Executive Summary: Key Legal and Evidentiary Issues

• Application by mortgage broker defendants for summary judgment and to strike the claim failed because triable issues remained on all pleaded causes of action.

• Evidence of a multi-year mortgage broker–client relationship and prior investments raised a factual issue about whether an implied undertaking and duty of care extended to the Martel Investment.

• Alleged assurances about the safety, security, and loan-to-value of the Martel Investment, and statements about Mr. Rosso, were capable of amounting to negligent misrepresentation based on existing facts.

• The plaintiff’s admission that it relied on Mr. Rosso for due diligence did not eliminate the possibility of concurrent reliance on Mr. Fetterly for advice relevant to causation.

• Particulars of the relationship, the plaintiff’s lack of sophistication, and alleged expectations about loyalty and disclosure supported a triable breach of fiduciary duty claim.

• The notice of civil claim, read with particulars, disclosed reasonable causes of action but was ordered amended within 30 days; costs of the application were ordered in the cause.

Background and parties

The plaintiff, 10010524 Manitoba Inc., is a holding company owned and operated by Darren Garnham, who installs sprinklers and lighting systems. The defendant Alan Fetterly is a certified financial planner and mortgage broker based in British Columbia, operating through Fetterly Financial and engaged as an independent contractor by Verico Compass Mortgage Group Corporation. Other defendants named in the action are Wesley Rosso, Rosso Enterprises Inc., 1172068 B.C. Ltd., Assured Credit Corporation, and Homeline Financial Services Ltd. o/a Dominion Lending Centres Homeline Mortgages. From 2018 through 2023, Mr. Garnham, through the plaintiff, made seven private mortgage investments with Mr. Fetterly, including a syndicated mortgage for an industrial subdivision project in Rosser, Manitoba known as the Saucier Project, in which the plaintiff invested $200,000 in 2019 and which remained extant in 2023.

Facts and alleged Martel Investment losses

In February or March 2023, Mr. Fetterly recommended that Mr. Garnham contact Mr. Rosso about an investment involving construction of a long-term care facility in Victoria, British Columbia, referred to as the Martel Investment. The plaintiff alleges that, after speaking with both Mr. Rosso and Mr. Fetterly about this investment and relying on the information they provided, it invested $450,000. Of that amount, $250,000 were funds the plaintiff had available and $200,000 came from a line of credit that the plaintiff pleads it obtained on the advice and encouragement of both men. The plaintiff further pleads that its $450,000 was transferred by Mr. Rosso to his business partner, Greg Martel, through My Mortgage Auction Corp., that Mr. Rosso later advised the investment was in jeopardy, that the funds were not invested in a Victoria long-term care facility but instead transferred to My Mortgage Auction Corp., and that Mr. Martel has been publicly accused of running a Ponzi scheme, of owing millions of dollars to investors, and that a receiver has allegedly been appointed over that company.

Claims against the Fetterly defendants

The plaintiff’s claim against the Fetterly defendants is based on allegations that Mr. Fetterly referred Mr. Garnham to Mr. Rosso and vouched for him, recommended that the plaintiff pursue the Martel Investment as safe and secure with a favourable loan-to-value rate, and encouraged the plaintiff to take out a $200,000 line of credit to maximize the investment. The plaintiff advances causes of action in professional negligence and negligent misrepresentation, and, as accepted for the purpose of the application, a breach of fiduciary duty claim when the notice of civil claim is read together with its particulars. The Fetterly defendants deny the alleged conduct apart from acknowledging that Mr. Fetterly referred Mr. Garnham to Mr. Rosso, and maintain that he did not know the referral related to the Martel Investment, knew nothing about that investment, and did not provide advice or recommendations about it.

Summary judgment and motion to strike applications

The Fetterly defendants applied for summary judgment under Rule 9-6 of the Supreme Court Civil Rules to dismiss the plaintiff’s claim against them, or alternatively to strike the notice of civil claim as against them under Rule 9-5(1)(a) on the basis that it disclosed no reasonable cause of action. They relied heavily on admissions obtained through a notice to admit, including admissions that Mr. Fetterly never explicitly undertook to provide services regarding the Martel Investment and that the plaintiff relied on Mr. Rosso to conduct due diligence. They also argued that the alleged misrepresentations were non-actionable opinions about future events and that the pleadings did not contain the material facts required to establish proximity, an undertaking, or a fiduciary relationship.

Court’s analysis and findings

The court emphasized the high threshold for summary judgment and the prohibition on weighing conflicting evidence or making credibility findings on such an application. It held that mortgage brokers can owe duties of care to clients and that an undertaking for proximity purposes need not be explicit; it may arise implicitly from the parties’ relationship and conduct. Given the pleaded history of seven mortgage investments between 2018 and 2023 and the plaintiff’s evidence about ongoing dealings, the court found a triable issue as to whether advice about the Martel Investment fell within the scope of services Mr. Fetterly undertook to provide. The court concluded that the plaintiff’s admission that it relied on Mr. Rosso for due diligence did not make its negligence claims bound to fail, as the plaintiff alleged it relied on both men. On negligent misrepresentation, the court accepted that statements describing Mr. Rosso as an “award winning mortgage broker,” characterizing the Martel Investment as “secure,” and commenting on its loan-to-value ratio could be construed as representations of past or existing facts. On breach of fiduciary duty, the court found that the notice of civil claim and particulars pleaded sufficient facts about the plaintiff’s lack of sophistication, the nature of the advisory relationship, expectations that the Fetterly defendants would protect the plaintiff’s interests, and potential undisclosed benefits, to support a triable fiduciary claim. It also held that, construed generously and together with the particulars, the pleadings disclosed reasonable causes of action in professional negligence, negligent misrepresentation, and breach of fiduciary duty, but required amendment to comply with the Rules.

Outcome of the application

The court dismissed the Fetterly defendants’ application for summary judgment, finding they had not shown it was manifestly clear there was no genuine issue for trial on the plaintiff’s claims. The court also dismissed their application to strike the notice of civil claim under Rule 9-5(1)(a), but ordered the plaintiff to file an amended notice of civil claim within 30 days to provide a concise summary of material facts and clearly articulated legal bases for each cause of action. The court regarded the result as divided success and directed that costs of the application be in the cause.