IN THE SUPREME COURT OF BRITISH COLUMBIA

Date: 20150505

Docket: S114502

Registry:
Vancouver

Between:

Cathleen
Graham

Plaintiff

And

Robert
Wells and CIBC World Markets Inc.

Defendants

Before:
The Honourable Madam Justice H. Holmes

Reasons for Judgment

INTRODUCTION

[1]            
Cathleen Graham was barely thirty years of age when, in the year 2003,
she received approximately $4 million as a result of the loss of her entire
family in deaths over the previous two years.  Her mother had died when a
re-emerged cancer led to a cardiac arrest from which Ms. Graham was unable
to save her with CPR.  A motor vehicle accident took Ms. Graham’s brother,
her only sibling, eight weeks later.  Ms. Graham then lost her father,
first to a severe depression, and then irrevocably when he hanged himself in
the basement of the family home.  Ms. Graham found him hanging, cut him
down, and administered CPR in an effort to bring him back to life, but it was
too late.  It is no surprise that Ms. Graham had a complex and distinctive
attitude towards the money that came to her with these terrible losses.

[2]            
Ms. Graham placed the funds with Robert Wells, principal of the
Wells Group at CIBC Wood Gundy.  Mr. Wells recommended a number of managed
funds he considered to be of high quality, and Ms. Graham’s portfolio did
well invested in those funds for a number of years.  However, the value of Ms. Graham’s
portfolio fell dramatically with the crash in the equities market through the
fall and winter of 2008.

[3]            
Ms. Graham now claims in respect of the significant losses she
sustained when she sold her portfolio in March 2009, and left the Wells Group. 
She contends that by July 2008, and certainly by early September 2008, which
was immediately before the worst of the market crash, Mr. Wells should
have recognized her heightened aversion to risk and the importance to her of preserving
her capital, and should have recommended a corresponding reduction in her
equity position.  She contends also that when she raised concerns about the effects
of a market crash, and asked what back-up plans were in place to prevent the
value of her portfolio changing by more than the 15% she had originally
indicated she could tolerate, Mr. Wells failed to tell her that there was
no such back-up plan at all.  Ms. Graham says that in these and other
failures, Mr. Wells breached a fiduciary duty toward her, as well as the
duties he owed as her investment advisor.

[4]            
Mr. Wells and CIBC World Markets Inc. deny that a fiduciary duty
was owed and say that Mr. Wells more than met his duty of care toward Ms. Graham. 
They submit that in any event Ms. Graham herself caused the loss in her
portfolio, by unilaterally and unreasonably liquidating her portfolio at a low
point after the market crash, instead of allowing the portfolio to rebound with
the market as Mr. Wells advised.

[5]            
It is common ground that if Mr. Wells is liable to Ms. Graham,
then so too is CIBC on a vicarious basis.

[6]            
I will first briefly outline the history of Ms. Graham’s
relationship with the Wells Group, before then describing the parties’
positions in more detail and discussing the issues to be determined.

BACKGROUND

[7]            
The following summary is based on facts as I find them to be.  Where
facts are in dispute and I make no finding, or where disputed points of fact
are discussed and determined later in these reasons, this summary expressly so notes.

[8]            
The summary draws heavily, though not exclusively, from Ms. Graham’s
own account of the events.  Her recollection of her dealings with Mr. Wells
is more detailed than his own.  Much, though not all, of Ms. Graham’s
account of the events themselves is undisputed, though her state of mind as the
events took place and her knowledge and understanding at various times are
matters of dispute which will be discussed later as necessary.

[9]            
Ms. Graham first met Mr. Wells in early 2002 when she asked a
neighbour, who had been a good friend of her mother’s, to recommend a financial
advisor to help her manage the life insurance proceeds she had received after
her brother’s death.  Ms. Graham had by then received proceeds of
$225,000, and also had a small (approximately $10,000) RRSP that her father had
established for her some time before.

[10]        
Ms. Graham hoped also that Mr. Wells might be suitable to help
her father with his financial affairs.  After the two family deaths in close
succession, Ms. Graham’s father experienced not only severe depression,
but also irrational anxiety about financial destitution.  His anxiety was
irrational because he was in fact in a very comfortable financial position,
with a full professorship at a local university, and substantial investment
holdings in Canada and Ireland.  Ms. Graham became aware of the magnitude
of these investments only after her father’s death.

[11]        
While preparing to leave Vancouver in the spring of 2003 to continue her
international development work overseas, Ms. Graham arranged for her
father to meet Mr. Wells.  By this time, Ms. Graham had had several
meetings with Mr. Wells about her own funds.  In a gesture Ms. Graham
considered to be generous and gracious, Mr. Wells offered to meet Ms. Graham’s
father at their home.  The day of the meeting turned out to be the day before Ms. Graham’s
father’s death.

[12]        
Ms. Graham turned to Mr. Wells for assistance almost
immediately after the death, and he gave it.  He worked with a friend of Ms. Graham’s
family, who was an accountant, to help Ms. Graham settle the estate.  Mr. Wells
also worked with a stockbroker in Dublin to liquidate investments there, and
arranged for the transfer of funds to Ms. Graham here.

[13]        
Mr. Wells advised caution in Ms. Graham’s initial investment
decisions because there was a bear market at the time.  It was not until July
23, 2003 that he presented Ms. Graham with a proposal for the investment
of her approximately $4 million in assets.

[14]        
In accordance with an investment strategy Mr. Wells favoured, he
recommended that Ms. Graham invest mainly through managed funds.  Mr. Wells
maintained a list of fund managers he considered capable and reliable, and
would make recommendations to his clients from that list based on the client’s
particular objectives and needs.  Funds differed according to the geographic
focus of their holdings (i.e. Canadian, U.S., international), their asset
mix, and whether they aimed mainly for “value” or, rather, “growth” investing
(the growth investing being the riskier).  Ms. Graham accepted the recommendations
Mr. Wells made to her for fund managers and for an overall asset
allocation strategy.

[15]        
After her father’s estate was settled and Ms. Graham returned to
Europe, she maintained contact with Mr. Wells by email and phone calls. 
They also met on one occasion in London, when Mr. Wells was there for a
meeting with an investment group.  During this period, Ms. Graham began to
acquaint herself with investment principles, and she learned how to check her
portfolio on-line.

[16]        
Ms. Graham’s emotional relationship to her assets was complex.  On
one hand, she did not feel that the money was hers, having never had any
expectation of inheriting so soon or of receiving funds in that amount,
particularly since she had no idea that her family’s wealth (including life
insurance proceeds and her father’s employment pension payout) would amount to
as much as it did.  On the other hand, she felt that through the trauma she had
endured in relation to the family deaths, particularly her father’s, she had in
a sense “earned” the funds.  In an additional layer of complexity, the funds
essentially stood in the place of her family and, for that reason, Ms. Graham
explained, she was unusually concerned to protect and conserve them.

[17]        
Ms. Graham testified that only some years after receiving the funds
did she begin to grow into the idea that they were truly her own to manage.  At
that point, she determined to learn more about investment in order to be an
effective steward.

[18]        
Mr. Wells encouraged Ms. Graham in this learning process, and
assigned Ross McCorquodale to guide and assist her as, essentially, a tutor.  Mr. McCorquodale
was also the main contact person within the Wells Group for Ms. Graham in
relation to her portfolio.  He quickly became the person with whom Ms. Graham
dealt the most frequently.

[19]        
Mr. McCorquodale was a qualified and experienced investment
advisor, but within the Wells Group did not act independently of Mr. Wells,
and had no responsibility for asset allocation decisions.  Typically, Mr. Wells
would meet with a client to discuss and develop portfolio proposals, and
would then instruct Mr. McCorquodale to prepare a detailed asset
allocation proposal reflecting the outcome of the client meeting.  Mr. McCorquodale
also had a significant role in client service, including by responding to
inquiries, conducting research for clients, and discussing particular stocks
with them.

[20]        
Together Mr. Wells and Ms. Graham decided that Ms. Graham
could learn from operating a separate trading account on her own, with Mr. McCorquodale
as a resource available to her.  In August 2007, Ms. Graham transferred
$50,000 from her portfolio into an account at the TD Bank for this purpose; she
later transferred a further $50,000 in order to reduce the transaction costs in
the account.  Ms. Graham made the investment decisions in that account,
based on her own market and other research, and often after consultation with Mr. McCorquodale.

[21]        
Ms. Graham’s portfolio with the Wells Group remained mainly in
managed funds, and delivered good returns for her.  The returns were sufficient
to allow Ms. Graham to embark on her ongoing work on a book about the losses
she experienced in her family, as well as to give some of her time to the
Special Olympics.  Ms. Graham was able to withdraw a total of
approximately $1 million over the course of the five years or so before the
2008 market crash, as well as to pay the applicable fees and commissions,
without depleting the $4 million in capital.  The withdrawals funded her costs
of ordinary living, which were relatively low, her travel, her own taxes, and the
taxes of approximately $550,000 associated with her father’s estate.

[22]        
In or around February 2008, Ms. Graham asked Mr. Wells to
simplify her holdings into fewer managed funds.  She was receiving 10 or 11
statements each month, one for each fund, and each fund held numerous
positions, some as many as 80.  Ms. Graham noticed also that some of the positions
were repeated in two or more of her funds.

[23]        
Mr. Wells did not favour the reduction in the number of managed
funds, because it reduced the diversification among fund managers and sectors
of the market, and diversification in turn reduces risk.  However, since Ms. Graham
was firm in her instructions, Mr. Wells acceded and asked Mr. McCorquodale
to implement them.  Mr. McCorquodale testified that it was a sizeable task
to do so, because the goal was to maintain the same asset mix for Ms. Graham,
despite the reduction in managers.

[24]        
Ms. Graham was pleased with the result.  She viewed her revised
portfolio as more streamlined and without duplicate or triplicate holdings. 
With fewer statements arriving each month, she felt better able to follow her
investments.

[25]        
In April or May 2008, Ms. Graham noticed a rapid and significant
rise in the value of her holdings.  This unsettled and unnerved her:  if her
accounts could swing up, then they could also drop down.

[26]        
Ms. Graham testified that after the first upswing, she spoke only lightheartedly
about it to Mr. Wells and Mr. McCorquodale.  However, the next
upswing caused her to reflect seriously on what she was coming to recognize as
her conservative approach to investing.  She testified that she began to wonder
whether her assets were as safe as she had believed them to be.

[27]        
Ms. Graham testified that she then arranged to meet with Mr. Wells
because she wanted to change to a more conservative portfolio.  She testified
that she was worried about the market crashing, as it had done in Ireland, which
she followed closely because she had family members there, and some additional
assets she had inherited.

[28]        
The meeting, which was a centre-point in the divergence between the
parties’ positions, took place on July 23, 2008.  In the remainder of this
narrative, the account of Ms. Graham’s knowledge, understanding, and
concerns is hers alone; I will make my findings concerning that account,
and the issues it raises, later.

[29]        
Ms. Graham explained that by this time she had come to accept her
funds as a gift from her father that gave her the freedom to write her book,
and thus to be of service to others in that way, as well as more generally in
life.  Ms. Graham testified that her financial needs were modest, and she
was in no rush to increase her capital because she had many years ahead in
which to do so.  She wanted steadiness and a security blanket.  She was more
than willing to pay taxes on her gains and income − indeed, considered it a privilege to do so
− but could
tolerate little risk.  Even upswings in the value of her portfolio made her
nervous.

[30]        
Ms. Graham testified that she discussed these and other concerns with
Mr. Wells in the July 23, 2008 meeting.  She testified that in explaining
her aversion to risk, she drew an analogy to mountain climbing, which was her
new passion, where the chance of falling into a crevasse is very small, but the
outcome is disastrous; climbers therefore guard against the risk by using ropes
and secure knots.  In her evidence, Ms. Graham implied that she used the
analogy to make clear that her portfolio must be similarly free from risk of
disaster.

[31]        
At the meeting on July 23, 2008, Mr. Wells presented a portfolio
proposal, dated July 15, 2008, that had been sent to Ms. Graham for her
consideration beforehand.  Under that proposal, Ms. Graham’s equity
holdings, which were the higher risk component of her portfolio, would be reduced
by approximately 10% to 55%.  The reason for the recommended changes was set
out as follows:

We have drawn up these recommendations to adjust our
asset mix towards a more conservative equity weighting.  We are recommending
this conservative asset mix due to conversations with Cathleen where she
expressed that preservation of her capital is very important to her.

The proposal also noted that, “[t]he result of these
recommendations will be a more conservative portfolio to help in protecting
your capital during the present volatile market conditions”.

[32]        
Ms. Graham agreed to the recommendations in the proposal, and also
agreed that the proposal would be implemented in two stages.  At the first
stage, Ms. Graham’s equity position would be reduced from approximately
65% to approximately 60%.  The second stage, to complete the reduction, would
be executed when the market conditions were favourable.  As events turned out,
the second stage was never implemented, because with the continued fall of the
market Mr. Wells saw no suitable time to sell.  Ms. Graham takes no
issue with, specifically, the failure to implement the second stage.

[33]        
Ms. Graham testified that although she agreed that the first
tranche should proceed, she remained unsure about the proposal, and she
therefore asked Mr. Wells to supply her with information or research to
validate it.  More specifically, Ms. Graham says that she made this
request at the July 23, 2008 meeting, and repeated it in emails she sent Mr. McCorquodale
on August 8, 2008.  In those emails, which I will discuss in more detail below,
Ms. Graham asked about the “strategy for rebalancing” used by the Wells Group
in volatile markets, and about what plans were in place should her portfolio
increase or decrease beyond the sway (15%) indicated in her initial risk
tolerance assessment.

[34]        
One of the breaches of duty Ms. Graham alleges consisted, Ms. Graham
says, of Mr. Wells’s failure ever to supply her with this research or
information.

[35]        
It was in September 2008 that the market began the significant decline
that became a crash.  The communications between the parties around this time bear
heavily on the issues for determination, and I will discuss those
communications in more detail below.  However, it is fair to say for present
purposes that by all accounts Ms. Graham became increasingly anxious about
her portfolio as time went on.  She also began to refer to not having been
heard by Mr. Wells.

[36]        
By mid-October, Ms. Graham asked for Mr. Wells’s
recommendation for other investment advisors.  She was no longer comfortable
with her relationship with Mr. Wells, but wished to be open with him about
her intentions.

[37]        
By late-October, Ms. Graham’s attitude toward her experience with the
Wells Group had crystallized into thoughts she expressed in this portion of an
email she wrote to Mr. Wells and Mr. McCorquodale on October 23,
2008:

Even now, I’m the one trying to come up with solutions
or ideas that can at least offset some of the damage to my holdings. I do know
that the market will fix that over time, but I kind of feel like I did every
reasonable effort to communicate I want protection, to support that with facts,
short of demanding going to lots more cash. … [it’s] really hard to accept
regardless of market conditions, that my risk has not been respected …. 

In her evidence in the trial, Ms. Graham explained that
she found it difficult to accept that Mr. Wells had exposed her assets to
risk, despite her having asked for changes in July 2008.

[38]        
Although she was disheartened and was unconvinced that her partnership
with the Wells Group could continue, Ms. Graham resolved nonetheless to
meet again with Mr. Wells to try to reach a better understanding.  The
meeting took place on November 25, 2008, with Mr. McCorquodale present
also, at Ms. Graham’s request.  From Ms. Graham’s perspective, the
meeting did not go well because Mr. Wells continued to display a
fundamental lack of understanding of her needs and sensibilities.  She had the
same view of a subsequent telephone discussion with Mr. Wells.

[39]        
Ms. Graham then began a lengthy process of seeking out and meeting
potential new investment advisors.

[40]        
The process of terminating her relationship with the Wells Group and
CIBC also took some time.  During that time, in early December 2008, Ms. Graham
raised concerns with senior manager Greg Johnson about her experience with the
Wells Group, and was put in touch with Marla Harrison, who she met with shortly
afterwards.  Ms. Graham understood that Ms. Harrison was CIBC’s
ombudsperson, and she testified that Ms. Harrison either introduced
herself in that fashion or failed to correct Ms. Graham’s reference to her
having that position.  Ms. Harrison, who is an assistant branch manager
with CIBC, and was never an ombudsperson, testified that she never knowingly
misrepresented her position with CIBC, and I accept that evidence.  In my view,
Ms. Graham’s misunderstanding about Ms. Harrison’s position likely
resulted from simple miscommunication somewhere in the course of the to and fro
that led to the meeting, a miscommunication that may also have clouded Ms. Graham’s
perception of how Ms. Harrison presented herself at the meeting.

[41]        
Ms. Graham and Ms. Harrison each gave a similar account of the
substance of the meeting, in which Ms. Harrison advised Ms. Graham of
the formal avenues for complaint, and also recommended an alternative
investment advisor within CIBC whose interests and personal experience seemed
more similar to Ms. Graham’s than were Mr. Wells’s.  Ms. Graham
recognized the features in common, but did not pursue the recommendation
because the advisor stimulated painful memories of the family she had lost.

[42]        
Ms. Graham met again with Mr. Wells in January 2009, after he
called her to give encouragement about the market.  However, Ms. Graham
was distressed by a reference Mr. Wells made to the investment advice he
thought Ms. Graham’s father would have given her, and she renewed her
efforts to find a new team of advisors.

[43]        
While Ms. Graham was still pursuing her search for new advisors,
she learned of a development within the Wells Group which troubled her greatly.

[44]        
Over her years with the Wells Group, Ms. Graham had become close
personal friends with Susan Matsunaga, who joined as Mr. Wells’s
administrative assistant in 2004.  Ms. Matsunaga has a university
education and has taken the Canadian Securities Course and other wealth
management and financial planning courses, but is not a qualified investment
advisor, and did not work in that capacity with the Wells Group.

[45]        
One evening in February 2009, a flustered and upset Ms. Matsunaga
telephoned Ms. Graham to tell her about involvement she understood Mr. Wells
was having or proposing to have with a long-time friend and mentor of his,
J.C.  Ms. Matsunaga understood that Mr. C., who was an investment
advisor with another financial institution, had been charged with child pornography
offences and let go from that institution, and would now be using the Wells
Group offices.  Ms. Matsunaga understood that Mr. Wells wished both to
help Mr. C. and to take over some or all of his book of business.  The
latter understanding was not correct:  in fact, Mr. Wells proposed to look
after Mr. C.’s clients for him until after Mr. C.’s trial, when, if
found not guilty, Mr. C. could take them back again.  Ms. Matsunaga was
extremely uncomfortable about the prospect of associating with Mr. C.
through the Wells Group, and sought Ms. Graham’s advice as a friend.

[46]        
Ms. Graham also spoke to Mr. McCorquodale about this
development.  Mr. McCorquodale was also distressed by Mr. C.’s
appearance at the Wells Group offices and by what he understood to be Mr. Wells’s
plan to write to Mr. C.’s clients.  He confronted Mr. Wells angrily,
and was not satisfied by his response.  Mr. McCorquodale testified that he
resolved at that time to leave the Wells Group.  However, he did not actually do
so until five months later.

[47]        
Ms. Graham herself was extremely upset by the J.C. development as described
to her by Ms. Matsunaga and Mr. McCorquodale.  However, she did not
raise the matter with Mr. Wells, because she did not wish to expose
impropriety or indiscretion on the parts of Ms. Matsunaga and Mr. McCorquodale
in having discussed internal office matters with a client.

[48]        
Ms. Graham was concerned not only about the offensive subject
matter with which Mr. C. appeared to be associated, but also about what
she feared was the risk Mr. Wells’s handling of the C. matter posed to her
assets.  After conducting some research by computer about “bank-client
poaching”, and reading about a case from Cranbrook, B.C. (presumably RBC Dominion
Securities Inc. v. Merrill Lynch Canada Inc., 2008 SCC 54), she concluded
that Mr. Wells was putting CIBC at risk through what she viewed as
criminal conduct.  In a discussion with Mr. McCorquodale two days later, Ms. Graham
was pleased to learn that Mr. Wells appeared not to be proceeding with what
she understood to be his plan to solicit Mr. C.’s clients, but she
remained convinced that matters at the Wells Group were nonetheless seriously
awry.

[49]        
The next day, Ms. Graham instructed Ms. Matsunaga to sell
large portions of her portfolio.  Ms. Graham did not seek Mr. Wells’s
advice about the sale, and did not notify him that she had given these
instructions.

[50]        
The losses from the equity-based investments in Ms. Graham’s
portfolio crystallized with this liquidation in early March 2009.  Brad Doney,
who gave expert evidence concerning various aspects of the investment industry
and the calculation of investment losses, calculated that Ms. Graham’s
portfolio declined by $841,939 between the end of July 2008 and the end of
February 2009.  Dean Holley gave expert evidence in the same areas, and agreed. 
It is Ms. Graham’s position that if her portfolio had been less
concentrated in equities, in accordance with what she says was her investment
objective of preserving her capital, her losses would have been substantially
reduced.

[51]        
With her new investment advisor, Ms. Graham holds mainly precious
metals investments.  In her evidence, she acknowledged that the cash value of
her precious metals holdings moves up and down by substantial amounts.  For
example, the total value of her account declined by approximately $50,000 in a
single month early in 2014.  However, she testified that owning gold and silver
− and especially
bullion, or the metals themselves −
brings her peace, because of the relationship of those metals to mother earth,
as well as their long-standing role in proving security and safety to
threatened or persecuted peoples through the history of time.  In that sense,
she considers her current investment approach to be a conservative and low-risk
one.

POSITIONS OF THE PARTIES

  Ms. Graham’s Position

[52]        
Ms. Graham alleges that Mr. Wells breached his fiduciary duty
to her and his duty of care as an investment advisor at three main stages.

[53]        
First, Ms. Graham contends that her investment objectives had
become more conservative by the summer of 2008, and that Mr. Wells failed
to ensure that her investments were suitable.  She submits that by July 2008, and
certainly by September 2008, she had given sufficient indications of her fear
of market volatility and her concern to preserve her capital to have triggered Mr. Wells’s
duty to re-evaluate her investment objectives and revise her asset allocation
to reflect them.  Ms. Graham notes that the KYC (“know your client”) forms
for her accounts were based on defaults and assumptions, and not on her actual
circumstances and investment objectives, and that they were in any event out of
date.

[54]        
Second, Ms. Graham contends that the proposal presented to her at
the July 23, 2008 meeting, and implemented in part shortly afterwards, was
in any event insufficient to reflect the original investment objectives she
established with the Wells Group, and was misleading in purporting to do so. 
What the proposal described as a conservative asset allocation was, in reality,
not at all so on the analysis Ms. Graham puts forward and, Ms. Graham
submits, the expert evidence.

[55]        
Thirdly, Ms. Graham contends that during this same time period
(late August to early September 2008) Mr. Wells failed to provide her
with all relevant information about her investments, including, in particular,
that there was no backup plan in place to protect her assets in accordance with
the tolerance for risk (approximately 15%) she had indicated in 2003.

[56]        
Ms. Graham submits that, had her assets been suitably allocated
with an emphasis on capital preservation, she would have been much better
protected during the market crash.  She submits also that had Mr. Wells
advised her, as he was obligated to do in response to her inquiries and
concerns, that nothing was in place to protect her portfolio from the crash,
she could have responded by taking alternative steps.

[57]        
Ms. Graham submits that the fiduciary relationship in which Mr. Wells
stood informs the nature of the duties he owed her as well as the calculation
of her damages for their breach.  She submits that the fiduciary relationship
and her vulnerable position required all the more of Mr. Wells in the
execution of his duties to her.  In the calculation of her damages, she submits
that the fiduciary relationship, and her own vulnerability in it, prevents any allocation
of responsibility to her for not acting differently or for not responding more
quickly to the consequences of Mr. Wells’s breaches.

[58]        
Overall, Ms. Graham contends that Mr. Wells did not hear what
she was saying, and that he responded not to her as herself, Cathleen, but rather
to her money, contrary to his fiduciary responsibility and, in any event, his
duty as her investment advisor.

  The Position of Mr. Wells and
CIBC

[59]        
Mr. Wells and CIBC deny that Mr. Wells stood in a fiduciary
relationship to Ms. Graham, and in any event deny that he breached any of his
duties as her investment advisor.

[60]        
They submit that nothing gave rise to a duty to change Ms. Graham’s
asset allocation more than Mr. Wells did in July 2008.  They submit that
although Ms. Graham described herself as “conservative”, it was clear that
she wanted and needed growth in her portfolio to generate the income she
expected.  This meant that an entirely conservative portfolio would not have
been consistent with her investment objectives.

[61]        
Mr. Wells and CIBC acknowledge that Ms. Graham’s KYCs were
inaccurate, and that it was improper for them to have been so.  However, they
submit that the inaccuracies caused no loss because Mr. Wells knew Ms. Graham
extremely well, and was well aware of her true investment objectives, including
her tolerance for risk, and her other characteristics as an investor, and recommended
an asset allocation consistent with that knowledge.  The defendants note that Ms. Graham
makes no claim that the defective KYCs prevented CIBC adequately supervising,
through its compliance department, the investment transactions Mr. Wells
conducted in Ms. Graham’s account.

[62]        
The defendants submit that Mr. Wells’s relationship with Ms. Graham
was not a fiduciary one.  They agree that Ms. Graham underwent appalling
life circumstances before she inherited her funds, and that Mr. Wells
helped her in the aftermath, but they submit that a fiduciary relationship does
not therefore arise.  They submit also that by the time of the alleged breaches,
Ms. Graham’s investment knowledge and her close involvement in the
operation of her accounts were wholly out of accord with the vulnerability she claims.

[63]        
The defendants submit in any event that, should the Court conclude that Mr. Wells
did owe Ms. Graham a fiduciary duty, there was no breach, because breach
of a fiduciary duty requires some form of misdeed beyond the breach of an investor
advisor to a client, and no such misdeed is alleged or established.

[64]        
The defendants contend finally that even if Mr. Wells breached a
fiduciary or other duty to Ms. Graham, it was Ms. Graham’s own
conduct, and not the breaches, which caused her financial loss.  They submit
that Ms. Graham acted unreasonably and irrationally in unilaterally
selling her entire portfolio in March 2009, after the J.C. development.

[65]        
Additionally or alternatively, the defendants submit that Ms. Graham
acted unreasonably in continuing to hold until March 2009 the investments she
says she learned to be unsuitable in September 2008.  The defendants submit
that if there were breaches that caused loss, the loss continued only until September
2008, at the latest, and therefore pre-dated the market crash of October 2008
and following.  The defendants submit that Ms. Graham’s unreasonable and
irrational conduct in holding her portfolio until March 2009, at the bottom of
the market, and unilaterally selling it at that time may, in legal terms, also
be viewed as contributory negligence or, alternatively, a failure to mitigate
her damages.

ISSUES

[66]        
The evidence in the trial and the parties’ positions give rise to the
following main issues:

1.              
whether Mr. Wells should have understood by July 2008 that capital
preservation was Ms. Graham’s priority, and that her assets should not be
exposed to risk that could affect their value by more than the 15% variation she
had said she could tolerate;

2.              
whether, in late August and early September 2008, Mr. Wells failed
in his duty to respond to Ms. Graham’s requests for relevant information
about her investments, by, in particular, failing to tell her that there was no
back-up plan to prevent a fall in value of more than 15%;

3.              
whether by September 2008, Mr. Wells should in any event have come
to the understanding outlined in relation to issue 1;

4.              
even if the answer to issues 1 and 3 is “no”, whether Ms. Graham’s
assets were nonetheless unsuitable for her because of high risk investments in
some of the managed funds;

5.              
if any of the questions above are answered “yes”, and Mr. Wells
therefore breached his duty of care as Ms. Graham’s investment advisor,
and potentially (subject to a separate determination) a fiduciary duty he owed
her, whether it was one or more of those breaches that caused her loss, as
opposed to Ms. Graham’s unilateral sale of her portfolio;

6.              
if breaches by Mr. Wells caused Ms. Graham’s loss, what
damages she should receive, taking into account, among other things:

(a)           
whether Mr. Wells stood in a fiduciary relationship to Ms. Graham,
and

(b)           
whether Ms. Graham should have mitigated her damages by selling her
portfolio, or some of it, when she became aware of the breaches she alleges,
and before the portfolio declined further in value.

[67]        
I will discuss these issues in turn, as necessary, after first briefly
referring to the duties of an investment advisor.

THE DUTIES OF AN INVESTMENT ADVISOR

[68]        
The parties agree that an investment advisor has a duty to provide
careful, competent, and considered professional advice to his or her client,
where advice is sought.  The duty does not require that the advice achieve
financial success, because consistently accurate predictions are impossible in
the investment industry: Mills v. Merrill Lynch Canada Inc., 2005 BCSC
151 at para. 129; and Kent v. May (2001), 298 A.R. 71 at para. 81
(Q.B.), aff’d 2002 ABCA 252.  The legal standard of care is informed not by the
outcome of the advice, but by the governing rules of the various regulatory
bodies.

[69]        
Mr. Doney described the regulatory context as follows (para. 4
of his report):

Securities
dealers in Canada are members of the Investment Industry Regulatory Association
of Canada (IIROC), a self-regulatory body recognized by the British Columbia
Securities Commission, with comprehensive rules, regulations, policies and
hearing panel precedents. As a registered representative of CIBC Wood Gundy,
Robert Wells was contractually subject to this regulatory regime. The industry
standard for business conduct requires compliance with these requirements. This
regulatory framework also requires that firms have comprehensive compliance
policies and procedures and supervisory regimes in place to monitor compliance.
In addition the IIROC requirements, securities dealers and their representatives
must also comply with applicable provincial and federal legislation, including
the Securities Act, RSBC 1996, c. 418. … Applicable federal laws
include anti-money laundering legislation and Criminal Code . . .  provisions
that address various securities related offences.

[70]        
The parties agree that the obligation created by the “know your client” rule
is the backbone of the advisor-client relationship, and is well-known to all
industry professionals.  The rule is designed to ensure that portfolios are
suitable.  Suitability involves a consideration of numerous factors relating to
the particular investor, including age, income, net worth, investment
knowledge, investment objectives, and tolerance for risk: Davis v. Orion
Securities Inc. (2006), 41 C.C.L.T. (3d) 302 at para. 35 (Ont. S.C.J.).

[71]        
The “know your client” obligation itself, and the regulatory standards
reflecting the obligation, require an advisor to complete and maintain an
up-to-date KYC form setting out the information relevant to the client’s
investment objectives and risk tolerance.

[72]        
Mr. Wells acknowledges that the KYC forms made and kept by the
Wells Group over the years for Ms. Graham were inadequate.  One or
more of the early KYCs, completed in 2002 and 2003, were signed in blank and
then completed on the basis of “default” information unrelated to Ms. Graham
personally.  The KYC completed in 2004, when CIBC changed its computer system,
was completed without input from Ms. Graham.  The KYC completed in
November 2005 is replete with errors.  That last KYC was never updated at all,
even though by all accounts Ms. Graham’s investment objectives changed in
2008, the parties disagreeing only about the extent of the change.

[73]        
Ms. Graham does not contend that Mr. Wells’s failure to
maintain current and accurate KYCs of itself put him in breach of his duties to
her.  Non-compliance with regulatory requirements, including the KYC
obligation, will not on its own form a basis for liability unless the
non-compliance itself also causes a loss: Parent v. Leach, [2008] O.J. No. 2155
at para. 166 (S.C.J.); and Mills, at paras. 147-148.

[74]        
Instead Ms. Graham submits that Mr. Wells failed in his more
fundamental obligation to ensure that her asset allocation reflected her
investment objectives.  She contends that his inattention to her KYC forms is
but illustrative of his more general inattention to her particular
circumstances and needs.  As I noted earlier, Ms. Graham does not allege
that Mr. Wells’s acknowledged failures to keep her KYC forms accurate
and current led to a failure by CIBC to adequately supervise his work.

[75]        
Although the parties agree that an investment advisor carries the duties
I have outlined, they do not agree about the circumstances in which an advisor
may also bear a fiduciary duty, and I leave that question aside at this stage. 
In my view, the issue of whether Mr. Wells carried a fiduciary duty to Ms. Graham
is unnecessary to determine unless Ms. Graham establishes that, in fact,
he acted in one or more of the various ways that she says were in breach of
such a duty.

[76]        
The first of those assertions of fact I will now discuss.

1. BY JULY 2008, SHOULD MR. WELLS
HAVE VIEWED MS. GRAHAM AS CONSERVATIVE AND RISK AVERSE?

[77]        
Ms. Graham contends that Mr. Wells failed to identify the
change in her investment objectives that took place during the spring or early
summer of 2008, and therefore failed to recommend an asset allocation
reflecting this change in the July 23, 2008 meeting.  She submits that
instead, Mr. Wells pressed forward with the asset allocation he considered
suitable for someone of her age and wealth, without taking account of her
unique features, including the history that made her so sensitive to loss.

[78]        
Ms. Graham submits that in so doing Mr. Wells violated his
duties as her investment advisor to know his client and ensure that her
investments were suitable, as well as the fiduciary duty she submits he owed
her.

[79]        
Ms. Graham makes no suggestion that Mr. Wells’s understanding
of her investment objectives was insufficient before the spring or summer of
2008.  And I will discuss later (as issue 4) her submission that some of the
managed funds in her portfolio as of July 2008 were higher risk, and unsuitably
so, than Mr. Wells represented them to be.

[80]        
For discussion now is Ms. Graham’s submission that Mr. Wells
failed to recognize her increasing concern, through the spring and summer of
2008, to preserve her capital, and that his July 23, 2008 asset allocation was
therefore inadequate to reflect this change.

[81]        
As I have noted, the first tranche of the July 23, 2008 proposal reduced
Ms. Graham’s equity position from about 65% to 60%, and the second tranche
would have reduced it further to 55%.  Some bonds were also to be sold from the
portfolio.

[82]        
Ms. Graham notes the five investor profiles used by CIBC to assist
in asset allocations, each reflecting a balance between risk and return.  Ranging
from the most conservative to the least so, these are:  (a) capital
preservation; (b) income; (c) income and growth; (d) growth; and
(e) aggressive growth.  Ms. Graham submits that by July 2008, she had
a capital preservation profile, and Mr. Wells should therefore have
recommended (according to CIBC’s guidelines) an asset allocation with
approximately 20% in cash, 65% in bonds, and only 15% in equities.

[83]        
Mr. Wells strongly disagreed with the suggestion that Ms. Graham
had a capital preservation investor profile.  He testified that for years she
was a growth investor, but that she shifted to income and growth around July
2008.  For an income and growth investor, the CIBC guidelines indicate equity
holdings of 55%.

[84]        
Ms. Graham submits that by the time of the July 23, 2008 meeting,
she had given numerous indications that she was anxious to ensure that her
assets were safe.

[85]        
For example, the rapid rise in the value of her portfolio had alarmed
her, in April or May of 2008, because it made manifest to her that a sharp
decline would be equally possible.  She had spoken to one or both of Mr. McCorquodale
and Mr. Wells about her concerns.  As I find, Mr. McCorquodale always
told Mr. Wells about conversations of any significance if Mr. Wells
had not overheard them from his nearby office.

[86]        
Also, at the July 23, 2008 meeting itself, Ms. Graham used her
crevasse analogy, mentioned above, as well as other analogies with the intent
of indicating a strong aversion to risk.  She testified that she also queried
whether her portfolio could be essentially reversed, from what she described as
a 75% equity position (Mr. Wells disagrees that her portfolio held that high
a percentage of equities) and 25% in cash, real estate, and bonds, to only 25%
in equities.  Ms. Graham submits that, in light of her background, character,
and circumstances, as Mr. Wells knew them to be, these remarks and others
were recognizable indications that the asset allocation under discussion was
causing her serious concern.

[87]        
I note in passing that Ms. Graham does not suggest that her query about
reversing the ratio of equities to cash, real estate and bonds in her portfolio
amounted to an instruction to Mr. Wells.  She refers to it only as one of
the indicators that, she submits, should have led Mr. Wells to inquire more
deeply into her level of comfort with the proposal.

[88]        
Ms. Graham agrees that at the July 23, 2008 meeting she expressly
agreed to the proposal there discussed.  She agreed that the first tranche
should be implemented, and she raises no issue in relation to Mr. Wells’s
failure to implement the second tranche, which is therefore unnecessary to
discuss.

[89]        
In her evidence, Ms. Graham implied that she agreed to the proposal
because she was nervous about contradicting Mr. Wells.  She testified that
although she was uncomfortable with the proposal because she did not see how it
was sufficient to protect her inheritance, she did not wish to appear to
question Mr. Wells’s judgement or his expertise.  She noted that never
before (except when she asked him to streamline her portfolio) had she given Mr. Wells
a direction that was not a simple approval of his recommendations.

[90]        
I have some difficulty accepting that Ms. Graham felt unable to
speak up to express her concerns.  Ms. Graham impressed me as a person who
musters the personal resources to say and do what she considers right and fair,
despite any challenges in doing so.

[91]        
But in any event, Ms. Graham followed up, after the July 23, 2008
meeting, to confirm the agreed approach several times in writing.

[92]        
She did so in an email to Mr. Wells on July 25, 2008, in which she expressed
satisfaction with the changes (albeit “for the time being”, as I will discuss
later), and explicitly related those changes to the investment objectives and
risk tolerance she had indicated early in her days with the Wells Group.  She
also made no reference to any change or evolution in her investment objectives
or risk tolerance since that time.  Except for a final paragraph relating to a
particular investment manager, the email read as follows:

Hi Bob,

Thanks for the meeting the other day; you were busy,
but I appreciate the time.

I am confident about the adjustments we made, for the
time being.  I came home and reviewed the initial allocation/plan you put
together for me in 2003-2004 – that addresses risk tolerance and strategic
planning.  There it talked about 40% fixed income and 5% cash; and 55% equity;
so we are in the right range according to how I answered the questionnaires
back then. 

[Brief inquiry about a small/mid cap manager].

Have a good weekend;

Cathleen

[93]        
Ms. Graham effectively confirmed the approach of the July 23, 2008 proposal
yet again, when, in an email to Mr. Wells on July 31, 2008, she spoke
about the July 23, 2008 changes as “my most recent choice of going a bit
defensive for now”.  In that email string, Ms. Graham expressed satisfaction
with her some of her real estate holdings, but also stated a preference for
equities as long term investments:  “I am also more in favor of equities over
the long term, though I know property is important too”.

[94]        
I am confident that even had Ms. Graham felt unable to express
concerns to Mr. Wells in the face-to-face meeting on July 23, 2008, she
would have found a way to express them in writing, had they troubled her as she
now remembers.  In her extensive communications with Mr. Wells over the
years, Ms. Graham on numerous occasions freely described her thoughts and
frankly stated her mind.  When she did so, Mr. Wells responded
attentively.

[95]        
Ms. Graham’s emails after the July 23, 2008 meeting do not express
or even hint at concerns that the approach there taken did not sufficiently reflect
evolving investment objectives and a reduced tolerance for risk.  They
positively endorse the approach as consistent with her original investment
objectives, and they make no reference to any recent change.

[96]        
It is not, of course, a client’s responsibility to articulate her
investment objectives or her fear of loss in terms relating to asset allocation. 
As the expert evidence given by Mr. Doney and Mr. Holley made clear,
one of the duties of an investment advisor is to listen for indications of the
client’s preference, priority, or concern, and to translate those indications into
the lexicon of asset allocation.  It is not the client’s responsibility to
determine that an asset allocation is no longer appropriate.

[97]        
However, on all the evidence I cannot conclude that the analogies Ms. Graham
used and some other remarks suggesting aversion to risk should have triggered a
deeper inquiry into whether her investment objectives had changed.  In the
context of Ms. Graham’s full, frequent, and extensive ongoing communications
with the Wells Group about her own portfolio specifically and the markets and
world events generally, any significance of these comments was far outweighed
by the different and clear message she gave in many other communications.  Mr. Doney’s
opinion that Ms. Graham was evidencing “temperamental unsuitability” for
her asset mix, through comments such as her query about reversing her equity
and other allocations, must be considered in light of the more limited range of
facts he was asked to assume.

[98]        
As noted above, Ms. Graham’s July 25, 2008 email referred to her
confidence in the July 23, 2008 changes as being, “for the time being”.  Ms. Graham
contends that she gave her agreement to the approach Mr. Wells recommended
in the expectation of receiving from him information or research supporting or,
in her words, validating the approach.  Ms. Graham testified that she
asked for such information or research at the July 23, 2008 meeting, and Mr. Wells
agreed to provide it but never did.

[99]        
As I find, the outcome of the July 23, 2008 meeting was not in any way dependent
on Mr. Wells producing information or research.  As I will explain, I find
that Ms. Graham’s memory is not accurate on this point.

[100]     Mr. Wells
has little memory of the discussions at the July 23, 2008 meeting.  However, he
was adamant in his evidence that if he makes a promise to a client, he fulfils
the promise.  That evidence is consistent with other evidence, and I accept
it.  Moreover, Mr. Wells was on holiday for much of August 2008, and I
find he would not have left a commitment to produce information or research
outstanding until after his return.

[101]     Nor, I
find, would Ms. Graham have failed to follow up, including in writing, had
Mr. Wells failed to produce material he had promised concerning a matter
as significant as Ms. Graham says it was to her at the time.  Ms. Graham
testified that while Mr. Wells was on holiday, she kept in touch with Mr. McCorquodale
regarding when the promised information would be coming, and chatted with him
both about the status of the research, and about her concerns about a general market
collapse.  Mr. McCorquodale testified that he had discussions over this
period with Ms. Graham, who was increasingly anxious about a potential market
collapse, but he made no reference in his evidence to any inquiries from Ms. Graham
about information or research Mr. Wells had promised to support the July
23, 2008 approach.

[102]     Ms. Graham
testified that she had a telephone conversation with Mr. Wells about the
promised research, in which he said he was working on it and that it would
reach her shortly.  She testified that he told her not to be concerned about a market
crash, but that she remained very concerned nonetheless.  Ms. Graham was
unsure of the date of this conversation, but recalled it as being near the end
of August 2008.

[103]     Mr. Wells
disagreed with the timing of this telephone conversation.  He testified that it
did not take place until he had received an email from Ms. Graham on September
8, 2008.

[104]     Also, by Mr. Wells’s
evidence, the conversation related not to information or research promised to Ms. Graham,
but rather to her inquiry about the Wells Group’s strategy for keeping the
value of a portfolio within the range of the indicated risk tolerance.  Mr. Wells’s
evidence on this point accords with the content of the email that he testified
gave rise to the conversation.  In that email (of September 8, 2008), Ms. Graham
said the following:

Hi Bob –

Just checking in.

In terms of the overall portfolio, the loss or perhaps
downside is more appropriate terminology since a loss is not a loss until it is
materialized; is hovering around 15% and dipped below the 4 million.
Inside some parts of the portfolio, that loss is closer to 20%.  The 15% and
20% is more what I look at in terms of real decision making than the threshold
level, although that level does correlate roughly.  I’ve revisited the original
[questionnaire] for risk tolerance used to set up the asset allocation and
portfolio, where my responses tend to intersect with these kinds of levels. 
Well in fact, the 20% is beyond that level.  The maximum downside tolerance
(which I take as upside also – as I feel thinking that way really gets you to
know your tolerance – ie/ you shouldn’t have a different upside tolerance than
downside tolerance) as noted on that form is 15%.  Although this period we are
in is exceptional in some ways, the asset allocation is not looking like it is
able to sustain keeping the portfolio in line with the proposed maximum
downside that we established in that [questionnaire].

So – my question is that what happens, what is the action steps
in place that you have, for when the asset allocation plan established for a
client (or for me in particular) goes outside of that range, isn’t protecting
assets in line with risk tolerance and goals established in the pre-set plan?

If you can get back to me, thanks.

Cathleen

[105]     The
evidence includes no written reference to Ms. Graham’s expectation of
receiving information or research following the July 23, 2008 meeting in
support of the approach there taken.  Ms. Graham’s email communications
with Mr. McCorquodale and Mr. Wells were frequent, detailed, and
often lengthy, and I am confident that if the information or research was to
follow − and
particularly if it was as important to her comfort with the proposal as she now
suggests − some
written mention would have appeared.

[106]     In all the
circumstances, I am unable to find that Ms. Graham had an expectation of
receiving information or research from Mr. Wells to support the approach
taken at the July 23, 2008 meeting.

[107]     As I have
discussed, Ms. Graham agreed at the July 23, 2008 meeting to the asset
allocation then proposed, and confirmed her agreement afterwards, albeit saying
that she did so “for the time being”, and her continuing interest in holding
equities.  As I will discuss later, she is an intelligent and educated person
who, by July 2008, was reasonably knowledgeable about investing.  In all
the circumstances, I am unable to accept Ms. Graham’s submission that Mr. Wells
failed in his duty to ensure that the July 23, 2008 asset allocation was
suitable for her at the time.

2. DID MR. WELLS
BREACH HIS DUTY BY FAILING to TELL MS. GRAHAM THAT THERE WAS NO BACK-UP
PLAN?

[108]     The next
question is whether questions and comments Ms. Graham made during August
and September 2008 should have prompted Mr. Wells to reassess her comfort
with the July 23, 2008 asset allocation (an issue discussed below as issue 3),
and, in particular, to respond directly to questions she asked about the
vulnerability of her portfolio.  I will address the latter, more specific issue
first.

[109]     As noted
above, by August 8, 2008 and possibly earlier, Ms. Graham had begun to ask
Mr. Wells (and Mr. McCorquodale before him, as I will discuss) about
what she termed the strategy for rebalancing, within the Wells Group, should
the value of her portfolio rise or fall more than 15%, the amount of her
indicated tolerance for risk.

[110]     It is
common ground that Ms. Graham received no direct answer to these questions,
and that no such measures were in place.

[111]     Ms. Graham
submits that in failing to give her a direct answer, Mr. Wells breached
his duty to give her all relevant information about her investments.

[112]     There is
no suggestion that Mr. Wells or anyone else ever told Ms. Graham
that, specifically, there were protective measures in place to keep the
value of her portfolio within the indicated range.  Ms. Graham says simply
that Mr. Wells had been telling her since 2003 that her portfolio was
“protected”, and that since she had clearly indicated in 2003 that her risk
tolerance was no greater than 15% and had reinforced this through her
statements about fear of loss, she understood that the her portfolio would be
protected from value fluctuation outside that range.

[113]     Before
discussing Ms. Graham’s position in this area I should briefly note
that Ms. Graham had a different understanding from that of Mr. Wells
and CIBC concerning how the risk tolerance percentage applied to the
portfolio.  Ms. Graham understood that it applied only to the equity
holdings in her portfolio.  Within the Wells Group, the clear understanding was
that it applied to the portfolio as a whole, including the cash, bond, and real
estate holdings.  There is some logic to Ms. Graham’s understanding,
because, as she explained, it is difficult to see cash losing value in a
portfolio.  However, the difference of understanding does not ultimately bear
on the issues in dispute, but simply adds to the factual context in which she asked
her questions.

[114]    
The email which forms the main basis of Ms. Graham’s claim in this
area was directed to Mr. McCorquodale on August 8, 2008, and read in part:

[I] also
have to ask, but [I] will ask [B]ob, what plans there are in place for when a
port[folio] increases or decreases too much, beyond the sway determined in the
initial risk assessment thing I filled out.  [M]y answers were never more than
15% either way, up or down movement.  [I] have never asked what happens then,
just assume that there is plans in place for that, in accordance with the risk
zones up and down, identified by that first questionnaire.

In the concluding lines of an
email she had written to Mr. McCorquodale earlier that day, Ms. Graham
had asked a similar question:

[B]y the
way, in such volatile markets, if the asset allocation is the key, then what is
the strategy for rebalancing actively used in the [W]ells [G]roup?  [I] was
wondering about that.

[115]     Mr. McCorquodale
did not answer these questions, and instead responded that Ms. Graham
should put them to Mr. Wells.

[116]     Ms. Graham
then put the same or similar questions to Mr. Wells.  The earliest record
of this is in an email Ms. Graham sent Mr. Wells on September 8,
2008.

[117]     Ms. Graham
testified that she raised these questions with Mr. McCorquodale and then Mr. Wells
because she was beginning to realize that her portfolio might not, in fact,
have the protection she had always understood it to have.  She testified that
she began to ask these questions as early as in the July 23, 2008 meeting;
however, she did so in a measured way at that time, because her portfolio was
then only beginning to accumulate losses, and she was merely trying to
understand the situation.  Only later, when the losses increased, was it
evident to her that the situation was, to her mind, seriously awry.

[118]    
When Ms. Graham put her question to Mr. Wells in her September
8, 2008 email, which is quoted in full above, Mr. Wells responded later
the same day.  He explained that the market was a bear market of a length and
magnitude hard to predict, but that the pendulum generally swings to correct
(and usually over-correct) afterwards and to allow for a full recovery.  He outlined
as follows the approach taken to prepare Ms. Graham’s portfolio for a bear
market, and said he would like to meet to give a fuller explanation and to
discuss the matter.  Mr. Wells’s email included the following:

How do we prepare for the bear markets?  One way is to
prepare a strategic asset allocation as well as a tactical asset allocation. 
Based on your age, your risk parameters and your conservative nature, we have
done this.  We also prepare an historical return analysis based on the asset
mix.  I have reworked this for you and would like to sit down with you to
explain this.  It shows risk parameters that have been faced in the last 10
years based on our investment managers[‘] assets.  We have had both a bear
market and a bull market in this time frame.

Let me know what would be a good day to meet to
discuss the above.

p.s. … I
know you are concerned about this bear market.  I am too, albeit, I have been
here before and would like to calm you to the realities of owning equities/real
estate, (appreciating assets), bonds and cash, (volatility reducing assets).

[119]     As I have
mentioned, in this response and his other communications with Ms. Graham, Mr. Wells
did not expressly tell her that the Wells Group had no strategy for rebalancing
or measures in place to protect her portfolio from dropping in value by more
than 15%.

[120]     However,
on my view of the evidence, an explicit response along those lines was not
necessary, because Ms. Graham knew that nothing was in place to prevent
the value of her portfolio declining with a general market crash.  As I find,
the question Ms. Graham asked Mr. McCorquodale and then Mr. Wells
(on August 8, 2008 and later) about the strategy for rebalancing amounted to a
challenge to or complaint about Mr. Wells’s professional judgement and
advice; it was not a genuine question.  I will explain.

[121]     Ms. Graham
clearly understood that equity investments tend to be associated with risk.  Mr. McCorquodale
had frequent discussions with her over the years, and he agreed that she knew
that a portfolio heavily concentrated in equities carries more risk than a
portfolio less so concentrated (although they usually spoke in terms of
volatility, not risk).  Mr. Wells testified that he too discussed
investment risk with Ms. Graham.  Indeed, asset allocation, on which Mr. Wells
advised Ms. Graham, aims in part to find the appropriate balance for the
particular client between maximizing ongoing returns on capital and guarding
the capital itself from risk.

[122]     Ms. Graham
is an educated and intelligent woman who had given considerable time and energy
to learning about investing.  During the spring of 2008, Mr. McCorquodale
spoke to her regularly −
once or twice per week −
about how her portfolio was performing; he also spoke to her frequently about
the TD account she was managing.  He described Ms. Graham’s investment
knowledge as between “fair” and “good” by July 2008.  Ms. Matsunaga gave
evidence that I took as indicating similarly that by mid-2008 or earlier Ms. Graham
had, to Ms. Matsunaga’s observation, an investment knowledge that was at
least reasonable.

[123]     Some of
the content of Ms. Graham’s emails suggests a familiarity with investment
concepts, and some comfort in applying them.  Sample extracts appear below,
from some of Ms. Graham’s frequent emails to Mr. Wells or Mr. McCorquodale
asking them questions about the industry or particular investments or
investment strategies, or passing on information she had come across on her own:

To Mr. McCorquodale, copied to Mr. Wells, on
July 15, 2008

The way it seems to me, it feels better and more at
ease to relate to Bob on matters of the portfolio and managers and asset
allocation since he keeps tabs on that, and with you on matters like how they
are performing benchmark wise and return-wise and w/ regard to their holdings
and gains/losses, since those things [are] related to your areas of experience
and expertise. … [S]ince I am a person with questions and learning and like to
have a lot of information behind my decision making, it feels better to dialogue
with each of you in those kind of zones, although I do appreciate the input
from each in all decisions.

The defensive changes I want to put in place or least
know that I have taken time and effort to look at the idea of making
adjustments, aren’t as much because the market is going down, but because the
market is going down – I know for several reasons – but mainly owing to excess
leveraging, excess risk and greed and fear.  … [E]ven if my asset mix might
change, there is still a significant dollar amount invested in equities, in
absolute terms if not in relative terms.  Plus, considering the Irish equity
fund, where I am exposed in euro/asia/us/uk and ireland, that brings the equity
mix to 60%.  When I finish the book and have a salary job, I think human nature
will be done and I can be exposed to 90% equities.  Then you guys will have to
convince me the other way. 

To Mr. Wells on July 31, 2008 at 9:38 p.m., “Re:
update – from Cathleen – Irish property info”:

Thanks Bob! Glad you saw I didn’t plan to invest – that
would be kind of reckless, I think and totally wouldn’t make my most
recent choice of going a bit defensive for now, make sense.  I always value
your opinion and experience!

I would be interested to know if you had any thoughts
on the [name of a fund] you proposed earlier on, as I went on their website;
and I kind of liked it.

I am going to sit with the decision for a bit, having
already made a bigger one to go forward with the bit of shifting into
cash/fixed income ….  The Irish banks have suffered greatly, of course things
can go down from down, but they are pretty down, like Death Valley altitude.

[O]r we could just split between freddie mac and
fannie mae? [T]hat’s probably the most conservative choice 😉

To Mr. Wells on July 31, 2008 at 5:54 p.m.

Thanks for the thoughts; I did see the initial
investment req – not great for asset allocation. … I am very satisfied with the
Churchill and Sunstone offerings to date! … I am also more in favor of equities
over the long term, though I know property is important too.

I see that many of the holdings in the BOI fund are in
the Lazard fund also … so I haven’t decided yet.  It does look like the euro is
going to depreciate some.  So there could be some currency gain there, if it
were to be reinvested in US dollars, I suppose.  While that may be likely in
the longer term – shorter term the US dollar may be still weak.  Everyone seems
to have a different opinion on that.

Do you suggest keeping in euros or would your passive
approach involve US/CAN investing? 

To Mr. Wells on September 8, 2008

Hi Bob –

Just checking in.

In terms of
the overall portfolio, the loss or perhaps downside is more appropriate
terminology since a loss is not a loss until it is materialized; is hovering
around 15% ….

[124]     I note
also that Ms. Graham did not take up Mr. Wells’s suggestion that they
meet, made on September 8, 2008 in his response to her email of the same day
inquiring about the strategy for rebalancing.  Had she believed at that point
that such a strategy was in place, she would, I find, have been eager to
quickly understand and assess it.  That she did not follow up with Mr. Wells
indicates clearly, in light of all the other evidence, that she understood at
least by then that there was no strategy in place that was more specific than
the broad approach to asset allocation Mr. Wells outlined.

[125]     But did Ms. Graham
understand this at the earlier stage, on August 8, 2008, when she made her
first inquiry about the strategy for rebalancing to Mr. McCorquodale, and
he avoided her question and referred her to Mr. Wells?

[126]     I find
that she did.  Ms. Graham was reasonably knowledgeable about investing, as
I have already noted.  Also, although she noted Mr. McCorquodale’s
non-response on the point in question by telling him that she would redirect
her inquiry to Mr. Wells, she did not put her inquiry to Mr. Wells
for another month, in her September 8, 2008 email.  If, as Ms. Graham
contends, she had only recently come to suspect or understand that her portfolio
was not backed-up as she had believed it to be, she would have acted much more
quickly to put the inquiry to Mr. Wells; had she found herself unable to
reach Mr. Wells during his holiday time, she would have pressed the matter
with Mr. McCorquodale or others.  Indeed, through this time Ms. Graham
remained in frequent contact with Mr. McCorquodale, often expressing
concern about declines in the value of her portfolio, sometimes to the point of
panic.

[127]     Ms. Graham’s
own reflections on this phase of her relationship with the Wells Group also
suggest that she knew before and through the market decline that no back-up
protections would cap the decline in her portfolio at 15%.  These reflections
covered numerous topics, but prominent among them was her regret at not having
trusted her own instincts about the market downturn.

[128]    
For example, Ms. Graham included the following in the first portion
of her “Action Points” email of September 19, 2008, which I will discuss in
more detail later):

Reflection: I think as a
team, we have understood my concerns about the market downturn as discomfort
with the downturn and volatility.  But I think after reflection, it is more
nuanced than that, as I really do believe in the long term ability of the
markets to outperform, even over real estate in the very very long term.  I
think my discomfort in this market downturn, after careful reflection is not so
much about the downturn, or downslide, then, although that is concerning, it’s
more that looking back, I was very much right on my instincts since I began
talking about the ridiculousness of investing in a company like Fannie Mae or
Freddie Mac, even in healthy times, and in the instincts I had that banks would
fail and that the US financial system would be questioned.  I had these
instincts, I could have been wrong, but I turned out to be right. … The thing
is, going forward, I want to have the confidence to act on my instincts – as
here, I would have been able to preserve more capital.  Maybe I’d miss an
upswing like this for some capital, but then it wouldn’t matter, b/c
I wouldn’t have lost to the downside.  Anyhow – I reflect that I had more
dire (maybe too strong a word) feelings of risk exposure than you, who had more
confidence in some of those institutions.  So – then, it hasn’t been the going
down as much as the lack of me acting on my instincts that has been bothering
me and making me feel uneasy.

[129]    
Ms. Graham developed the same theme in an email she wrote to Mr. Wells,
Mr. McCorquodale, and Ms. Matsunaga during the morning of September
26, 2008.  In that email and others, she emphasized that she was coming into
her own as an investor, and needed to have her views heard.  She saw no rush to
make returns on her investments, and proposed that in the future she design her
own asset allocation plans for Mr. Wells to review and discuss with her. 
That email, which was very lengthy, included the following:

Maybe some of it has to do with all the learning of the last
year for me, and me sort of more coming into my own as an investor, or
beginning to.  But I feel that I need some help in having my instincts and my
views heard, so that I act on them more fully and better.

Often, in conversations with you
or with Ross, I appreciate the other point of view; and the voice of experience;
but I think I need more encouragement in my instincts, even when they diverge
from yours.  The investing is my [responsibility] at the end of the day, but I
don’t think there is very much encouragement or acceptance of my point of view,
which makes it harder for me to act on what I think is best.

[130]    
Ms. Graham wrote again to Mr. Wells and Mr. McCorquodale
in the afternoon of September 26, 2008, and observed that had she acted on her
instincts she would have been more peaceful in withstanding losses in her
portfolio:

Anyhow,
just trying to re-iterate that my lack of peacefulness isn’t so much because
things are going down at this current time, [it’s] because I had the instincts
and not the experience yet to trust them fully.  I did okay, maybe 60% backing
my instincts.  I want to be acting 100% on my thoughts that are carefully
considered.  If I’d done that, the holdings would still be going down, but I’d
be more peaceful, [because] I’d acted on my instincts.

[131]     In that
and other emails in the exchanges then and over the next few days, which also
spoke of a telephone conversation Ms. Graham and Mr. Wells had in
that period, Ms. Graham also spoke of feeling unheard by the Wells Group,
and said she may be looking for different investment advisors.  She noted that
capital preservation was important to her because she had 45 years ahead, and
would need time before being able to join the work force, were she to decide to
do so.  She also said that she had come to realize that she should have relied
more on her own opinions, in preference to Mr. Wells’s, since her instincts
had turned out to be sound.

[132]     Cross-examined
about the emails in which she expressed regret at not having followed her
instincts, Ms. Graham responded that when she wrote those emails she was
still taking on blame that was not properly hers to take.  However, this
explanation fails to account for the strong emphasis in these emails on the
value of her own opinions and intuitions about the market, and her faulting of Mr. Wells
for not hearing −
and by implication applying −
what she had had to say.  Ms. Graham nonetheless did not fault Mr. Wells
for misunderstanding her investment objectives or her risk tolerance, or for
allowing her to be misled about the lack of a back-up plan to protect the value
of her portfolio.

[133]     Ms. Graham’s
consistent complaint at this stage was that Mr. Wells had not foreseen the
market crash as clearly as she herself had done, and, by implication, that he
therefore had not taken steps to avoid its worst effects.  Her complaint was
not that her portfolio should not have been composed of assets which would be
exposed to the effects of a crash.  Nor was it that she had been led to
understand that a crash would not affect her portfolio beyond the 15% range.

[134]     More
fundamentally, Ms. Graham’s regret at not having trusted her instincts
indicates that she knew, when those instincts operated, that her portfolio was
exposed to the effects of a market crash.  Her instincts warned her of a
general crash in the equity market, and thus to reduce her position in that
market.  Such a reduction would have been unnecessary if, as Ms. Graham
maintained she understood, protective measures were in place.

[135]     On all the
evidence, I conclude that Ms. Graham understood, and had done so for some
time, that no measure was in place to cap potential gains or losses in her
portfolio at 15% or thereabouts.  She knew that in exceptional circumstances,
such as a market crash, the loss could be greater.

[136]     When Mr. Wells
failed to directly answer Ms. Graham’s question about the strategy for
rebalancing her portfolio, he therefore did not fail in his duty to provide her
relevant information about her investments.  Ms. Graham had that
information already.  She had known for a long time that no protective measures
were in place.

3. BY SEPTEMBER 2008,
SHOULD MR. WELLS HAVE VIEWED MS. GRAHAM AS CONSERVATIVE AND RISK
AVERSE?

[137]     Should Mr. Wells
nonetheless have done more to address Ms. Graham’s increasing anxiety,
sometimes panic, about the decline in the value of her portfolio, with the
general market crash?

[138]     The fact
that many of Mr. Wells’s other clients were distressed by a similar
decline did not relieve him from his duty to ensure that Ms. Graham’s
investments remained suitable, given her particular sensibilities.  Should Mr. Wells
have done more to determine whether Ms. Graham would have felt more
peaceful moving her investments largely or entirely into cash or cash
equivalent investments, even at the cost of foregoing the eventual rebound in
the equities market Mr. Wells expected?

[139]     On all the
evidence, I conclude that Ms. Graham has not established that Mr. Wells
did not do enough to ensure that her investments remained suitable for her,
given her particular needs and sensibilities.

[140]     Although Ms. Graham
was distressed by the decline in the value of her portfolio, she continued to
emphasize expectations of her assets that were inconsistent with the
conservative investment objectives she claims she had at the time.

[141]     For
example, in her “Action Points” email of September 19, 2008, Ms. Graham
described herself in terms that the industry would not apply to a conservative
investor.  After her opening reflections on her experience with the Wells
Group, quoted in part and discussed above, she set out a number of action
points concerning client-advisor communications, the development of asset
allocation plans, and ongoing monitoring and evaluation of the client-advisor
relationship in the future.  In doing so, she dwelt for some time on her
discomfort with volatility in the market, and the importance to her of
preserving the capital that would support her as she wrote her book.  However,
she also stated that she was “not prepared to have all the time,
ultraconservative investing”, and that she therefore wished to set up two
interconnected plans for “when the circumstances change within defined
parameters”.  She stated that she expected her investments to deliver returns,
failing which they should be substituted for others.  As I find, Ms. Graham
knew enough about investing at the time to understand that these were somewhat
competing demands which required an asset allocation in careful balance.

[142]     In his
efforts to address Ms. Graham’s concerns in September and October 2008,
Mr. Wells arranged for her to complete a new risk tolerance questionnaire
designed by his new associate, Steve Nyvick.  The result of that process
indicated that Ms. Graham’s investment objectives remained largely
unchanged from 2003. However, Ms. Graham testified that the process had no
value in identifying her true investment objectives, including her unique
sensitivity to risk of loss, because the questionnaire did not include
questions that allowed for answers revealing her particular sensibilities and
needs.

[143]     The
difficulty with this evidence is that it runs directly contrary to various
emails Ms. Graham wrote after she used the questionnaire.  For example, in
an email she wrote to Mr. Nyvick, copying Mr. Wells and Ms. Matsunaga,
on November 26, 2008, shortly after completing the questionnaire, she
described the questionnaire as “a good tool in that it mixes rule of thumbs
which apply to only theoretical norms with more specifics of a person that do
not always fit the norm, but of course, contribute to the norm”.

[144]    
Ms. Graham testified that she expressed her reservations about the
questionnaire in telephone or face-to-face discussions with each of Mr. Nyvick
and, she thought but was not certain, Mr. Wells.  However, this evidence
does not accord with the content of her emails.  For example, on October 27,
2008, she told Mr. McCorquodale, “I spoke with Steve by phone and he went
over his findings, basically in line with where I saw myself as I filled that
one in, and the previous one” and she expressed no concern that the findings
were not accurate.  That email also included the following:

Overview:
my basic risk tolerance in line with equity exposure, about 56%. Potential for
taking more risk, good, above average. Greater than average on desire to
protect/downside/prudent/less risk. Sounds in line with what I have always been
thinking and expressing – les risk right now than I would normally, if I had
income outside of the investments and will in future, greater risk later or
when I have that income, and more risk-aversion than average in protection
times, like months ago when I started talking about this stuff. So it fits well.

[145]    
Moreover, Ms. Graham made clear, even as late as in October 2008,
that she probably would not have substantially reduced her equity position
before the market crash, even had Mr. Wells recommended that she do so.  Her
email to Mr. McCorquodale on October 2, 2008 included the following:

I feel like
Bob and you were both getting the better sense lately that I was asking to be
more supported in developing decision making around my instincts, rather than
assured about the market going up. …I’m just learning my way through this,
that’s why I didn’t act more forcefully when I started worrying about how
things would unfold. I had these thoughts early enough that it would have stood
me well to be a bit more out of the market. Even Bob said in retrospect 40%
equities would be good.  I can’t say I would have gone straight to that, but I
would have gone right to 45-50%.

[146]     Ms. Graham
explained in cross-examination that she made this comment on the basis of the
assurance Mr. Wells had given her, in the July 23, 2008 meeting, that a
55% equity position was conservative and safe.  But I am unable to accept this
explanation.  While the explanation might accord with the situation in August
2008, before the market crash, which was when, it appeared, Ms. Graham
mistakenly understood that the email in question was written, it does not
accord with the situation in early October 2008 when the email was actually
written.  By that time, Ms. Graham’s portfolio had begun to sustain
significant losses.

[147]    
This conclusion has support also in the fact that some of the asset allocation
proposals presented to Ms. Graham by potential new investment advisors
included significant equity holdings.  Although, as Ms. Graham testified,
some of these proposals may have come from advisors who did not reach her
short-list, it seems unlikely that Ms. Graham described herself to those
potential advisors as equities-averse.  Indeed, even as late as August 2009, Ms. Graham
described as follows her approach, in an email to her new advisor’s associate
during her ongoing search:

I rather
favour the reverse of what the textbook asset allocation says – and have 70% in
the more rock solid allocation and 30% or less in the other more risk oriented
position.

[148]     Challenged,
in cross-examination, with the proposition that she knew full well in August
2009 the implication of equity investments, Ms. Graham responded that her
email described how asset allocation related to her sense of personal peace,
and that it took her a while longer, after August 2009, to realize that the
peace she was seeking was not to be found at 30% equity-investment or even
lower; it was to be found at zero.

[149]     Cross-examined
about her current approach to investing, in which she holds mainly precious
metals investments, Ms. Graham explained that she has had to “reorient”
since her experience with the Wells Group and her losses with the crash in the
equities market.  That Ms. Graham sees her movement away from stocks and
bonds as a reorientation indicates, in my view, a significant change in her
attitude toward investing since her departure from the Wells Group.

[150]     The
evidence included references to “going to cash” or “going all to cash” as
emblematic of what Mr. Wells generally did not recommend to his
clients.  Implicit in Ms. Graham’s position is that Mr. Wells should
have given her the opportunity to consider moving some or all of her portfolio
to “cash” (or cash-equivalent vehicles, such as GICs or the money market) in
order to avoid losses that would emotionally devastate her.  Ms. Graham
contends in essence that Mr. Wells ought to have recognized that she could
not in reality withstand any meaningful loss in her portfolio at all, even a
loss that could likely be reversed with the recovery of the market.  She
submits that Mr. Wells should have made her aware that it was open to her to
essentially go all to cash.

[151]     It is
clear that Mr. Wells did not recognize an extreme fragility in Ms. Graham’s
emotional state at the time in relation to declines in the value of her
portfolio.  In his evidence, he acknowledged that he has sometimes recommended
that a client go all to cash if the client seems panicky about fluctuations in
the market.  However, he did not consider Ms. Graham unable to handle the
fluctuations, especially because, as a young person, she had a long time ahead
for her portfolio to recover and grow.

[152]     Ms. Graham
contends that Mr. Wells should have inquired deeper into her discomfort
with risk and made clear to her that very different asset allocations from
those he proposed were available to her.  She testified that, for example, it
was only after receiving a proposed asset allocation from the advisor she
ultimately selected (albeit, not a proposal she chose to implement) that she
realized that it was possible to be invested heavily in bonds; she then wrote
to Mr. McCorquodale expressing disappointment that Mr. Wells had
never suggested such an allocation.  She testified similarly that in about
February 2009, she paid unusually close attention to a monthly World Markets
Report she received from CIBC, and noticed that for investors whose priority is
capital preservation, the recommended asset mix included 65% bonds and 20%
cash.  Ms. Graham testified that had information such as this been brought
to her attention in July 2008, she would have had support for her own feeling
that Mr. Wells’s proposal at that time was insufficient to address her
concerns about risk of loss.

[153]     Ms. Graham
was extraordinarily careful, in her evidence, to give accurate and fair
evidence based on recollections of which she was confident.  In this sense, she
was a witness of the utmost honesty, determined to be true to the facts as she
truly recalls them.

[154]     However, I
find that Ms. Graham has convinced herself of a naiveté and a vulnerability
concerning her investments that do not accord with her actual state of
knowledge and her role in the client-advisor relationship during the period in
issue.

[155]     This was
apparent when, for example, Ms. Graham was cross-examined about a lengthy
email she forwarded to Mr. McCorquodale in April 2009 setting out in five or
six pages her analysis of an investment product.  Asked about the
sophistication of her analysis, Ms. Graham became emotional.  Ms. Graham
then explained the various sources of her analysis, and downplayed her own
input.  She also explained that she reacted with emotion because she
engaged in this analysis to help her “second parents”, in a significant
development in her relationship with them.  However, to my observation, Ms. Graham’s
emotional reaction −
which was unusual in her evidence −
had a different origin.  To my observation, Ms. Graham anticipated the
line of cross-examination, and was troubled by its clear implication that
she was far more knowledgeable about investing than she acknowledges.

[156]     As I have
already explained, I conclude that Ms. Graham’s knowledge of investing was
much broader and deeper by July 2008 than she now remembers.  But more
fundamentally, I cannot agree with Ms. Graham that Mr. Wells’s
duties, whether as her advisor or as the fiduciary she submits he was − and I do not decide
that point −
extended as far as she contends.

[157]     Ms. Graham
did indeed reorient her approach to investing after her departure from the
Wells Group following the market crash.  However, on the evidence as a whole I
am unable to find that Mr. Wells could reasonably have identified and
addressed in advance of that crash the particular sensibilities that led her to
do so later.

4. WERE SOME OF THE MANAGED
FUNDS UNSUITABLY HIGH RISK?

[158]     As I have
mentioned, Mr. Wells testified that by July 2008 Ms. Graham fell into
the “income and growth” investor profile.  He testified that while she wished
to reduce her concentration in equities, she still required fairly substantial
returns to sustain her ongoing withdrawals from her portfolio and to maintain
the portfolio’s value over the long term in the face of inflation and taxes.

[159]     Ms. Graham
disagrees, and submits that a much higher concentration in more secure
investments, such as cash or bonds, would have generated the necessary returns
and maintained the portfolio’s inflation-adjusted value.  However, little, if
any, evidence supports this position, and the position was not put to Mr. Wells
in sufficient detail to allow for meaningful comment.  I do not find counsel’s
own calculations, presented in closing submissions, of the annual returns that
might have been expected from a different, more conservative asset allocation
to provide a sufficient basis for discounting Mr. Wells’s evidence on
this point.

[160]     Ms. Graham
submits also that her portfolio was at higher risk than was suitable even for
an income and growth investor because, properly analyzed, it included a higher
proportion of equities than the July 23, 2008 proposal represented.

[161]     However,
this position also has insufficient evidence in support.  Mr. Doney’s
analysis, which attributed a 65% proportion to Ms. Graham’s equity
investments, was not explained in any detail in the evidence.  More
significantly, neither Mr. Wells nor Mr. McCorquodale was asked about
the percentage calculated by Mr. Doney, or about the basis for the
difference between that percentage and the percentage attributed to equities
under the July 23, 2008 proposal.

[162]     I find no
basis in the evidence for concluding that Ms. Graham’s asset allocation after
July 23, 2008 was unsuitable for her.

[163]     This
conclusion, together with the conclusions reaches in relation to issues 1, 2,
and 3, leave no basis for a finding that Mr. Wells breached a duty he owed
Ms. Graham, whether as her investment advisor or, as she submits, as a
fiduciary.

5. DID BREACHES BY MR. WELLS
CAUSE MS. GRAHAM’S LOSS?

[164]     This issue
is therefore unnecessary to determine.  However, Ms. Graham’s case and the
scope of the evidence she gave concerning her dealings with the Wells Group
were broad and somewhat mutable, and it is possible that the above discussion
leaves potential bases for liability unaddressed.

[165]     I turn
therefore to consider whether any breach of a duty Mr. Wells owed Ms. Graham
is shown to have caused her loss, as she claims.

[166]     Ms. Graham
agreed that before and throughout the crash in the equities market, Mr. Wells
generally advised staying the course, and to allow her portfolio to recover
with the market.  However, she was reluctant to acknowledge that Mr. Wells
gave this advice to her personally, as distinct from to his client group as a
whole (via group or mass email or letter).

[167]     For a
while Ms. Graham allowed her portfolio to recover from the losses it had
sustained.  However, then came the J.C. events, described above, during which Ms. Graham
instructed Ms. Matsunaga to liquidate most of her investments.

[168]     As I have
mentioned, Ms. Graham testified that she did so because she felt her
assets were not safe with the Wells Group.  She viewed the plan to solicit Mr. C.’s
clients as criminal activity, and felt that her long-standing trust in Mr. Wells
was betrayed by what she saw as his loss of moral compass.  She was concerned
that the consequences of what she viewed as Mr. Wells’s wrongful conduct
would redound to the financial disadvantage of CIBC, and could jeopardize her
own assets in CIBC’s custody.  She was concerned also that CIBC local
management appeared, to her understanding, to be turning a blind eye to the
true nature of Mr. Wells’s conduct.

[169]     Ms. Graham’s
evidence given in her examination-in-chief varied in the emphasis she gave to
the J.C. events as the reason she sold most of her portfolio.

[170]     At times,
she described those events and her consequent fear for her assets as at the
heart of her decision to sell, but explained that she downplayed the events
somewhat in her discussions with Mr. Wells because of the potential
implications for Mr. McCorquodale and Ms. Matsunaga.

[171]     At other
times, she described the J.C. events as but the final straw in a chain of developments
that convinced her that Mr. Wells had been focussing on her funds and
their ability to withstand the market, and not on her own unique needs as an
investor, including whether she personally could withstand financial loss.

[172]     At yet
further times, she described the J.C. events as one of several final straws,
albeit the weightiest.  For example, Ms. Graham was extremely distressed
by a thoughtless comment Mr. Wells made that Ms. Graham associated
with her father.  She also felt that Mr. Wells’s focus was misplaced on
the recovery of her portfolio, instead of on her own personal recovery.

[173]     Ms. Graham
agreed that but for the J.C. events she would have held her investments until
she had found a new advisor, and would then have transferred her assets in kind
to that advisor.  Mr. McCorquodale had suggested this approach, as had
some of the potential new advisors she consulted.  With such an approach, her
losses would not have crystallized, and, the expert evidence indicates, her
portfolio would have recovered with the market.

[174]     On all the
evidence, I consider it clear that Ms. Graham would not have liquidated
her portfolio as she did without the J.C. events.  She explained that at the
time of those events she had not yet made a firm decision about who her new
advisor would be, and she was anxious to get her cash out of what she saw as
the danger it was in, and into a local bank.

[175]     In my
view, Ms. Graham’s stated view of the situation was not a reasonable one,
and her consequent liquidation of her portfolio was not a reasonable course
of action.

[176]     Ms. Graham
reached her own view about the legal status and implications of Mr. Wells’s
conduct in relation to Mr. C. without checking the facts relayed to
her by Ms. Matsunaga and Mr. McCorquodale and without seeking legal
or other experienced advice.  Some of the key facts were erroneously reported. 
Ms. Graham’s conclusions about the legal effects of Mr. Wells’s
conduct were for the most part simply wrong.  Ms. Graham could
in any event have moved her portfolio from the Wells Group to another
investment advisor without liquidating it.

[177]     Had Ms. Graham
not liquidated her portfolio when she did, she would not have suffered the
losses she now claims from Mr. Wells.

[178]     For these
reasons, I conclude that even if Mr. Wells breached a duty or duties he
owed Ms. Graham, the breach or breaches did not cause Ms. Graham’s
loss.

6. WHAT DAMAGES SHOULD MS. GRAHAM
RECEIVE?

[179]     Since I
find that Mr. Wells and CIBC are not liable to Ms. Graham for her
losses, this question is unnecessary to address.

CONCLUSION

[180]     Ms. Graham’s
claim is dismissed.

“The Honourable Madam Justice H. Holmes”