Ontario’s Superior Court of Justice has refused to grant summary judgment in a $40 million suit by HSBC Securities (Canada) Inc. against law firm Davies, Ward and Beck.

HSBC was seeking a partial summary judgment declaring that the defendant, Davies, owed HSBC predecessor Gordon Capital Corp. a duty to advise it about the limitation periods contained in three fidelity bonds, and that Davies breached its duty to Gordon by failing to advise Gordon to commence an action against its insurers within the applicable limitation periods.

The court decision noted that in the statement of claim, Gordon claimed damages from Davies in excess of $40 million. Gordon alleged that, if it were not for Davies’ alleged failure to advise of the relevant limitation periods, it would have recovered under the bonds. Gordon attempted to recover under the fidelity bonds for losses it allegedly suffered as a result of dishonest conduct by Eric Rachar, a former director, officer and employee of Gordon.

In June 1991, Gordon discovered that it had suffered a potential loss as a result of the conduct of Rachar. Gordon turned to its long standing solicitors, Davies, for advice and assistance. On the advice of Davies, Gordon notified its insurer, Guarantee Company of North America, of a potential loss.

Gordon did not commence action against Guarantee and the other additional excess fidelity insurers until June 30, 1993. Guarantee advised Gordon that it considered that the limitation period under the policy had expired. Gordon then commenced actions against Guarantee and the other insurers. In that action, the motions judge and the Supreme Court of Canada determined that Gordon had missed the contractual limitation period.

It its decision delivered last week, Ontario’s Superior Court of Justice ruled that a grant of a summary determination on the issues on this motion “does not seem likely to have any material beneficial effect on the trial and the litigation”. It noted, “The dealings between Gordon and Davies might well have to be the subject of evidence with regard to the issue of contributory negligence on the part of Gordon. Moreover, the entire issue of causation would remain to be dealt with at trial whatever decision is taken on the present motion. So granting summary judgment here would probably not have a significantly different effect on the length of the trial from not granting summary judgment.”

“To decide the issue of breach of duty of care on this motion for summary judgment when other issues relating to the question of negligence are outstanding and will require a trial might also be unfair to Davies,” it added.