COURT OF APPEAL FOR ONTARIO
ABELLA, GOUDGE AND MACPHERSON JJ.A.
B E T W E E N :
DORALDICK INVESTMENTS LIMIED
Plaintiff
(Appellant)
- and -
CANADIAN IMPERIAL BANK OF
COMMERCE
Defendant
(Respondent)
Joel Goldenberg
Jonathon Eades
for the plaintiff/appellant
Sean F. Dunphy
Nicholas McHaffie
for the defendant/respondent
Heard: April 6, 2000
On appeal from the judgment of Sanderson J. dated August 12,
1.
Overview
In March and May 1994 the appellant made two purchases
through the respondent bank of Confederation Life commercial
paper. The subsequent financial problems of Confederation Life
mean that this commercial paper is likely worthless.
- The appellant sued the bank for negligent misrepresentation
because when the bank furnished its quote for this commercial
paper to the appellant it gave the Dominion Bond Rating Service
rating of R1 low, but did not add that D.B.R.S. had placed this
rating under review with negative implications.
- Sanderson J. dismissed the appellant’s action, finding that
the respondent’s duty of care did not extend beyond the
information requested of it, namely the D.B.R.S. rating of the
commercial paper and that it had accurately represented to the
appellant what that rating was.
This is the appeal from that decision.
For the reasons that follow, I agree with the decision of
the trial judge and would dismiss the appeal.
6.
Background
The appellant is a privately held company with a portfolio
in excess of $15 million consisting of a mix of short-term money
market instruments including commercial paper. When it had funds
to invest, the appellant sought quotes from a variety of
financial institutions including the respondent bank. The only
information sought by the appellant was the type of investment,
the term and whether the D.B.R.S. rating was R1 high, middle or
low.
- As the trial judge found, both the appellant and the bank
were sophisticated parties operating in a competitive commercial
environment in which the appellant was the purchaser and the bank
was a quote giver. The bank was not the appellant’s investment
advisor. The appellant did not look to it for investment advice
or recommendations.
- When the appellant sought quotes for commercial paper in
March and May 1994, the bank supplied the information requested
including, for Confederation Life commercial paper, the D.B.R.S.
rating which was R1 low. While the bank was aware that D.B.R.S.
had placed this rating under review with negative implications,
it did not give this information to the appellant.
9.
Analysis
The appellant makes two arguments. First, it says that the
trial judge erred in confining the duty on the bank to accurately
representing the D.B.R.S. rating.
- I disagree. In my view the trial judge was correct in
defining the extent of the representational duty of care owed by
the bank.
- While it is true that the fact that D.B.R.S. had placed
Confederation Life on a credit watch would no doubt be useful
information for an investor, there would undoubtedly be further
information known to the bank and in the public domain that might
be similarly relevant. However, in the relationship between the
appellant and the bank, none of this information was sought by
the appellant.
- The bank was simply requested to provide quotes on
commercial paper rather than general investment advice. The bank
was asked by a sophisticated purchaser to include in its quotes
only the type of investment, the term, the yield and the D.B.R.S.
rating. This it did.
- Given the specifics of the appellant’s request and the
context in which it was made, it was simply not reasonably
foreseeable that the appellant would be relying on any
information beyond that requested in the quoting exercise. Hence
the trial judge correctly determined that the bank’s duty of care
extended no further than supplying the D.B.R.S. rating for the
commercial paper being quoted. This ground of appeal fails.
14.
Accuracy of the Rating
The appellant’s second argument is that the bank breached
its duty to supply the accurate D.B.R.S. rating because to supply
the rating without adding that it was under review with negative
implications is misleading.
The trial judge found otherwise and I agree with her.
The trial judge found that it is not uncommon for ratings to
be placed under review. To place a rating under review indicates
only that it may ultimately be changed, not that it will
necessarily be changed. Even though a rating may be under review
it stands unless and until it is changed.
- These findings are well supported by the evidence. Hence
the trial judge correctly found that when the bank responded to
the appellant’s request by saying that the D.B.R.S. rating for
Confederation Life Commercial Paper was R1 low it was accurately
representing that rating.
- The respondent therefore did not breach the duty of care it
owed to the appellant to supply the information requested. This
ground of appeal must also fail.
19.
Disposition
The appeal must therefore be dismissed with costs.
Released: April 26, 2000
“S.T. Goudge J.A.”
“I agree R.S. Abella J.A.”
“I agree J.C. MacPherson J.A.”
