An Ontario appeal court has tossed out a brokerage house’s appeal, finding that a fiduciary relationship did indeed exist between a client and her former broker.

Hampton Securities Ltd. and its employee Peter Deeb appealed a lower court decision awarding $288,846 in damages against them to Deeb’s client, Jeanne Hayward. In doing so, the trial judge found that Deeb was in breach of a fiduciary duty to Hayward.

They appealed liability on the ground that the trial judge erred in finding that there was a fiduciary relationship. They also argued that Hayward’s claim should have been dismissed on the grounds that she ratified any breach of fiduciary duty. They also appealed the trial judge’s assessment of damages.

Hayward operated a non-discretionary account with Hampton under terms that would permit her investment advisor, Deeb, to trade securities in her account only with her prior authorization. The court noted, this arrangement, in and of itself, did not create a fiduciary relationship.

However, the trial judge found that there was a fiduciary relationship between Deeb and Hayward, because although Hayward had designated her account to be non-discretionary, from the outset Deeb disregarded her instructions by assuming total control and dominance of her account. The trial judge concluded that in disregarding the non-discretionary nature of Hayward’s account and operating the account as if it were a discretionary account, Deeb created a fiduciary relationship.

The appeal court agreed, noting, ” I am satisfied that in the circumstances of this case the trial judge did not err in concluding that Ms. Hayward did not ratify the unauthorized trades because she maintained her relationship with Deeb and did nothing to terminate his unauthorized trading… Nor would I interfere with the trial judge’s finding that Ms. Hayward did not contribute to her losses by withdrawing money from her account thereby creating a substantial increase in her margin position.”

“Given the trial judge’s careful review of the evidence, her findings of credibility and her application of appropriate legal principles, I am satisfied that there is no basis on which to interfere with her finding that there was a fiduciary relationship between Deeb and Ms. Hayward for which HS is vicariously liable. I would, therefore, dismiss the appeal on liability,” it ruled. It also dismissed the appeal on damages.