Canaccord Capital Corp. has lost a claim for indemnity against a former investment advisor whose clients sued the company. The June 7 decision from the Ontario Court of Appeal found that Canaccord waited too long to pursue Gregory Roscoe, and was thus barred by the statutory two-year limitation period for making such a claim.
The decision suggests that firms that want to hold their advisors responsible for claims by clients should not wait until the matter is settled with the client; they should move quickly to launch formal claims against such advisors if they want to recover from them.
The case dealt with the $316,816 amount paid by Canaccord to settle a claim brought by Thomas and Kathleen Cavanagh, former clients of Roscoe’s. The Cavanaghs filed a statement of claim against both the company and the advisor, alleging that Roscoe owed them a duty of care to “use due diligence with respect to investment recommendations,” the decision says. The claim alleged that the duty had been breached and that damages were owed.
Canaccord settled with the Cavanaghs in July 2009, without the involvement of Roscoe. In January 2010, Cannacord wrote to Roscoe asking that he indemnify the company for the costs of the settlement. The company relied on Roscoe’s employment agreement, which stated that the advisor would “indemnify, reimburse and save harmless the Company for all losses, damages or amounts due to any claimant…” the decision notes. The indemnity included settlements as well as judgments. In June 2011, three years after the delivery of the Cavanagh’s Statement of Claim, Canaccord started a lawsuit against Roscoe to recover the settlement amount, as well as legal fees.
However, s. 18 of Ontario’s Limitations Act sets a two-year deadline for potential litigants. The issue for the appeal judges was when that two-year period began to run. Canaccord argued that the two years began to run from the time that it settled the action with the Cavanaghs: but Roscoe maintained that the two-years started when the Cavanagh’s delivered their claim to Canaccord.
A lower court judge had agreed with Canaccord, concluding that Canaccord’s claim was governed by the employment contract and not the parts of the Limitations Act relied on by Roscoe. As a result, the lower court judge concluded, the earliest date that the claim against Roscoe arose was when the employment contract was breached – the date the claim was settled by Canaccord.
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But the Court of Appeal disagreed. Among other things, it concluded that the Limitations Act, which was amended a decade ago after much consultation, is designed to widen the concept of those who harm another; it uses the broad term “wrongdoers,” not just tortfeasors, the decision notes.
The policy behind those changes is to wind up disputes efficiently, the decision notes. “This is consistent with the often-repeated goal of creating a clear, cohesive scheme for addressing limitation issues,” the decision says. “As mentioned, the purpose of the Act is to balance the plaintiff’s right to sue with the defendant’s need for certainty and finality.” Carving out certain types of exceptions, such as those that might arise only by contract, “would undercut that purpose,” the judgment says.