Bank of Montreal has won an appeal in a case involving losses suffered by Seaboard Life Insurance Co. relating to a public share offering.

Seaboard sued BMO and the Canadian Depository for Securities over a large loss it incurred in May 1994 when it did not receive certain information sent to shareholders relating to a public offer to purchase preferred shares in the capital of BCE Place Finance Corp. Seaboard owned 80,000 preferred shares, which it had placed in BMO’s custody.

The bank and the insurer agreed that if Seaboard had received the information, it would have tendered to the offer and would have realized $2,080,000 in total. Instead, Seaboard chose not to tender its shares. Shortly after the offer expired, Seaboard found that the shares had been delisted and were essentially worthless.

Seaboard commenced its action against BMO and CDS in the Supreme Court of British Columbia in May 1995. The trial judge granted Seaboard judgment against the bank for $2,080,000 plus $1,470,498.70 in respect of “loss of profit” up to the date of trial, for a total of $3,550,498.70. The Court dismissed Seaboard’s claim against CDS.

BMO appealed the finding of liability made against it, while Seaboard appealed the dismissal of its action as against CDS.

The bank’s central argument on its appeal was that the lower court erred in finding that it breached its obligations or any fiduciary duty it owed to Seaboard. It also argued that Seaboard’s losses were caused in whole or in part by CDS’s fault.

The appeals court dismissed Seaboard’s appeal against CDS, and it dismissed the claim for loss of profit, cutting BMO’s liability to $2,080,000. A dissenting opinion suggested cutting the principal award to $1,040,000. It replaced the lost profit award with interest charged at 9% per year.