Limitation Periods in Investment Losses: Rotzang v. CIBC World Markets Inc.

Issues: When does a limitation period begin for an investment loss claim where the client continues to have an account with an investment firm but receives no advice and does no trading in that account?

Key Facts: The plaintiffs had three accounts with an investment advisor and dealer. The plaintiffs had a falling out with the IA in August of 2007. The plaintiffs closed two of the three accounts. Many of the assets in the third account were transferred out, but one investment (shares in Seair Inc.) remained. The plaintiffs ceased contact with the IA and dealer—no further advice was provided with respect to the remaining investment, and there was no trading activity. The account was ultimately closed in November 2010 after further losses were incurred from the Seair investment. The plaintiffs filed their claim in May 2011, almost four years after they ceased contact with the IA, but less than a year after they closed the third account.

Key Findings: The dealer pleaded the claim was barred by section three of the Alberta Limitations Act, which bars claims where the plaintiff fails to commence the claim within two years of when the plaintiff knew or ought to have known that the plaintiff could bring a claim. The plaintiffs argued the claim could not reasonably have been discovered until 2010, when their losses were crystallized with the liquidation and closure of the third account.

The Master found the limitation period had begun to run as of August 2007. In upholding this finding, the Court of Appeal held that the plaintiffs clearly knew of their dissatisfaction with the investment advice they had received at that time, and they knew they had suffered significant losses. An exact quantification of losses did not negate that the claim ought to have been discovered: "An exact quantification of losses was no reason to refrain from bringing the action."

The Court of Appeal also concurred with the Master's finding that there was no evidence of any ongoing relationship between the firm and client because there was no trading activity or ongoing investment advice being given by firm or sought by the client beyond 2007. This finding prevented a potential argument that the limitation period should be extended beyond 2007.

What You Need to Know: This case stands in contrast to numerous decisions which reject limitation defences in claims by retail investors by holding that they reasonably ought not to have discovered the existence of their claim despite the passage of time (e.g., Ridel v. Cassin, 2014 ONCA 763). Rotzang suggests that plaintiffs can be held to a more rigorous standard of discoverability, where they clearly take steps that confirm their dissatisfaction with an IA and receive no further investment advice in respect of the securities at issue, and notwithstanding that they may have an ongoing account with the dealer and that the amount of the losses are not known.