Barrs v. Trapeze Capital Corp., 2017 ONSC 5466
CITATION: Barrs v. Trapeze Capital Corp., 2017 ONSC 5466
COURT FILE NOS.: CV-12-469866 & CV-12-470118
DATE: 20170914
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
JASON RANDALL BARRS Plaintiff
– and –
TRAPEZE CAPITAL CORP., TRAPEZE ASSET MANAGEMENT LTD., RANDALL ABRAMSON and HERBERT ABRAMSON Defendants
AND BETWEEN:
GARY BARRS, Trustee of the Sharon Lewis Trust Plaintiff
– and –
TRAPEZE CAPITAL CORP., TRAPEZE ASSET MANAGEMENT LTD., RANDALL ABRAMSON and HERBERT ABRAMSON Defendants
COUNSEL:
Harold Rosenberg, for the Plaintiff, Jason Randall Barrs
Andrea J. Sanche, for the Defendants
Harold Rosenberg, for the Plaintiff, Gary Barrs
Andrea J. Sanche, for the Defendants
HEARD: May 26, 2017
REASONS FOR DECISION
HOOD J.
Overview
[1] On December 12, 2012 Jason Randall Barrs (“Randall”) issued a claim against the defendants for damages for misrepresentation, negligence, breach of fiduciary duty and breach of contract.
[2] Randall alleged that he invested funds in excess of $1,000,000 with the defendants starting in 1999, and that, as a result of the defendants’ negligence and breaches, he lost most of his investment by the time he transferred his investments in 2012.
[3] On December 14, 2012, Gary Barrs (“Gary”), Trustee of the Sharon Trust (“the Trust”) issued a claim against the defendants for damages for misrepresentation, negligence, breach of fiduciary duty and breach of contract.
[4] Gary, as Trustee, alleged that the Trust invested funds in excess of $1,000,000 with the defendants starting in 1999, and that, as a result of the defendants’ negligence and breaches, the Trust had lost most of its investment by the time it transferred its investments in 2012.
[5] The defendants in both actions seek orders for summary judgment asking that the claims be dismissed. Firstly, they argue that Randall signed a release in April 2010 which prevents both claims from proceeding. Secondly, they argue that the plaintiffs knew or ought to have known of their respective causes of action no later than February 24, 2010, and certainly by April 2010 when the release was executed. Accordingly, their claims are statute-barred, having been commenced after the two-year limitation period.
[6] For the following reasons, the defendants’ motions are dismissed.
Summary Judgment Principles
[7] Summary judgment is available where there is no genuine issue for trial: Hyrniak v. Mauldin, 2014 SCC 7, 366 D.L.R. (4th) 641, at para. 34.
[8] The court will find that there is no genuine issue requiring a trial when it is able to reach a fair and just determination on the merits. The motions judge should determine if there is a genuine issue requiring a trial based only on the evidence before her, without using the fact-finding powers in Rule 20.04(2.1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194: Hyrniak, at paras. 49 and 66.
[9] The standard for a “fair and just determination” is not whether the procedure is as exhaustive as a trial, but whether it gives the judge confidence that she can find the necessary facts and apply the relevant legal principles so as to resolve the dispute. The evidence need not be equivalent to that at trial but must be such that the judge is confident that she can fairly resolve the dispute: Hyrniak, at paras. 50 and 57.
[10] On a summary judgment motion, the court is entitled to assume that the parties have advanced their best case and that the record contains all of the evidence the parties would present at trial: Sweda Farms Ltd. v. Egg Farmers of Ontario, 2014 ONSC 1200, [2014] O.J. No. 851, at para. 33.
[11] While summary judgment can operate as a timely, fair, and cost-effective means of adjudicating a civil dispute, it has its limits. Not all civil disputes are amenable to a final adjudication on the merits by summary judgment. In certain cases, adjudication exclusively on a written record poses a risk of substantive unfairness. Great care must be taken to “ensure that decontextualized affidavit and transcript evidence does not become the means by which substantive unfairness enters, in a way that would not likely occur in a full trial”: Baywood Homes Partnerships v. Haditaghi, 2014 ONCA 450, 120 O.R. (3d) 438, at para. 44; see also Cook v. Joyce, 2017 ONCA 49, 275 A.C.W.S. (3d) 399, at para. 91.
Factual Background
[12] Randall is a criminal defence lawyer and a longtime investor with Herbert Abramson. Herbert and his son, Randall Abramson, are the officers and directors of the other defendants, Trapeze Capital Corp. (“TCC”) and Trapeze Asset Management Inc. (“TAMI”). (Trapeze Asset Management Inc. was wrongly styled in both actions as Trapeze Asset Management Ltd.; in these reasons, I will refer to this corporation by its correct name.) Both TAMI and TCC are portfolio managers. TAMI is a portfolio management firm and TCC is registered as an investment dealer and provides portfolio management services. According to the defendants, TAMI managed the Trust accounts and TCC managed Randall’s accounts. Randall and the Trust, however, did not distinguish between the two. In Randall’s affidavits on the motion, he stated that it was the ‘defendants’ who managed the accounts.
[13] Starting in 1999, Randall and the Trust each provided the defendants with over $1,000,000 to manage.
[14] Randall was not a trustee of the Trust but was, along with his issue, the sole beneficiary. The Trust had authorized Randall to act as its agent and authorized representative.
[15] From time to time, Randall complained to the defendants about the management of his personal account. Examples are provided in the affidavits of Randall Abramson: at Exhibit F, being a letter dated March 2, 1999; at Exhibit G, being a letter dated January 13, 2000; at Exhibit J, being a letter dated February 5, 2008; and at Exhibit Q, being a letter dated October 27, 2009.
[16] The defendants argue that Randall alleged misrepresentation, negligence, breach of fiduciary duty, breach of contract and loss of reasonably anticipated rate of return at various points in his correspondence. These are the same causes of action pleaded in both his and the Trust’s eventual claims.
[17] Randall says that, in response to his complaints, the defendants always reassured him that the investments in the accounts were appropriate. He was told that the investments met his risk requirements of 90% medium-risk investments and 10% high-risk investments. He was told that if there was a reduction in the investments, it was attributable to a general downturn in the market, and that overall their investment strategy was sound. Randall refers to letters from Herbert Abramson dated March 10, 2008 and March 18, 2010 as examples of these reassurances.
[18] Randall alleges that, because the defendants were the experts, he relied upon their assurances that the poor performance in the various accounts was the result of general market conditions. Moreover, because his investments from 2000 had rebounded, he was prepared to accept that the downturn in 2008 and 2009 was only temporary.
[19] In February 2010, Randall’s partner Melissa Carway (“Carway”) issued a claim against TAMI, Randall Abramson and “Herb Randall”. (In the claim itself, he is correctly referred to as Herb Abramson). Carway had invested approximately $85,000 with TAMI on a short-term basis. The defendants allege that Randall directed Carway’s litigation. Randall denies this.
[20] The Carway claim was settled with the execution of a release on April 28, 2010. Emails between counsel provide some evidence as to the negotiations prior to the execution of the release. Counsel for Carway advised that she would accept $25,000, and that Randall would not provide the release or covenant not to sue that had been requested by counsel for the Abramsons and TAMI in a prior email. In response to this, counsel for the Abramsons and TAMI stated that his clients would increase the payment to $20,000, but required a waiver (presumably not to sue) from Randall.
[21] Between April 21, 2010 and April 28, 2010, the payment was increased to $25,000 and Randall was added to the release. TCC was also part of the release, despite the fact that Carway had not sued TCC. The Trust was not part of the release.
[22] Unbeknownst to Randall, the Abramsons and TAMI were under investigation by the Ontario Securities Commission (“OSC”) at the time. The Abramsons and TCC were also under investigation by the Investment Industry Regulatory Organization of Canada (“IIROC”) concerning, among other things, their improper assessment of risk associated with many of their investments. IIROC alleged that what they had represented to clients as medium-risk investments was actually high-risk, and that many of the investments made were not suitable for their clients.
[23] According to its April 20, 2012 news release, the IIROC investigation started in July, 2009. Randall Abramson confirms that the OSC investigation commenced at or around the same time.
[24] In April 2012, the OSC reached a settlement agreement with the Abramsons and TAMI, and the IIROC reached a settlement agreement with the Abramsons and TCC. These agreements included admissions that the defendants had:
• Improperly assessed the risk associated with many of their investments;
• Failed to ensure that their investments were appropriate for their clients;
• Breached various rules, regulations, bylaws of the IIROC;
• Breached OSC rules;
• Violated the Securities Act.
[25] The defendants agreed to pay sizeable fines and costs to the IIROC and the OSC.
[26] Randall learned of these settlements soon after they were made. Randall states that, until he learned of the settlements, he was unaware that he might have a claim against the defendants because up until then he had accepted the defendants’ assurances that his investments met his level of risk tolerance. From the settlements, however, he discovered that most of his investments were high-risk, not medium-risk, and that his investments were not suitable for his agreed-upon risk factors.
[27] In December 2012, Randall and the Trust commenced their claims against the defendants.
Limitation Period
[28] The defendants argue that the plaintiffs had known of their causes of action for much longer than two years before they brought their claim (i.e., well before December 2010) and that their claims are therefore statute-barred.
[29] The legal rule on discoverability is set out in s. 5(1) of the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B (“the Act”). The limitations period begins to run when the plaintiff first knew that, having regard to the nature of his loss, a proceeding would be an appropriate means to seek to remedy it or when, given his circumstances and abilities, he ought reasonably to have known this: Presidential MSH Corporation v. Marr Foster & Co. LLP, 2017 ONCA 325, 135 O.R. (3d) 321, at paras. 9-10.
[30] Whether an action is appropriate depends upon the specific factual or statutory circumstances of each individual case. If legal action is inappropriate, this can postpone the start date of the two-year limitation period beyond the date when a plaintiff knows they have incurred a loss because of the defendant’s actions: Presidential, at paras. 17-18.
[31] Legal action may be inappropriate where a plaintiff is relying upon the superior knowledge and expertise of a defendant, as often occurs in a professional relationship: Presidential, at para. 26.
[32] That is the case here. While Randall had concerns over his investments, the defendants assured him that the losses were merely reflective of the market and were not a result of their actions. I have difficulty in seeing how the defendants can argue that Randall should have started a lawsuit against them when they had continuously assured him that they were not to blame for his losses, and that the losses were caused by something else. They are, in effect, arguing that Randall should not have accepted their assurances, but rather should have disbelieved them and started a lawsuit.
[33] In response to the Carway claim, the defendants denied any liability. They took the position that their payment to Carway was not reflective of any loss that they had caused; rather, it represented their potential legal fees in fighting a frivolous claim. However, they now argue that Randall should have known that their assurances were false, that Carway had in fact suffered a loss for which a proceeding was appropriate, and that Randall too should have known he had suffered a loss for which a proceeding was appropriate.
[34] While the defendants were giving assurances to Randall, they were under investigation by the OSC and the IIROC for a variety of violations, including the improper assessment of the risk associated with many of their investments. Despite their assurances to Randall that their “value investment philosophy” was appropriate and a means of identifying medium-risk securities in accordance with his risk requirements, the defendants admitted to the OSC and the IIROC that this approach was not a proper means for determining the risk level of securities. They acknowledged that the securities they invested in were more than medium-risk. They admitted that they had failed to ensure that their investments were suitable for all their clients.
[35] It was reasonable for Randall to rely upon the defendants’ assurances. There was no basis for him not to do so, despite the fact that he was a lawyer. The defendants were the experts in investing, not Randall.
[36] The defendants were portfolio managers to whom Randall had given account management and investment decision-making authority. A portfolio manager has a duty to advise a client of the risks associated with their portfolio: Vipond v. AGF Private Investment Management, 2012 ONSC 7068, 224 A.C.W.S. (3d) 246, at paras. 181-182. The defendants appear to have failed in this duty, and cannot now rely upon their failure to argue that Randall ought to have known what they failed to disclose.
[37] The fact that the Abramsons were not allowed to advise Randall of the OSC and IIROC investigations is irrelevant to whether Randall should have known he had suffered a loss for which a proceeding was appropriate. Randall’s lack of activity was reasonable based upon what he then knew. It is not reasonable to suggest that Randall should have known of the OSC or IIROC investigations.
[38] The same analysis holds true for the Trust, only more so. While Randall was a beneficiary, he was not a trustee. There is no evidence to suggest that the then trustees were in a different position than Randall.
[39] While one of the trustees, Mr. Battiston, was also the lawyer for Carway, there is nothing to suggest that he knew legal action was appropriate for the Trust. The fact that he was both a lawyer and trustee is not enough to cause the limitation period to begin to run against the Trust.
[40] There is no evidence in relation to the other trustee, Gary Barrs, and what he knew or when.
The Release
[41] No mention of the Trust is made in the release, and the Trust is not a signatory to the release. There is no basis to hold that the executed release is also a release by the Trust.
[42] The defendants argue that the reference to Randall’s accounts in the emails leading up to the execution of the release includes the Trust accounts. There is no evidence of this. The defendants knew that the Trust had separate accounts. The defendants knew that Randall was not a trustee. They knew who the trustees were. It would have been easy to include the Trust in the release if it was to have been part of it. It was not, and it cannot now be argued that it was contemplated that it was.
[43] The defendants knew that for the Trust to be bound by any agreement, the trustees had to execute it. They required this for their investment agreements with the Trust. The release is no different.
[44] Randall did execute the release. As indicated previously, there is limited evidence as to how Randall became part of the release that settled the Carway claim.
[45] The issue is whether the release applies to the claim now being put forward by Randall. The release has to be interpreted to determine what was in the contemplation of the parties when it was executed.
[46] The principles to use in such interpretation are set out in Biancaniello v. DMCT LLP, 2017 ONCA 386, 278 A.C.W.S. (3d) 517, at para. 42.
[47] I cannot interpret the release as the defendants want. There was no existing dispute between Randall and the defendants at the time the release was executed. While Carway was settling her action, and may have been wiping the state clean, Randall was not. He had no action. He continued to invest with the defendants. He was unaware that he had a claim against the defendants, relying upon their assurances that his investments would come back like they had in the past. Carway’s claim was different. Her investment was meant to be short-term, and she needed her investments back along with the settlement monies in order to invest elsewhere.
[48] The language of the release is broad and general. The wording contains no clear basis for an inference that Randall intended to release claims of which he was unaware. On Randall’s evidence, there was no claim within his contemplation when he signed the release. Equally, there was no claim by Randall within the contemplation of the defendants when the release was executed. They set out assurances in writing that they had done nothing wrong and that their investments were appropriate. As far as they were concerned, Randall had no existing claim, known or unknown, to release.
Costs
[49] The plaintiffs have submitted a costs outline for $32,232, inclusive of HST and disbursements, for both motions. The defendants’ costs outlines are the same for each motion, and together add up to $23,083 inclusive of HST and disbursements.
[50] The plaintiffs are presumptively entitled to their costs. At the conclusion of argument on this motion, I indicated that both sides could make costs submissions. If the parties are unable to agree upon the award of costs, the plaintiffs are to provide their submissions consisting of no more than two typed pages, double-spaced ,along with any appropriate offers or case law relied upon, to my attention at Judges’ Administration, Room 170, 361 University Avenue, on or before September 29, 2017. The defendants are to provide their submissions subject to the same directions on or before October 16, 2017. There are to be no reply submissions.
HOOD J.
Released: September 14, 2017