Chen v. TD Waterhouse – Ontario Superior Court of Justice finds no duty of stock brokers to provide cost information on individual T-5008s

Consistent with the industry practice, TD Waterhouse sent to CRA individual T-5008 forms for each sales transaction of the taxpayer (Mr. Chen) that showed the securities’ proceeds but did not complete the box for the securities’ cost. However, TD Waterhouse provided Mr. Chen with a T-5008 Summary which provided the cost, sale price, and gain/loss figures for each series of securities in the aggregate, thereby providing the information he needed to prepare his tax return for the year in question (2009). However, in that year he had net trading losses and minimal employment income, so that his accountant advised him that it was unnecessary to file a return for that year (2009), contrary to the return-filing requirement of s. 150(1.1)(b)(ii). CRA then used the information in the individual T-5008 forms to assess Mr. Chen for $4.1M in tax and interest (i.e., effectively treating the securities as having a nil cost). Mr. Chen ultimately filed his 2009 income tax return and had the erroneous tax assessment corrected, but nonetheless sued TD Waterhouse.

In finding that Mr. Chen had no cause of action, Myers J stated:

Mr. Chen offers no basis to argue that the law might recognize a duty of care on stockbrokers to provide cost information in T-5008 reporting slips to protect the customers from the risk of harm if they unlawfully failed to file their income tax returns and then CRA took aggressive enforcement positions. TD Waterhouse provided Mr. Chen with all applicable cost information in its T-5008 Summary so that he could file his income taxes as required by law.

Neal Armstrong. Summary of Chen v. TD Waterhouse Canada Inc., 2020 ONSC 1477 under Reg. 230(2).