Court of Appeal for Ontario

COURT OF APPEAL FOR ONTARIO DATE: 20220204 DOCKET: C68132

MacPherson, van Rensburg and Roberts JJ.A.

BETWEEN

John Susin The Executor of the Estate of Phyllis Susin Plaintiff (Appellant)

and

TD Waterhouse Discount Brokerage, division of TD Waterhouse Canada Inc. Defendant (Respondent)

Counsel: Adrienne Zaya, acting as agent for the appellant Scott Gfeller, for the respondent

Heard: January 25, 2022 by video conference

On appeal from the judgment of Justice Benjamin T. Glustein of the Superior Court of Justice, dated February 12, 2020.

Reasons for Decision

[1] The appellant, John Susin (“John”), the executor of the Estate of Phyllis Susin, appeals the decision of Glustein J. of the Superior Court of Justice granting summary judgment to the respondent, TD Waterhouse Discount Brokerage, a division of TD Waterhouse Canada Inc. (“TDW”). In that decision, the motion judge dismissed John’s claim for damages relating to TDW’s sell-out of two margin accounts on October 8, 2008. The two margin accounts were held by John and Phyllis Susin, although both were managed by John.

[2] A margin account allows account holder/investors to purchase securities with borrowed funds. The margin is the difference between the market value of a stock and the loan amount, the loan being the amount of money a customer borrows from the broker to buy securities. Accounts have a margin requirement, which is the minimum amount that a customer must deposit in the account to purchase securities. A margin account is undermargined if the margin is greater than the margin requirement.

[3] Both John and Phyllis held only Manulife shares in their accounts.

[4] On the morning of October 28, 2008, John’s account was undermargined by $46,764.71 and Phyllis’ account was undermargined by $26,990.89. At about 10:00 a.m., Dimitry Kuchmar, a Credit Officer in the Credit and Risk Management Department of TDW, called John to bring this to his attention. On the motion, TDW produced a transcript of this call.

[5] In the call, Kuchmar advised John that both accounts were “in a high risk margin call” and had to be “covered as soon as possible”. John asked for “a little more time” but Kuchmar replied that “your account might be sold out at any time … so it may be today, may be tomorrow, may be Friday, may be next Monday”. Kuchmar also said “if you don’t keep your margin on side, we’re not even going to call you we’re just going to cover your accounts right and there will be a message placed in your account that you are aware of a margin call”.

[6] On the same day, at approximately 1:45 p.m., TDW conducted a sell-out of the two margin accounts.

[7] John assigned his cause of action to Phyllis and brought action relating to both accounts in the name of her estate.

[8] TDW brought a motion for summary judgment. The motion judge granted the motion and dismissed John’s action. The motion judge concluded that “(i) the Margin Agreement, (ii) the decision in Questrade Inc. v. Gu, 2011 ONSC 4106 (“Gu”), and (iii) the application of the doctrine of waiver itself, all preclude such a claim by John”.

[9] John appealed this decision. He filed a lengthy factum setting out many grounds of appeal and seeking punitive damages. Shortly before the appeal hearing, legal counsel, acting as agent for John, filed a concise factum setting out two grounds of appeal. At the appeal hearing, counsel argued these grounds of appeal and we will respond to them.

[10] First, the appellant contends that John’s action was too complicated to be resolved on a motion for summary judgment. In particular, the appellant submits that the recording of the telephone conversation between John and Kuchmar was both inaudible in places and, perhaps, improperly compromised.

[11] We do not accept this submission. The transcript of the telephone call records that Kuchmar’s advice and warning to John were crystal clear: the two accounts were “in a high risk margin call” and needed to be “covered as soon as possible” and “might be sold at anytime”.

[12] Kuchmar also advised John that if the margins in the two accounts were not kept onside, TDW would just cover the accounts without any further call and that there would be a message placed on the account indicating that the account holder was aware of the margin call.

[13] This was not a case like Jack Ganz Consulting Ltd. v. Recipe Unlimited Corporation, 2021 ONCA 907, where there was cogent conflicting evidence about verbal agreements or assurances. By the terms of the Margin Account contract, TDW had the right to make a sell-out as soon as the accounts were undermargined. TDW did not do this immediately. Instead, Kuchmar provided John with a clear warning. John did nothing and TDW made the sell-out just under four hours later. There was nothing in Kuchmar’s language to suggest that TDW would forebear from taking this step.

[14] Second, the appellant in oral argument asserted that a party can choose not to rely on its strict rights and that this is what happened here. Accordingly, the trial judge erred by not addressing this issue.

[15] We disagree. There is a substantial overlap between this issue and the first issue. Like on the first issue, the appellant’s argument fails when set against the fact of Kuchmar’s warning call and, especially, the clear language he used in conveying the warning that the accounts were undermargined and that corrective action by TDW was very imminent indeed.

[16] We make one final comment. In the context of otherwise excellent reasons, the motion judge said: “TDW was entitled to conduct the Sell-Out regardless of whether any extension was provided in the Kuchmar call”. We would not want to be taken as endorsing this sentence. There may be a case where the words and conduct of a commercial lender require, in fairness, a careful assessment of their interplay with the strict contractual words. In this case, no such inquiry is required because there is an essential unity between the contractual wording and Kuchmar’s language in the phone call.

[17] The appeal is dismissed. The respondent is entitled to its costs of the appeal fixed at $10,000 inclusive of disbursements and HST.

“J.C. MacPherson J.A.”

“K. van Rensburg J.A.”

“L.B. Roberts J.A.”