Margin call claim must go to trial

A discount broker’s lawsuit against former clients, alleging that they owe over $850,000 to the firm from failed margin calls, will have to go to trial, an Ontario court has ruled.

The Superior Court of Justice denied a motion from CIBC Investor Services Inc. seeking partial summary judgment against clients — Ming Fai Chan and Lai Yang Chan, and their son Henry Ho Chan — alleging that they failed to meet margin calls on shares bought on the Nasdaq through the firm’s platform.

The firm is seeking $856,602 in damages from the outstanding margin calls, plus interest and other relief, including an order setting aside real-estate transfers from Ming and Lai to Henry, which the bank alleged were fraudulent. It is also seeking $300,000 in punitive damages.

The court noted that while most of the facts of the case are not disputed, there is a key issue in contention. Ming Chan claims he placed stop loss orders on the shares he bought, while the firm disputes that claim.

“Ming and Lai take the position that a significant number of the shares purchased ought not to have been fulfilled in light of the stop loss orders that were placed by them. CIBC disputes that,” the court said.

They have counterclaimed against the firm for $1.65 million, alleging that it failed to follow the stop loss orders registered by them.

CIBC brought a motion seeking partial summary judgment — specifically, a ruling that the Chans owe the firm the margin call debt, and dismissing their counterclaim.

The firm did not seek summary judgment on its claim for an order seeking to unwind the real-estate transfers and imposing punitive damages.

The investors argued against granting partial summary judgment, claiming that there’s a risk of inconsistent findings if part of the case is resolved by summary judgment, while the other part goes to trial; and that there are genuine issues that need to be heard at trial.

Ultimately, the court ruled against the firm, dismissing the motion for partial summary judgment.

“In short, CIBC has not persuaded this court, on the balance of probabilities, that there is no genuine issue requiring a trial on the debt claim and the counterclaim,” the court said in its decision.

Specifically, it said, the question of whether stop loss orders were used or not needs to be considered at trial.

“Our case presents a real risk of inconsistent findings of fact, specifically on the issue of whether Ming and/or Lai placed the stop loss orders, and, consequently, inconsistent results. For that reason, the motion by CIBC for partial summary judgment must be dismissed,” the court ruled.