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Quebec Courts once again award considerable punitive damages


Over the course of the last year a noticeable tendency to grant considerable punitive damages has emerged in decisions rendered by Quebec courts. Indeed, in both Chiasson v. Fillion, [2005] R.J.Q. 1066 (S.C.) (on appeal) and Johnson v. Arcand et al. [2006] R.J.Q. 395 (C.A.), the defendants were ordered to pay large amounts in punitive damages. In June 2006, the Honorable Jean-Pierre Senécal of the Quebec Superior Court rendered a decision with similar conclusions, in the case of Markarian v. CIBC World Markets inc..

In that case, the plaintiffs Markarian had been clients of the defendant World Markets CIBC Inc. (hereafter “CIBC”) for several years, through its securities representative Harry Migirdic, with respect to several investment accounts. It appears that Migirdic committed numerous acts of fraud against his clients, including the Markarians. In particular, Migirdic made false representations concerning their investment accounts and made fraudulent transactions without their consent. Amongst others, in 1993, Migirdic obtained the Markarians' signature on transaction documents, which allowed guarantees to be issued in favour of two other clients, unknown to the Markarians. CIBC’s compliance department failed to verify these transactions with the Markarians personally, as it limited itself to the vague explanations obtained from Migirdic.

In 2001, CIBC informed the Markarians of the existence of these guarantees, which totaled approximately $1,350,000, and advised them of its intention to invoke these guarantees. Despite their vigorous opposition, the CIBC proceeded to seize these amounts from the Markarians' accounts a few months later.

The evidence revealed that, by the time these guarantees were invoked, the CIBC had been made aware that the Markarians had not consented to them. In fact, Migirdic had been dismissed after admitting to having defrauded his clients. Moreover, he specifically admitted that the Markarians had no knowledge whatsoever of these guarantees. We note that these facts were set out by the Court in more detail throughout the 152 pages of this decision.

The Court found CIBC liable for the fault of its employee (Migirdic’s fraud) and for its own fault due to its knowledge that the guarantees were subject to an absolute nullity (because of the absence of consent on the part of the Markarians), as well as its failure to protect the interests of its clients. Although the fact that the CIBC failed to discover its employee’s fraudulent actions was not a fault in and of itself, the Court emphasized that CIBC had failed to intervene although it had been made aware of Migirdic’s various incongruities and questionable acts. The Court was of the opinion that CIBC’s behaviour demonstrated a greater concern with financial matters than with its clients.

For these reasons, the Court ordered CIBC to reimburse the Markarians the amount which had been illegally seized, as well as related costs, which amounted to approximately $1,455,000. Considering the age of the victims, as well as the consequences that the CIBC’s actions had on their lives, well-being and dignity, and in keeping with the limits imposed by the Supreme Court of Canada in that respect, the Court granted the Markarians $50,000 each in moral damages.

Moreover, the Court was of the opinion that the normal rules of compensating for harm suffered were insufficient in the circumstances and that punitive damages should be awarded. The Court emphasized the fact that CIBC had ample evidence that the Markarians had not consented to the guarantees and concluded that the CIBC had invoked the guarantee all the while knowing that it was illegal and in bad faith. The Court found that CIBC had intentionally deprived the Markarians of their right to the peaceful enjoyment of their property (i.e. their investments). A member of the CIBC management was particularly singled out with respect to this finding. The Court therefore ordered CIBC to pay punitive damages in the order of $1,500,000 to the Markarians, which corresponded approximately to the amount that it tried to misappropriate.

In addition, because the Court was of the opinion that CIBC had committed an abuse of the judicial system (by lying in its defence, by hiding essential facts, by obstructing judicial debate, etc.), the Court ordered it to reimburse 75% of the Markarians' extra-judicial fees incurred before trial (an agreement having been made between the Markarians and their lawyer for the trial fees), in the amount of approximately $95,000.

It is important to note that this case was settled out of Court after having been inscribed for appeal, such that we will not benefit from the Court of Appeal’s position with respect to the damages granted to the Markarians.
"CIBC must assume responsibility for the fraud.”
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