On October 9, 2008, the Supreme Court of Canada released its decision in RBC Dominion Securities Inc. v. Merrill Lynch Canada Inc., allowing, in part, the appeal brought by RBC Dominion Securities (“DS”). The court restored the damages awarded by the trial judge against DS’s former branch manager for breaching the duty of good faith he owed to DS. The Court upheld the Court of Appeal’s decision refusing to award damages against the investment advisors. Damages for failure to give adequate notice and the punitive damage award were not appealed.


At trial, DS was awarded almost $2 million, plus interest, after Merrill and its local manager enticed all of the investment advisors and assistants, save two junior advisors and two clerical staff, from DS’s Cranbrook branch office. The branch manager of DS’s Cranbrook branch was one of those who moved to Merrill. Thereafter, DS lost a significant number of clients who followed their advisors to Merrill.

Supreme Court of Canada Findings

A majority of the Supreme Court reinstated the damages award of almost $1.5 million, representing five years of lost profits, against DS’s former branch manager. Central to the Court’s analysis was the finding, admitted at trial, that an implied term of the branch manager’s employment contract with DS was to retain investment advisors under his supervision. In coordinating the mass exit of the investment advisors to Merrill Lynch, the branch manager breached his duty of good faith in the discharge of his employment contract. The majority found it unnecessary to consider whether the branch manager (or any employee with managerial responsibilities) owed quasi-fiduciary duties to DS.

The majority confirmed that, absent a contractual non-compete clause, the departing investment advisors were free to compete with DS during the notice period. It noted, however, that an employee terminating his or her employment may, nevertheless, be liable for failure to give reasonable notice and for breach of specific residual duties. One of those residual duties was the duty not to misuse confidential information. While there was evidence of misuse of confidential client information on the part of the departing DS employees, the majority found that there were no unique damages flowing from the breach, and it would be inappropriate to award additional damages against the investment advisors for loss of profits based on improper use of confidential information after having made a global loss of profits award against the branch manager. As a result, the majority declined to entertain the specific issue of conversion of those documents.

Abella J., in dissent, would not have awarded any damages against the branch manager holding that absent a finding that he was a fiduciary employee, he owed no higher duties to DS than did the other investment advisors. She noted that damages for misuse of confidential information was reflected in the punitive damages awarded at trial.