Net Trading Services Firm Found Liable for a Customer’s Loss
NETTRADINGSERVICESFIRMFOUNDLIABLEFORACUSTOMER’SLOSS
MarcelNaud*
LEGERROBICRICHARD,Lawyers,
ROBIC,Patent&TrademarkAgents
CentreCDPCapital
1001Square-Victoria-BlocE–8
thFloor
Montreal,Quebec,CanadaH2Z2B7
Tel.:(514)9876242-Fax:(514)8457874
info@robic.com–www.robic.ca
CASEREPORT
CANADA
WeiZhuv.MerrillLynchHSBC,2002BCPC0535
Facts
TheClaimantisasoftwareengineerwhoisknowledgeableinthefieldof
investment,withaportfolioof$250,000.00CAD.TheClaimantallegedthathe
usedtheDefendant’sNetTrader,anInternettradingplatformallowingon-line
tradingofstock,tosell4000XYBRsharesat2:47p.m.onMay23,2001andthat
hecancelledthattradeorderimmediatelythereafter.TheClaimantalleged
thathereceivedconfirmationthatbythetimehecancelledhistradeorder,
200ofthe4000shareshadalreadybeensold,andthatthesaleofthe
remaining3800shareshadbeencancelled.TheClaimantallegedthathe
waitedfiveminutesandthenplacedasecondtradeordertosellthe
remaining3800shares.
However,inreality,thecancellationorderhadnotbeencompleted,which
resultedinaduplicatesellorderofthesameshares.TheDefendantrequested
thattheClaimantbuyback3800sharestomakeuphis”short”position.By
then,thepriceforthoseshareswere$5.26USD,upfromtheinitial$3.70USD
price.TheClaimantisseekingcompensationfromtheDefendantforhislossof
$9,768.12CADresultingfromtheduplicatesellorderandrelatedbuy-back.
TheevidenceshowedthatwhentheClaimantmadehiscancellationorder,a
messagecontainingthefollowingstatementsappearedonhiscomputer
LEGERROBICRICHARD,2003.*Lawyer,MarcelNaudisamemberofthelawfirmLEGERROBICRICHARD,g.p.andofthe
patentandtrademarkagencyfirmROBIC,g.p.Thedecisionisavailableat:
http://www.provincialcourt.bc.ca/judgments/pc/2002/05/p02_0535.htm.Publication274.08.
screen:”Belowisaconfirmationthatyourtradecancellationrequesthas
beensent.Pleasenotethatallcancelandchangerequestsaresubjectto
priorfill.Yourtradewascancelledat[timeofcancellation]”.
Inessence,theClaimant’spositionisthatthismessagewasaconfirmationof
hiscancellation,whiletheDefendantclaimsthatthemessage”allcanceland
changerequestsaresubjecttopriorfill”indicatesthatthecancellationisnot
confirmed.
Aspartofhisdefence,theDefendantenteredintoevidencea”Disclaimer”,
contendingthatallhisclientswereboundbysame.However,nothinginthe
evidencesuggestedthattheClaimantwaseverprovidedwithacopyof
suchadisclaimer.
TheDefendantalsoenteredintoevidencethe”TermsandConditions”ofuse
ofNetTrader,a36-pagedocumentsetoutinfineprint.TheDefendant
allegedthatitwasthecontractbetweentheparties,whiletheClaimant
arguedthatheneversawthedocumentbeforetheDefendantprovidedhim
withacopy,aftertheloss.TheCourtnotedthatnocopyofthedocument
executedbytheClaimanthadbeenproducedattrial.
TranscriptsofexcerptsoftwotelephoneconversationsbetweentheClaimant
andDefendant’srepresentativesfollowingthelosswerealsoenteredinto
evidence.
Issues
Doesthe”LegalDisclaimer”and”Disclaimer”sectionsinthe“Termsand
Conditions”documentinDefendant’swebsitehaveanylegaleffect?
IstheDefendantliablefortheClaimant’slossresultingfromtheduplicatesell
order?
HastheClaimantmitigatedhisloss?
Findings
Ontheissueoftheenforceabilityofdisclaimers,theCourtfoundthatthe
“LegalDisclaimer”andthe”Disclaimer”inthe“TermsandConditions”
documentontheDefendant’swebsitehadnosignificanceonthebasisthat
theywereseekingtovirtuallyeliminatetheDefendant’sliabilityforinaccuracy
intheperformanceoftheservicescontractedforbythecustomer,andcould
beconstruedasexoneratingtheDefendantfromactsofgrossnegligence.
TheCourtconsideredapriorcase,Robetv.VersusBrokerageServicesInc.
(2001)O.J.No.1341,asrelevantonthatparticularissue.
Inaddition,theCourtopinedthatthenatureoftheDefendant’sbrokering
servicesrequiredagreaterdutyofcarethanusuallyexpectedinproviding
suchservicesbecauseofacustomer’smonetaryrisks.
OntheissueoftheDefendant’sliabilityfortheClaimant’sloss,theCourtfound
thattheDefendantwasliable.TheDefendant’scontentionthatthemessage
ontheClaimant’sscreensuggestedawarningthatthecancellationmaynot
havebeencompleted,wasdeemedunacceptablebytheCourtwhich
stated”theDefendant’ssystemcouldeasilyhaveissuedapromptsaying
cancellationpendingorpleasewaituntiladvisedthatcancellationis
completedbeforeplacinganotherorder.”IntheCourt’sview,tohold
otherwisewouldamounttoallowingtheDefendanttoascribemeaningstoa
computerpromptwhicharecontrarytoitsplainmeaning.
Hence,theCourtfoundthattheClaimantcouldassumethathisorderwasin
factcancelledfollowingthepromptonhiscomputerscreen.Giventhatthe
attractivenessoftheservicesliedinthefactthattheywereprovidedon-line,it
wasunreasonabletoexpectofaclienttomakeaphonecallinquiringasto
whetherornotcancellationsofhisorderswerecompleted:”[t]henatureof
theservicesofferedimpliesthatthepromptsonthecomputerscreensshould
suffice.”
Ontheissueofmitigationofloss,theCourtfoundthattheClaimantwas
entitledtoholdofffrombuyingbackthestockuntilthepriceatleast
approachedthepriceatwhichhesoldit,sincethelosswasduetothe
faultinessoftheDefendant’ssystemandthenatureofstocktrading.
Accordingly,theCourtorderedthattheClaimantwasentitledtoreceive
compensationfortheagreedupondamages.
Comments
Inthiscase,theDefendantwasnotabletoestablishthattheClaimanthad
receivedacopyofandagreedtobeboundbytheDefendants’disclaimers.
Inaddition,thedisclaimerscouldbeconstruedasexoneratingtheDefendant
fromactsofgrossnegligence.Finally,theDefendant’sscreenpromptswere
viewedasnotaccuratelyreflectingthetruestatusoftheorder,which,inturn,
leadtoitsliabilityfortheloss.
Therefore,suppliersofwaresandservicesofferedon-line,especiallywithreal-
timeornearreal-timetransactionalsystems,shouldcarefullyreviewthe
languageofthescreenpromptsanddisclaimersusedinassociationwiththeir
on-lineactivitiestoensurethattheydonotcontainanylanguagethatcould
makethemunenforceable.
Generallyspeaking,supplierswhowantthespecifictermsandconditionsof
theiragreementswithclientstobeenforceableshouldhavethemeansto
establishthattheirclientsdidreceiveacopyoftheagreementorhaveread
itandagreedtobeboundbyitscontent.Ideally,theagreements’format,
lengthandsizeoftheprintprovidedinelectronicformshouldbesuchthat
onemayreasonablyexpectthatclientshavereadthecontent.Otherwise,
theCourtmaybereluctanttofindthatthetermsandconditionsspecifiedin
theagreementwerebindinguponthecustomersintheeventofadispute.
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