On February 11, 2014, the Quebec Court of Appeal rendered its judgment in Succession Huppé c. Valeurs mobilières Banque Laurentienne, 2014 QCCA 294 confirming a judgment of the Superior Court which had rejected an investor’s claim against his investment advisor and the latter’s brokerage firm because the investor had waited too long before denouncing the renegade.
Mr. Huppé was a Hydro-Québec retiree. At the beginning of December 1999, he entrusted a portfolio worth some $319,222 to one Mr. Duplessis of Valeurs Mobilières Banque Laurentienne (VMBL), whom he authorized to effect securities transactions in his name with the account which Mr. Huppé held with BNP. Mr. Duplessis behaved himself at first, but by September 2000 had taken matters into his own hands: Mr. Huppé noticed that Mr. Duplessis had been making unauthorized margin calls. Mr. Huppé warned Mr. Duplessis to cease and desist, but continued their business relationship nevertheless. Mr. Duplessis paid no heed. In January 2001, Mr. Huppé noticed additional unauthorized transactions. Although the value of his portfolio had by then grown to $350,135, Mr. Huppé lost faith in Mr. Duplessis. It was only in June 2001, however, that he began to complain about his investment advisor, and not before May 2002 that he issued instructions to BNP to close his brokerage account. By this time, however, Mr. Huppé had suffered a loss.
The Superior Court initially concluded that Mr. Duplessis had, indeed, committed a fault with respect to Mr. Huppé, by failing to consult and seek authorization from the latter, and by engaging in speculative transactions. The responsibility of VMBL was also engaged as Mr. Duplessis had been acting on their behalf. But Mr. Huppé’s claim for damages was refused. According to article 1479 of the Civil Code of Quebec, he had been responsible for mitigating his own damages (“A person who is liable to reparation for an injury is not liable in respect of any aggravation of the injury that the victim could have avoided”), and this he had failed to do. Had Mr. Huppé withdrawn his mandate from Mr. Duplessis in January of 2001, i.e. then when he had noted for the second time that Mr. Duplessis was out on a limb, he would not have suffered any loss.
It bears mentioning that neither party had established the cause of the disappearance of the amounts claimed, and that Mr. Huppé’s bank statements did not show movements which would have supported an allegation of fault against either Mr. Duplessis nor VMBL.
While it is not surprising that a brokerage firm or its advisors would be held accountable for unauthorized transactions on a client’s account, it is noteworthy that a considerable degree of responsibility lies with clients who employ their services, at least to the extent that the latter are aware of suspicious movements. The principle applies regardless of one’s degree of experience. Indeed, although Mr. Huppé was no novice, the Court of Appeal stressed that even an inexperienced investor had to exercise a minimum amount of diligence. The scope of article 1479 of the Civil Code of Quebec is also illuminated: by the time Mr. Huppé had noted the suspicious account movements for a second time, he was still ahead, having profited significantly for Mr. Duplessis’ maneuvers. But the prospect of a future loss had, by then, reared its ugly head.
Succession Huppé c. Valeurs mobilières Banque Laurentienne, 2014 QCCA 294
Date of Decision: February 11, 2014