "Dunlop clients" against National Bank Financial Ltd. (NBFL) - The Dunlop clients, which included Dunham, the Weirs and their company, Blackwood Holdings, alleged that NBFL failed to adequately supervise its employee (Clarke), a broker/investment advisor, who engaged in market manipulation respecting KHI, which resulted in the Dunlop clients' losses - The Nova Scotia Supreme Court allowed the action and awarded Dunham punitive damages of $200,000 having regard to Clarke's breach of fiduciary duty and the conduct of NBFL - The court also awarded punitive damages of $200,000 to the Weirs and Blackwood jointly, citing NBFL's breach of contract and conduct - See paragraphs 876 to 897 and 913 to 926.

Equity - Topic 3718

Fiduciary or confidential relationships - Commercial relationships - Broker and principal - [See Brokers - Topic 3081, first and second Brokers - Topic 3084].

Evidence - Topic 7003.2

Opinion evidence - Expert evidence - General - When expert evidence required - A complex series of multi-party actions arose out of the collapse of a publicly traded company, Knowledge House Inc. (KHI), including a claim by several parties referred to as the "Dunlop clients" against National Bank Financial Ltd. (NBFL) - The Dunlop clients alleged that NBFL failed to adequately supervise its employee (Clarke), a broker/investment advisor, who engaged in market manipulation respecting KHI, which resulted in the Dunlop clients' losses - NBFL admitted that it failed to supervise Clarke, but claimed that the Dunlop clients failed to establish a breach of duty by Clarke - NBFL submitted that expert evidence was required to establish its standard of care and that Clarke's actions were not consistent with that of an ordinary market-maker - The Nova Scotia Supreme Court held that lack of expert evidence was not fatal - The conduct was "so egregious" that expert evidence was not essential for a determination of whether the market manipulation in this case breached the standard of care - There was a substantial amount of non-technical evidence of manipulation - The court held that as trier-of-fact, it could appreciate the matters in issue without recourse to expert evidence - See paragraphs 270 to 287.

Fraud and Misrepresentation - Topic 6

Fraudulent misrepresentation (deceit) - What constitutes - [See first Brokers - Topic 3083].

Securities Regulation - Topic 5203

Trading in securities - General - Market manipulation - The Nova Scotia Supreme Court discussed generally the issue of stock market manipulation and the statutory responses to market manipulation - Given the paucity of Canadian jurisprudence on what constituted market manipulation, the court considered the "comparatively rich" United States jurisprudence in this area - See paragraphs 237 to 269.

Securities Regulation - Topic 5203

Trading in securities - General - Market manipulation - The Nova Scotia Supreme Court discussed generally the issue of stock market manipulation - The court stated that "The test for what constitutes market manipulation depends on the statutory framework and context in which a case arises. For example, market manipulation in the context of a criminal charge is obviously tied closely to the wording of the criminal statute. Market manipulation allegations in the context of a provincial regulator's 'public interest power' is more relaxed and linked to the provincial legislation. Market manipulation in the context of a civil action depends on whether it is an action pursuant to the common law or a statutory action where available. In any event, the jurisprudence discloses some common elements of what constitutes market manipulation" - The court examined that jurisprudence - See paragraphs 262 to 269.

Securities Regulation - Topic 5203

Trading in securities - General - Market manipulation (incl. market-makers) - The Nova Scotia Supreme Court discussed "market-makers" as a permissible type of market manipulation - The court noted that the Ontario Securities Commission defined a market-maker "as a person, normally approved by the stock exchange on which the shares are listed, who buys and sells shares of an issuer as principle or for his own account on a continuous basis with a view to creating or maintaining an orderly market for the shares. Their function is to take the other side of a transaction when none is apparent, that is, to buy a stock when someone wishes to sell and there are no apparent buyers and vice versa. The market-maker also attempts to prevent undue variations in the price of a stock by selling into a rising market or buying in a declining market. These are called stabilizing trades because they attenuate the buying or selling pressure. Destabilizing trades, on the other hand, work the opposite way, that is they are buys in rising market and sales in a declining market which tend to exacerbate the pressure. The purpose of a market-maker is to provide liquidity and to maintain an orderly market" - See paragraph 256.

Securities Regulation - Topic 5203

Trading in securities - General - Market manipulation (incl. market-makers) - A complex series of multi-party actions arose out of the collapse of a publicly traded company, Knowledge House Inc. (KHI), including a claim by a group referred to as the "Dunlop clients" against National Bank Financial Ltd. (NBFL) - The Dunlop clients alleged that NBFL failed to adequately supervise its employee (Clarke), a broker/investment advisor, who engaged in market manipulation respecting KHI, which resulted in the Dunlop clients' losses - NBFL admitted that it failed to supervise Clarke, but claimed that the Dunlop clients failed to establish a breach of duty by Clarke - NBFL submitted that companies could act as their own market-makers, which was what Clarke was doing - The Nova Scotia Supreme Court stated that the problem that NBFL faced was that even if companies could act as their own market-makers, there was not even an air of reality to the argument that Clarke was acting as a market-maker on behalf of KHI - There was no documentation whatsoever to establish that role - Moreover, the Toronto Stock Exchange, on which KHI traded, required formal registration of any market-makers - Clarke was not formally registered as the market-maker for KHI - In fact, another individual was already registered as the official market-maker - See paragraphs 288 and 289.

Securities Regulation - Topic 5203

Trading in securities - General - Market manipulation (incl. market-makers) - A complex series of multi-party actions arose out of the collapse of a publicly traded company, Knowledge House Inc. (KHI), including a claim by a group referred to as the "Dunlop clients" against National Bank Financial Ltd. (NBFL) - The Dunlop clients alleged that NBFL failed to adequately supervise its employee (Clarke), a broker/investment advisor, who engaged in market manipulation respecting KHI, which resulted in the Dunlop clients' losses - NBFL admitted that it failed to supervise Clarke, but claimed that Clarke's trading activity was not manipulative either because he failed to create an artificial price and/or because he had no intent to create an artificial price of KHI stock - The Nova Scotia Supreme Court found that Clarke's activities were manipulative and were intended to be manipulative - The court detailed Clarke's activities - His intent could be inferred from the circumstances - See paragraphs 290 to 309.

Securities Regulation - Topic 5203

Trading in securities - General - Market manipulation (incl. market-makers) - The Nova Scotia Supreme Court stated that "Market manipulation is a form of representation. The very purpose of market manipulation is creating an artificial stock price or trading volume that induces investors to buy or sell the stock in question. It follows that failure to disclose market manipulation can constitute active concealment or non-disclosure of a material fact for the purposes of meeting the fraudulent misrepresentation test" - See paragraph 679.

Securities Regulation - Topic 5203

Trading in securities - General - Market manipulation (incl. market-makers) - [See first Brokers - Topic 3084].

Torts - Topic 48.9

Negligence - Standard of care - Particular persons and relationships - Financial advisors - [See Brokers - Topic 3081].

Cases Noticed:

Falkenham (C.R.) Backhoe Services Ltd. v. Human Rights Board of Inquiry (N.S.) et al. (2008), 264 N.S.R.(2d) 281; 847 A.P.R. 281; 2008 NSCA 38, refd to. [para. 114].

Constitution Insurance v. Coombe, 1993 CanLII 5641 (Ont. S.C.), refd to. [para. 114].

Northern Wood Preserves Ltd. v. Hall Corporation Shipping (1969) Ltd. (1973), 2 O.R.(2d) 335; 42 D.L.R.(3d) 679 (C.A.), refd to. [para. 114].

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; 1994 CarswellBC 438, refd to. [para. 124].

Kerr v. Baranow (2011), 411 N.R. 200; 300 B.C.A.C. 1; 509 W.A.C. 1; 274 O.A.C. 1; 2011 SCC 10, refd to. [para. 130].

Whiten v. Pilot Insurance Co. et al. (2002), 283 N.R. 1; 156 O.A.C. 201; 2002 SCC 18, refd to. [para. 132].

Blackburn v. Midland Walwyn Capital Inc. et al., [2003] O.T.C. 142; 2003 CarswellOnt 684 (Sup. Ct.), refd to. [para. 134].

Church of Scientology of Toronto v. Maritime Broadcasting Co., Proudfoot and North (1979), 33 N.S.R.(2d) 500; 57 A.P.R. 500 (C.A.), refd to. [para. 172].

Homer Estate et al. v. Eurocopter S.A. et al. (2003), 180 B.C.A.C. 316; 297 W.A.C. 316; 2003 BCCA 229, refd to. [para. 173].

Grewal v. Nijjer et al., [2011] B.C.A.C. Uned. 153; 2011 BCCA 505, refd to. [para. 173].

Buildings v. Brampton (City) et al., [2010] O.A.C. Uned. 727; 2010 ONCA 898, refd to. [para. 173].

Sable Offshore Energy Inc. et al. v. Ameron International Corp. et al. (2011), 310 N.S.R.(2d) 382; 983 A.P.R. 382; 2011 NSCA 121, refd to. [para. 173].

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.), refd to. [para. 213].

Elderkin et al. v. Merrill Lynch et al. (1977), 22 N.S.R.(2d) 218; 31 A.P.R. 218; 1977 CarswellNS 184 (C.A.), refd to. [para. 213].

Placements Armand Laflamme Inc. v. Roy et al., [2000] 1 S.C.R. 638; 253 N.R. 155, refd to. [para. 214].

LaFlamme v. Prudential-Bache Commodities Canada Ltd. - see Placements Armand Laflamme Inc. v. Roy et al.

Reed v. McDermid St. Lawrence Ltd. (1990), 52 B.C.L.R.(2d) 265; 1990 CarswellBC 291 (C.A.), refd to. [para. 214].

Hunt v. TD Securities Inc. et al. (2003), 175 O.A.C. 19; 229 D.L.R.(4th) 609 (C.A.), leave to appeal refused (2004), 330 N.R. 198; 196 O.A.C. 399; 2004 CarswellOnt 1610 (S.C.C.), refd to. [para. 215].

Morin v. Blais, [1977] 1 S.C.R. 570; 10 N.R. 489, refd to. [para. 216].

875121 Ontario Ltd. v. Nesbitt Burns Inc. et al. (1999), 106 O.T.C. 161; 50 B.L.R.(2d) 137; 1999 CarswellOnt 3247 (Sup. Ct.), refd to. [para. 216].

Abrams v. Sprott Securities Ltd. et al., [2001] O.T.C. 104; 13 B.L.R.(3d) 78; 2001 CarswellOnt 547 (Sup. Ct.), refd to. [para. 217].

Parent Estate et al. v. Leach et al., [2008] O.T.C. Uned. B34; 2008 CarswellOnt 3217 (Sup. Ct.), refd to. [para. 217].

Varcoe v. Sterling (1992), 7 O.R.(3d) 204; 1992 CarswellOnt 1156 (Gen. Div.), refd to. [para. 217].

Merit Investment Corp. v. Mogil, 1989 CarswellOnt 2708 (H.C.), refd to. [para. 217].

Osborne v. Harper et al., [2005] B.C.T.C. 1202; 2005 BCSC 1202, refd to. [para. 219].

Robinson v. Funded Investments Inc., 2006 CarswellOnt 4477, refd to. [para. 222].

Santa Fe Industries Inc. et al. v. Green et al. (1977), 430 U.S. 462 (Sup. Ct.), refd to. [para. 238].

Pezim v. British Columbia Securities Commission et al., [1994] 2 S.C.R. 557; 168 N.R. 321; 46 B.C.A.C. 1; 75 W.A.C. 1, refd to. [para. 240].

Kerr et al. v. Danier Leather Inc. et al. (2007), 368 N.R. 204; 231 O.A.C. 348; 2007 SCC 44, refd to. [para. 240].

Anderson et al. v. British Columbia Securities Commission (2004), 192 B.C.A.C. 119; 315 W.A.C. 119; 2004 BCCA 7, leave to appeal refused (2004), 331 N.R. 399; 210 B.C.A.C. 320; 348 W.A.C. 320 (S.C.C.) refd to. [para. 263].

R. v. Jay, [1966] 1 C.C.C. 70 (Ont. C.A.), refd to. [para. 264].

Ernst & Ernst v. Hochfelder et al. (1975), 425 U.S. 185, refd to. [para. 264].

R. v. Théroux (R.), [1993] 2 S.C.R. 5; 151 N.R. 104; 54 Q.A.C. 184, refd to. [para. 265].

Al-Tar Energy Corp., Re (2010), 33 O.S.C.B. 5535; 2010 CarswellOnt 3966, refd to. [para. 266].

Sears Canada Inc., Re, 2006 CarswellOnt 6994 (Sup. Ct.), refd to. [para. 267].

Federal Corp., Re (1947), 25 S.E.C. 227, refd to. [para. 267].

MacLean v. Huddleston (1983), 459 U.S. 375, refd to. [para. 267].

R. v. de Berenger (1814), 3 Manule & S. 67; 105 Eng. Rep. 536, refd to. [para. 269].

Connolly v. Walwyn Stodgell Cochran Murray Ltd. and Himmelman (1993), 121 N.S.R.(2d) 278; 335 A.P.R. 278; 1993 CarswellNS 436 (C.A.), refd to. [para. 272].

820823 Ontario Ltd. v. Kagan, 2003 CarswellOnt 1446 (Sup. Ct.), refd to. [para. 272].

Cole v. Merrill Lynch Canada Inc., [2005] O.T.C. 1195; 2005 CarswellOnt 9962 (Sup. Ct.), refd to. [para. 272].

Johansson v. General Motors of Canada Ltd. (2011), 307 N.S.R.(2d) 53; 975 A.P.R. 53; 2011 NSSC 352, refd to. [para. 276].

Krawchuk v. Scherbak et al. (2011), 279 O.A.C. 109; 2011 ONCA 352, refd to. [para. 276].

Ryan v. Victoria (City) et al., [1999] 1 S.C.R. 201; 234 N.R. 201; 117 B.C.A.C. 103; 191 W.A.C. 103, refd to. [para. 282].

Cycomm International Inc., Re, 1993 CarswellOnt 922 (S.C.), refd to. [para. 284].

R. v. Mohan, [1994] 2 S.C.R. 9; 166 N.R. 245; 71 O.A.C. 241, refd to. [para. 285].

R. v. Abbey (W.N.) (2009), 254 O.A.C. 9; 97 O.R.(3d) 330; 2009 ONCA 624, leave to appeal denied (2010), 409 N.R. 397; 276 O.A.C. 398; 2010 CarswellOnt 4827 (S.C.C.), refd to. [para. 286].

United States of America v. Bilzerian (1991), 926 F.2d 1285 (2nd Cir.), refd to. [para. 287].

Blackie v. Barrack (1975), 524 F.2d 891 (9th Cir.), refd to. [para. 287].

Huddleston v. Herman & MacLean (1981), 640 F.2d 534 (5th Cir.), refd to. [para. 287].

Huddleston v. Herman & MacLean (1983), 459 U.S. 375, refd to. [para. 287].

Morgan v. Columbia (District) (1987), 824 F.2d 1049 (D.C. Cir.), refd to. [para. 287].

SRI International v. Matsushita Electric Corp. (1985), 775 F.2d 1107 (Fed. Cir.), refd to. [para. 287].

Cotton v. Witco Chem Corp. (1981), 651 F.2d 274 (5th Cir.), refd to. [para. 287].

Varcoe v. Stirling, [1992] O.J. No. 1501 (C.A.), refd to. [para. 366].

International Corona Resources Ltd. v. LAC Minerals Ltd., [1989] 2 S.C.R. 594; 101 N.R. 239; 36 O.A.C. 57, refd to. [para. 366].

Rowe v. New Capital Inc. et al. (1994), 134 N.S.R.(2d) 52; 383 A.P.R. 52; 1994 CarswellNS 186 (S.C.), refd to. [para. 674].

Sullivan v. Victoria (City), [2010] B.C.T.C. Uned. 218; 2010 BCSC 218, refd to. [para. 674].

Sokol v. Photonics Research Ontario et al., [2009] O.T.C. Uned. 279; 2009 CarswellOnt 521 (Sup. Ct.), refd to. [para. 674].

Benson v. United Steel Workers Inter-Alia Brotherhood of Maintenance of Way Employees et al., [2008] Man.R.(2d) Uned. 40; 2008 MBQB 94, refd to. [para. 674].

United Shoe Machinery Co. v. Brunet, [1909] A.C. 330 (P.C.), refd to. [para. 677].

Royal Bank of Canada v. Druhan and Druhan (1997), 163 N.S.R.(2d) 174; 487 A.P.R. 174; 1997 CarswellNS 438 (C.A.), refd to. [para. 677].

Bank of British Columbia v. Wren Development Ltd. (1973), 38 D.L.R.(3d) 759 (B.C.S.C.), refd to. [para. 678].

Wallace v. Gummerson (1915), 8 O.W.N. 35, refd to. [para. 678].

Ruthenian Farmers Elevator Co. v. Hrycak, [1924] 3 D.L.R. 402 (Sask. C.A.), refd to. [para. 678].

Lesson v. Darlow (1926), 59 O.L.R. 421 (C.A.), refd to. [para. 678].

Burrows v. Burke (1984), 49 O.R.(2d) 76 (C.A.), leave to appeal refused (1985), 59 N.R. 74; 10 O.A.C. 354 (S.C.C.), refd to. [para. 684].

London Loan & Savings Co. v. Brickenden, [1934] 2 W.W.R. 545 (Ont. Prov. Ct.), refd to. [para. 685].

Canson Enterprises Ltd. v. Boughton & Co. (1989), 39 B.C.L.R.(2d) 177 (C.A.), affd. [1991] 3 S.C.R. 534; 131 N.R. 321; 6 B.C.A.C. 1; 13 W.A.C. 1, refd to. [para. 685].

Reidy Motors Ltd. v. Grimm et al. (1996), 177 A.R. 320; 38 Alta. L.R.(3d) 131 (Q.B.), affd. in part (1997), 200 A.R. 206; 146 W.A.C. 206; 52 Alta. L.R.(3d) 343 (C.A.), leave to appeal refused (1997), 226 N.R. 315; 219 A.R. 181; 179 W.A.C. 181 (S.C.C.), refd to. [para. 685].

Chasins v. Smith, Barney & Co. (1970), 438 F.2d 1167 (2nd Cir.), refd to. [para. 686].

Bastian v. Petren (1990), 892 F.2d 680 (7th Cir.), refd to. [para. 687].

Affiliated Ute Citizens v. United States of America (1972), 406 U.S. 128, refd to. [para. 687].

Shapiro v. Merrill Lynch, Pierce, Fenner & Smith Inc. (1974), 495 F.2d 228 (2nd Cir.), refd to. [para. 687].

Basic Inc. v. Levinson (1988), 485 U.S. 224, refd to. [para. 687].

Dura Pharmaceuticals Inc. v. Broudo (2005), 125 S. Ct. 1627, refd to. [para. 688].

Carom et al. v. Bre-X Minerals Ltd. et al. (1998), 78 O.T.C. 356; 41 O.R.(3d) 780; 1998 CarswellOnt 4285 (Gen. Div.), refd to. [para. 689].

Royal Trust Corp. of Canada et al. v. Fisherman et al., [2001] O.T.C. 134; 2001 CarswellOnt 4206 (Sup. Ct.), refd to. [para. 690].

CC&L Dedicated Enterprise Fund (Trustee of) v. Fisherman - see Royal Trust Corp. of Canada et al. v. Fisherman et al.

Kripps et al. v. Touche Ross & Co. et al. (1997), 89 B.C.A.C. 288; 145 W.A.C. 288; 33 B.C.L.R.(3d) 254 (C.A.), leave to appeal refused (1997), 225 N.R. 236; 102 B.C.A.C. 238; 166 W.A.C. 238, refd to. [para. 691].

Clements v. Clements (2012), 431 N.R. 198; 331 B.C.A.C. 1; 565 W.A.C. 1; 2012 SCC 32, refd to. [para. 696].

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. 701].

Grenkow v. Merrill Lynch Royal Securities Ltd., MacFadden and Smith (1983), 23 Man.R.(2d) 54; 1983 CarswellNS 278 (Q.B.), refd to. [para. 709].

Forrest v. Gairdner & Co. (1962), 33 D.L.R.(2d) 575; 1962 CarswellBC 81 (C.A.), refd to. [para. 710].

Ryder v. Osler, Wills, Bickle Ltd. (1985), 49 O.R.(2d) 609; 16 D.L.R.(4th) 80; 1985 CarswellOnt 1423 (H.C.), refd to. [para. 712].

Dixon v. Deacon Morgan McEwen Easson, 1990 CarswellBC 1726, refd to. [para. 712].

Williamson v. Williams et al. (1997), 160 N.S.R.(2d) 106; 473 A.P.R. 106; 1997 CarswellNS 283 (C.A.), refd to. [para. 713].

Penner v. Yorkton Continental Securities Inc. and Buskell (1996), 183 A.R. 5 (Q.B.), refd to. [para. 713].

Hayward v. Hampton Securities Ltd. (2002), 46 B.L.R.(3d) 43; 2002 CarswellOnt 5919 (Sup. Ct.), refd to. [para. 714].

Farah v. Barki, [1955] S.C.R. 107, refd to. [para. 718].

TWT Enterprises Ltd. et al. v. Westgreen Developments (North) Ltd. et al. (1991), 78 Alta. L.R.(2d) 62 (Q.B.), refd to. [para. 718].

United Services Funds v. Lazzell, 1998 CarswellBC 245 (S.C.), refd to. [para. 735].

Athey v. Leonati et al., [1996] 3 S.C.R. 458; 203 N.R. 36; 81 B.C.A.C. 243; 132 W.A.C. 243, refd to. [para. 767].

St. Elizabeth Home Society v. Hamilton (City) (2010), 266 O.A.C. 136; 2010 ONCA 280, refd to. [para. 771].

Lambert v. Quinn et al. (1994), 68 O.A.C. 352; 110 D.L.R.(4th) 284 (C.A.), refd to. [para. 771].

Levesque v. Comeau, [1970] S.C.R. 1010, refd to. [para. 771].

Canada Trustco Mortgage Co. v. Co-operators General Insurance Co. (1997), 163 N.S.R.(2d) 241; 487 A.P.R. 241; 1 C.C.L.I.(3d) 22 (C.A.), refd to. [para. 771].

Doiron v. Haché (2005), 290 N.B.R.(2d) 79; 755 A.P.R. 79; 2005 NBCA 75, refd to. [para. 771].

Austral Imports Inc. v. Bank of Montreal et al. (2006), 400 A.R. 231; 2006 ABQB 428, refd to. [para. 784].

Venture Capital USA Inc. et al. v. Yorkton Securities Inc. (2005), 197 O.A.C. 264 (C.A.), refd to. [para. 787].

Wentzel, Re, [2005] A.S.C.D. No. 153, refd to. [para. 790].

Keays v. Honda Canada Inc. (2008), 376 N.R. 196; 239 O.A.C. 299; 2008 SCC 39, refd to. [para. 880].

2502731 Nova Scotia Ltd. v. Plazacorp Retail Properties Ltd. (2009), 276 N.S.R.(2d) 364; 880 A.P.R. 364; 2009 NSCA 40, refd to. [para. 881].

Fidler v. Sun Life Assurance Co. of Canada, [2006] 2 S.C.R. 3; 350 N.R. 40; 227 B.C.A.C. 39; 374 W.A.C. 39, refd to. [para. 881].

Paciorka v. TD Waterhouse, [2007] O.T.C. Uned. F99 (Sup. Ct.), refd to. [para. 901].

Authors and Works Noticed:

Archibald, Todd L., and Echlin, Randall Scott, Annual Review of Civil Litigation 2011 (2011), pp. 303, 304 [para. 229].

Biron, Caroline, and Bouton, Oliver C., Recent Developments in Broker's Liability in Canada, generally [para. 229].

Borrelli, Mark, Market Making in the Electronic Age (2000-2001), 32 Loy. University Chic. L.J. 815, p. 907 [para. 239].

Bowstead and Reynolds on Agency (17th Ed. 2001), generally [para. 712].

Bromberg, Alan R., and Lowenfels, Lewis D., Securities Fraud & Commodities Fraud (1991), vol. 3 [para. 241]; vol. 7, p. 58 [para. 242].

Bryant, Allan W., Lederman, Sidney and Fuerst, Michelle, The Law of Evidence in Canada (3rd Ed.), generally [para. 763].

Campion, John A., and Dimmer, Diana W., Professional Liability in Canada (4th Ed. 1994) (2011 Looseleaf Supp.), c. VII, 10, p. 10-1 [para. 221].

Couglin, Patrick J., Issacson, Alan, Eric, and Daley, Joseph D., What's Brewing in Dura v. Broudo: The Plaintiff's Attorneys Review the Supreme Court's Opinion and Its Import for Securities-Fraud Litigation (2004), 37 Loy. University Chi. L.J., p. 40 [para. 287].

Fischel, Daniel R., and Ross, David J., Should the Law Prohibit Manipulation in Financial Markets (1991), 105 Harv. L. Rev. 503, pp. 506, 507 [para. 239].

Fridman, Gerald H.L., The Law of Contract in Canada (5th Ed. 2006), p. 293 [para. 718].

Gervais, Borden Ladner, Securities Law and Practice (3rd Ed. 2009) (Looseleaf) c. 21, 23 [para. 229].

Gillen, Mark R., Securities Regulation in Canada (3rd Ed. 2007), generally [para. 241], pp. 423 [para. 242]; 245 [para. 243]; 426 [para. 246].

Groia, Joseph and Hardie, Pamela, Securities Litigation and Enforcement (2007), pp. 168, 169 [para. 220]; 171 [para. 366].

Loss, Louis, and Seligman, Joel, Fundamentals of Securities Regulation (4th Ed. 2004), c. 9, 10 and 11 [para. 229].

Loss, Louis, Seligman, Joel and Paredes, Troy, Fundamentals of Securities Regulation (6th Ed. 2011), vol. 2, pp. 1485 [para. 237]; 1500 [para. 268].

Nicholls, Christopher C., Corporate Finance and Canadian Law (2000), pp. 97 to 99 [para. 229].

Petraglia, Philip, and Lazar, Sarna, Corporate Securities Law in Canada (2005), c. XVII, generally [para. 229].

Poser, Norman S., Stock Manipulation and Corporate Control Transactions (1986), 40 University of Miami L. Rev. 671, generally [para. 229]; p. 672 [para. 238].

Powell, John L., Stewart, Roger and Jackson, R., Jackson & Powell on Professional Liability (6th Ed. 2007) (2010 4th Looseleaf Supp.), c. 15 [para. 229].

Rostow, Eugene V., Market Manipulation and the Securities Exchange Act (1937), 46 Yale L.J. 624, pp. 626 to 628 [para 245].

Soderquist, Larry D., and Gabaldon, Theresa A., Securities Law (2nd Ed. 2004), generally [para. 229]; pp. 181 [para. 255]; 183 [para. 259].

Sopinka, John, Lederman, Sidney N., and Bryant, Alan W., The Law of Evidence in Canada (3rd Ed. 2009), para. 6.449 [para. 114].

Counsel:

James Hodgson, David Coles, Q.C., and Robert Blair, for NBFL and National Bank of Canada;

W. Dale Dunlop, and Sean MacDonald, for Calvin Wadden, Andrea Wadden, 3019620 Nova Scotia Limited, the Estate of Michael Barthe, Lowell Weir, Carol McLaughlin-Weir, Blackwood Holdings Inc., and Craig Dunham;

Linda Fuerst, for BMO Nesbitt Burns.

This case was heard in Halifax, Nova Scotia, from February 13 to April 17, 2012, before Warner, J., of the Nova Scotia Supreme Court, who delivered the following decision on August 7, 2013.