ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: CV-01-B2684

DATE: 20131108

BETWEEN:

DAVID IVANY, JEAN DUVAL and KAREN ABERNOT

Plaintiffs

– and –

FINANCIERE TELCO INC. and CFM CONSULTANT FINANCEMENT MULTIPLE INC. a.k.a. MFC MULTIPLE FINANCING CONSULTANT and BRIAN VERBEEK and THE VERBEEK GROUP CORP. and DUNDEE SECURITIES CORPORATION and BUCKINGHAM SECURITIES CORPORATION and CANADIAN WESTERN TRUST COMPANY and VOX TECHNOLOGIES INC. and INVESTISSEMENT EDIMAX INC. and INTERMAX TECHNOLOGIES INC. a.k.a. 9080-6746 QUEBEC INC. formerly INTERMAX TECHNOLOGIES INC. and VIA NET TECHNOLOGIES INC. and REME BEAUREGARD

Defendants

I.A. Mair, C.M.J. Kealy and B.M. Martin, for the Plaintiffs (Responding Parties)

L. Parliament and A. Boudreau, for the Defendant, Canadian Western Trust Company (Moving Party)

HEARD: November 6, 2013

REASONS FOR DECISION ON MOTION

R. MacKINNON J.

[1] The defendant Canadian Western Trust Company (herein “CWT”) has moved to appeal the decisions of Lauwers, J. (as he then was) of May 23 and October 4, 2013 certifying this action as a class proceeding. It seeks leave on both branches of the test under rule 62.02(4), arguing that there is good reason to doubt the correctness of the decision and that his errors raise matters of such importance that leave to appeal should be granted. In addition they argue there are conflicting decisions on the matters in issue and it is desirable in the circumstances that leave be granted.

[2] The plaintiffs have alleged in this action that the proposed class lost their individual retirement savings by participating in an investment scheme which ran from August 1998 to June 2001 and which they assert was a scam entirely inappropriate for any investor.

[3] The motions judge arrived at his decision to certify notwithstanding his findings that:

a. The live issues against CWT arose from his re-characterization of the plaintiffs’ allegations as being based on a possible “super-added duty” of CWT; and

b. The plaintiffs’ proposed class and sub-class definitions were faulty; and

c. The common issues required revision; and

d. The litigation plan was inadequate; and

e. The proposed notice required revision.

[4] First, CWT argues on this motion that the plaintiffs did not satisfy section 5(1)(a) of the Class Proceedings Act (herein “CPA”) which requires that the pleadings disclose a cause of action. The claim however, does include allegations that the investment scheme was a scam and that CWT failed to warn the CWT sub-class about it. It is clear that the motions judge determined an adequate cause of action was disclosed. In doing so, he identified what he called a “super-added duty” that custodial trustees such as CWT may owe to beneficiaries - to warn of risks posed to their assets.

[5] This duty was recognized by the British Columbia Court of Appeal decisions in Froese v. Montreal Trust Co. of Canada (1996), 1996 1643 (BC CA), 137 D.L.R. (4th) 725 and Elms v. Laurentian Bank of Canada 2001 BCCA 429, 2001 B.C.C.A. 429. Lauwers, J. applied Froese to support his finding that it was not obvious that the claim in this action against CWT for duty to warn had no chance of success and he correctly applied the duty discussed in Froese without reference to any possible CWT defences. While counsel for CWT described this duty as a new legal concept that could trump unsettled legal principles that govern responsibilities and allocation or risk in contract and tort and which would have serious and wide ranging implications, I disagree. The Reasons for Decision of Lauwers, J., read in context, make it clear that he was describing the overarching tort duty of care owed by a custodial trustee. The cases cited by both parties on this motion fully satisfy me that, in law, an administrative agent or custodial trustee may be found to have a common-law duty to plan beneficiaries beyond the terms of the contractual documents, depending on the factual circumstances determined at trial. I agree with Conway, J. in Chapman v. Benefit Plan Administrators Ltd., 2013 ONSC 3318 (at para. 40) that whether that duty will arise will depend upon the trial court’s factual findings about the role played and functions assumed by CWT as the administrative agent or custodial trustee.

[6] In the case at bar, Mr. Ivany’s dealings and participation in the alleged scheme predated his agreement with CWT. Counsel for the trustee accordingly argues there is no legal basis upon which Ivany can properly transfer a risk to CWT that he himself created. They further argue that losses foreseeable as a consequence of contractual privity are not more foreseeable because a party sues in court. They also argue that concurrent or alternative liabilities in tort do not enable a contracting party to circumvent or a contractual exclusion or a limitation of liability.

[7] The motion judge found that CWT was a federally regulated account holding institution which, in its trustee function, held shares in the investments for some of the proposed class members. The certification decision also noted, that after opening his new self-directed account in 2000, Mr. Ivany received a letter from CWT confirming that it had provided no licensed representative and no opinion to him on any investment. It also noted Mr. Ivany’s representations to CWT of his own performance, of his own due diligence, and his acknowledgment that he had sought and received from others all needed financial, investment, tax and legal advice. The certifying judge noted that the live issues for trial included whether CWT had received or should have been equipped to receive warnings from the OSC in 1999 and from CRA in March 2000, what CWT ought to have done in response to the warnings, and whether the warnings gave rise to a “super-added” duty on CWT to warn its class members to ensure that they did not make such investments using their CWT accounts given the exculpatory language of the CWT documents signed by them. He found that it was not plain and obvious that this claim had no chance of success. I agree. The existence of a tort duty of care is an established principle. Its application to this case will depend upon established facts at trial. There is no conflict of law on this point. There is no good reason to doubt the correctness of the certification order on this point.

[8] Secondly, on this motion, the moving parties note that the plaintiffs have listed four causes of action against CWT, being:

a. Negligent performance of a service; and

b. Negligence simpliciter; and

c. Breach of contract; and

d. Breach of fiduciary duty.

Paragraph 5(1)(c) of the CPA requires that the claims or defences of the class members raise common issues. CWT argues that it is clear from the motion judge’s May 23, 2013 Reasons (at paragraphs 78 and 83), that he believed the plaintiffs had “pared the” complaint down to a simple assertion that the investment scheme was a scam and entirely inappropriate for any investor. He found that to be a plausible assertion and concluded there was no need for an individual suitability assessment for each member of the Verbeek class and the Dundee and CWT sub-classes. The plaintiffs argue, however, and I agree, that they made no such overall promise, representation or commitment. The “paring down” discussion to which the certifying judge referred occurred on a different, separate motion for leave to deliver a Fresh as Amended Statement of Claim. That document expressly pleads that CWT owed a duty to warn the CWT sub-class about the investment scheme which was illegitimate and a scam. The claim was “pared down” when the Statement of Claim was filed. It is clear that no further amendment of pleading was contemplated by Lauwers, J. when he issued his certification order. There is no conflicting decision on this point. There is no good reason to doubt the correctness of his order on this point.

[9] Third, CWT argues that the process used by the motion judge to settle the terms of the certification order and related documentation represents a change to law concerning certification motions generally. I disagree. As noted by Cullity, J. in Heward v. Eli Lilly & Co. (2007), 2007 2651 (ON SC), 39 C.P.C. (6th) 153, the task of defining the class appropriately is often a fluid exercise in fine tuning. I am aware of the mandate for caution issued by the Court of Appeal in Brown v. Canada (Attorney General) 2013 CarswellOnt. 206. The process directed by Lauwers, J. in difficult circumstances allowed for the parties to co-operate on revising the class and sub-class definitions, common questions, litigation plan and notice to the class. There is no good reason to doubt its correctness on these points. It is not desirable in the circumstances that leave be granted on these points. Notwithstanding the submissions of counsel for CWT, Lauwers, J. at no time improperly shifted the onus and burden on certification to the defendant CWT, nor was the litigation plan requirement treated as a mere afterthought.

[10] There is nothing in the proposed appeal that raises issues important to class actions generally.

[11] CWT argued that Laxey Partners Ltd. v. Strategic Energy Management Corp., 2011 ONSC 6348 is a conflicting decision. In Laxey, Newbould, J. considered whether a defendant trustee owed a duty of care to beneficiaries of a trust notwithstanding that the trustee had delegated all of its powers to another company. In Laxey, all of the functions had been delegated. In the case at bar, however, CWT agreed to keep safe the plan assets of the CWT sub-class members in the context of distinct warnings made by public authorities to players in the industry. CWT has demonstrated no difference in the principles chosen by the certifying judge as a guide to the exercise of his discretion.

[12] In Baldwin v. Daubney (2005), 2005 46087 (ON SC), 78 O.R. (3d) 693 the plaintiffs claimed to recover losses as a result of their having borrowed monies for leveraged investments in mutual funds. The plaintiffs were borrowers and the defendant financial institutions were lenders. Baldwin does not conflict with the certification decision at bar. It considered an entirely different relationship. The exercise of discretion by the motion judge on certification in the case at bar leading to a different result because of different circumstances also does not meet the requirement for a conflicting decision within the meaning of rule 62.02(4).

[13] In conclusion, I order that the motion for leave to appeal is dismissed. There is no conflicting decision from another judge or court in Ontario or elsewhere on the matters involved in the proposed appeal and there is no good reason to doubt the correctness of the certification order.

[14] Consistent with the parties’ agreement on the amount of costs for this leave motion and when they should be paid, I order the defendant CWT to forthwith pay the plaintiffs their partial indemnity costs fixed in the agreed upon sum of $15,000 all inclusive of fee, disbursements and HST.

R. MacKINNON J.

Released: November 8, 2013