Executive Summary: Key Legal and Evidentiary Issues

• The court decided Scotia Capital's dismissal application under the summary trial rule, finding the matter suitable for summary determination despite the self-represented plaintiff's request for further discovery.
   
• A bare assertion that further discovery might uncover useful evidence was held insufficient to defeat a summary trial application.
   
• Credibility disputes over how the account was opened and whether the plaintiff understood margin trading were found tangential to the central question of whether the account agreement governed her claims.
   
• Clause 16(g) of the account agreement, which required the client to promptly notify Scotia iTRADE of inaccurate confirmations or unauthorized use of her passwords, barred her claim that her losses resulted from unauthorized trades.
   
• Because Scotia iTRADE was a self-directed discount brokerage, the plaintiff's contractual acknowledgment that it gave no tailored advice or suitability assessment defeated her negligence and fiduciary duty claims.
   
• Having dismissed all claims on their merits, the court declined to decide the limitations defence and refused the application to add The Bank of Nova Scotia as a defendant.
   

Facts of the case

Pearl Cheng opened an account in March 2022 on Scotia iTRADE, a self-directed online trading platform owned by Scotia Capital Inc. Between April and September 2022, more than 500 trades were made on the account, including purchases and sales on margin. She later alleged that some of those trades were unauthorized and caused her losses.

On March 11, 2024, Ms. Cheng filed a Notice of Claim in Small Claims Court. The claim was transferred to the Supreme Court of British Columbia on November 26, 2024, because the amount claimed exceeded the Small Claims Court's monetary jurisdiction, and she filed no new pleadings after the transfer. In this "Original Claim," she alleged that between April 7 and September 1, 2022, she deposited, transferred or withdrew a net US$47,988 into her U.S. dollar margin account, and that around September 1, 2022, the balance fell from US$47,988 to zero. Her prayer for relief sought judgment of US$47,998.10 [sic — the decision elsewhere describes the Original Claim as being for US$47,988]. Breach of contract was her only pleaded legal basis.

On April 27, 2026, Ms. Cheng filed an Amended Notice of Civil Claim (ANOCC). It sought judgment for $49,801 CAD and 300 NVIDIA shares, both alleged to be missing from the account, and she asserted the shares were worth US$50,925 as of May 26, 2022. Beyond breach of contract, the ANOCC pleaded negligence, breach of fiduciary duty, fraud, misrepresentation and conversion, and it made no mention of the US$47,988 claim. Three days later, she applied to add The Bank of Nova Scotia as a defendant. Given the ambiguity about whether she meant to abandon the Original Claim, and to give her the benefit of the doubt as a self-represented litigant, Justice Loo treated the contractual claim in the Original Claim as still extant and addressed both pleadings on their merits.

The account statements showed a zero balance on April 1, 2022. More than 130 trades followed in April, leaving the account at month end with a cash balance of US$45,663, a stock position of -US$32,692, and total holdings of US$12,971. By the end of May, the account held a Canadian cash balance of $49,801 and a U.S. dollar portfolio of US$44,475; by the end of July, those figures were $41,443 and US$5,530. Several August trades in the U.S. dollar portfolio produced significant losses, which were covered by transfers from the Canadian dollar balance. The account's value was close to zero by the end of August and below zero by the end of September.

The new client application and "Know Your Client" forms recorded that Ms. Cheng had a medium level of investment knowledge and a net worth of more than $4.3 million. She denied filling out those forms personally, suggested a Scotia Capital representative completed them incorrectly, denied understanding what a margin account is, and said she had told the investment advisor she did not want to borrow money.

Policy and legislative provisions at issue

The account opening form, the "Know Your Client" form and the customer agreement together made up the "Account Agreement." Clause 7 provided that if the client failed to pay any indebtedness in the account when due, Scotia Capital could, without notice or demand, apply funds held to the client's credit in any other Scotia iTRADE account, or sell the client's securities, to eliminate or reduce that indebtedness. Under Clause 13, the client was required to immediately notify Scotia iTRADE of any omission or inaccuracy in a confirmation or statement and was liable for damages arising from a failure to do so. Where an inaccuracy operated in Scotia iTRADE's favour, statements were deemed approved unless written notice was received within 30 days.

Clause 16(g) required immediate notice if the client received an inaccurate confirmation of an order the client did not place, or became aware of any unauthorized use of the client's passwords. If the client failed to promptly notify, the clause provided that neither Scotia Capital nor its affiliates would have any responsibility or liability for claims arising from those conditions. Ms. Cheng also acknowledged in the Account Agreement that Scotia iTRADE did not provide personal, client-specific or tailored investment advice, did not assess the suitability of her investment decisions, and accepted no responsibility to advise her on those matters.

Reasoning and analysis

Justice Loo first considered whether the case was suitable for summary trial, applying the factors from Inspiration Mgmt. Ltd. v McDermid St. Lawrence Ltd., as cited in C.K.M. v H.R.M., 2021 BCSC 1297. The amount at stake was modest and the issues were not particularly complex; Ms. Cheng had initially appeared prepared to limit her claim to $35,000 so it could proceed in Small Claims Court. A full trial or further discovery would cost a disproportionate amount relative to the sums involved, and the delay would prejudice both parties. More than five months had passed since the defendant's application was filed and more than two years since the claim was started, yet no application or demand for further documents had been made. Relying on Tassone v Cardinal, 2014 BCCA 149, the court held that the possibility of further discovery turning up something useful could not defeat the application. Credibility issues about the account opening forms were described as tangential, since the primary question was whether the Account Agreement determined her claims.

Ms. Cheng argued that her signature did not show she understood the Account Agreement. Justice Loo rejected this, holding that absent exceptional circumstances such as unconscionability, which were not argued, she was bound by the terms she signed, consistent with D2 Contracting Ltd. v The Bank of Nova Scotia, 2015 BCSC 1634. That decision had specifically upheld Clauses 7 and 13, with Justice Dardi finding that the bank would be liable for forged, unauthorized or fraudulent instructions only if the customer reported the error within the 30-day period.

Andrea Arakelien, a credit manager with a Scotia Capital affiliate, deposed that Scotia Capital itself initiated two transactions on the account. The first, on April 29, 2022, addressed a short position of 100 Twitter shares in one part of the account and a long position of 100 Twitter shares in another; according to her evidence, Scotia Capital notified Ms. Cheng that the positions could cancel each other out, and she approved the transaction. The second, on August 23, 2022, moved funds from one portion of the account to cover debt in another, as Clause 7 permitted. Every other transaction, according to Ms. Arakelien, was initiated by Ms. Cheng or someone using her login credentials, which Scotia Capital's system recorded for each trade. She further deposed that monthly statements were emailed to Ms. Cheng and that the account was accessed multiple times a month between March and November 2022.

Ms. Cheng maintained that authorization was the central issue and that login records could not show who actually entered the disputed trades. The court held that this did not matter legally, because the Account Agreement placed the responsibility on her to bring unauthorized trades to Scotia Capital's attention. Although she had corresponded with Scotia Capital between April and August 2022 about login difficulties, she told the court that her allegations came from account statements she received from the branch office and that she made her authorized trades by signing on to the system. From this, Justice Loo concluded that she ultimately received her statements and was able to access the account despite initial or intermittent problems. She could not say which of the hundreds of trades she disputed or how to distinguish them from those she authorized. The court was shown no evidence that she complained specifically about the U.S. dollar loss before filing her claim in March 2024. On that record, Clause 16(g) precluded her claim that the alleged US$47,988 loss was caused by unauthorized trades, and the Original Claim was dismissed.

The contractual claims in the ANOCC failed for the same reason, given her failure to raise concerns about unauthorized trades within 30 days. Her negligence allegations of unauthorized access without proper verification and of irregular and unreliable record-keeping were likewise precluded by the Account Agreement. In advancing her claims in negligence, fiduciary duty, conversion and fraud, Ms. Cheng referred to alleged interactions in 2022 with Brianna Wu, a Scotia Capital employee, and pleaded that the firm failed to explain the risks, ensure suitability or obtain her informed consent to the opening of the account. Justice Loo found that the Account Agreement defined and limited Scotia Capital's duties, and that it owed her no duty to explain the risks of her online trading, ensure her trades were suitable, or obtain her informed consent to transactions. Conversion, which involves wrongful interference with another's goods under Lepage v Bowen Island Municipality, 2021 BCSC 1077, also failed because the Account Agreement defined what was wrongful and no conduct by Scotia Capital breached it. No facts were pled that could ground a fraud claim. The decision does not separately analyze the misrepresentation plea.

Ruling and overall outcome

The Supreme Court of British Columbia dismissed both the Original Claim and the ANOCC, and it refused the application to add The Bank of Nova Scotia because no facts were pled grounding a valid claim against it. Justice Loo declined to address Scotia Capital's limitations defence as unnecessary. Although Scotia Capital's application materials sought special costs on the basis of the fraud allegations, that request was not pressed in oral submissions, and the court noted under Hamilton v Open Window Bakery Ltd., 2004 SCC 9, that a failed attempt to prove fraud does not inevitably lead to special costs. Scotia Capital succeeded in full and was awarded its costs of the action at scale B, payable by Ms. Cheng; no dollar amount for those costs is specified in the decision.