The British Columbia court of appeal has largely upheld a lower court decision against a brokerage firm in a case that highlights how broker-client relationships can break down through poor communication.

The case dealt with a judgment ordering the defendants, Global Securities Corp and broker Robert Semple in the firm’s Delta, B.C. office, to pay damages to the plaintiff, No. 299 Sailview Ventures Ltd.

Sailview was controlled by Mary Secord, who was also a plaintiff.

The lower court noted that throughout their dealings there was a conflict between Semple’s desire to take into account Secord’s total portfolio in achieving the desired balance in her holdings, and Secord’s wish that Semple just deal with her personal accounts and the Sailview accounts, and not concern himself with her other assets.

Secord originally complained and continued at the initial trial to maintain that her investment advisors at Global were doing discretionary trading in the accounts, but the trial judge did not find that to be the case.

The appeal court upheld that finding. Part of the problem, it noted was that the plaintiff asked the firm to hold onto her mail while she was travelling, and her receipt of trading information about her accounts was spotty. “I believe this “hold mail” arrangement was a factor that contributed to a reduced level of communication and trust in the relationship between the parties,” the appeal court found.

“The plaintiff came to believe that the brokers were doing transactions without consulting her and profiting at her expense. This was part of the genesis of her belief, ultimately determined to be unfounded, that unauthorized trading was occurring,” the appeal court said.

The court did find that the options strategy Secord pursued was too complex. It also found that the trial judge was entitled to find a breach of contract and fiduciary duty by the defendants based on the evidence in this case.

In assessing damages, the appeals court found that Sailview should recover the US$57,419 it lost on options trading, and another US$50,000 for losses on stocks in the options account. It also assessed opportunity cost damages at $30,000.

However it disallowed an earlier damage award of $20,000 for trading commissions, suggesting that these were awarded in error. As well, it dismissed a cross appeal of the plaintiff seeking more damages.

http://www.courts.gov.bc.ca/jdb-txt/ca/03/00/2003BCCA0085.htm