Citation: Gatti v. Avramidis, 2016 ONSC 1246

COURT FILE NO.: CV-12-464441

DATE: 20160322

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

JOSEPH GATTI Plaintiff

– and –

TERRY AVRAMIDIS, THE TORONTO-DOMINION BANK (c.o.b. TD CANADA TRUST), 6558887 CANADA INC., 3897915 CANADA INC., INGRAM JEFFREY ESHUN, ROGER BLAIR and BERNADETTE BOWMAN Defendants

COUNSEL:

Bruce O'Toole and Kate McGrann for the Plaintiff

Edward H. Merifield, for the Defendant Terry Avramidis Martin Greenglass, for the Defendant The Toronto-Dominion Bank

HEARD: February 17, 2016

BEFORE: S. F. DUNPHY, J.

REASONS FOR JUDGMENT

[1] This case considers whether statements of opinion admitted to have been made honestly and truthfully can nevertheless give rise to a tort claim of negligent misrepresentation if the maker is claimed to have failed to do enough due diligence to validate the opinions honestly expressed. In the circumstances of this case I have found they do not.

[2] In about January 2010, Mr. Gatti found that cash flow was tight in his home renovation business. He decided that he needed to generate some cash flow to help him until business picked up. He already had a home equity line of credit with a very low (3.25%) interest rate with Toronto-Dominion Bank (“TD”) that had been set up for him some years earlier by his “mobile” mortgage manager, Mr. Avramidis. He knew that Mr. Avramidis had helped his own father and his cousins make what appeared to be successful investments in similar short-term debentures that paid monthly interest at rates of up to 12% annually. The prospect appealed. He approached Mr. Avramidis, who had also become a friend. Whether he asked for advice and was proposed the debenture or whether he simply asked to purchase a similar debenture is disputed.

[3] What is not in dispute is that on February 23, 2010, Mr. Gatti used the proceeds of a $120,000 withdrawal from his home equity line of credit and invested it all ($20,000 of it apparently belonging to his brother) in a debenture issued by 6558887 Canada Inc. (“655”). Pursuant to the debenture, 665 undertook to use the proceeds to invest in “high-yield consumer secured notes”. Mr. Gatti admits to having read the debenture before he signed it.

[4] Why would Mr. Gatti borrow $120,000 - that he apparently could ill-afford to lose - and invest it in a debenture of a numbered company that he had never heard of to be placed in “high-yield consumer secured notes”, the details of which he knew next to nothing about?

[5] Mr. Gatti says it was because he reposed trust and confidence in his “advisor” Mr. Avramidis and reasonably assumed that Mr. Avramidis had done his homework. He claims that Mr. Avramidis assured him that the investment would be “safe” and was “guaranteed” and that these assurances amount to negligent misrepresentation in light of the paucity of due diligence Mr. Avramidis had actually performed. He claims that he assumed the debenture was either associated with TD or sponsored by it. He also claims that TD is vicariously liable for the actions of its employee.

[6] Mr. Avramidis answers the question differently. He says that Mr. Gatti made all of his own decisions and that he has never acted as Mr. Gatti’s “advisor” in this or in any other investments. The only business he had done with Mr. Gatti before this was arranging mortgage products through TD, his employer. While he denies making any representations about the debenture, he says that he honestly believed that it was safe from his own experience and helped Mr. Gatti arrange the purchase only because he was asked by Mr. Gatti to do so as a friend. He did not generally “sell” such debentures but had facilitated purchases for friends, a small number of clients who had become friends or their relatives.

[7] If the proof of the pudding is in the eating, Mr. Avramidis sat down at the same table as his friend and client Mr. Gatti for a very full bowl. He and his wife invested $650,000 between 2008 and 2010 in debentures similar to the one purchased by Mr. Gatti. These investments too have been lost. He had known the principals of the issuer for a number of years and trusted them. His honesty and good faith in believing in the quality of this investment cannot be seriously doubted. It is clear that he had no inkling the investment would turn sour for Mr. Gatti or for himself.

[8] The central issue the plaintiff raises is whether Mr. Avramidis had done enough to inform himself of Mr. Gatti’s situation or the underlying quality of the debenture and whether TD is vicariously liable.

[9] This is a motion for summary judgment brought by Mr. Gatti against Mr. Avramidis and TD alone. The other defendants have all been noted in default and have not been heard from. The allegations against them in the statement of claim are of course not evidence as against Mr. Avramidis or TD except to the extent proved. The plaintiff has not done so.

[10] For the reasons that follow, I am dismissing this claim. The suggestion that Mr. Gatti believed the debentures issued by 655 to be in any way connected to TD cannot be considered to be more than wishful thinking fuelled by regret and hindsight. Mr. Gatti did not rely upon Mr. Avramidis as a financial advisor but as a friend. Whether the investment was initiated by Mr. Gatti or recommended by Mr. Avramidis, Mr. Gatti has admitted that any recommendation made was made “friend to friend” and concerned only Mr. Avramidis’ highly favourable personal experience in similar debentures to that point. Such a representation was honestly and reasonably made and cannot be the basis of a negligent misrepresentation claim. TD is not vicariously liable for a failed investment in a product with which it was not associated and that the plaintiff could not reasonably have associated with it merely because its employee may have recommended it in a “friend to friend” conversation over dinner. The essentially coincidental connection to TD’s pre-existing line of credit that the plaintiff happens to have used to fund the purchase is not a sufficient factor to alter that conclusion.

[11] This matter came on originally as a “test case”. There is of course no such thing in law. This is not a class proceeding. Plaintiff’s counsel has brought 13 other very similarly-drafted claims on behalf of a number of other parties with various connections to Mr. Avramidis. The nature of the relationship of each plaintiff to Mr. Avramidis and to the other defendants, the knowledge of each as to the relationship between Mr. Avramidis and TD and the damages of each are separate and distinct. While there are certainly common issues between the 14 claims, there are significant distinctions as well. What consequences the judgment rendered here may have on those other cases is another matter to be considered another day. I shall confine myself in these reasons to the circumstances of Mr. Gatti and his claim.

Overview of Facts

[12] At the relevant time, the defendant Mr. Avramidis had been an employee of TD for eight or nine years and had been in the mortgage business for a number of years before working with TD.

[13] At TD, Mr. Avramidis was a “mobile” manager for residential mortgages. The “mobile” element of his position meant that he had no office at TD but made arrangements to meet clients at their place of business or worked out a co-location arrangement. He was paid on a commission basis to develop a range of contacts to whom he could sell TD’s various residential mortgage products (conventional residential mortgages and home equity lines of credit, primarily). As a mobile manager, he often went to where his clients were.

[14] In about 2002, Mr. Avramidis had an office inside the offices of an insurance and financial planning company known as “Solutions 21”. The three (other) individual defendants were its principals and the various debentures that Mr. Avramidis purchased himself or assisted Mr. Gatti or his family members to purchase were issued by affiliates of Solutions 21. 655 was one such debenture-issuing affiliate.

[15] Mr. Avramidis initially shared an office inside the premises of Solutions 21, moving after a time to a separate office of his own within their premises. Solutions 21 would introduce some of its clients to Mr. Avramidis when they had financial planning issues that required residential mortgage financing and Mr. Avramidis would introduce his own clients to them if they needed financial planning advice.

[16] There is disputed evidence as to whether Mr. Gatti had ever been to the Solutions 21 offices or seen Mr. Avramidis there before the investment underlying his claim. He says he had not heard of them nor been to the office. Mr. Avramidis claims that he had. I have not found it necessary to resolve that conflict in the evidence (although Mr. Gatti’s position on the subject renders more tenuous his argument regarding vicarious liability as is discussed below).

[17] TD was aware of this arrangement with Solutions 21 in its broad terms at least. They had a commission arrangement with Solutions 21 (paying Solutions 21 for client mortgage referrals). Solutions 21, however, did not have an “exclusive” arrangement with TD – indeed, at the relevant time Solutions 21 had established its own in-house mortgage brokerage business through a related company and was to that extent in competition with TD.

[18] Mr. Avramidis received a small commission – 12 basis points – for referring financial planning clients to Solutions 21. There is no evidence before me that Solutions 21 ever actually paid any commission to Mr. Avramidis in respect of the debenture sold to Mr. Gatti that is the subject-matter of this action. Mr. Gatti had his own financial planner and advisor and there is no evidence that he ever became a financial planning client of Solutions 21. Mr. Avramidis may have received a commission or he may not have in this case.

[19] While the plaintiff sought to draw conclusions and inferences from the existence of approximately 30 other debenture purchases by the plaintiffs in the other actions, the evidence before me suggests that all of these arise from Mr. Avramidis’ dealings with friends or relatives of friends. Mr. Gatti admitted to having become a friend of Mr. Avramidis by the time the purchase was made. Mr. Avramidis did not attempt to place these debentures with his broader client base and was not in any way in the “business” of selling them. I cannot find on the evidence before me that Mr. Avramidis expected to be paid for his role in facilitating the purchase of debentures, although the evidence suggests that he sometimes was. As noted, there is no clear evidence that this was true in Mr. Gatti’s case.

[20] Mr. Avramidis or members of his family had personally invested quite heavily (at least $650,000) in the debentures. He had formed the view from his eight years of experience with the sponsors of these debentures that they were a good and safe investment and he had come to trust the principals of Solutions 21 with whom he worked over those years. He shared his opinions and experience with a small number of his friends and clients who had become friends. It is likely that he shared this opinion with Mr. Gatti at some point.

[21] Mr. Avramidis had been arranging mortgages for Mr. Gatti and members of his family for eight or nine years prior to the debenture transaction in February 2010. Prior to the purchase of the subject debenture in February 2010, Mr. Gatti’s business dealings with Mr. Avramidis for his own account had been solely related to residential mortgages. He had never used Mr. Avramidis to make any of his own investments.

[22] Mr. Gatti did have investments at the relevant time, including an RRSP that was invested with the help of a financial advisor. He also had a financial planner working for him and had an accountant dealing with the books of his business. Indeed, it was his financial planner who initially introduced him to Mr. Avramidis to secure a TD home equity line of credit. Mr. Gatti knew that Mr. Avramidis had to get credit approval from his superiors for all of the mortgage products he acquired from TD.

[23] Mr. Gatti had numerous sources of financial advice to assist him with his investments and, prior to this one disputed investment, had never sought to use Mr. Avramidis for that purpose.

[24] Mr. Gatti and Mr. Avramidis had become friends. Mr. Gatti has been to his house, they had meals together and chatted “like friends”. Mr. Gatti told Mr. Avramidis of his wife’s illness. I have no doubt that Mr. Gatti had closer friends in his life then and now. However, the relationship between the two was more than “just business”.

[25] Mr. Gatti’s income situation, on the other hand, has not been addressed candidly in his evidence. His income tax returns showed either no income or negligible income for the years prior to the purchase of the debenture. This is simply not a credible description of the income that he had access to. He had a financial planner, an accountant and an interest in two family companies whose finances he was not willing to disclose when questioned. He was able to support his family and keep a $120,000 line of credit open and current. The credit information given to TD claimed income of $120,000 per year despite a tax return showing essentially nil income.

[26] I am prepared to use Rule 20.04(2.1) of the Rules of Civil Procedure to draw at least limited adverse inferences from his refusals to provide more information regarding his actual means as well as the representations of income made in his credit applications. Mr. Gatti’s tax returns did not reflect the full income available to him and Mr. Gatti was the reasonably sophisticated businessman and investor he claimed to be in executing the debenture. While I certainly do not accept at face value his income claims, I need conclude only that he was not an innocent novice and had greater resources, experience and understanding of financial risk than he has been willing to admit.

[27] Mr. Gatti’s father made an investment in a similar debenture issued by a different affiliate of Solutions 21 named “Trem Dy” in 2006. Mr. Avramidis had facilitated the transaction as had Mr. Gatti. Accordingly, Mr. Gatti had acquired some knowledge of debentures similar to the one he purchased later. This particular transaction appears to have been a happy one. His father received the promised steady stream of income. At term the money was repaid. Mr. Gatti’s cousins had also made a similar investment with Mr. Avramidis’ assistance – Mr. Gatti did not know the details but had not heard of any problems experienced by them either.

[28] The parties are in a reasonable level of agreement that the investment giving rise to this claim was arranged over at least two meetings. The details of the meetings are a matter of some controversy.

[29] The first meeting took place in late 2009 at a Tim Horton’s restaurant. There appears to be no dispute on the evidence that the meeting was arranged, at least in part, because Mr. Gatti had to update the paperwork relating to his home equity line of credit. Documents in relation to that updating suggest the meeting took place in early December 2009. Nothing turns on the precise date.

[30] There is disputed evidence as to whether Mr. Gatti also raised the subject of his cash flow needs and asked for advice or whether he came to the meeting for the purpose of asking if Mr. Avramidis would help him arrange a purchase of debentures similar to those he had witnessed earlier in order to help out his cash flow needs. Both parties agree that something of Mr. Gatti’s cash flow problems was discussed. I do not find it necessary to resolve the dispute on the evidence as to who first mentioned the subject of the debentures as a possible solution.

[31] There is no doubt that Mr. Gatti had helped his father arrange a debenture investment through Mr. Avramidis in 2006 and there is no doubt that Mr. Gatti at least knew that his cousins had also invested in similar debentures. It is clear from the evidence that Mr. Gatti knew generally of the debentures from his prior experience (especially the high interest rate they paid) and had no intimation of any problems experienced by them with their debenture investments. Whether Mr. Gatti asked for help in buying the debentures or whether the suggestion was made and fell on fertile ground due to their common shared and favourable experience is a nuance that does not change the analysis greatly.

[32] The parties also agree that there was a second meeting at a restaurant on February 23, 2010. Mr. Gatti, his brother and Mr. Avramidis were present. Either before or after dinner, Mr. Avramidis gave Mr. Gatti the debenture ready for signature by Mr. Gatti, a TD bank draft for $120,000 that had been drawn on his line of credit and a void cheque to set up the pre-authorized payment scheme enabling the automatic deposit of payments on the debenture into his account. Mr. Gatti read the debenture and asked some questions about it before signing it. These circumstances strongly support the inference that the decision to purchase the debenture had already been made prior to this dinner meeting and that the parties only finalized the arrangements at that time.

[33] Mr. Gatti claims that his brother loaned him $20,000 of the $120,000 investment although the bank draft that actually funded the purchase came entirely from his account. I found no need to resolve the question of whether his brother was a silent co-investor in the debenture.

[34] The debenture was issued by 655. It provided no details of the business of 655 or the security held for repayment beyond the statement that the funds would be used to purchase “high yield consumer secured notes”. The debenture provided for a return of principal to be paid at the rate of $1,200 per month with the principal balance plus “bonus” interest of $14,400 (or 12% of the original principal amount) payable only if held to term.

[35] There is virtually no evidence before me as to the business of 655. The plaintiff has presented circumstantial evidence suggesting that some of the principals behind Solutions 21 had a chequered past in their dealings with securities regulators, but this assists in no way in identifying 655 or its business. Of the business of 655 itself, I have no evidence beyond the very general statements in the debenture and the evidence that its principals were the same as the principals of Solutions 21. I have no information as to what 655 did with the funds raised by the sale of the debenture. I cannot say if 655 invested the funds in the fashion described in the debenture. I cannot say whether the security it was meant to have received was received or not. I have no evidence whatsoever as to why 655 failed to return the investors’ funds; I know only that ultimately it did not.

[36] Mr. Gatti made his investment on February 23, 2010. He claims that Mr. Avramidis set him up with a direct deposit arrangement so that the funds could be paid directly. If indeed a direct deposit arrangement was established, the irregular payment history established by 655 almost out of the gate for this investment ought to have given him some level of concern. Indeed, his evidence suggests that the irregular payments did arouse concerns on his part. The following table shows the dates of the payments received by Mr. Gatti under his debenture:

Date Amount

April 1, 2010 $1,200

April 27, 2010 $1,200

May 20, 2010 $1,200

July 9, 2010 $1,200

August 3, 2010 $1,200

September 7, 2010 $1,200

November 12, 2010 $1,200

Total: $8,400

[37] Mr. Avramidis left the employ of TD in December 2010 and has continued his mortgage sales business with others. There is no evidence to suggest that his departure is in any way connected to this litigation and I draw no such inference.

[38] The chronology after December 2010 leading up to the commencement of this litigation is not material to the motion. The claim is based on negligent misrepresentation and there were no representations made thereafter from which damages are alleged to flow.

[39] The only two facts that I have found to be material thereafter are: (i) that the plaintiff has admitted that he never contacted TD about this investment after Mr. Avramidis left TD’s employ and payments under the debenture ceased (while he nevertheless continued to make payment on his line of credit); and (ii) in numerous communications with Mr. Avramidis after he had become very alarmed, he never made any suggestion consistent with the notion that he originally thought the debenture to have been a TD product or one sponsored by TD as he now claims.

[40] The plaintiff’s motion in this case was supported by his own affidavit. His affidavit very significantly tracked the wording of his statement of claim which in turn closely tracked the wording of claims filed by other plaintiffs against TD and Mr. Avramidis all of whom were represented by the same counsel. Mr. Gatti was examined on his evidence. The transcripts of his oral testimony qualified, varied or retreated from so many of the statements in his affidavit as to lead me to draw the inference under Rule 20.04(2.1) that I can attribute almost no weight to it, especially where it contradicts transcripts of his own oral testimony. It is clear to me that Mr. Gatti’s memory has been very heavily influenced by suggestion and by hindsight and must be reviewed carefully.

Issues to be Decided

[41] This case raises the following issues for decision:

a. How ought Rule 20.04(2.1) to be applied in the face of the conflicts in the evidence?

b. May the plaintiff assert a breach of s. 25(3) of the Securities Act, R.S.O. 1990, c. S.5 and thus the duties of care owed by an investment advisor?

c. Has the plaintiff established a case of negligent misrepresentation on the facts of this case?

d. Is the plaintiff’s claim barred by s. 4 of the Limitations Act, 2002, S.O. 2002, c. 24?

e. Is TD vicariously liable for the actions of Mr. Avramidis?

[42] The plaintiff indicated that it would not be arguing on this motion that TD had breached the pleaded duty to supervise its employee. Its statement of claim seeks damages from TD both on the theory of breach of an independent duty to supervise and on the theory of vicarious liability. While I have dismissed the claims of the plaintiff based upon negligent misrepresentation, I have neither considered nor ruled upon the separate claim against TD in relation to its allegedly negligent supervision of Mr. Avramidis.

Analysis and Discussion

(i) Applying Rule 20.04(2.1)

[43] The parties filed a considerable volume of evidence in support of this motion. Much of it was conflicting.

[44] Some of the material was simply not necessary for this motion. TD filed pleadings and discovery extracts from the various related (but separate) actions filed by plaintiff’s counsel arising out of the debenture investments with Solutions 21 and its related group of entities. TD felt a need to do so in light of the declared “test case” nature of this motion. As discussed above, if issue estoppel actually arises as to some matters, that will be a determination for down the road. If the parties are moved closer to overall settlement or farther away on the basis of perceived similarities of other cases to this one, that will be also be for them to decide in the fullness of time. I have not considered the discovery evidence from the other proceedings. I have considered the analysis of the similarities between the pleadings in the other actions and Mr. Gatti’s affidavit on this motion as that analysis was germane to an assessment of the credibility of his affidavit, particularly in light of the transcripts of his examinations.

[45] There remains however a considerable volume of affidavit, discovery transcript and cross examination transcript evidence of the parties to this motion that is properly before me. Mr. Avramidis and Mr. Gatti have stories to tell that differ in many key areas. Accordingly, I think it useful to set forth how I have gone about applying the “toolbox” in Rule 20.04(2.1) in light of the directions given by the Supreme Court of Canada in Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87.

[46] The first step in the analysis of a summary judgment motion is to determine whether the evidence taken as a whole raises a genuine issue for trial on any of the issues that are raised for determination. The issues of negligent misrepresentation, vicarious liability and the Limitations Act all raise genuine issues for trial in my view. By this I mean that it would not be possible for me to conclude that I can safely make a ruling accepting or dismissing those claims or defences without the opportunity to make a qualitative assessment of the evidence through either (a) a trial or (b) making inferences, weighing the evidence or evaluating the credibility of the witnesses using the “toolbox” of 20.024(2.1).

[47] This preliminary process is undertaken with one main assumption in mind. I have to assume that the parties have placed before me in some fashion evidence of all of the facts that they would intend to prove at trial. That does not mean that all of the evidence is before me in exactly the format that it might take at trial; it does mean that I do not need to fear moving forward to reach conclusions on the evidence because of speculation of what further evidence or facts might come to light in future. With few exceptions that I can readily bring to mind, the thought process essentially involves accepting as true the admissible evidence of both parties and deciding whether a fair determination of the issues can be made based on the evidence “as is, where is”.

[48] The second stage of the analysis requires considering whether the interests of justice require that the qualitative testing of that evidence should only be performed at a trial or whether, to the contrary, the nature and quality of the evidence in relation to the live issues permit me to make a just determination after weighing the evidence, evaluating the credibility of the witnesses who have tendered it and drawing inferences from it. This consideration is made, once again, on the assumption that both sides have “led trump” and placed before me evidence of all of the facts they would intend to prove at trial.

[49] Had I found it necessary to resolve all of the conflicts on the evidence I would certainly have determined not to grant summary judgment in this case and, following the directions of Hryniak, remained seized of the matter, making appropriate orders under Rule 20.05 to define the issues that need a trial for determination. However, I have found that admissions obtained from Mr. Gatti when considered in a contextual framework that has required only sparing use of the Rule 20.04(2.1) toolbox permits me to make the findings necessary to deal with the claim without requiring a trial to explore what are essentially collateral issues with no impact upon the outcome on the merits.

[50] It is now clear that if the motions judge is in a position to make a determination on the merits of an issue raised on a motion for summary judgment, he or she may do so even in the absence of a cross-motion for such relief: Meridian Credit Union Limited v. Baig, 2016 ONCA 150 at para. 17 and cases cited therein.

[51] Where I have found on the evidence before me that I may fairly resolve issues raised by the motion without resort to a trial, the proper procedure is to rule on those issues and for that ruling to be a final order on those issues.

[52] At the hearing of this motion, the plaintiff advanced the view that I have all the evidence I require before me and can rule in his favour based upon it using the “toolbox”. Mr. Avramidis took the same position but in the opposite sense – his position was that the plaintiff has the onus and is deemed to have put his “best foot forward”. Assessing the same body of evidence using the toolbox, he submits I should dismiss the claims against him. TD sought to hedge its bets, claiming that either the claim should be dismissed outright or, in the alternative, a trial on the disputed evidence should be held. None of the parties suggested that this was not an appropriate case to have resort to Rule 20.04(2.1), even if they each suggested different conclusions be drawn thereafter.

[53] In my view the interests of justice do not require a trial here and I have sufficient evidence in the form of admissions and inferences and conclusions derived from a sparing use of Rule 20.04(2.1) to reach the necessary conclusions on the issues without depriving a party of fairness or due process.

(ii) Section 25(3) of the Securities Act

[54] In his factum, the plaintiff relied very strongly on s. 25(3) of the Securities Act in support of the duty of care he sought to argue in favour of. Section 25(3) provides that:

“[u]nless a person or company is exempt under Ontario securities law from the requirement to comply with this subsection, the person or company shall not engage in the business of, or hold himself, herself or itself out as engaging in the business of, advising anyone with respect to investing in, buying or selling securities unless the person or company: (a) is registered in accordance with Ontario securities law as an adviser…”.

[55] The plaintiff argues that the debenture purchased by Mr. Gatti was a “security” as defined by the Securities Act and that Mr. Avramidis was engaged “in the business of…advising [him] with respect to buying” that security by reason of the evidence of transactions with the other plaintiffs in the other actions. He argues that I ought to have reference to the provisions of the Securities Act, particularly the “know your client” and “know your product” rules applicable to securities investment advisors in assessing whether Mr. Avramidis discharged his alleged statutory due diligence obligations to Mr. Gatti. Citing Ridel v. Cassin, 2013 ONSC 2279, he argued these statutory obligations should be looked to in establishing the extent of the duty of care owed for the negligent misrepresentation claim.

[56] The defendants took great exception to this position. The statement of claim contains no mention of the Securities Act whatsoever. Neither the examinations for discovery nor the affidavit materials filed were designed to answer the questions necessary to determine the applicability of the Securities Act to the facts of this case. Section 25(3) requires that Mr. Avramidis be proven to be engaged in the “business” of advising with respect to investing in securities. There is no such pleading in the statement of claim and the evidence of it before me is equivocal.

[57] I agree with the defendants for several reasons.

[58] Even if it s. 25(3) of the Securities Act had been pleaded, I cannot find that the plaintiff has done more than place some evidence before me from which I might draw that conclusion. I am not persuaded that the evidence of Mr. Avramidis “engaging” in a business of advising on the sale of securities is convincing – the evidence could be taken to suggest that all transactions were arranged by Mr. Avramidis out of friendship with no expectation of remuneration even if he appears to have been remunerated on occasion. The onus is on the plaintiff to prove his claim and lead trump. I would find that he has not led convincing enough evidence to persuade me of the preliminary fact of engaging in the business.

[59] The standard of care pleaded in the statement of claim is contained in paragraph 31. That paragraph alleges “a duty of care to advise [the plaintiff] honestly and in good faith and in accordance with standards of a reasonably prudent mortgage advisor and to ensure that the representations he made in relation to his financial advice were accurate” (emphasis added). While the statement of claim (para. 28) mentions that Mr. Gatti learned of the existence of other clients to whom Mr. Avramidis allegedly sold debentures, it does not plead that this was part of engaging in a business or that this engages the Securities Act.

[60] The claim pleaded was based upon the duty of care owed by a reasonably prudent mortgage advisor. That is not at all the same as the range of duties owed by a securities advisor required to be registered under s. 25(3) of the Securities Act and the Statement of Claim cannot be read fairly to imply such a claim.

[61] I am not prepared to accept the plaintiff’s argument that the content of Mr. Avramidis’ duties can be found in the unpleaded Securities Act. The defendants also argue, with some force, that Mr. Gatti has failed to lead any expert evidence as to what the duties of a mortgage advisor might actually be to support the pleading he did make.

[62] That being said, the pleaded duties of honesty and good faith do not strike me as being particularly difficult to imply in the circumstances. I would not hesitate to find that, to the extent Mr. Avramidis had a duty that was engaged in his discussions with Mr. Gatti, those duties extended to acting honestly and in good faith.

(iii) Negligent Misrepresentation

[63] The elements of the tort of negligent misrepresentation are not in dispute in this case even if the application of the law to the facts is. The starting point is the five part test summarized by the Supreme Court of Canada in Queen v. Cognos, [1993] 1 S.C.R. 87, 1993 CanLII 146 (SCC) at para. 33:

(1) there must be a duty of care based on a "special relationship" between the representor and the representee; (2) the representation in question must be untrue, inaccurate, or misleading; (3) the representor must have acted negligently in making said misrepresentation; (4) the representee must have relied, in a reasonable manner, on said negligent misrepresentation; and (5) the reliance must have been detrimental to the representee in the sense that damages resulted.

[64] The five parts of the Cognos test are not watertight compartments. The factors that go into determining whether a special relationship exists have been found by the Supreme Court to include factors that are aspects of other parts of the test. For example, in Hercules Managements Ltd. v. Ernst & Young, [1997] 2 S.C.R. 165, 1997 CanLII 345 (SCC) the foreseeability of reliance enters into the “proximity” analysis, while reasonable reliance itself is a separate test. If the overlap between the elements of the test is maddeningly imprecise on occasion, the common sense propositions underlying the boundaries of the tort are reasonably clear and easily grasped.

[65] The test is of course conjunctive – should the plaintiff fail positively to establish any one of these five foundational elements of his claim, the entire claim must fail.

Special relationship

[66] The existence of a special relationship is an issue that was contested in argument. The Supreme Court elaborated upon this aspect of the test in Hercules finding (at para. 41) that the court must consider whether: “(a) the defendant ought reasonably to foresee that the plaintiff will rely on his or her representation, and (b) reliance by the plaintiff would, in the particular circumstances of the case, be reasonable”.

[67] There are conflicts in the evidence that go to the existence of a special relationship existing between Mr. Gatti and Mr. Avramidis. Mr. Gatti claims he asked for advice; Mr. Avramidis claims that he merely asked to purchase something he was already familiar with. Mr. Avramidis claims that Mr. Gatti came to the office and met privately with one of the principals of Solutions 21 before deciding to purchase; Mr. Gatti claims never to have heard of Solutions 21 or its principals before his purchase and says he never went to their office.

[68] I do not need to decide the conflicts between them in order to conclude that the threshold of a “special relationship” as defined in Hercules and in Cognos is to be found in the evidence here. While there were certainly aspects of casualness and social interaction between friends present in the exchanges between the two men leading to the purchase of the debenture, at least some parts of their interaction were of a business nature. In the first meeting, Mr. Avramidis was updating information in relation to Mr. Gatti’s home equity line of credit; in the second he brought the debenture documentation ready for execution as well as a bank draft and blank cheque. Mr. Avramidis was the conduit through whom Mr. Gatti actually arranged the purchase from 655 and Solutions 21. At the very least, Mr. Avramidis must have assumed that Mr. Gatti expected him to be honest and in show good faith in their dealings in relation to the debenture acquisition and must have known that Mr. Gatti would rely on at least that minimum standard of care being discharged. Whether it was reasonable for Mr. Gatti to expect more than this will be examined below.

Untrue, inaccurate or misleading statement

[69] What precisely is the representation alleged to have been made, bearing in mind that omissions, silence and half-truths can also be considered as misrepresentations in appropriate circumstances: Meridian Credit Union at para. 30?

[70] The allegation is that Mr. Avramidis made an untrue, inaccurate or misleading statement in relation to Mr. Gatti’s acquisition of the debenture by:

a. Describing the investment as safe and secure or guaranteed;

b. Implying that TD endorsed or was connected to the investment;

c. Failing to disclose that Mr. Avramidis was receiving payment for his role in the sale; and

d. Failing to disclose his own lack of due diligence.

[71] I shall examine the evidence supporting each of these allegations in turn.

“safe”, “secure”, “guaranteed”?

[72] The first of these statements was very heavily qualified by Mr. Gatti when tested by examination. He admitted that he had never been told the investment was guaranteed by TD or anyone else, contradicting the assertion in his affidavit. After lengthy questioning about the actual representations made, Mr. Gatti agreed with the following formulation in his May 26, 2015 cross-examination:

“Q. 251: So, if we put matters into perspective, when Terry told you that it was safe and that he had invested, he was effectively telling you I had no problems in my investment either?

A. Yes, correct.

Q. 252: Okay. And do you have any evidence to put forward today, sir, that when Terry effectively told you he’s not having problems in his investment, that that statement was untrue?

A: No.”

[73] Mr. Gatti also admitted that Mr. Avramidis had made the recommendation to him “friend to friend”.

[74] Even this narrow version of the representation made was cast into doubt by further admissions of Mr. Gatti. He admitted that he might well have been confusing comments made by Mr. Avramidis in 2006 (when Mr. Gatti assisted his father in making a similar investment) with comments made to him in 2009 or 2010. In other words, Mr. Gatti himself was unsure whether any direct representation as to the safety of the investment was made to him in either of the two meetings he described (at Tim Horton’s in late 2009 or at the restaurant on February 23, 2010).

[75] Despite Mr. Gatti’s confusion, I find that Mr. Avramidis very likely indicated in one or both of their meetings in connection with the debenture that he thought the investment to be “safe” and that this claim was understood by Mr. Gatti to be a recommendation from one friend to another made in the context of Mr. Avramidis’ personal experience with similar investments. However, I cannot find that such a casual and essentially personal recommendation can bear the weight of assumptions and inferences that the plaintiff would seek to heap upon it, particularly when he is as confused as his evidence suggests that he was concerning whether the discussion occurred before or after he had decided to make the purchase. The plaintiff cannot reasonably have expected Mr. Avramidis to have been his financial advisor in these circumstances nor could Mr. Avramidis have reasonably expected Mr. Gatti to rely on more than the truth of what he did say: Doraldick Investments Limited v. Canadian Imperial Bank of Commerce, 2000 CanLII 3634 (ON CA) at para. 7 and 13. On the evidence before me, the limited advice given was based upon Mr. Avramidis’ personal experience and was honest, truthful and in good faith. Mr. Gatti’s admissions do not permit him to take issue with that conclusion.

[76] This is a motion for summary judgment that Mr. Gatti himself has precipitated over some considerable resistance from the defendants. It is his obligation to discharge the onus upon him and to do so by putting his best foot forward. Negligent misrepresentation is not a strict-liability tort. If he is unable clearly and consistently to articulate and convincingly prove what the additional representations were that give rise to his claim, he cannot expect to succeed. He has not done so in this case.

[77] I have considered whether the plaintiff could salvage his claim by reference to admissions that Mr. Avramidis may have made in his own examination. For the most part, Mr. Avramidis had relatively little in the way of detailed recollections of his meetings with Mr. Gatti on this subject in relation to this investment. He did attempt to outline his normal practice in relation to debentures arranged through Solutions 21. The problem for the plaintiff is that there is no clear evidence that any of those statements were actually made to Mr. Gatti in this instance.

[78] As noted above, the significant differences between Mr. Gatti’s transcribed oral evidence and his affidavit and the similarities between his affidavit and other pleadings drafted by his lawyer were such that I have been able to attach virtually no weight to Mr. Gatti’s affidavit on its own. Almost every material statement in it was qualified so heavily by his oral evidence, if not actually contradicted, as to render the affidavit entirely suspect.

[79] I am not prepared to disregard the express admissions made by Mr. Gatti in favour of general practices that Mr. Avramidis may have followed with others but not necessarily with Mr. Gatti. Mr. Gatti cannot rely on alleged misrepresentations that may have been made to others if they were not also made to him.

[80] I find that the only express representation that Mr. Gatti was prepared to stand by having received was an assurance that Mr. Avramidis had found the investment to be a good one based upon his own personal experience up to that point. That statement was honestly made and was true. I cannot find that it was untrue or misleading in any way.

Involvement or endorsement of TD

[81] What then of the allegation that Mr. Avramidis impliedly represented a connection between TD and the investment? Mr. Gatti’s statement in an affidavit sworn in 2015 as to what he believed in 2010 will always be self-serving and must be tested in light of the objective evidence as to what he knew or ought to have known in 2010. A trial will not improve my ability to assess the truth of his statement of belief today – what must be teased out of the facts is what he ought reasonably to have believed then.

[82] In my view, the assertion of TD’s alleged connection to the debenture cannot withstand close examination. By the time the cross-examination was complete, Mr. Gatti was prepared to go no further than to say that he assumed TD was involved because he had not been told otherwise. Even this weak statement could not stand long since he also admitted that Mr. Avramidis might have told him TD was not involved with the debenture but the detail had been forgotten by him. This description of a key foundation of his claim, coupled with the admission that Mr. Avramidis discussed the debenture with him in a “friend to friend” discussion, is a slender evidentiary reed from which to hang this tort claim. It has all the hallmarks of a “memory” thoroughly tainted by hindsight and wishful thinking. The fact that this allegation is framed in terms so closely resembling other claims in the other actions is also a very suspicious fact in terms of assessing its credibility.

[83] I have applied the “toolbox” of Rule 20.04(2.1) to reject Mr. Gatti’s bald assertion that he assumed TD’s involvement after considering the context, almost all of which is admitted by him.

[84] Firstly, I consider what Mr. Gatti knew at the time of his initial investment (i.e. February 23, 2010). The following picture emerges from his cross-examination and discovery evidence:

a. He purchased the debenture over a dinner with his brother and his friend Mr. Avramidis;

b. He knew that the debenture, which he admitted to reading before signing, made no mention of TD and did not suggest on its face any TD affiliation;

c. He knew that under the debenture he was the lender and 655 was the borrower, whereas all of his dealings with TD had been in the opposite sense (i.e. borrowing money from the bank);

d. He conceded that he did not believe that TD owned 655 or that TD was guaranteeing 655;

e. He had no idea if TD earned a fee in relation to the sale of the debenture;

f. He was unable clearly to articulate what the nature of TD’s assumed involvement was with any consistency or clarity;

g. He went to the February 23, 2010 meeting expecting that the debenture he was purchasing would be issued by “Trem Dy” since that was the name of the company that had issued the debenture in which his parents had invested in 2006;

h. The contact information he had for Trem Dy was neither a TD branch nor apparently related to TD;

i. He had no reason to believe that Mr. Avramidis was a trained investment advisor or was selling TD investment products generally and he never made any effort to discover what qualifications outside of the mortgage world Mr. Avramidis might have;

j. He knew that Mr. Avramidis had made the recommendation of the debenture to him “friend to friend” and that Mr. Avramidis was personally invested in similar debentures;

k. He knew of no bank offering a risk free investment in 2010 with a 12% yield;

l. He could not explain why TD needed to have him involved at all given that he borrowed from TD at 3.25% and expected to receive back 12% from a borrower supposedly connected to TD;

m. He knew that 12% was a high rate of interest and a high rate of interest denotes risky transactions;

n. He knew that Mr. Avramidis did not offer the debenture to all of his clients – a circumstance not consistent with the debenture being considered as a “bank” product; and

o. There were no TD brochures or TD forms filled out in connection with the investment in the debenture.

[85] The foregoing circumstances, all of them derived from admissions of Mr. Gatti or uncontradicted evidence, are not consistent with a reasonably held belief of any affiliation between TD and the debenture issued by 655. A trial is not necessary to obtain these admissions from him again.

[86] The plaintiff suggested that the involvement of TD and Mr. Avramidis in obtaining the bank draft drawn on his line of credit or “filling out the paperwork” for the debenture ought to be given great weight by me in assessing his assumption of TD sponsorship. I cannot agree.

[87] The line of credit used in the transaction was not established for the purchase of the debenture. It pre-dated the debenture by a number of years. Its use on this transaction does not lead to any reasonable inference of TD involvement in the investment since Mr. Gatti could use it at any time and for any purpose.

[88] While it appears that Mr. Avramidis arranged to pick up the bank draft drawn on the home equity line of credit to pay for the debenture, it cannot credibly be claimed that he did so without permission. Neither party had a very clear memory of the circumstances. I need not resolve the dispute on the evidence because Mr. Gatti admitted that he made no contemporary complaint at all. He knew where the money had come from and had no objection at all at the time. Indeed, if he had objected, TD’s (lack of) involvement would very likely have become quite clear to him.

[89] Mr. Gatti conceded that he had done no due diligence about the debentures or 655 before investing. He simply claimed that he was expecting that “Terry would take care of everything”. He could not point to any representation made by Mr. Avramidis to justify that limitless assumption.

[90] Knowing what he knew, Mr. Gatti would have had to come to dinner at the Mississauga restaurant on February 23, 2010 armed with a healthy dose of willful blindness and wishful thinking to assume that TD was connected to the debenture when he signed the paperwork over dinner.

[91] Counsel suggested in oral argument that this investment showed more red flags than a May Day parade in Red Square. While the suggestion betrayed his age and mine, I am inclined to agree. Mr. Gatti clearly admitted the casual nature of the “friend to friend” conversation. The idea of using his line of credit to generate income can only have come from him – his own evidence was sufficiently vague and inconsistent on the point to enable me to accept Mr. Avramidis’ evidence as preferable. Mr. Gatti was no babe in the woods. He had numerous qualified sources to turn to for investment advice. His failure to do so suggests quite strongly that other forces were at play in his decision-making process. The pursuit of a quick and lucrative return would appear high on the list of suspects. He cannot credibly claim to have assumed bank-like security attaching to a 12% investment in 2010 and admitted as much.

[92] I cannot give credit to his after-the-fact claim to belief in TD’s involvement when the suggested belief has so little objective factual basis.

[93] What then of Mr. Gatti’s conduct after the investment was made? In my view, his post-investment conduct is also quite inconsistent with the position he now takes that he understood TD to be connected to or endorsing this investment from the beginning:

a. Although ostensibly paid via “pre-authorized deposits”, the erratic monthly payments made under the debenture before payments ceased in no way resembled a bank product;

b. Mr. Gatti became perturbed about the erratic payment pattern almost immediately but neither made any effort to contact TD nor did he seek confirmation of his alleged assumption about TD’s role or involvement with 655 when the expected regular cash flow proved to be as erratic as it was;

c. He knew that Mr. Avramidis had left TD in late 2010 but never initiated any direct contact with TD until he commenced the claim even though payments had ceased long before;

d. Despite his increasing state of alarm in 2011, his correspondence with Mr. Avramidis never suggested that he had been deceived into believing TD had a role or involvement with 655; and

e. He never complained of TD deducting interest payments on the line of credit while payments had ceased altogether from 655.

[94] Mr. Gatti’s admission on cross-examination that Mr. Avramidis’ may indeed have warned him that TD was not involved with Solutions 21 or the debenture program shatters the foundations of this allegation still further.

[95] I find that Mr. Gatti did not have any belief that TD was in any way affiliated with 655 at the time he made his investment on February 23, 2010. It goes without saying that such a belief, if actually held, would not be a reasonable one. It follows that I find, contrary to the allegation in paragraph 34 of the statement of claim and repeated verbatim in Mr. Gatti’s affidavit, that Mr. Gatti did not believe the debenture was either a TD product or a TD-endorsed or TD-approved product.

Receipt of commissions

[96] The plaintiff alleges that Mr. Avramidis failed to disclose the fact that he received commissions from Solutions 21 for client referrals and that this failure to disclose was material in that, had he but known it, he never would have made the fateful investment on February 23, 2010.

[97] In my view, the claim is unsustainable and can fairly be disposed of with only a sparing application of Rule 20.04(2.1). The allegation of materiality is implausible and the evidence of actual commissions actually paid in this instance is insufficient.

[98] Could the disclosure of commissions paid to Mr. Avramidis in respect of the sale of debentures have been a material fact that would have influenced Mr. Gatti’s investment decision? Apart from the obviously self-serving nature of such a subjective allegation (made years after the fact and tainted by hindsight), the suggestion is not reasonable.

[99] Mr. Gatti’s case is premised on the trust he allegedly reposed in Mr. Avramidis’ vague recommendations of “safety” because of the alleged business context in which it was made – by a TD employee involving a financial product. Taking that characterization at face value (Mr. Avramidis’ evidence would dispute each aspect of it), the transaction is effectively characterized by Mr. Gatti as if it were in the ordinary course of business for Mr. Avramidis. The suggestion that a consumer would take his or her custom elsewhere upon being advised that a bank employee is being paid for his efforts on commission cannot be described as reasonable. In fact, there is no dispute that Mr. Avramidis was paid on a commission basis by TD for his mortgage work, presumably including the home equity line of credit held by Mr. Gatti at the time. There is no suggestion that this was disclosed to Mr. Gatti either yet there is no claim for a return of prior interest paid to TD by virtue of such non-disclosure.

[100] Mr. Gatti had his own financial planner and financial advisor and cannot have been ignorant of the basis of compensation of such professionals. If he thought he was receiving professional advice in a professional capacity, the theory that he thought it was both professional and free is implausible. If it was not professional (and he has admitted as much), then there are limits to what inferences are to be reasonably drawn from it. These would not include TD’s implication in a “friend to friend” transaction or support unstated assumptions of financial due diligence. Even in “friend to friend” circumstances, I cannot find the fact that Mr. Avramidis might have been paid for his limited role to be any more significant than the payments

[101] In any event, the plaintiff has failed to adduce evidence to demonstrate that a commission was actually paid to Mr. Avramidis on the sale of the subject debenture. Mr. Avramidis admitted to receiving a commission of 12 basis points for referrals of financial planning clients to Solutions 21. None of this amounts to an admission of the receipt of commissions from the sale of this debenture since there is no evidence that Mr. Gatti was considered a financial planning client referral. Mr. Avramidis’ admission was equivocal and unclear on this point and no other evidence was tendered. The onus was upon Mr. Gatti to put his best foot forward. If the claim stands unproved, the court ought to dismiss it and not invite the plaintiff to try again after having already put his “best foot forward”.

[102] For all of these reasons, I find no claim can be founded on this alleged failure to disclose the receipt of remuneration.

Due Diligence

[103] Mr. Avramidis admitted that he had not performed financial due diligence on Solutions 21 or 655. Was it reasonable for Mr. Gatti to assume that he had such that the failure to have performed “adequate” due diligence or to have positively disclosed its absence can be characterized as negligence?

[104] There is no objective evidence that Mr. Gatti actually assumed that any due diligence had been performed by Mr. Avramidis. He admitted to having no knowledge of Mr. Avramidis’ financial qualifications and admitted to having performed no due diligence of his own. He did not ask to discuss the subject of due diligence with him at all. In fact, he said that he was surprised that 655 and not Trem Dy turned out to be the issuer of the debenture when he signed the debenture over dinner on February 23, 2010 but he asked no questions and proceeded with the transaction.

[105] Can the receipt of a “friend to friend” recommendation known to be based on years of favourable personal experience lead to the reasonable conclusion that the friend had first conducted the very financial due diligence that the recipient himself chose not to undertake? In my view it cannot. A “friend to friend” recommendation of this nature leaves no room for such an assumption. The lack of a reasonable association between the debenture issuer and TD also excludes the making of such an assumption.

[106] In fact, Mr. Avramidis’ evidence of due diligence was not insignificant even if it was not of the financial analyst variety. He had been working with Solutions 21 for eight or nine years at that point; he had observed them being audited by regulators on a regular basis without any apparent problems; he had come to trust the principals from his years of working with them; he had placed a considerable amount of his own family’s money with them; he had been involved in a number of other clients or friends placing funds with them over several years and all of the investments with them that he was aware over that span of years had, to that point, produced only favourable results. Those years of favourable experience spanned a very severe financial crisis where many blue chip names found themselves in serious difficulty and thus cannot be lightly dismissed. There was a reasonable basis for his recommendation based on personal experience and the suggestion that he reasonably implied further financial due diligence is not borne out by the evidence or Mr. Gatti’s own admissions.

[107] Further, there is little evidence as to what the allegedly deficient due diligence would have turned up if performed to whatever standard the plaintiff would apply in hindsight. There is no evidence at all as to what 655 did with the funds or why it ultimately failed to repay them. Allegations of fraud have been ventured in the statement of claim as against other defendants who have not appeared but are not backed up by any actual evidence before me. The only evidence that has been tendered in that area is the fact of non-repayment of all debentures (i.e. not merely one issuer), the rather dodgy and inconsistent excuses given to investors by the principals after payments ceased and the history of some of the principals with securities regulators in other jurisdictions, much of which appears to post-date the making of this investment. While this is all quite suggestive of smoke and even suspicious circumstances today, the evidence does not establish in a convincing way any single material fact Mr. Avramidis ought to have discovered about 655 had he conformed to some suggested standard of financial due diligence on or before February 23, 2010.

[108] In concluding that no representation of due diligence can reasonably be inferred in these circumstances I have confined myself to Mr. Gatti’s admissions on cross-examination as to the nature of the recommendations he actually received and to Mr. Avramidis’ uncontradicted evidence (that I have accepted) as to what due diligence lay behind his personal or experience-based recommendation.

Conclusion re: negligent misrepresentation

[109] I therefore find that the claim of negligent misrepresentation as against Mr. Avramidis has not been proved by the plaintiff who has failed to discharge his onus of demonstrating the existence of a representation that was untrue, inaccurate or misleading. It is not necessary for me to consider the reasonableness of reliance or damages. Had I found liability, contributory negligence would certainly have been a major issue to consider in the matter of damages.

[110] The negligent misrepresentation claim must therefore be dismissed.

(iv) Limitations Act

[111] Mr. Gatti advanced the sum of $120,000 to 655 on February 23, 2010. It is alleged that this investment would not have been made but for the breach of duty that occurred on that same day by Mr. Avramidis and that TD is vicariously liable for that breach. Damages pleaded include the value of the investment lost plus interest paid to TD on the loan incurred to purchase it.

[112] Section 4 of the Limitations Act imposes a two-year limitation period from the day a claim is “discovered”. Section 5 provides that a claim is “discovered” on the day Mr. Gatti knew:

(i) that the injury, loss or damage had occurred,

(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,

(iii) that the act or omission was that of the person against whom the claim is made, and

(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it.

By reason of the operation of s. 5(1)(b) and s. 5(2), Mr. Gatti is presumed to know of each of these matters on the day they “occurred”, subject to proof to the contrary, and he will be held to have known of them when a reasonable person in his circumstances ought to have.

[113] Since this action was commenced on September 27, 2012, I must consider whether all of the elements of the claim occurred prior to September 27, 2010. If so, the onus shifts to the plaintiff to rebut the presumption of discovery.

[114] The first condition – that injury, loss or damage has occurred – is satisfied as soon as the plaintiff becomes aware of any damages relating to the cause of action. It is not necessary to know or fully appreciate the nature or the extent of the damages: Peixeiro v. Haberman, 1997 CanLII 325 (SCC), [1997] 3 S.C.R. 549, at para. 18; Hamilton (City) v. Metcalfe & Mansfield Capital Corporation, 2012 ONCA 156, 347 D.L.R. (4th) 657 (at para. 61) and Pickering Square Inc. v. Trillium College Inc., 2016 ONCA 179 (at para. 33).

[115] The plaintiff argues that the cause of action arises afresh with each monthly payment made under the debenture: Limitations Act, s. 13(11). The last such payment was in December 2010, well within the two-year period prior to the commencement of the action. There would be no disputing the logic of that position if this were an action for payments owing under the debenture. It is not an action under the debenture, even if the measure of damages is largely the same.

[116] The plaintiff claims to have been assured that he was acquiring a safe and secure investment that would reliably pay him interest at a very high rate (12% per year). The payment history disclosed by the plaintiff reveals that the borrower, 655, never made a single payment on time before September 27, 2010 (the cut-off date for this analysis). Furthermore, the evidence shows that the plaintiff paid interest to TD each month at rates of between 3.25% and 4% while not receiving timely payments from 655. Not only was 655 late in paying, it was late in paying principal. The debenture was structured such that the payments made each month were deemed to be principal with “bonus interest” earned and payable only at term (I express no views as to how effective that scheme may have been in the eyes of the Canada Revenue Agency of course).

[117] It is therefore clear that at least some of the claimed damages occurred before September 27, 2010 in the form of late payments from 655 and interest payments made to TD. It is not necessary that the full extent of the damages now claimed be known or appreciated for the time to start running. Some of the damages now claimed had certainly occurred.

[118] Has Mr. Gatti displaced the onus upon him of showing that he neither knew nor ought to have known of the occurrence of these damages at the time? In my view he has not. He has admitted to being aware of the spotty payment history of 655 all the way through. That he was prepared to stay his hand or accept reassurances is another matter entirely.

[119] The second and third discovery criteria require knowledge that the injury was contributed to by an act or omission and that the act or omission was that of the relevant defendant. In my view, this condition too was present at the time of each late payment by 655 and each withdrawn interest payment made to TD in the pre-September 27, 2010 time frame.

[120] Mr. Gatti claim is that he was induced to enter into the investment on the strength of Mr. Avramidis’ recommendation as to the strength and character of the investment and that he reasonably assumed TD’s implication in the investment as an added element of comfort and security. The payment history prior to September 27, 2010 reflected serious delinquency and in no way resembled a product that could reasonably be assumed to be bank-sponsored.

[121] Whether the plaintiff believed that 655 would eventually make good on the payments missed or delayed is beside the point. Prior to September 27, 2010, Mr. Gatti cannot fail to have discovered that the character of the debenture investment was quite different from that allegedly represented to him. A reasonable person would have been put on inquiry to find out why. He knew that the damages experienced to that point were attributable to Mr. Avramidis’ recommendation that, by this time, he had reason to suspect was wrong. Nevertheless, he took no concrete steps to investigate further. He knew the damages that he was suffering arose from an investment that he claims he never would have made had its character been other than as represented to him. The second and third discoverability criteria of s. 4 of the Limitations Act are therefore satisfied prior to September 27, 2010.

[122] Did Mr. Gatti appreciate that a legal proceeding would be the appropriate means of seeking to remedy the claim that he had? If he himself did not, would a reasonable person in his circumstances have understood this?

[123] This last discoverability criterion does not require the claimant to seek legal advice or to fully understand all of the nuances of a negligent misrepresentation claim. The limitation period is not tolled by failing to seek legal advice. The question is whether the person knew of the constituent facts that give rise to a claim and not whether all of the evidence necessary to win the claim has been marshalled.

[124] The plaintiff knew of the representation on which the claim is based at the time he heard it (i.e. February 23, 2010). He knew who made it and what reliance he put upon it at the same time. That reliance became detrimental reliance as soon as damages occurred. This happened each and every month when payments were not received on time and when monthly interest payments were nevertheless taken from his account for an investment of a fundamentally different character than he claims to have expected. The plaintiff had knowledge of all of the elements of his claim prior to September 27, 2010.

[125] The plaintiff has not discharged his onus under s. 5(2) of the Limitations Act. I therefore conclude that the plaintiff knew or ought to have known of his negligent misrepresentation claim as against both TD and Mr. Avramidis before September 27, 2010 and that this tort claim is therefore barred by s. 4 of the Limitations Act.

(v) Vicarious Liability

[126] I have found that the claim of negligent misrepresentation made against Mr. Avramidis is not made out on the facts and is in any event barred by s. 4 of the Limitations Act. If the claim as against Mr. Avramidis is dismissed, TD cannot be vicariously liable for his acts.

[127] Since a considerable amount of argument was directed at this issue, I shall set forth my findings on the vicarious liability claim as well.

[128] The leading modern case on the question of vicarious liability is that of Bazley v. Curry, 1999 CanLII 692 (SCC), [1999] 2 S.C.R. 534. Bazley, at para. 41, applied a purposive analysis to ask whether the wrongful act is “sufficiently related to the conduct authorized by the employer to justify the imposition of vicarious liability”. Bazley considered a case of sexual abuse of children in the care of the defendants by their employee and addressed the question of whether an employer is vicariously liable for an employee’s unauthorized, intentional, wrong. It was in relation to this sort of intentional tort that McLachlin J. (as she then was) set forth a list of relevant factors to consider, including the opportunity the employer afforded the employee to abuse his power, the extent the wrongful act furthered the employer’s aims, the extent of power conferred on the employee by the employer in relation to the victim and similar matters. While the case sets forth useful criteria to be considered, it must be considered in its proper context.

[129] I do not find the Bazley criteria particularly helpful or applicable in this case. The admission that the recommendation of the debenture by Mr. Avramidis was made “friend to friend” and based on the personal experience of Mr. Avramidis rather conclusively precludes any finding of a disparity of “power” or the existence of “vulnerability” in this relationship. The debenture transaction was only tangentially related to Mr. Gatti’s status as a customer of TD in that the long-standing line of credit happens to have been used. He did not look to TD or Mr. Avramidis as an investment advisor and had others that he already looked to in that role. There can be no reasonable inference of connection between TD and 655 as the issuer of the debenture.

[130] The co-location of Mr. Avramidis in the Solutions 21 offices cannot be pointed to as an aggravating factor here. Mr. Gatti denies having ever heard of Solutions 21 or having set foot in its offices before he consummated his purchase. Mr. Avramidis’ physical proximity to Solutions 21 was a purely neutral fact if Mr. Gatti’s own evidence on the matter is accepted since Mr. Gatti would have been ignorant of it. Further, it cannot be concluded that this proximity facilitated anything since there is nothing before me to permit a conclusion that Solutions 21 or 655 in fact did anything wrong. This gap in the evidence renders any suggestion of Mr. Gatti blaming TD for having contributed to placing him in their power on rather thin ice. Allegations in a claim and similar fact evidence of other proceedings in other jurisdictions cannot be used to fill that gap.

[131] The simple fact of the matter is that Mr. Gatti had no reason to believe that TD was in any way connected with the debenture when he bought it and had no reason to believe that Mr. Avramidis was giving him more than an honest but personal opinion about its qualities on a “friend to friend” basis. His subsequent actions up to the point of retaining legal counsel are frankly consistent with no other view. In such circumstances, vicarious liability simply does not arise.

[132] I would dismiss the claim that TD is vicariously liable for Mr. Avramidis’ actions.

Disposition

[133] The plaintiff’s claim against Mr. Avramidis is dismissed with costs of the motion and the action combined. The plaintiff’s claim against TD is dismissed only to the extent of TD’s alleged vicarious liability. TD is only entitled to costs of the motion – TD cannot claim costs of the action unless the remaining claim against it is resolved in its favour or abandoned. I have reserved the amount and relevant scale of costs pending receipt of written submissions.

[134] If the parties are unable to resolve the matter of costs within 15 days of the release of these reasons, I shall receive written submissions from each (not to exceed five pages excluding the outline of costs and attachments but with case citations only). If there are any offers to settle that may affect the amount or scale of costs, these may be attached and should be discussed in the written submissions. The successful defendants’ submissions are due within 30 days of the date of the release of these reasons, the responding plaintiff 15 days later and reply submissions, if any, within five days thereafter. I direct TD’s counsel to gather all costs submissions and provide them to me in electronic format thereafter. These may be sent to my assistant or delivered to my attention at Judges’ Administration at 361 University Avenue, Room 107. If any time periods require extension, a simple letter copied to all counsel requesting this with reasons may be addressed to me c/o my assistant and an email response is to be expected.

[135] All sides are to be commended on the thoroughness and professionalism of their written and oral arguments.

S. F. Dunphy, J.

Released: March 22, 2016