IN THE SUPREME COURT OF BRITISH COLUMBIA
|
Citation: |
Shetty v. Gill, et al, |
|
|
2004 BCSC 451 |
Date: 20040401
Docket: S066947
Registry: New Westminster
Between:
BALA SHETTY
PLAINTIFF
And
BHARPUR SINGH GILL, W.H. STUART MUTUALS LTD. AND
W.H. STUART & ASSOCIATES
DEFENDANTS
Before: The Honourable Madam Justice Koenigsberg
Reasons for Judgment
|
Counsel for Plaintiff |
R.S. Deol |
|
Appearing on his own behalf |
B.S. Gill |
|
Counsel for Defendants W.H. Stuart Mutuals Ltd. and W.H. Stuart & Associates
|
D.F. Gurney |
|
Date and Place of Hearing: |
May 14, 2003 |
|
|
Vancouver, B.C. |
[1] These are the Reasons for Judgment following the decision rendered May 14, 2003 in which the Court found that the Defendants Gill and W.H. Stuart and Associates (“W.H.S.”) were found liable to the Plaintiff Mr. Shetty for his losses as a result of an investment made on the advice of Mr. Gill who was at the time employed by W.H.S.
[2] I found that Mr. Gill’s liability was as a result of his negligence in failing to carry out his duties to his client Mr. Shetty, those duties defined in part by the Securities Regulations in place and to which Mr. Gill was subject. In addition, W.H. Stuart was vicariously liable in that it allowed Mr. Gill to hold himself out as qualified to give advice in relation to securities for which he was not certified. The security in question was a security which W.H. Stuart had not authorized its agents in the Burnaby office to sell it failed to adequately supervise those premises and as a result Mr. Gill and other agents did in fact sell the security in question from the premises.
[3] Finally, I found that Mr. Shetty was contributorily negligent in making the investment and, in particular, in sustaining the losses which he did by borrowing a substantial sum on the strength of increasing his mortgage security and thus imperilling his mortgage when he sustained the loss that he did.
FACTS
[4] Mr. Shetty approached Mr. Gill in January of 1994 in response to a newspaper ad placed by Mr. Gill offering financial planning and, in particular, management of mutual funds. In the advertisement Mr. Gill is held out as being with W.H. Stuart & Associates at a Burnaby address. The first meeting was preceded by a telephone contact and Mr. Gill sending out a prospectus and fund information to Mr. Shetty at his home.
[5] Mr. Gill testified that he provided an investment book and a pamphlet on how mutual funds worked at this first meeting. Mr. Shetty did not deny this, but was not certain what the name of the book was and thought it was something different from that which Mr. Gill said he gave him.
[6] There was another meeting at which Mr. Gill filled out a W.H.S. New Client Application Form, based I find, on information given to him primarily by Mr. Shetty. Mr. Shetty’s investment knowledge is described in that Client Account Application Form as fair and his investment objective is noted to be capital appreciation. Mr. Shetty testified that he had no investment knowledge and relied completely on Mr. Gill and everything that Mr. Gill told him in relation to any investments that he made. Mr. Gill denied that Mr. Shetty had no investment knowledge and pointed out that Mr. Shetty had purchased mutual funds in the past on his own and also through other advisors. In addition he had dabbled in penny-stocks, although in a very minor way. What is notable about the financial information is that Mr. Shetty’s home is listed as being worth approximately $500,000. This was a gross exaggeration of the value of it. I do not doubt that Mr. Shetty likely indicated that he thought that his house might be worth $500,000 and I find that Mr. Gill was overly optimistic in accepting such a number. He would and should have known that the type of home and where it was located was not worth nearly that much.
[7] What is clear, and what I find to flow from the new client information, is that Mr. Gill demonstrated that he knew that Mr. Shetty was not a sophisticated investor and that his primary objective was to appreciate capital and not to make risky investments which might have a higher pay off. There is no issue that the initial investments made were modest and that such investments were agreed upon and in fact decided upon by Mr. Shetty with only minimal input from Mr. Gill.
[8] Over the following eight or nine months in 1994, a number of relatively modest mutual fund investments were made by Mr. Shetty through Mr. Gill. All of those investments were appropriate given the information Mr. Gill had regarding Mr. Shetty.
[9] In or around October, 1994 Mr. Gill introduced Mr. Shetty to a “two-for-one” investment. This introduction followed Mr. Gill having urged Mr. Shetty to attend the Annual General Meeting of Templeton Growth. Mr. Shetty did attend this meeting and picked up a variety of materials having to do with mutual fund investing. Mr. Shetty’s testimony was that Mr. Gill was the sole basis of introducing him and urging him to utilize an investment, known as a “two-for-one” investment. I find that this is not accurate. Mr. Shetty attended the meeting, was impressed with what he saw and was interested in increasing the potential for growth of his investments and wished to look at faster growth which could be provided by a “two-for-one” investment.
[10] I find that Mr. Shetty over the period prior to actually investing in Northern Aviator I and II, the security at issue, was relying not only on advice from Mr. Gill but, was in fact, doing research and making inquiries to increase his ability to invest wisely and profitably.
[11] I find as well that Mr. Shetty did pick up information in regard to Eron Mortgage Corporation. He became interested in the potential for investing in that kind of security particularly the mortgage-back investments. Mr. Shetty did go to Mr. Gill and asked him about investing in Eron Mortgage and I find that Mr. Gill advised him that he, Mr. Gill, could not assist him because Eron Mortgage used its own sales agents and not other brokers.
[12] About the same time that Mr. Shetty became interested in mortgage-back information, Mr. Gill became involved and interested in a Northern Aviator I and Northern Aviator II, a security that worked similarly to that offered by Eron Mortgage Corporation. In the summer of 1995, Mr. Gill invested $25,000 of his own money in Northern Aviator. It is noteworthy that Northern Aviator’s principal, a Mr. Gary Chandler, had offices in the same premises as W.H. Stuart’s Burnaby branch office. There were meetings and presentations in the common boardroom of the two companies. Those premises were used for conferences by both W.H. Stuart and by Northern Aviator. Shortly after Mr. Gill invested in Northern Aviator, he invited Mr. Shetty to a presentation at W.H. Stuart’s offices in August of 1995. Mr. Shetty did attend that meeting. He believed that he was attending a meeting at W.H. Stuart and that W.H. Stuart, in fact, was involved as a company in the marketing of Northern Aviator. He believed this because he was not told otherwise and because the boardroom of W.H. Stuart was at the offices of W.H. Stuart, and marked as the offices of W.H. Stuart, and thus Mr. Shetty was not aware that both Northern Aviator or Mr. Gary Chandler, the principal of Northern Aviator, and W.H. Stuart shared a boardroom on the premises.
[13] There were several other people at this meeting regarding the sale of Northern Aviator I and II including other agents employed by W.H. Stuart. At this meeting Mr. Shetty had available to him several documents providing information. Among these documents was the Offering Memorandum of NA I and NA II. Gary Chandler made a presentation at this meeting. Mr. Shetty was quite interested as a result of all that he heard and saw at this meeting. Mr. Shetty had a recollection of this meeting which included that he was stopped by Mr. Gill from asking questions. I do not accept this recollection of Mr. Shetty’s as accurate.
[14] In the middle of September of 1995 there was an open house at the construction site of the NA I and NA II Project. Mr. Gill invited Mr. Shetty to go, and they went together. Mr. Chandler was at the site and Mr. Gill recalls Mr. Shetty having the Offering Memorandum and, on the ride back from the initial site visit, reviewed that Memorandum which had been highlighted by Mr. Gill.
[15] Mr. Shetty testified that upon Mr. Gill introducing Mr. Shetty to the NA I and NA II investment, Mr. Gill harassed and pressured Mr. Shetty to invest including that he encouraged him to take out a mortgage on his home and invest a larger sum than the initial minimum amount of $5,000.
[16] I find that Mr. Gill did not pressure or harass Mr. Shetty. I find that it is unlikely that Mr. Gill knew Mr. Shetty had re-mortgaged his home to obtain $70,000 before he did it. I find that Mr. Shetty made his own decision with regard to investing in NA I and NA II and that he was encouraged by the fact that Mr. Gill, in whom at this time he had some confidence, had both introduced him to it and had invested in it himself.
[17] Mr. Shetty lost his investment, as did Mr. Gill, and in recollecting how he could have been so imprudent as to actually take out a mortgage on his home and lose monies such that it would affect his ability to assist his son in his university education and provide security for his home, he chooses to recollect that he was pressured into doing so. As indicated above, I do not accept that this is accurate.
[18] The fact is that Mr. Shetty did a considerable amount of his own investigation of this investment and took a number of steps to assure himself that it would provide him a significant return with a minimum of risk. He was incorrect in that, but I find that he was not misled in any way by Mr. Gill. Mr. Gill’s sole fault in this matter was assisting, in any way, Mr. Shetty in obtaining this investment as it was both outside Mr. Gill’s competence and licensing parameters and outside the investment relationship which is evidenced by the appropriate documentation which was filled out at the beginning of their relationship.
[19] Initially the investment paid a dividend which Mr. Shetty received. In addition, most importantly, when Mr. Gill sought to charge Mr. Shetty with the appropriate commission amount for the sale of NA I and II, Mr. Shetty negotiated a split of the commission with Mr. Gill 60/40, that is, Mr. Shetty received 60% and Mr. Gill 40%. This is further evidence that Mr. Shetty’s reliance on Mr. Gill in doing due diligence on this investment was minimal.
[20] Unfortunately the NA I and NA II investment turned out to be the subject of litigation involving allegations of fraud. Almost all the investors, in particular Mr. Gill and other salesmen from W.H. Stuart as well as Mr. Shetty, lost their investments.
[21] Mr. Shetty testified he believed that the subsequent hiring of a lawyer and the initiation of a class action lawsuit, which he was invited to participate in, again were not appropriately represented to him by Mr. Gill. I find that there is no merit in any allegations that Mr. Gill acted inappropriately subsequent to the investment going bad.
[22] Upon losing his money and being dissatisfied with the way in which the matter was handled by a lawyer who was retained by a number of investors to bring the class action lawsuit against the principals of NA I and NA II, Mr. Shetty was advised to complain to the B.C. Securities Commission, and he did so.
[23] There were a number of findings by the B.C. Securities Commission. In particular, the B.C. Securities Commission found that Mr. Gill had failed to properly warn Mr. Shetty regarding investing in NA I and II, that he should not have introduced him to NA I and NA II and that he was not qualified to sell such securities.
[24] In summary, I make the following findings. For the most part I accept the evidence of Mr. Gill over that of Mr. Shetty where their evidence is in conflict. Mr. Shetty is understandably devastated by the loss of borrowed money, but his devastation has robbed him of any objectivity or accuracy when recalling why and how he came to invest in NA I and NA II. I make the following findings of fact:
(a) Mr. Shetty approached Mr. Gill with regard to the possible investment in Eron Mortgage. He did so because he was interested in mortgage-back investment. It was this interest of Mr. Shetty’s which led to Mr. Gill introducing Mr. Shetty to Northern Aviator.
(b) Mr. Shetty had the Offering Memorandum on NA I and NA II before the first site visit. He likely read through most of it. The risks of the investment are clearly set out in that Offering Memorandum and I find that Mr. Shetty had the means of being aware of it and had the risks drawn to his attention as well.
(c) Mr. Shetty received a copy of the Subscription Agreement involved in NA I and NA II long before he executed the formal Subscription Agreement in October of 1995.
(d) Mr. Shetty had discussions with Gary Chandler, one of the principals of Northern Aviator about the investment and likely he relied upon what Mr. Chandler said to him. It was Mr. Chandler who told him that it was a safe investment. I find however, that Mr. Gill did not warn Mr. Shetty of the risks of such an investment.
(e) Mr. Shetty was impressed with what he saw when he visited the site. He visited it more than once, and his visits and information which he gleaned from others other than Mr. Gill, were also contributing factors to his making the investment.
(f) Mr. Shetty was influenced by the fact that Mr. Gill had invested personally, as had others at W.H. Stuart. It was this factor, not any representation made by Mr. Gill, that further influenced Mr. Shetty to feel that the investment was safe. I find that Mr. Shetty was not pressured by Mr. Gill to either borrow funds or to make the investment at all.
(g) Mr. Shetty was advised by Mr. Gill to seek professional advice with regard to this investment. He was further advised by Mr. Gill that he would have to make up his own mind about the investment.
(h) I find that Mr. Shetty was not a completely unsophisticated investor. He was not pressured to borrowing funds to invest in Northern Aviator, he had experienced a margin call on the two-for-one investment which he made in North American Trust prior to investing in NA I and II, and thus, understood the risks of a falling market.
(i) Finally, it is particularly important that Mr. Shetty demanded a portion of Mr. Gill’s commission for selling Northern Aviator to him. I find that he demanded it because he had done a substantial part of the due diligence and leg work in terms of determining how safe the investment was.
LAW
[25] The first issue is what duties, if any, did Mr. Gill owe to Mr. Shetty. I find that the relationship between Mr. Gill and Mr. Shetty was likely a fiduciary relationship and Mr. Gill was held out to be a qualified financial advisor.
ANALYSIS
Fiduciary Relationship between Mr. Gill and Mr. Shetty
[26] The Plaintiff pled and relied on the prima facie fiduciary relationship existing between a security or financial advisor and the client to claim breach of Mr. Gill’s fiduciary duty in the circumstance.
[27] It is always tempting to find a breach of fiduciary duty, where there is a breach of duty and a fiduciary relationship. However, given the specific purpose of classifying relationships as fiduciary, some element of disloyalty or dishonesty such as a clear conflict of interest should be present. (See C.A. v. Critchley, B.C.C.A. (1998) 60 B.C.L.R. (3d) 92 at p. 116).
[28] Here there is no conflict of interest nor is there apparent any personal benefit gained by Mr. Gill’s failure to discharge his legal duties to Mr. Shetty. This loss to Mr. Shetty was caused, in part, by Mr. Gill having introduced Mr. Shetty to the investment when not qualified to evaluate it and failing to warn Mr. Shetty of its risks to a person in Mr. Shetty’s position.
[29] In the result, there was no breach of any fiduciary duty owned to Mr. Shetty by Mr. Gill.
NEGLIGENCE
[30] Mr. Gill was negligent in introducing Mr. Shetty to Northern Aviator and not advising him of its risks in relation to Mr. Shetty’s investment goals.
[31] The basis for a finding of negligence against Mr. Gill is found in the Agreed Statement of Facts signed by Mr. Gill and made part of Exhibit 2. Mr. Gill admitted the following:
a) “failed to make enquiries concerning the Client in order to learn the essential facts relative to the Client’s risk tolerance and the source of the funds used by the Client to purchase the Investment”;
b) “Gill had no basis on which to determine that the Investment was suitable for the client and, thus, failed to follow the know your Client and suitability rules set out in Section 43 of the Securities Regulation, BC Reg 270/86......”;
c) “Gill was not registered to act as an adviser ...... and therefore by recommending the Investment to the Client”, he breached Section 34 of the Securities Act RSBC 1996 c. 418.
[32] Further in an expert report dated November 28, 2002, marked Exhibit 32:
Mr. Sterling Shultz states that “the concentration of over 80% of [Mr. Shetty’s] portfolio in a single, illiquid, high-risk security is inappropriate for any investor”.
this evidence was uncontradicted.
[33] In addition, I find that Mr.Gill admitted that he did not advise Mr. Shetty regarding the risks of using borrowed monies to invest in NAV.
[34] Further, Mr. Gill admits that he did not conduct satisfactory due diligence with regard to the investment in NAV and that had he done so, he would not have invested in NAV.
[35] Finally, I find that “But for” Mr. Gill’s advice, Mr. Shetty would probably not have purchased the shares in NAV.
[36] In the result, I find Mr. Gill liable in negligence.
VICARIOUS LIABILITY OF W.H. STUART
[37] Mr. Gill, with the agreement of W.H. Stuart published ads holding himself out as being employed by, or an agent for, or representing W.H. Stuart. W.H. Stuart referred in submissions to Mr. Gill as an independent contractor.
[38] Mr. Shetty saw this ad and contacted Mr. Gill. Mr. Gill met with Mr. Shetty and signed him as a client on a form labelled – W.H. Stuart Mutuals New Account Application. This application was filled out and sent to W.H. Stuart’s head office as Mr. Gill was instructed by W.H. Stuart to do.
[39] About a year and a half after Mr. Shetty began investing with advice from Mr. Gill – Mr. Gill invited him to a presentation regarding investing in NA I and II. This presentation was held at the offices of W.H. Stuart. W.H. Stuart shares offices with other businesses including Gary Chandler’s company. They utilize a common boardroom and the sign on the way into the meeting had W.H. Stuart’s name on it. At this meeting in the offices of W.H. Stuart several other W.H.Stuart sales people attended along with Mr. Gill and Mr. Shetty. The evidence is and I find that Mr. Shetty believed on reasonable grounds that he was attending a meeting to be introduced to NA I and II at the offices of W.H. Stuart. He was not told otherwise and was never told that W.H. Stuart was not promoting NA I and II, and in fact did not authorize its sales people generally and Mr. Gill in particular to sell NA I and II.
[40] Mr. Gill did not have actual authority to offer Nothern Aviator for sale. The issue is therefore, did W.H. Stuart hold Mr. Gill out as its agent or representative with respect to the transaction or was there any action on the part of W.H. Stuart which led Mr. Shetty to believe that Mr. Gill was authorized to offer North Aviator and recommend it to Mr. Gill.
[41] In my view, on all the evidence the answer to both those questions is yes.
[42] The evidence is uncontradicted that Mr. Gill reported directly to the head office in Ontario. Further, in 1994 and 1995, W.H. Stuart did not have a compliance officer in British Columbia in the Burnaby office. There was no on site supervision. Essentially, in that time period, the only compliance system in place was based on self-reporting. At least half of the agents were involved with NA I and NA II and were seen to be involved by Mr. Shetty.
[43] At the time of the meeting at the office of W.H. Stuart regarding Mr. Shetty investing in NA I and II, Mr. W.H.S. was required by both the B.C. Securities Regulation and the Investment Dealers’ Association of Canada (of which it was a member) to have a branch manager with supervision as a compliance office at the Burnaby branch. There was no such supervision. It is the position of W.H. Stuart that because Mr. Gill did not keep the records of his dealings with NA I and II at the branch office – even if a manager had been in place the breaches may not have been detected. This position put forward as mitigation or a defence is contrary to public policy. It would encourage “wilful blindness”.
[44] In fact, it is unlikely that if a compliance officer had been in place, that the overt dealing with NA I and II could have taken place at least on the premises of W.H. Stuart. Thus, Mr. Shetty might not have been led to believe that W.H. Stuart was clearly behind the investment.
[45] In all of these circumstances, this is an appropriate case to impose vicarious liability. The elements in this case necessary to impose vicarious liability fit the analysis discussed in Thiessen v. Mutual Life Assurance Co. of Canada [2001] B.C.J. No. 1849 (B.C.S.C.), adopting the analysis of MacLachlin, J. in Bazley v.Curry.
[46] Thiessen was appealed and the Court of Appeal provided a helpful analysis of the concepts of “agent” v. “independent contractor” in defining boundaries for the imposition of vicarious liability. In this case, I find that there is no distinction to be drawn between Mr. Gill as an “independent contractor” or an “agent” of W.H. Stuart. The nature of the relationship and the circumstances found fit appropriately into the Bazley v. Curry analysis. (See Thiessen v. Mutual Life Assurance Co. of Canada [2002] B.C.J. No. 2041 2002 (B.C.C.A.)501).
[47] While Thiessen was concerned with a “rogue” agent who defrauded his client, here the issue is one of an agent/contractor who was simply falling far below the expected standard of care. At page 11, paragraph 64 (quoting from Bazley v. Curry, [1999] 2 S.C.R. 534 at 559-60) the following is apposite:
The fundamental question is whether the wrongful act is sufficiently related to conduct authorized by the employer to justify the imposition of vicarious liability. Vicarious liability is generally appropriate where there is a significant connection between the creation or enhancement of a risk and the wrong that accrues therefrom, even if unrelated to the employer's desires. Where this is so vicarious liability will serve the policy considerations of provision of an adequate and just remedy and deterrence. Incidental connections to the employment enterprise, like time and place (without more), will not suffice. Once engaged in a particular business, it is fair that an employer be made to pay the generally foreseeable costs of that business. In contrast, to impose liability for costs unrelated to the risk would effectively make the employer an involuntary insurer.
Further, in Thiessen at page 12:
¶ 65 In the case at bar, there is no doubt in my mind that the risk which materialized was an eminently foreseeable risk of this kind of enterprise. There is a close and immediate connection between the creation of the risk and the wrong that ensued. The sales representative is placed by Mutual in a position of trust, intended by the company to serve as a financial adviser to members of the public. It is sad but true that it is foreseeable that some of these representatives will abuse their trust and defraud clients. The enterprise here clearly affords the sales representative with the opportunity to do so. Clients wishing to deal with Mutual were required to go through a representative such as Dennis. In this case, in fact, Mutual directed the plaintiffs to Dennis and transferred their accounts to his care.
¶ 66 It is clear that Dennis' acts in no way furthered Mutual's aims. Not only were funds which the plaintiffs intended to be invested with Mutual diverted instead to Dennis, but Mutual suffered a blow to its reputation when Dennis' frauds came to light.
¶ 67 The wrongful act was, however, directly related to the trust which Mutual sought to foster and to the power conferred upon Dennis by Mutual. Mutual wanted its representatives to be the trusted advisers of persons in the situation of the Thiessens. Yet the greater the trust, the greater the vulnerability to wrongful acts arising from the breach of that trust.
[48] Thus I find W.H. Stuart vicariously liable for Mr. Shetty’s loss.
CONTRIBUTORY NEGLIGENCE
[49] On all the evidence and based on the findings set out above, Mr. Shetty is contributorily negligent in relation to his loss.
[50] As set out in the decision of this case in Oral Reasons dated May 14, 2003, for the reasons stated there, I find Mr. Shetty 50% liable for his own loss. I attach those Oral Reasons of May 14, 2003 as an appendix to these reasons and forming part of these reasons.
CONTRIBUTION AND INDEMNITY OF THIRD PARTY NOTICE
[51] As set out in my Oral Reasons of May 14, 2003, attached hereto, W.H. Stuart is entitled to full indemnity from Mr. Gill. W.H. Stuart put forward the following position:
WHS, by way of Third Party Notice, claims full indemnity for any loss, expense or damages assessed against WHS on the grounds that any such loss, expenses or damages were caused solely by the negligence of Gill and/or in the alternative that Gill was in breach of his agency agreement with WHS, by soliciting, selling or otherwise dealing in products that were not marketed or approved by WHS and making representations in connection therewith, and/or on the basis that Gill agreed to hold WHS harmless for any lawsuit by a client where Gill was in violation of any provincial or federal law or regulation.
[52] I find the basis for full recovery in the following:
The Agency Agreement (Ex. 50)
(a) Agent agrees to comply fully with all applicable Provincial and Federal Regulations in force.
(b) Agent agrees to hold the Agency harmless for any lawsuit by any client against the Agent and/or Agency where the Agent is in violation of a provincial or federal law or regulation.
(c) Agent pledges to market only those products that are presented in the Compensation Manual or amendments to such manual or by special written permission from the Agency.
Compensation Manual (Ex. 50)
(a) The Mutual Funds authorized to be sold are set out at p.25. The Limited Partnership Products authorized to be sold are set out at p. 42.
(b) Gill acknowledged that the authorized products to be offered for sale are contained in the Compensation Manual. Northern Aviator is not among them.
Agreed Statement of Facts (Ex. 26)
(a) Gill acknowledged that he failed to follow the ‘know your client’ and ‘suitability’ rules set out in section 23 of the Securities Regulation, B.C. Reg. 270/86.
(b) Gill acknowledged that the investment was not approved by WHS for sale by its mutual fund salespersons and that he sold the investment without the knowledge and approval of WHS.
Gill admitted that Northern Aviator was not an authorized product to be sold.
Gill admitted further that he was not to engage in “off-book” or “selling away” trading, transactions, trades which were not recorded in the books of WHS or trades which were not authorized by WHS.
[53] In summary, the damages and the apportionment are as follows:
The Plaintiff lost $70,000.
He received $2,100 from Mr. Gill’s commission on the sale; and $2,988.26 in dividends on the investment. These must be deducted from the tax.
That leaves a net loss of $64,911.38.
There is a 50% deduction for contributory negligence.
The total loss claimable as against Mr. Gill and W.H. Stuart & Associates is $32,455.69 plus Court Order Interest from June 15, 1996. (one month after Northern Aviator released payments).
Costs follow the event. Counsel have liberty to make further submissions on costs if they are unable to agree.
“M.M. Koenigsberg, J.”
The Honourable Madam Justice M.M. Koenigsberg
APPENDIX “A”
|
Counsel for Plaintiff |
R.S. Deol |
|
Appearing on his own behalf |
B.S. Gill |
|
Counsel for Defendants W.H. Stuart Mutuals Ltd. and W.H. Stuart & Associates
|
D.F. Gurney |
|
Place and Date of Hearing: |
Vancouver, B.C. May 14, 2003 |
[54] THE COURT: First of all, I find that Mr. Shetty was owed non-fiduciary duties. I am going to find both Mr. Gill and W.H. Stuart to be liable to Mr. Shetty for the loss in relation to his investment in Northern Aviator.
[55] Mr. Gill’s liability flows from his negligence in failing to comply with his obligations under the Securities Regulations, and W.H. Stuart is vicariously liable because they permitted him to hold himself out as selling this with their authorization even though they did not authorize it, and I find that that only was allowed to happen because they failed to have adequate supervision on the premises, where, in fact, a number of their agents were selling Northern Aviator.
[56] I find Mr. Shetty contributorily negligent.
[57] As I appreciate it -- is it agreed that the total sum lost was $70,000, plus interest?
(DISCUSSION BETWEEN THE COURT AND COUNSEL)
[58] THE COURT: All right. Plaintiff’s loss was $70,000 plus the interest that he paid because he borrowed that amount on his mortgage. However, Mr. Shetty demanded and received a split of the commission received by Mr. Gill for the sale of Northern Aviator, and 60 percent to Mr. Shetty and 40 percent to Mr. Gill.
[59] This, of course, has significant consequences in terms of the legal analysis of this case, but, in addition, the amount received by commission needs to be deducted from the loss, as well as the amounts that Mr. Shetty received from the investment by way of dividend. The amount here is $2,988, but it should be whatever the actual amount is if it is not $2,988, and that makes -- according to Mr. Gurney’s submission, that the net loss, then, is $64,911.38, and I would find that the contributory negligence should be 50/50.
[60] The reason I do not find it to be 60/40 is because I believe that there is a greater duty on Mr. Gill and that his failure to warn and simply live up to his basic obligations, which he was being relied upon for, was the major cause of the loss, and he was relied upon to be competent and he was not.
[61] W.H. Stuart has claimed over by way of contribution and indemnity from Mr. Gill on the basis of the employment contract and other factors, and I find that they are entitled to that contribution and indemnity. They are entitled to be made whole from any damages, which they have to pay to Mr. Shetty.
[62] All right. Is there anything further that you need -- that I should be dealing with in terms of the decision?
[63] MR. DEOL: My Lady, just to confirm, it’s $64,911.38 plus mortgage interest, as I understood it.
[64] THE COURT: No.
[65] MR. DEOL: Okay. Just --
[66] THE COURT: No, he is not entitled to his mortgage interest. Mr. Gill in no way is responsible for Mr. Shetty’s decision to borrow against his home equity.
[67] MR. DEOL: Okay. Not entitled to a mortgage interest.
[68] MR. DEOL: So it’s at Court Order Interest Act rates.
[69] THE COURT: Yes.
[70] MR. DEOL: My Lady, do you want to deal with the issue of costs now or is that to await the written reasons?
[71] THE COURT: Do you want to deal with costs? Is there anything fancy about costs? Is there any reason why costs should not follow the event?
[72] Do you want to make submissions on costs? I would say they follow the event, but the event is a little bit complicated in terms of contributory negligence. So I do not know if you can sort it out and -- or, if you cannot sort it out, you are at liberty to apply. Is that all right? So --
[73] MR. GURNEY: That’s fine. Thank you.
[74] MR. DEOL: That’s fine, My Lady.
[75] THE COURT: All right.
“M.M. Koenigsberg, J.”
The Honourable Madam Justice M.M. Koenigsberg