The recent case of Rainville vs. MTCC No. 1056 et al. provides a useful reminder about how important it is to be careful when naming defendants in a lawsuit.

It is not uncommon for a plaintiff who feels that he has a complaint to sue everyone he can think of who might possibly have had some role to play in the events that gave rise to the complaint.

Sometimes you simply do not have a choice. You know that someone has done something wrong to you but you cannot be sure as to who is actually responsible.

Sometimes you simply do not have a choice. You know that someone has done something wrong to you but you cannot be sure as to who is actually responsible.

Sometimes this is a tactic to bring as many cheque books to the bargaining table as possible in the hope that the more people contribute, the more easily one’s objective in terms of a financial recovery can be met.

Unfortunately, all of this will backfire if the case is one of those few that actually does get to trial and the claim is dismissed as against one or more of the various defendants.

In 1997, Ms. Rainville purchased a condominium townhouse in Etobicoke near Lake Ontario. On inspection and based on the description of the townhouse in the real estate listing, it seemed to have three floors of living space.

After she closed the deal, she discovered that in fact, the townhouse only consisted of two floors.  The third floor, which the previous owner had used as living space, was actually part of a common area.

This meant not only that she had overpaid for the property but also that she had considerably less living space than she had thought.

To make matters worse, she found that the roof of the unit leaked and that water was damaging not only the items she had moved into the third floor (which didn’t actually belong to her) but also other floors.

She sued her lawyer, the property management company, various individuals employed by the property manager, the Condominium Corporation, and members of the Board of Directors of the Condominium Corporation. Initially, she also sued the vendor of the unit although fairly early on, for reasons which were never explained, she abandoned that lawsuit.

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The current volatility in the equity markets has led to a number of enquiries from people dissatisfied with the services provided by their investment advisors. In particular, I have been asked a number of times about the possible liability of investment advisors for investor losses.

This issue is not new. It seems to arise every time the stock markets take a dip, especially if the dip is prolonged.

Obviously, every case is different but there are some general principles that can be gleaned from the jurisprudence.

The cases differentiate between the type of broker who simply makes purchases and sales on the instructions of clients, and the type of broker who appears to be offering guidance and advice on which an investor can rely.

A broker who acts basically as an order taker probably does not have any responsibility for the wisdom of the transactions involved.

A broker who acts basically as an order taker probably does not have any responsibility for the wisdom of the transactions involved. If that broker is asked to give an opinion and does so but makes it clear to the client that the opinion is merely a personal opinion and is not the result of extensive research by the broker or his brokerage, it is going to be difficult to pin liability on the broker.

However, these days, most brokers try to develop business by offering guidance using phrases like “growing and managing retirement wealth” or “keeping investments safe”. Sometimes brokers characterize themselves as financial advisors with extensive investment experience.

The cases are clear that such brokers have to expect that their advice is going to be relied upon, and will have to accept responsibilities well beyond that of the order taker. They take on a duty to provide competent professional advice upon which clients, especially experienced ones, can rely completely.

In those circumstances, a broker or any financial advisor will be treated like any other professional advisor, including doctors, accountants and lawyers. The broker will be expected to take reasonable steps to ensure that investors are aware of the available options and of the potential benefits and risks associated with each one.

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