Stott v. Merit Investment Corp.

• Jurisdiction: Ontario
• Judge: Blair, Finlayson and Krever, JJ.A.
• Citation: (1988), 25 O.A.C. 174 (CA),1988 CanLII 192 (ON CA),1988 CanLII 192 (NS CA),63 OR (2d) 545,48 DLR (4th) 288,[1988] OJ No 134 (QL),25 OAC 174
• Court: Court of Appeal (Ontario)
• Date: 12 February 1988

Stott v. Merit Inv. Corp. (1988), 25 O.A.C. 174 (CA)

MLB headnote and full text

Donald P. Stott (plaintiff/respondent) v. Merit Investment Corporation (defendant/appellant)

(No. 757/85)

Indexed As: Stott v. Merit Investment Corp.

Ontario Court of Appeal

Blair, Finlayson and Krever, JJ.A.

February 12, 1988.

Summary:

Stott was a registered representative of Merit Investment Corp. employed to sell securities. One of Stott's clients whose account was undermargined had to be sold out at a loss to the corporation of approximately $66,000. Merit alleged that Stott was personally responsible for the corporation's loss. Stott acknowledged the loss in a written agreement. Merit agreed to give Stott time to pay off the loss and proceeded to deduct the loss from his commissions. Two years later Stott left Merit's employ and commenced an action against Merit for the sums held back from his commissions. Merit counterclaimed for the balance of the loss yet unpaid. The trial judge allowed Stott's action, holding that there was no consideration for Stott's written acknowledgment of the debt and therefore the acknowledgment was invalid. The court entered judgment in favour of Stott for the amount of the held back commissions. The trial judge dismissed Merit's counterclaim. Merit appealed.

The Ontario Court of Appeal, Blair, J.A., dissenting, allowed the appeal, set aside the judgment against Merit and dismissed Stott's action against Merit. The court also allowed Merit's counterclaim for the full amount of the loss yet unpaid.

Contracts - Topic 1586

Formation of contract - Consent - Duress - Defence of - When available - Stott was a registered representative of Merit Investment Corporation employed to sell securities - One of Stott's clients whose account was undermargined had to be sold out leaving a $66,000 loss to the corporation - Merit alleged that Stott was personally liable for the loss and Stott acknowledged his liability in a written agreement - Stott alleged that he signed the agreement under economic duress because he feared for his job - The Ontario Court of Appeal discussed the doctrine of economic duress and agreed that there was duress in this case which rendered the acknowledgment voidable - The court held however, that Stott had affirmed the acknowledgment by remaining in the corporation's employ and by subsequently again acknowledging responsibility for the loss - See paragraphs 46 to 55.

Contracts - Topic 2875

Consideration - What constitutes - Forbearance - General - The Ontario Court of Appeal stated that "a specific request for forbearance for a precise period of time is not necessary where it can be implied from the surrounding circumstances that such a request was made and that forbearance for a reasonable time was extended" - See paragraph 43.

Contracts - Topic 2876

Consideration - What constitutes - Forbearance to sue - Stott was a registered representative of Merit Investment Corporation, employed to sell securities - One of Stott's clients whose account was undermargined had to be sold out leaving a $66,000 loss to the corporation - Merit alleged that Stott was responsible for the loss and Stott acknowledged his liability in a written agreement - He was given time to repay the loss (i.e. the loss would be deducted from his commissions) on the understanding that Merit would not sue Stott during the course of the agreement - The Ontario Court of Appeal discussed forbearance as consideration for a contract and held that Merit's forbearance in pursuing its claim against Stott was consideration for the written acknowledgment of Stott's debt - See paragraphs 36 to 43.

Cases Noticed:

Miles v. New Zealand Alford Estate Company (1886), 32 Ch. D. 266 (C.A.), refd to. [para. 37].

Ronald Elwyn Lister Ltd. et al. v. Dunlop Canada Ltd. (1982), 42 N.R. 81; 135 D.L.R.(3d) 1, refd to. [para. 39].

Fullerton et al. v. Provincial Bank of Ireland, [1903] A.C. 309 (H.L.), refd to. [para. 43].

Royal Bank of Canada v. Kiska (1967), 63 D.L.R.(2d) 582, refd to. [para. 43].

Pao On and others v. Lau Yiu and another, [1979] 3 All E.R. 65 (P.C.), refd to. [para. 48].

Hill v. Peter Gorman Ltd. (1957), 9 D.L.R.(2d) 124 (Ont. C.A.), refd to. [para. 49].

Universe Tankships Inc. of Monrovia v. International Transport Workers' Federation, [1982] 2 All E.R. 67, refd to. [para. 50].

North Ocean Shipping Co. Ltd. v. Hyundai Construction Co. Ltd. and another The Atlantic Baron, [1978] 3 All E.R. 1170, refd to. [para. 51].

D. & C. Builders Ltd. v. Rees, [1965] All E.R. 837 (C.A.), refd to. [para. 55].

Royal Bank of Canada v. Paletta (1983), 44 O.R.(2d) 29 (M.C.), refd to. [para. 57].

Lensen v. Lensen (1987), 79 N.R. 334 (S.C.C.), refd to. [para. 66].

Hallberg v. C.N.R. (1955), 16 W.W.R.(N.S.) 538, refd to. [para. 68].

Ex parte Banner In re Blythe (1881), 17 Ch. D. 480, refd to. [para. 71].

Authors and Works Noticed:

Toronto Stock Exchange Manual for Registered Representatives [para. 15].

Waddams, S.M., The Law of Contract (2nd Ed. 1984), p. 376 et seq. [para. 47].

Counsel:

Benjamin Zarnett, for the appellant;

Alan J. Davis, for the respondent.

This appeal was heard on September 17 and 18, 1987, before Blair, Finlayson and Krever, JJ.A., of the Ontario Court of Appeal. The decision of the Court of Appeal was released on February 12, 1988, including the following opinions:

Finlayson, J.A. (Krever, J.A., concurring) - See paragraphs 1 to 58;

Blair, J.A., dissenting - See paragraphs 59 to 76.