The Ontario Court of Appeal on Wednesday dismissed the application by Christopher Morgis to add the Investment Dealers Association of Canada as a defendant to his statement of claim against Thomson Kernaghan. The firm was suspended by the IDA in July 2002.

Morgis sought to sue the IDA claiming it failed to protect investors that were clients of defunct brokerage, Thomson Kernaghan.

Morgis argued that the IDA owed investors a duty of care. The court framed the issue as a possible precedent-setting case. “The issue is whether the IDA’s status as a voluntary regulator, as distinct from a regulator created and governed by statute, and the nature of the relationship between the appellants and the IDA set this case apart from [Supreme Court precedents] such that a new category of negligence should be recognized.”

The court ruled that the appeal did not make this case. The three-judge panel said that investors are not sufficiently proximate to the IDA to create that duty. Recognition of a duty of care must be justified on the basis of a sufficiently close and direct relationship between the parties.

The appeal court suggested that Morgis’ argument cast the net too wide. The appeal agreed with the motions judge’s conclusion that the effect of imposing a duty of care on the IDA would be to create, “an insurance scheme for dissatisfied investors who have paid the IDA nothing.”

It dismissed the appeal and awarded the IDA $8,500 in costs.

Responding to the decision, IDA senior vice president, Member Regulation Paul Bourque, said, “We are pleased that today‚s decision again confirms the IDA’s position as a regulator acting in the interests of the public. Regulators must be free to regulate in the best interest of the public without threat of legal action from individual clients.”