



COURT OF APPEAL FOR ONTARIO

CITATION: Montrose Hammond & Co. v. CIBC
    World Markets Inc., 2020 ONCA 219

DATE: 20200317

DOCKET: C67039

Rouleau, Hourigan and Roberts JJ.A.

BETWEEN

Montrose Hammond & Co. and
The Raillery Fund LP

Plaintiffs
(Respondents)

and

CIBC World Markets Inc.
and
Belzberg Technologies Inc.

Defendants
(
Appellant
)

Geoff R. Hall and Anu Koshal, for the appellant

David E. Greenwood and Christopher
    McClelland, for the respondents

Heard: March 9, 2020

On appeal from the judgment of
    Justice Michael A. Penny of the Superior Court of Justice, dated May 10, 2019, with
    reasons reported at 2019 ONSC 2870.

REASONS FOR
    DECISION

[1]

The appellant CIBC appeals from the judgment granted by the trial judge
    to the respondents. We dismissed the appeal with reasons to follow. These are
    those reasons.

(a)

Factual and Procedural Background

[2]

CIBC and the respondent, Montrose Hammond & Co., entered into a
    contract under which CIBC agreed to provide the respondents start up hedge
    fund with access to CIBCs electronic trading system, as well as assistance
    from time to time in executing orders through this system. The contract between
    the parties contains clauses purporting to limit CIBCs liability. CIBC relies on
    the provisions of articles 5.1 and 6.1 of the contract to exclude its liability
    in this case.

[3]

The services offered under the contract included the use of proprietary
    automated trading software from various suppliers. Some components of CIBCs
    trading system, including a software called Viper, was CIBCs proprietary software.
    Other software components were licensed to CIBC by third party suppliers, such
    as QuoteAgent by Belzberg Technologies Inc. The respondents had no contractual
    relationship with Belzberg or the other third party suppliers. Until September
    2008, the respondents dealt exclusively with CIBC for assistance with Belzberg
    software. After September 2008, CIBC instructed the respondents to deal directly
    with Belzberg concerning any issues with the Belzberg software.

[4]

On March 18, 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;
    however, without the respondents permission or knowledge, one of Belzbergs
    employees shut down the QuoteAgent component while the respondents were trading.
    This caused the Viper program to make several erroneous trades resulting in a
    trading loss to the respondents of over a million dollars.

[5]

The trial judge interpreted articles 5.1 and 6.1 of the contract between
    CIBC and the respondents and determined that properly interpreted, these
    articles did not exclude CIBCs liability for the respondents trading loss claim.
    He also concluded that the two employees of Belzberg who dealt with the system
    and caused the error were acting as CIBCs apparent or ostensible agents.

(b)

Issues

[6]

In addition to the issue of the applicable standard of review, CIBC submits
    two other arguments on appeal: the trial judge erred in his interpretation of the
    exclusion clauses in the contract between the parties; and the trial judge
    erred in concluding that Belzberg was the apparent or ostensible agent of CIBC.

[7]

We do not accept these submissions.

(c)

Analysis

(i)

Standard of Review

[8]

Starting with the standard of review, there is no evidence that the
    contract between the parties was a standard form contract, that the interpretation
    at issue was of precedential value, or that there was no meaningful factual matrix:
Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co.
, 2016
    SCC 37, [2016] 2 S.C.R. 23, at para. 24. Rather, the evidence indicates that the
    contract in issue here was the subject of negotiations, although the contract wording
    proffered by CIBC was not changed. As a result, the palpable and overriding standard
    of review applies to the trial judges interpretation of the contract. Absent
    overriding and palpable error or extricable error of law, which we do not see
    here, deference is owed to the trial judges reasonable interpretation of the contract:
Sattva Capital Corp. v. Creston Moly Corp.
, 2014 SCC 53, [2014] 2
    S.C.R. 633, at paras. 50, 53 and 55;
Ledcor
, at para. 21.

(ii)

The trial judges interpretation is without error

[9]

The trial judges interpretation of articles 5.1 and 6.1 was reasonably open
    to him and reveals no palpable and overriding error or extricable error of law.
    He referenced and followed the three-part analytical approach articulated by
    Binnie J. for the Supreme Court in
Tercon Contractors Ltd. v. British Columbia
    (Transportation and Highways)
, 2010 SCC 4, [2010] 1 S.C.R. 69, at paras. 122,
    123: whether the exclusion clause even applies to the circumstances; if it
    applies, whether the exclusion clause was unconscionable at the time the contract
    was made; and if valid, whether the exclusion clause should nevertheless not be
    enforced because of an overriding public policy.

[10]

In
Tercon
, at para. 122, Binnie J. further stated, If the exclusion
    clause does not apply, there is obviously no need to proceed further with this
    analysis. That was the case here.

[11]

The
    trial judge determined that article 6.1 did not apply to exclude or limit the
    respondents trading loss claim caused by Belzbergs negligence. Following the recommended
    approach in
Tercon
, the trial judge indicated at para. 83 of his
    reasons that he read article 6.1 harmoniously as a whole, in a manner that
    gives meaning to all of its terms and avoids an interpretation that would
    render one or more of its terms ineffective and determined that article 6.1
    can only be read so as to exclude liability for matters which are beyond CIBCs
    control.

[12]

Contrary
    to CIBCs submission, we do not read the trial judges reasons as suggesting a
    general principle that it is impossible for parties to exclude all damages claims
    by using unambiguous language. Rather, the trial judge focused on the wording
    of article 6.1 and the objective intentions of these parties, as he was
    required to do. This is demonstrated by the trial judges agreement with CIBCs
    position that article 6.2 excluded the respondents claim for lost profits. Nor
    are we persuaded by the submission that the trial judge read article 6.1 too
    narrowly and misconstrued the parties intention to allocate the risks of electronic
    securities trading to the respondents.

[13]

The
    trial judge simply determined that Belzbergs act of shutting down the
    QuoteAgent software was a matter within CIBCs control and not within the ambit
    of article 6.1. He recognized and properly distinguished the circumstances in
    issue here from those that would fall within the proper scope of the exclusion
    under article 6.1. As he noted, by way of example:

So, if data provided by the TSX, for example, were inaccurate,
    that would be beyond CIBCs control and fall within the proper scope of the exclusion.
    But, in this case, the inaccuracy of the market data had nothing to do with the
    market or the providers of the data itself. That data continued to be available
    and there is no suggestion it was inaccurate. The inaccuracy of the data, to
    the extent it arose at all, was the result of CIBCs apparent or ostensible
    agent turning off the QuoteAgent program that gave Viper access to the market data.

[14]

We
    see no basis for appellate intervention.

[15]

With
    respect to article 5.1 of the contract, we agree with the trial judges conclusion
    that the factual circumstances of the error did not amount to connectivity to
    the Trading System and the availability of the Trading System that article 5.1
    states are the responsibility of the applicable software vendor. Moreover, we
    agree with his determination that article 5.1 is neither an exclusion nor a
    limitation of liability. As he found, correctly in our view, CIBC was, in the
    ordinary course of affairs, obliged to [perform] its support obligations reasonably
    and competently and [t]his standard of performance applied equally to CIBCs
    agents, namely Belzberg, whom CIBC authorized as competent to assist in fulfilling
    what otherwise were CIBCs contractual obligations to support the trading platform.

[16]

CIBC
    has not persuaded us that the trial judges interpretation of the contract reflects
    reversible error. We do not agree with CIBCs submission that its
    interpretation of the contract was the only reasonable interpretation possible.

(iii)

Belzberg was CIBCs apparent or ostensible agent

[17]

This
    brings us to CIBCs final submission that the trial judge erred in finding that
    Belzberg was designated as CIBCs apparent or ostensible agent for the purposes
    of supporting its electronic trading system. Specifically, CIBC argues that the
    trial judge misapplied the test for ostensible or apparent authority. CIBC relies
    on the articulation of ostensible or apparent authority as a type of estoppel by
    Professor Gerald Fridman in
Canadian Agency Law
, 3rd ed. (Markham,
    Ont.: LexisNexis, 2017), at p. 61, as follows: The requirements for agency by
    estoppel are: (a) a representation; (b) a reliance on a representation; and (c)
    an alteration of a partys position resulting from such reliance.

[18]

CIBC
    maintains that the trial judge erred because he failed to expressly deal with the
    question of detrimental reliance.

[19]

We
    do not accept this submission. It is implicit from the trial judges reasons
    and the record that the respondents relied on CIBCs representation in
    September 2008 that they were to deal directly with Belzberg instead of CIBC to
    satisfy their requests for service under the contract because they communicated
    with Belzberg to respond to their request for assistance on March 18, 2009. The
    respondents clearly relied on CIBCs representation to their detriment because
    of the enormous trading losses they suffered as a result of Belzbergs
    negligence.

Disposition

[20]

Accordingly,
    the appeal is dismissed.

[21]

As
    agreed, the respondents are entitled to their partial indemnity costs from the
    appellant in the amount of $25,000, inclusive of disbursements and applicable
    taxes.

Paul Rouleau
    J.A.

C.W.
    Hourigan J.A.

L.B.
    Roberts J.A.


