Sookochoff LawsuitTSX-V member Northern, Smith deny widow's allegations
2008-05-23 15:49 ET - Street Wire
by Mike Caswell
David Smith, the Northern Securities Inc. broker being sued by his mother-in-law, denies allegations that he mismanaged her account. He says his mother-in-law is a decisive, detail-oriented person who exercised her own judgment.
The complaint
The suit was filed in B.C. Supreme Court on April 8, 2008. It identified the mother-in-law as 77-year-old widow Lois Sookochoff. She claimed that she inherited her husband's portfolio when he died on June 1, 2004, and that she only had minimal knowledge of investments.
According to the lawsuit, Ms. Sookochoff relied on the advice of Mr. Smith to manage the account. She said that he cultivated and obtained her trust. He owed her a duty to provide suitable advice and to manage her account consistent with her objectives, the suit claimed.
Ms. Sookochoff said he broke that duty by failing to explain the risks she faced and by failing to manage her account in a manner that would provide a reasonable rate of return.
In addition to Mr. Smith, the lawsuit named his employer, Northern Securities Inc., as a defendant. Ms. Sookochoff alleged that Northern failed to properly supervise him.
Ms. Sookochoff claimed that she suffered a loss of her investment, principal and interest, and the opportunity to invest.
She is represented by David Goult of Bull, Housser & Tupper LLP.
Smith's defence
In his statement of defence, filed on May 2, 2008, Mr. Smith says that his mother-in-law is a knowledgable investor who made her own decisions. He says that she and her late husband had amassed a considerable part of their wealth through high-risk and speculative investing. He was their investment adviser for 25 years.
Ms. Sookochoff was familiar with her husband's investments and was involved in the decision-making before her husband died, the defence claims. She also maintained a personal account, for which she made the decisions.
After her husband died, Mr. Smith discussed Ms. Sookochoff's investment objectives with her, he claims. He recommended that she put much of her assets into lower risk securities, but Ms. Sookochoff said her principal investment objective was high income or growth. She understood and accepted the risks, Mr. Smith says.
According to the statement of defence, Ms. Sookochoff authorized all transactions on her account. She relied on her own judgment, knowledge and experience, and received independent advice from others.
To the extent that he offered advice, Mr. Smith says it was reasonable and appropriate, given Ms. Sookochoff's investment objectives. If Ms. Sookochoff relied on his advice, which is denied, she accepted the risks.
Mr. Smith asks that the claim against him be dismissed with costs. He is represented by John Forstrom of Forstrom Jackson.
Northern's defence
Northern Securities has also filed its defence to the suit. It denies any wrongdoing as well, and says that Ms. Sookochoff is a knowledgeable, experienced investor, "who was at all times the boss of her own affairs." She became a client of Northern in August, 2005, when Mr. Smith moved there from Canaccord Capital Corp.
She instructed Mr. Smith that her investments were to yield an annual rate of return of at least 10 per cent and generate additional income of at least $100,000 per year.
She declined to follow repeated recommendations that she consider lower risk investments, the defence states. She also executed a high-risk client release form in which she acknowledged that some of the trades might be unsuitable for her, and released Northern and Mr. Smith from any liability that might result.
While Ms. Sookochoff was a Northern client, she "remained the decision-maker in respect of her accounts, exercising independent judgment on the investment objectives," the defence reads. As the value of her portfolio declined, Mr. Smith again suggested that she move to more conservative investments.
Northern says if it did breach any duty it owed to her, the breach did not cause or materially contribute to her loss. If she has suffered any loss, she caused or contributed to it herself.
Northern asks that the claim against it be dismissed with costs. The brokerage is represented by Aidan Cameron of McCarthy Tetrault LLP.