Stock Trader and IRROC: Durno v. TD Waterhouse Canada Inc. 2019 ONSC 3328
This case underscores the potential of employment law consequences of employers failing to have appropriate compliance controls that are in line with relevant regulations. The consequences are apparent especially when the employer includes a term of obligating themselves to abide by the regulations. In this case, the employment contract between the Durno and TD had a term that stipulated TD would follow the relevant regulations. The plaintiff is arguing that TD’s failure to keep up with the regulations was a breach of contract that facilitated the noncompliance by the plaintiff.
To note, the court’s dispensing of this interlocutory motion centred around doctrine of collateral attack, which was invoked by the TD. The court did not expand on its position on the state of the law of collateral attack, I therefore have not delved in detail on the law.
The plaintiff, a stock trader working for TD, was fined by IIROC, a regulator covering the trading of financial assets by dealer-brokers, for overcharging clients excessive commission fees. IIROC and the plaintiff entered into a settlement agreement, of which he was personally liable for.
In this action, the plaintiff claims that TD’s failure to maintain sufficient compliance controls that would audit the plaintiff’s transactions was a breach of the employment contract.
In the Statement of Claim, the plaintiff makes specific reference to the settlement agreement with IIROC. Notably, the plaintiff plead that TD exposed him to “unreasonable risk of regulatory review and potential sanction.” The plaintiff plead that TD should have informed him of the noncompliance.
As the case proceeded to trial, TD brought a motion to strike the plaintiff’s claim to dismiss the suit on the basis that the plaintiff was attempting to relitigate the admission he gave in the settlement agreement. TD argued that the plaintiff’s arguments are a collateral attack on the settlement agreement.
The plaintiff in response asserts that he is not challenging the settlement agreement but is asking for his losses that were as a result of TD’s breach of contract by failing to maintain sufficient regulatory controls in place to identify the noncompliance and informing the plaintiff of the noncompliance.
The plaintiff argues that the overcharging of fees, which was found to be in contravention of the rules by IIROC, was in fact within the parameters prescribed in TD’s compliance policies. Inferentially, TD’s policies were not compliant with the regulation.
Motion judge’s disposition
The motion judge ultimately found that the plaintiff was not relitigating his admissions as he did not challenge the points of facts in the settlement agreement.
The judge held that the plaintiff’s claim is related to TD’s breach of contract. TD’s failure to meet contractually-prescribed obligation to maintain compliance was the breach of contract that resulted to the plaintiff’s fine given by IIROC.
Resultantly, the motion judge dismissed TD’s motion to strike. The case proceeds on to trial.