2019 QCCQ 8846, 2019 QCCQ 8846

Bahadoran c. TD Warehouse Discount Broker JC00G0 2019 QCCQ 8846 COURT OF QUÉBEC Small Claims Division CANADA PROVINCE OF QUÉBEC DISTRICT OF MONTREAL TOWN OF MONTREAL Civil Division Nos: 500-32-132639-123 500-32-132640-121 DATE: December 11, 2019 ______________________________________________________________________ PRESIDED BY THE HONOURABLE DAVID L. CAMERON, J.C.Q. ______________________________________________________________________ HORMOZ BAHADORAN v.

TD WATERHOUSE DISCOUNT BROKER ______________________________________________________________________ JUDGMENT ______________________________________________________________________ [ 1 ] The Plaintiff, Mr Hormoz Bahadoran sues the defendant TD Waterhouse Discount Broker (“TD”) in case number 500-32- 132639-123 for $ 7,000, the limit available in the Small Claims division at the time he instituted the proceedings (March 9, 2012). He alleges that there was an unjustifiable sellout of shares in his margin account at less than 20% of book value resulting in a financial loss.

He holds the Defendant responsible for this loss alleging that it resulted from a slower than promised transfer of assets from another broker when he opened his margin account with TD Waterhouse. [ 2 ] In the interim, the value of stocks in his portfolio dropped significantly and he was deprived of managing his account. [ 3 ] In case number 500-32-132640-121 he sues again for $ 7,000 on the basis of the same agreements, alleging again a financial loss in connection with the Defendant’s alleged failure to respect its obligations.

He alleges a promotion where he would have discounted fees on trades provided that a balance of at least $ 100,000 was kept in the account and other conditions. This case also raised the allegation that TD was withholding access to the recorded telephone conversations on record, and this led to the Court managing the process of the disclosure of these recordings.

Division of the claim [ 4 ] The Code of Civil Procedure (article 955 as it read at the time of the proceedings) prohibits a plaintiff from dividing a claim into two or more claims in order to artificially increase the limit of the Small Claims Division beyond the threshold of $ 7,000. [ 5 ] TD asserts that this was done here. The Court agrees. The two claims, filed together, allege the default on the part of TD in respect of the agreement entered into between them in respect of the margin account.

The fault, which is alleged to be both the technical failure to respect the agreement and allegations of conduct amounting to fraud, lead to the same alleged damages, a great financial loss because of the manner in which the account was opened and did not allow immediate access to the client, as well as moral damages. [ 6 ] Therefore, the Court would have dismissed the second claim in file number 500-32-132640-121 even if the first claim had been successful.

Liability for the slowness in transferring assets [ 7 ] Part of the Plaintiff’s grievance is that it took several weeks for the process of transferring assets from his former account with another institution into the TD account, as opposed to the much shorter period of 5 to 10 business days he had been told would be required. [ 8 ] He applied for the margin account by signing and filing the proposed application on January 14, 2009 (D-1).

He states in his testimony that he received information on a phone call with a TD representative that the transfer period would be 5 to 10 business days and that he only signed the application after he received that information. The application was approved and the account opened on or about January 22, 2009. (D-2, Margin Account Agreement) The process of transferring assets from the other institution began on January 22 and was complete February 28.

[ 9 ] The Plaintiff alleges that, if he had had access to his funds and could have traded them within that 5-10 business day timeframe, he could have avoided the heavy losses that affected the value of his portfolio. He alleges that he had over $ 100,000 in securities that diminished in the period of the transfer significantly. [ 10 ] While he states, almost as a self-evident fact, that he was prevented from avoiding the loss, it is not an obvious fact.

The Plaintiff has the burden of proving the fact that he could have and would have avoided the loss if the transfer had been completed within the approximately 14 days (5 to 10 business days) that had been promised. [ 11 ] The Court does not doubt the sincerity of Mr Bahadorian’s belief that he could have maintained the value of his capital in the market fluctuations that occurred in that particular period. But there is no way to know what, if any, trades Mr Bahadoran would have made and the effects of those trades, had he been in control during that period.

Even if they had been available to be transferred within what would have amounted to 7 to 14 calendar days, which positions would he have traded, and with what financial effect ? After the fact, when the market drop was known, the degree of loss on any given position became apparent, but as the market changes were unfolding, what could have been known from day to day and which decisions would the typical investor have made ? What decisions would Mr Bahadorian have made ?

In something as unpredictable as the securities market, the Court cannot make any presumptions about what would have taken place. [ 12 ] As well, though it was an expectation that the transfer process would be fairly expeditious, the Court does not see the timeframe foreseen by TD as a contractual promise. It is not written into the agreements. It is an indication of an employee based on experience, not a contractual covenant of the TD. [ 13 ] This part of the claim therefore fails. The margin call [ 14 ] As early as March 5, 2009, the Plaintiff was made aware of an impending margin call.

The agreement (D-2) spells out very clearly that the lending that takes place on the margin account is to be covered by the client by amounts of cash and securities that are considered adequate by the TD, in its discretion. This is inherent in the nature of a margin account with a broker. The credit is short term, and subject to the broker’s requirements to maintain an adequate ratio of asset to debt.

Brokerage firms, in this case, a bank, have the mechanisms in place to sell off assets in the account to cover the shortfall as determined from time to time by the Bank. [ 15 ] The deficit was approximately $ 10,000 on March 5 and attempts were made to reach the Plaintiff by telephone to inform him of this. He would have been aware of it because it appeared on the screen when he logged in to his account by internet.

The record shows that he logged in several times on March 5, 6, 7, 9 and 10. [ 16 ] On March 10, an employee of TD reached the Plaintiff by telephone and told him of the situation, inviting him to make deposits of cash or transfer of securities sufficient to satisfy the margin call. The recording of the calls establishes clearly the Plaintiff’s awareness of the impending sale of securities in his account to cover it. He did not comply, and certain shares were sold into the market to raise cash to cover the amount. [ 17 ] The Plaintiff has no claim in respect of the TD’s actions in this regard.

The Benefits [ 18 ] The Plaintiff asserts that he was deprived of the benefits associated with the account. There were several features of the margin account that were beneficial to a client, chiefly the discounted rate on trades. In a series of communications, Mr Bahadoran complained that he should have this low rate, but it depended upon conditions, chiefly the net value of at least $ 100,000 and the use of what was called the “Active Trader Platform” or ATP. By using this computer application, the client would benefit from a rate of $ 7 per trade.

The Plaintiff never got active on this platform, and, never had a net value of $ 100,000 in his account. As a courtesy, and an incentive, TD gave him a rate of $ 9.99 and tried to accommodate him from the outset, but it had no duty to do so: the parties were bound by a clear written agreement. [ 19 ] The assertions that Mr Bahadoran makes about the conduct of the TD range from allegations that what they did was a contractual fault to harsh allegations of it being a “scam” and other words denoting deceit.

The case progressed through various continuances required, first in order to get the recordings of conversations into the file and later to accommodate the parties on dates, and to be sure that both had had the opportunity to make all of their evidence and arguments. Mr Bahadorian’s statements about the TD became more and more inflammatory and provocative.

Nevertheless, the facts remain that, despite his sincere belief that he has been aggrieved, the case does not succeed on any of the allegations made. [ 20 ] The Court will not award costs, in light of that sincere belief, and because the TD, in a small-claims matter, has very minimal legal costs that could be awarded. FOR THESE REASONS, THE COURT: DISMISSES the Plaintiff’s applications in both cases; WITHOUT LEGAL COSTS. __________________________ David L. Cameron, J.C.Q.

Dates of hearing: May 12, 2015 October 26, 2015 February 23, 2016 November 28, 2016 December 19, 2017 January 28, 2019 Exchange of written representations ending May 28, 2019