Northey-Taylor et al. v. Casey et al., (2007) 414 A.R. 318 (QB)

• Judge: Erb, J.
• Court: Court of Queen''s Bench of Alberta (Canada)
• Case Date: Tuesday March 06, 2007
• Citations: (2007), 414 A.R. 318 (QB);2007 ABQB 113

Northey-Taylor v. Casey (2007), 414 A.R. 318 (QB)

MLB headnote and full text

Temp. Cite: [2007] A.R. TBEd. MR.047

Morag Northey-Taylor, Christopher Taylor and Christophe Gulka (plaintiffs) v. Daniel Casey and Wolverton Securities Ltd. (defendants)

(0201 17606; 2007 ABQB 113)

Indexed As: Northey-Taylor et al. v. Casey et al.

Alberta Court of Queen's Bench

Judicial District of Calgary

Erb, J.

March 6, 2007.

Summary:

Brier Resources sought to raise funds through a private placement. Brier began negotiating an agency agreement with Wolverton Securities Ltd. Through Casey, a Wolverton stockbroker, the plaintiffs invested in Brier. Unknown to Casey, the agency agreement had never been executed. Brier breached the subscription agreement, failed to deliver the shares or to return the plaintiffs' funds and went into receivership. The plaintiffs sued Casey and Wolverton, alleging negligence and a negligent misrepresentation that the transaction was brokered through Wolverton.

The Alberta Court of Queen's Bench found Casey and Wolverton jointly and severally liable for the plaintiffs' losses.

Editor's note: for a related decision, please see 414 A.R. 339.

Brokers - Topic 3543

Duties of broker to third parties - Stockbrokers - Negligence - General - [See Fraud and Misrepresentation - Topic 2508 ].

Brokers - Topic 5041

Duties of principal - To broker - General - [See Fraud and Misrepresentation - Topic 2508 ].

Damages - Topic 1022

Mitigation - In tort - What constitutes reasonable remedial measures - Brier Resources sought to raise funds through a private placement - Brier began negotiating an agency agreement with Wolverton Securities Ltd. - Through Casey, a Wolverton stockbroker, the plaintiffs invested in Brier - Unknown to Casey, the agency agreement had never been executed - Brier expended the funds in breach of the subscription agreement and failed to deliver the shares - The plaintiffs requested return of their funds, refusing Brier's offer of replacement shares - Brier failed to return the plaintiffs' funds and went into receivership - The plaintiffs sued Casey and Wolverton, alleging negligence and a negligent misrepresentation that the transaction was brokered through Wolverton - The Alberta Court of Queen's Bench found Casey and Wolverton jointly and severally liable for the plaintiffs' losses - The appropriate damages would be return of an amount equal to the plaintiffs' respective subscription funds with appropriate interest - The court rejected the defendants' argument that the plaintiffs failed to mitigate their damages by refusing to accept replacement shares - Brier had acted in an unsavoury manner - The plaintiffs had been literally robbed and it was reasonable for them to avoid further calamity - See paragraphs 90 to 97.

Damages - Topic 1066

Mitigation - In particular matters - Sale of shares - [See Damages - Topic 1022 ].

Damages - Topic 3630

Deceit and misrepresentation - Negligent misrepresentation - [See Damages - Topic 1022 ].

Damages - Topic 3903

Interference with economic relations - General - Negligence - Recovery for economic loss - [See Damages - Topic 1022 ].

Fraud and Misrepresentation - Topic 2508

Misrepresentation - General principles - Negligent misrepresentation - Brier Resources sought to raise funds through a private placement - Brier began negotiating an agency agreement with Wolverton Securities Ltd. - Through Casey, a Wolverton stockbroker, the plaintiffs invested in Brier - Unknown to Casey, the agency agreement had never been executed - Brier breached the subscription agreement, failed to deliver the shares or to return the plaintiffs' funds and went into receivership - The plaintiffs sued Casey and Wolverton, alleging negligence and a negligent misrepresentation that the transaction was brokered through Wolverton - The Alberta Court of Queen's Bench found Casey and Wolverton jointly and severally liable for the plaintiffs' losses - Casey and the plaintiffs believed that they were involved in a brokered private placement - This special relationship triggered a duty of care - Casey breached the standard of care of a reasonable stockbroker in failing to make himself and his clients aware that the investment was not brokered and that their funds would be at risk - Wolverton failed to inform and supervise Casey - Casey believed the deal to be brokered and acted accordingly - The plaintiffs relied on that representation that Wolverton was handling the deal - The reliance was detrimental because, on its strength, the plaintiffs entered into the transaction thinking that they had accurate information about its true nature - See paragraphs 29 to 60.

Fraud and Misrepresentation - Topic 2533

Misrepresentation - Elements - Special relationships - [See Fraud and Misrepresentation - Topic 2508 ].

Fraud and Misrepresentation - Topic 2535

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

Fraud and Misrepresentation - Topic 2825

Misrepresentation - Defences - Lack of reliance - Brier Resources sought to raise funds through a private placement - Brier began negotiating an agency agreement with Wolverton Securities Ltd. - Through Casey, a Wolverton stockbroker, the plaintiffs invested in Brier - Unknown to Casey, the agency agreement had never been executed - Brier breached the subscription agreement, failed to deliver the shares or to return the plaintiffs' funds and went into receivership - The plaintiffs sued Casey and Wolverton, alleging negligence and a negligent misrepresentation that the transaction was brokered through Wolverton - The Alberta Court of Queen's Bench found Casey and Wolverton jointly and severally liable for the plaintiffs' losses - The plaintiffs had relied to their detriment on the representation that Wolverton was brokering the deal - The court rejected the defendants' argument that the plaintiffs would have proceeded with the subscription whether or not it was brokered through Wolverton because they were satisfied that the investment was very exciting - The court's focus was not on the transaction's allure, but on the fact that the plaintiffs were denied the chance to make an informed decision about its true nature - See paragraphs 61 to 62.

Limitation of Actions - Topic 15

General principles - Discoverability rule - Application of - Brier Resources sought to raise funds through a private placement - Brier began negotiating an agency agreement with Wolverton Securities Ltd. - Through Casey, a Wolverton stockbroker, the plaintiffs invested in Brier - Unknown to Casey, the agency agreement had never been executed - Brier breached the subscription agreement, failed to deliver the shares or to return the plaintiffs' funds and went into receivership - The plaintiffs obtained a default judgment against Brier for breach of contract - Subsequently, the plaintiffs sued Casey and Wolverton, alleging negligence and negligent misrepresentation - Casey and Wolverton asserted that the action was statute-barred - The Alberta Court of Queen's Bench rejected the argument - The allegations of negligence and negligent misrepresentation arose from information that was discovered only from the breach of contract pleadings - While the plaintiffs were aware that Wolverton had not opened a trading account, it was not until other facts were disclosed that the causes of action in negligence and negligent misrepresentation materialized - The plaintiffs were entitled to file their claim after they discovered information in the pleadings that gave a concrete sense of reality to the claim - See paragraphs 69 to 80.

Limitation of Actions - Topic 3103

Actions in tort - Negligence - When time begins to run - [See Limitation of Actions - Topic 15 ].

Torts - Topic 77

Negligence - Duty of care - Relationship required to raise duty of care - [See Fraud and Misrepresentation - Topic 2508 ].

Torts - Topic 2530

Vicarious liability - Master and servant - Employer - Liability for acts of employees - Brier Resources sought to raise funds through a private placement - Brier began negotiating an agency agreement with Wolverton Securities Ltd. - Through Casey, a Wolverton stockbroker, the plaintiffs invested in Brier - Unknown to Casey, the agency agreement had never been executed - Brier breached the subscription agreement, failed to deliver the shares or to return the plaintiffs' funds and went into receivership - The plaintiffs sued Casey and Wolverton, alleging negligence and a negligent misrepresentation that the transaction was brokered through Wolverton - The Alberta Court of Queen's Bench found Casey and Wolverton jointly and severally liable for the plaintiffs' losses - The plaintiffs had relied to their detriment on the representation that Wolverton was brokering the deal - The court rejected Wolverton's argument that Casey was acting in an unbrokered transaction for Brier - Neither Casey nor Wolverton took any steps, such as presenting a disclaimer, that would have suggested that Casey was not acting in the scope of his employment as a Wolverton broker - In addition to being directly liable for its failure to inform and supervise Casey, Wolverton was vicariously liable for Casey's negligence in his capacity as Wolverton's employee - See paragraphs 63 to 68.

Torts - Topic 6254

Abuse of legal procedure - Abuse of process - What constitutes - Brier Resources sought to raise funds through a private placement - Brier began negotiating an agency agreement with Wolverton Securities Ltd. - Through Casey, a Wolverton stockbroker, the plaintiffs invested in Brier - Unknown to Casey, the agency agreement had never been executed - Brier breached the subscription agreement, failed to deliver the shares or to return the plaintiffs' funds and went into receivership - The plaintiffs obtained a default judgment against Brier for breach of contract - Subsequently, the plaintiffs sued Casey and Wolverton, alleging negligence and negligent misrepresentation - Casey and Wolverton asserted that the action was an abuse of process - The Alberta Court of Queen's Bench rejected the argument - The issues in the action against Casey and Wolverton were not issues in the earlier action and were not addressed against any party to that action - Nothing in the action against Casey and Wolverton could be interpreted as oppressive or vexatious or a breach of fundamental principles of justice - See paragraphs 81 to 87.

Cases Noticed:

Hedley Byrne & Co. v. Heller & Partners Ltd., [1964] A.C. 465 (H.L.), appld. [para. 29].

Queen (D.J.) v. Cognos Inc., [1993] 1 S.C.R. 87; 147 N.R. 169; 60 O.A.C. 1, appld. [para. 29].

Caparo Industries v. Dickman et al., [1990] 1 All E.R. 568; [1990] 2 A.C. 605; 108 N.R. 81 (H.L.), refd to. [para. 31].

Hercules Management Ltd. et al. v. Ernst & Young et al., [1997] 2 S.C.R. 165; 211 N.R. 352; 115 Man.R.(2d) 241; 139 W.A.C. 241; 146 D.L.R.(4th) 577; 35 C.C.L.T.(2d) 115; 31 B.L.R.(2d) 147; [1997] 8 W.W.R. 80; 1997 CarswellMan 198, refd to. [para. 32].

473759 Alberta Ltd. et al. v. Heidelberg Canada Graphic Equipment Ltd., [1995] 5 W.W.R. 214; 168 A.R. 112; 27 Alta. L.R.(3d) 105 (Q.B.), refd to. [para. 33].

Schloss v. Koehler, Koehler Estate, Knaut, Rolf and Cochrane (1977), 8 A.R. 96 (T.D.), varied (1979), 107 A.R. 96 (C.A.), refd to. [para. 62].

Luscar Ltd. v. Pembina Resources Ltd., [1995] 2 W.W.R. 153; 162 A.R. 35; 83 W.A.C. 35; 24 Alta. L.R.(3d) 305 (C.A.), refd to. [para. 70].

Atlanta Industrial Sales Ltd. et al. v. Emerald Management & Realty Ltd. (2006), 399 A.R. 1; 2006 ABQB 255, appld. [para. 74].

Owners-Condominium Plan No. 9421249 v. Main Street Developments Ltd. et al. (2004), 365 A.R. 162 (Q.B.), agreed with [para. 77].

Toronto (City) et al. v. Canadian Union of Public Employees, Local 79 et al., [2003] 3 S.C.R. 77; 311 N.R. 201; 179 O.A.C. 291; 232 D.L.R.(4th) 385; 120 L.A.C.(4th) 225; 31 C.C.E.L.(3d) 216; 2003 C.L.L.C. 220-071; 2003 CarswellOnt 4328; 2003 SCC 63, refd to. [para. 82].

R. v. Scott, [1990] 3 S.C.R. 979; 116 N.R. 361; 43 O.A.C. 277; 61 C.C.C.(3d) 300, refd to. [para. 82].

Blue Range Resources Corp., Re (2000), 259 A.R. 30 (Q.B.), refd to. [para. 88].

Christianson v. North Hill News Inc. (1993), 145 A.R. 58; 55 W.A.C. 58 (C.A.), refd to. [para. 91].

Authors and Works Noticed:

Waddams, Stephen M., The Law of Damages (1998) (Looseleaf Ed.), pp. 5-19, 5-28 [para. 88].

Counsel:

John H. Wilson (Wilson Laycraft), for the plaintiffs;

Blair C. Yorke-Slader and Michael D. Mysak (Bennett Jones LLP) and Robert J. Hall, Q.C. (Scott Hall LLP), for the defendants.

This action was heard on January 8-16, 2007, by Erb, J., of the Alberta Court of Queen's Bench, Judicial District of Calgary, who delivered the following reasons for judgment on March 6, 2007.