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AGENCY - Liability of principal to third person - Agent’s torts

Friday, May 15, 2020 @ 9:22 AM  


Lexis Advance® Quicklaw®
Appeal by the defendant CIBC from trial judgment finding the appellant liable for the respondents’ trading losses. CIBC agreed to provide the respondents’ startup hedge fund with access to CIBC’s electronic trading system, as well as assistance from time to time in executing orders through this system. The services offered under the contract included the use of proprietary automated trading software from various suppliers. In 2008, CIBC advised the respondents to deal directly with Belzberg regarding the Belzberg software instead of CIBC to satisfy their requests for service under the contract. In 2009, the respondents alerted CIBC and Belzberg about certain software issues they were experiencing in setting up a new computer. The respondents authorized Belzberg with view access only of their computer system. Without the respondents’ permission or knowledge, a Belzberg employee shut down part of the system while the respondents were trading. This caused a program to make several erroneous trades resulting in a trading loss to the respondents of over a million dollars. The trial judge found that the exclusion clauses in the contract with CIBC did not exclude CIBC’s liability for the respondents’ trading loss claim. He also concluded that the Belzberg employees who dealt with the system and caused the error were acting as CIBC’s apparent or ostensible agents.

HELD: Appeal dismissed. The trial judge’s interpretation of the exclusion clauses was reasonably open to him and revealed no palpable and overriding error or extricable error of law. The trial judge determined that Belzberg’s act of shutting down the respondents’ software was a matter within CIBC’s control and not within the ambit of the exclusion clause. He recognized and properly distinguished the circumstances in issue here from those that would fall within the proper scope of the exclusion. CIBC was, in the ordinary course of affairs, obliged to perform its support obligations reasonably and competently and this standard of performance applied equally to CIBC’s agents, Belzberg, whom CIBC authorized as competent to assist in fulfilling what otherwise were CIBC’s contractual obligations to support the trading platform. The trial judge did not misapply the test for ostensible or apparent authority. The respondents clearly relied on CIBC’s representation that they were to deal directly with Belzberg instead of CIBC to their detriment because of the enormous trading losses they suffered because of Belzberg’s negligence.

Montrose Hammond & Co. v. CIBC World Markets Inc., [2020] O.J. No. 1165, Ontario Court of Appeal, P.S. Rouleau, C.W. Hourigan and L.B. Roberts JJ.A., March 17, 2020. Digest No. TLD-May112020010