On October 9, 2008, the Supreme Court of Canada released its
decision in RBC Dominion Securities Inc. v. Merrill Lynch
Canada Inc., allowing, in part, the appeal brought by RBC
Dominion Securities ("DS"). The court restored the
damages awarded by the trial judge against DS's former branch
manager for breaching the duty of good faith he owed to DS. The
Court upheld the Court of Appeal's decision refusing to award
damages against the investment advisors. Damages for failure to
give adequate notice and the punitive damage award were not
At trial, DS was awarded almost $2 million, plus interest, after
Merrill and its local manager enticed all of the investment
advisors and assistants, save two junior advisors and two clerical
staff, from DS's Cranbrook branch office. The branch manager of
DS's Cranbrook branch was one of those who moved to Merrill.
Thereafter, DS lost a significant number of clients who followed
their advisors to Merrill.
Supreme Court of Canada Findings
A majority of the Supreme Court reinstated the damages award of
almost $1.5 million, representing five years of lost profits,
against DS's former branch manager. Central to the Court's
analysis was the finding, admitted at trial, that an implied term
of the branch manager's employment contract with DS was to
retain investment advisors under his supervision. In coordinating
the mass exit of the investment advisors to Merrill Lynch, the
branch manager breached his duty of good faith in the discharge of
his employment contract. The majority found it unnecessary to
consider whether the branch manager (or any employee with
managerial responsibilities) owed quasi-fiduciary duties to DS.
The majority confirmed that, absent a contractual non-compete
clause, the departing investment advisors were free to compete with
DS during the notice period. It noted, however, that an employee
terminating his or her employment may, nevertheless, be liable for
failure to give reasonable notice and for breach of specific
residual duties. One of those residual duties was the duty not to
misuse confidential information. While there was evidence of misuse
of confidential client information on the part of the departing DS
employees, the majority found that there were no unique damages
flowing from the breach, and it would be inappropriate to award
additional damages against the investment advisors for loss of
profits based on improper use of confidential information after
having made a global loss of profits award against the branch
manager. As a result, the majority declined to entertain the
specific issue of conversion of those documents.
Abella J., in dissent, would not have awarded any damages
against the branch manager holding that absent a finding that he
was a fiduciary employee, he owed no higher duties to DS than did
the other investment advisors. She noted that damages for misuse of
confidential information was reflected in the punitive damages
awarded at trial.
The Canadian Office of the Superintendent of Financial Institutions ("OSFI") recently ruled that a bank cannot promote comprehensive credit insurance ("CCI") within its Canadian branches under the Insurance Business (Banks and Bank Holdings Companies) Regulations (the "Regulations").
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