IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation: Lau v. Royal Bank of Canada, 2015 BCSC 1639

Date: 20150911

Docket: S125412

Registry: Vancouver

Between:

Marco Lau

Plaintiff

And

Royal Bank of Canada and Royal Mutual Funds Inc.

Defendants

Before: The Honourable Madam Justice Loo

Reasons for Judgment

Counsel for the Plaintiff: R.P. Campbell Counsel for the Defendants: L. Novakowski

K. Bennett Place and Dates of Trial/Hearing: Vancouver, B.C. December 1-4, 2014

January 21-22, and April 13, 2015 Place and Date of Judgment: Vancouver, B.C. September 11, 2015





Table of Contents

Introduction. 3

The Pleadings. 5

Amended Notice of Civil Claim.. 5

Amended Response to Civil Claim.. 5

Background. 7

the client meeting on january 27, 2012. 10

The client complaint. 13

The CIS investigation. 20

the decision to terminate mr. lau. 39

Events post termination. 44

termination - legal principles. 46

1. Did Mr. Lau lie about having a joint session with the client?. 50

2. Did Mr. Lau falsify bank records?. 58

Was there just cause for dismissal?. 58

the period of reasonable notice. 60

Damages. 62

summary. 68

[1] The plaintiff Marco Lau was an account manager with the defendant Royal Bank of Canada (“RBC”). He was employed for five years when his employment was terminated. He claims damages for wrongful dismissal. The defendants RBC and Royal Mutual Funds Inc. (“RMFI”) claim that Mr. Lau was terminated for just cause on the grounds that (a) he falsified bank records; and (b) an internal investigation disclosed that he lied when he claimed that he and another employee had a joint session with a client.

[2] The issues for determination relate to whether the defendants have established just cause to terminate Mr. Lau’s employment; and if not, the period of reasonable notice.

[3] The defendants redacted all of their documents for what they considered were “privacy concerns”. This extended to redacting the names of RBC employees appearing on internal documents that the defendants rely on in their defence. The redactions were not consistent. At times the names of certain RBC employees were redacted; at other times, the same employees were identified. The plaintiff did not object to the redactions, but I took the position that some of the redactions were not properly privacy concerns in the context of litigation. Internal memoranda had the names of the sender and the recipients redacted. This made it nearly impossible, if not impossible, to determine who did what. There is no doubt that the defendants should redact the names of clients, accounts numbers and similar personal or private information. At my request, the defendants provided the court with an unredacted version of the documents. The redactions extended to redacting the words “Cantonese only” adjacent to the name of the client whose complaint led to Mr. Lau’s termination, and the names of RBC employees who testified.

[4] I will use initials where I consider it appropriate. Where the word “REDACTED” appears in the defendants’ internal documents, the redaction is the defendants’.

[5] RBC and RFMI use acronyms extensively, and I will use the same acronyms.

[6] Turning now to a summary of the introductory facts:

[7] Mr. Lau is 30 years old. In 1992 he immigrated to Canada from Hong Kong, with his parents and older sister. The family lived with Mr. Lau’s aunt in West Vancouver and Mr. Lau attended school in West Vancouver. As a child, he opened his first “Leo” account at RBC’s Chinatown branch. In grade 12, he volunteered 100 hours at RBC’s Park Royal branch. He then obtained a paid intern position and worked for RBC on Saturdays from March to September 2002. Mr. Lau graduated from high school in 2002.

[8] From 2002 to 2005 Mr. Lau worked in the retail clothing sector until he decided he wanted to return to banking. He worked for JP Morgan Chase at their new call centre in Surrey for a time. However, he wanted to return to RBC because it was where he banked, and his father always told him how much RBC has helped their family.

[9] By letter dated June 7, 2007 RBC offered Mr. Lau employment as a customer service representative (“CSR”), on terms and conditions, including RBC’s code of conduct. Mr. Lau worked at various branches in Vancouver, and in 2010, he became an account manager (“AM”). In June 2010 he was asked to work at RBC’s Chinatown branch at Main and Hastings Street, Vancouver. He declined at first because he did not feel confident enough to be able to work with Cantonese speaking clients. However, his reporting manager at the time, encouraged him to stay, and Mr. Lau committed himself to improving his Cantonese language skills. In 2011 Mr. Lau became registered and licensed to sell mutual funds for RMFI, and subject to RMFI’s compliance manual.

[10] RMFI is wholly owned by Royal Bank Holdings Inc. which is in turn owned by RBC.

[11] Every RBC branch has a branch manager (“BM”), and every BM is also a branch compliance officer (“BCO”) through RFMI.

[12] Mr. Lau had annual performance reviews, his job performance was rated as outstanding, and he received annual salary increases. At the time of his termination on May 11, 2012 he was earning an annual salary of $41,500.

[13] Following Mr. Lau’s termination, RMFI filed with the BC Securities Commission a Form 33-109F1 Notice of Termination Information For An Individual setting out the following particulars of his termination:

The termination was a result of his falsification of bank records and failing to tell the truth when questioned regarding an alleged joint session with a client. In particular, he claimed existing money as new to bolster his sales, and maintained that he participated in a joint session with a client despite evidence to the contrary.

[14] This action was commenced on August 1, 2012.

[15] By his amended notice of civil claim, Mr. Lau seeks damages for wrongful dismissal and alleges that the Form 33-109F1 contains “false/unsubstantiated allegations” and restricts his ability to obtain employment at any financial institution. Mr. Lau also alleges that the defendants’ actions have caused him great financial and emotional hardship, damages to his professional reputation and ability to work, and he seeks aggravated and/or punitive damages.

[16] The defendants’ amended response to civil claim include the following allegations and particulars of just cause:

6. There were express or implied terms of the Employment Contract that the Plaintiff would:

(a) act towards the Defendant RBC with all good faith, fidelity and loyalty;

(b) obey the reasonable and lawful directions of the Defendant RBC, including complying with the Defendant RBC’s Code of Conduct;

(c) not act so as to damage or destroy the trust and confidence between the Plaintiff and the Defendant RBC;

(d) act with all due skill, care and competence; and

(e) not neglect his duties to the Defendant RBC.

7. On or about January 27, 2012, a client of RBC (the “Client”) made an appointment with the Plaintiff to discuss a maturing GIC. The Plaintiff counselled the Client to sign mutual fund forms, and transferred the client’s funds. The Client was unaware of the reason for signing the forms. The Client became aware that the Plaintiff had invested the GIC in a short-term income fund. The Plaintiff represented to RBC that the GIC was new money (i.e. money newly received by RBC, rather than funds that were previously held by RBC).

8. The Client made a complaint to RBC about her interaction with the Plaintiff and the way in which her funds were handled. The manager reviewing the complaint noted that the bank documents indicated that the Client had met with the Plaintiff and an investment retirement planner (“IRP”), with the IRP handling the investments. However, the Client denied having met with the IRP.

9. RBC escalated the investigation to its corporate investigation services (“CIS”), who conducted an investigation (the “Investigation”), reviewed videotape, appointments and banking documents for the IRP, met with the Plaintiff and the IRP, and determined that the IRP could not have been in any meeting with the Client on the material date, notwithstanding the statements made by the Plaintiff and the IRP.

10. In his meeting with CIS, the Plaintiff was given an opportunity to provide his responses in the Investigation. The Plaintiff was dishonest during the course of the interview as pertaining to his meeting with the client. The Plaintiff did admit that he regularly misrepresented the status of funds as being “new money” to RBC.

11. The fact that the Plaintiff and the IRP both claimed to attend the meeting resulted in the potential of a monetary benefit for both. The Plaintiff s claim of booking the GIC as new money also had the potential to provide a monetary benefit to the Plaintiff.

12. The IRP was interviewed again and admitted that he did not meet with the Client and the Plaintiff.

13. The Plaintiffs employment was terminated for cause as a result of falsification of bank records and failing to tell the truth when questioned regarding an interaction with a client of RBC. The Plaintiffs actions were contrary to RBC’s Code of Conduct, and RBC had lost confidence in the Plaintiff’s honesty, integrity and trustworthiness.

…

16. The Defendant RBC acted fairly toward the Plaintiff in the manner of termination and did not treat the Plaintiff in an insensitive manner. The Defendant RBC conducted a full and comprehensive Investigation and made its decision based on the outcome of the Investigation.

17. As required by the BC Securities Commission, the Defendant RMFI filed a Form 33- 109F1, setting out the reason for termination as being dismissal for cause, with the reasons being that the termination was as a result of falsification of bank records and failing to tell the truth when questioned regarding an alleged joint session with a client. The Defendant RMFI says that the content of the form was true.

[17] Jennifer McCarthy is RBC’s regional vice-president, and manages a market territory of nine branches in Vancouver east, including the Main and Hastings branch. Ms. McCarthy testified that RBC’s five core values are diversity, integrity, responsibility, teamwork, and service. RBC’s code of conduct is a guideline that sets out the standards of appropriate behaviour for all bank employees, and allows for clarity and consistency in terms of how RBC does business and conducts itself in the Canadian marketplace. RBC’s eight guiding principles that form the foundation of the code of conduct are upholding the law, confidentiality, fairness, corporate responsibility, honouring our trust in you, objectivity, integrity, and individual responsibility.

[18] In terminating Mr. Lau for cause, RBC relies on its code of conduct, in particular, Principle 7 which concerns integrity. Principle 7 reads:

7. Integrity

Our word is our bond. As representative of RBC companies, we tell the truth in all our communications and do not mislead by commission or omission.

Telling the Truth

Employees should evaluate all communications for which they are responsible, including sales representations and advertising, and ensure information is true and does not mislead the public, either directly or indirectly.

As an employee:

- You are to tell the truth in all communications, making every reasonable effort to provide full, fair, accurate, timely, and understandable disclosure in reports, documents and communications, and to avoid errors, omissions, or misunderstandings in statements issued on behalf of RBC.

Integrity of Records

The books and records of RBC companies are to be maintained with scrupulous integrity and are to accurately reflect all business dealings.

[19] Gus Stassinopoulos is the former branch manager of the Main and Hastings branch. He has worked at RBC for over 30 years. For six years he was the manager of the Main and Hastings branch until around the end of February 2012 when he left for another position at RBC, and Shirley Ma took over as the branch manager.

[20] Mr. Stassinopoulos and Ms. McCarthy testified about AMs, IRPs, and internal policies and procedures generally.

[21] RBC’s Main and Hastings branch has approximately 50 FTE’s, or full-time equivalents. It is the second or third largest branch in British Columbia measured by assets on the books, and one of the busiest branches in the Province with many people coming and going through its front doors. Because it is a large branch, Mr. Stassinopoulos had Vincent Fong, assistant BM, reporting to him, and another assistant BM reporting to him “on the operations side”.

[22] There were at the material times approximately 10 AMs, and about half of them were senior account managers (SAM). The SAMs, as the job title implies, had more seniority and experience than the AMs. The AMs, including Mr. Lau, reported directly to Mr. Fong, while the SAMs reported directly to Mr. Stassinopoulos.

[23] The AMs are the first point of contact with RBC’s personal banking clients. They work fairly independently, provide investment advice, sell mortgages, loans, mutual funds, other investments, and have delegated lending authority limits. AMs work closely with “internal partners” including the mortgage specialists and the investment retirement planners (“IRP”).

[24] IRPs are responsible for sourcing out new funds for RBC. They have a higher level of accreditation than AMs or SAMs, and are considered “the experts” in investments generally. IRPs have no fixed office in any branch, but are in and out of different branches. When an IRP comes to a branch, office space is made available so that he or she can work and meet with clients.

[25] RBC employees use an internal RBC computer software system known as sales platform that records interactions with clients, client profiles, and the tracking of sales. Sales platform has many other functions, including a to-do list and a calendar. RBC has detailed guides for its employees on the use of sales platform, including a 16-page RBC Royal Bank Sales Platform Sales Activity Input Guide that explains definitions, “the need for common and consistent Sales Platform input”, “Guiding Principles for recording sales”, and “How to wrap up Sales, Retention and Referral Sales”. A copy of section 6, Organizer - Pending (Wrap Up), is six pages in length and details how each meeting with a client must be wrapped up for sales credits. Under the heading “Purpose”, it states:

Purpose The Pending tab of Organizer lists customers with whom you used the Public View of Sales Platform. The customer names will appear regardless of the outcome of the meeting.

Each meeting must be wrapped up to finalize the results. If you made sales in a meeting, you have four days to complete the “Wrap-Up” to receive credit for the sale(s). After four days, Sales Platform will do an automatic wrap-up and no sales credits will be recorded.

[26] “New $” is defined as:

ü Net new business is acquired in conjunction with a new product sale

ü Existing product is increased resulting in the acquisition of net new business.

ü Money invested is not currently in another RBC product (including bank accounts) unless the funds have been on deposit less than 90 days. (Exception: RSP contribution when the source of funds is accumulated funds in a banking account.)

[27] Retained money is money that is already recorded in the books of RBC. Every RBC branch wants to ensure that it retains one hundred percent of its retained money, if possible. However, even retaining one hundred percent will not achieve an AM’s sales target. Every AM is expected to grow the branch assets. At the Main and Hastings branch, every AM has a “grow target” of $8.4 million in new money. New money increases an AM’s sales volume, and the ability to meet a grow target is a “direct driver” on an AM’s compensation.

[28] Sales portal is an RBC internal tracking system which takes information from various data bases, such as investment, loans, and new accounts, and produces or generates a sales report.

[29] Mr. Stassinopoulos testified that in January 2012 the Main and Hastings branch was “getting our numbers” from sales platform and each employee was required to manually input numbers into sales platform to track their sales. Sales portal tracked individual sales automatically. However, they were “not sure” what sales portal was tracking, so the “messaging” over the last year to the sales team was to continue inputting sales results into sales platform and to distinguish between new money and retained money. Mr. Stassinopoulos testified that sales portal was “relatively new”, but was unable to estimate how long it had been in use.

[30] However, Mr. Stassinopoulos did not disagree with Mr. Lau’s evidence that at the AMs’ weekly goal setting meetings, as well as their quarterly and annual reviews, the AMs were told by their managers to use and rely on the tracking sheets from sales portal. He therefore understood that his sales were accurately tracked in sales portal. Mr. Lau does not dispute however that sales result were also to be input into sales platform.

[31] Mr. Lau testified that the client, MW, booked an appointment in advance of her scheduled meeting with him on January 27, 2012. Before any clients’ appointed time, as in the case of MW, he prepared for the meeting by reviewing the client’s profile on sales platform. He also involved an internal partner, Anson Tse, IRP. At the RBC sales meetings, the branch managers refer to the internal partners as the hunters, and the AMs as the gatherers. AMs are encouraged to engage the internal partners, especially when a client like MW has maturing investments, or clients have investments that are held elsewhere other than at RBC. He also knew that Mr. Tse was aware of his appointments. During RRSP season, the IRPs frequently review the AMs’ calendars on sales platform to determine whether they should attend a client meeting. Generally an IRP would contact him in the morning to see if they could join in a meeting with a client. He cannot recall whether he reached out to Mr. Tse, or Mr. Tse reached out to him, but he recalls discussing about MW with Mr. Tse the morning of January 27, and that the purpose of her appointment was to review the investments in her RSP.

[32] Mr. Lau’s office was located at the front of the Main and Hastings branch, closest to the bank’s main entrance. Outside the door of the office is the receptionist’s desk and waiting area. Waiting clients frequently sat outside the door to his office.

[33] Mr. Lau testified that he recalls being in his office with Mr. Tse, when he saw MW standing outside the door of his office in the waiting area. He went out and brought her into his office. He had met MW many times before and felt that they had already established a rapport with each other. He introduced MW to Mr. Tse. They spoke in Cantonese. They discussed the investment strategies that he had discussed with her in an earlier meeting. Elderly Chinese clients (MW was 66 years old) prefer relatively safe investments such as guaranteed investment certificates (GICs), and tend to invest in the same product for years. It is difficult to convince them to consider investing in mutual funds. However, MW agreed to their suggested investment strategy that she invest in mutual funds. She had three GICs in her RRSP account that were maturing at the end of the month, and one GIC of approximately $900,000 that was in a non-registered investment. MW signed documents so that her GIC was transferred into a new one year GIC, and her registered GIC investments were transferred into a short term income fund in an RRSP, and a short term income fund in a TFSA.

[34] Mr. Lau testified that he is not certain how long Mr. Tse was in his office with MW, but believes that it could have been between five and 10 minutes. He candidly admits that there are times when he is still trying to recall exactly what happened – whether Mr. Tse was already present in his office when MW arrived, or whether he had to get him from somewhere else in the branch. He concedes that his present recollection is different from what he may have told the corporate investigation services (“CIS”) investigators. However, Mr. Lau consistently maintains that Mr. Tse was present at his meeting with MW on January 27, 2012.

[35] In his examination for discovery on October 11, 2013 Mr. Lau testified:

Q Okay. And then after Mr. Tse left, your evidence was you were processing the work and discussing it further with her?

A Right.

Q Okay. Now, your licence. So you could have processed these trades for the client; correct?

A Yes.

Q And so did you process the trades for the client?

A No.

Q Who did?

A Anson did.

Q And why did he process the trades?

A Because it was a joint session, and I refer the client to him.

[36] After each appointment, Mr. Lau generally wrapped up the appointment in sales platform. This involves clicking within multiple tabs, manually entering or checking off items, inputting the sales numbers, and writing detailed notes. He testified that wrapping up sales properly generally takes a “bit of time”, so he did not track the retained amount in order to save time. Immediately after MW’s appointment, he had another appointment. Because it was RRSP season, he had appointments back to back. He also thought that sales portal would automatically reflect that MW’s funds were existing funds and not new money.

[37] On January 31, 2012, Mr. Lau saw MW standing in the reception area early in the morning and he spoke with her. She voiced concern about what they had done with her investments on January 27. She wanted to cancel the investments, but was hesitant to give him a reason why. He asked her if she had any questions about the investments and whether there was something she did not understand. If she had any doubts about the investments, he wanted to be able to discuss it with her. He eventually understood from MW that her family disapproved of the investments she had made. In the end, he cancelled two of the three GIC trades that were in her RRSP, but the third GIC had already matured and was switched into a short term mutual fund. He explained to her that by cancelling the trade that had already been processed, she would incur a short term trading fee. He asked her if it was all right to leave that in the mutual fund, and she agreed.

[38] Cecilia Macharia is the regional compliance officer for RMFI. Her role is to ensure that all RBC employees who are licensed by RMFI, and provide financial planning services, comply with securities regulations and RMFI’s policies and procedures. She is also responsible for handling all mutual fund complaints, investigation, and client resolution.

[39] Ms. Macharia testified that as an employee who was licensed to sell mutual funds, Mr. Lau had an obligation to review and understand the RMFI mutual fund and financial planning compliance manual for licensed representative. She expressly referred to the manual at s. 3.2 Timing, which relates MFDA (Mutual Fund Dealers Association) Rule 5 on bookkeeping and recordkeeping. The first paragraph of section 3.2 reads in part:

3.2 Timing

Mutual fund orders should be processed on the date of receipt by the licensed representative who interacted with the client. The cut-off time for inputting trades is 4:00 p.m. ET to receive that day’s closing price. Once processed, all trades are automatically forwarded electronically to MFRP in Montreal. In the event that your computer system is down, the order must be faxed as soon as possible and before the end of the day to MFRP. Regular mail or courier is not acceptable.

[40] Once a BCO is made aware of a client complaint or concern, the BCO is required to report the complaint to Ms. Macharia. If a complaint concerns only RMFI policies or securities regulations Ms. Macharia will conduct the investigation herself. If the complaint is more serious, she will sometimes wait for CSI to complete their investigation, and once she has their report, she will complete her own investigation.

[41] Ms. Macharia was notified of MW’s complaint by a February 3, 2012 e-mail from Ted Wiens who was then the BM and BCO for the Burnaby main branch. Mr. Wiens’s e-mail reads:

From: Wiens, Ted

Sent: 2012, February, 03 7:50 PM

To: REDACTED Macharia, Cecilia

Subject: Mutual Fund Related Client Complaint

Importance: High

AM Daniel Suen Burnaby Main Branch received a client complaint today regarding a mutual fund trade that was completed last week at Main & Hastings Branch. Daniel brought me in to the office right away to meet the client and acknowledge receipt of the complaint.

The client confirmed to me (through Daniel’s translation for me) 2 specific concerns.

1. A mutual fund trade was completed for her by AM Marco Lau (she did sign the trade documents) but client says she asked Marco to hold off on processing anything until she discussed further with her family and none of the documents were explained to her (she can’t read English).

2. Sales Platform comments show this was a joint session with IRP, but the client is upset because there was never another person meeting with her other than the AM.

Client’s name: CLIENT [MW] - Cantonese only

Client does not speak English so Daniel translated and summarized our conversation with the client below.

Complaint details:

On Feb 3, 2012, client came in to see if I have time available to discuss about some documentations that she does not fully understand. During the appointment, found out that those were IRP manual forms 03220 IA Switch/consolidation & 03209 KYC [Know Your Client] forms. Client was instructed to sign the forms prior to knowing what they are for on Jan 27, 2012 in Main & Hasting Branch by Marco Lau AM. Client would like to file an official mutual fund related complaint. Alerted Ted Wiens BCO 00320 to come in as an official mutual fund related complaint is taking place.

Joint Session taken place On Feb 3, 2012 @2:30 pm to 3:00 pm.

Chain of events described my (sic) client, translated by Daniel Suen AM 00320 in Cantonese:

1. On Jan 23, 2012, client received a call by Royal Direct or Branch and was booked on Jan 27, 2012 with Marco Lau AM at Main & Hastings Branch to discuss about Maturing GIC in TFSA plan # REDACTED.

2. Client attended the meeting and was asked to sign 2 or 3 Eform 03220 & 03209 - client has client copies. Client was not aware what the forms were however she trust the bank so she did not pursue for any answer. Marco Lau AM asked client to consider investing in RBC Short term income funds and printed up a Chinese version prospectus for client. Client said that she needs to discuss about this with her children. Her children [do] not like the idea. Marco also asked client if it is alright to adjust the GIC rate of 1 yr cashable GIC. Client agrees to that.

3. Client visited the Main & Hastings Branch to see Marco Lau AM 00320 on Jan 31, 2012 to gain some clarification and was told that the 1 of the Maturing GIC 00000001 within TFSA plan # REDACTED has been placed into RBC Canadian Short Term funds and if she would like to withdraw it, there will be a short term trading fee.

4. Client was confused and came to Burnaby Main Branch 00320 on Feb 3, 2012 and spoke with REDACTED and was referred to my Attention. Spoke with the client and alerted the BCO. Based on CSS notes, Anson Tse IRP was handling all of client's trades. Confirmed with client that she has never met Anson Tse nor heard of his name. She did state that she received a call (does not know who was calling) asking her about the maturing GIC and offered to book an appointment to look after her finances.

***Ted Wiens BCO wanted to ask a question to the client. As CSS notes state that on Jan 27, 2012, the appointment was a joint session with Marco Lau AM and Anson Tse IRP.

BCO would like to know who was in the appointment that day on Jan 27, 2012. Client said that only Marco Lau AM was present in the appointment.

Action to take:

Client would like to have the funds from GIC 00000001 within TFSA plan REDACTED that was invested into RBC Short term income funds to be reversed as she never gave the authorization to process the trade. Advise client that it will be done as of Feb 3, 2012. The funds will be placed back into TFSA within a few business days.

Both myself Daniel Suen AM 00320 & Ted Wiens BM & BCO 00320 have let the client know that we will investigate further.

As per complaint handling procedures, we are so far just notifying the RCO of the complaint, we have not yet corrected the funds order or notified the Branch Manager/MIRP of those salespeople involved.

Please advise on next steps.

Thanks...Ted

[42] Mr. Wiens did not testify. Neither did Daniel Suen.

[43] Ms. Macharia testified that Mr. Wiens was not available when she received his e-mail on Monday February 6, so she e-mailed him that day, asking him to call her the next day when he returned to the office. When they talked on the phone, she “gave him guidance” which is contained in Mr. Wiens’s e-mail of February 7 to Mr. Stassinopoulos and Ms. Grewall. She then spoke with Ms. Grewall who wanted to know how to deal with the issues relating to Mr. Lau, and she “guided her to engage CIS in the matter.”

[44] Ms. Macharia testified that based on Mr. Wiens’s February 3 e-mail, she assessed what the client was complaining about, and requested Mr. Wiens to allow the client to redeem the short term income fund, to engage the BCO for Mr. Lau and Mr. Tse, and to escalate the issues to CIS because the e-mail “raised a number of red flags”: the client told Mr. Lau not to purchase the short term income fund until she had discussed it with her children, and secondly, the client said that she had only met with Mr. Lau, when Mr. Lau had noted otherwise.

[45] Despite escalating the issues to CIS, Ms. Macharia testified that MW’s complaint was an “informal” complaint that was resolved at the branch level by redeeming MW’s shares. If a complaint is a “formal complaint” she will conduct an investigative review, arrive at findings and recommendations, and if the BCO agrees with her recommendations, draft a resolution letter to the client, to be signed by the BCO. In this case, she determined that MW’s complaint was a “service complaint” and decided to handle it as an informal complaint. Her role was only to provide guidance or advice on how the informal complaint should be handled, insofar as it related to any regulatory issues.

[46] Mr. Stassinopoulos first became aware of MW’s complaint when he received a February 7, 2012 e-mail from Mr. Wiens which included an e-mail thread and Mr. Wiens’s February 3, 2012 e-mail to Ms. Macharia. Mr. Wiens’s February 7, 2012 e-mail to Mr. Stassinopoulos reads:

From: Wiens, Ted

Sent: 2012, February, 07 2:26 PM

To: Stassinopoulos, Gus; REDACTED; Grewall, Harbans

Cc: REDACTED; Macharia, Cecilia

Subject: FW: Mutual Fund Related Client Complaint

Importance: High

Hello, I received a client complaint on Saturday that may have been a formal mutual fund complaint, and possible breach of integrity by AM Marco and IRP Anson.

I have discussed the complaint further with Cecilia Macharia and she feels that while this will not be treated as a formal client complaint, there is evidence of possible integrity with the 2 employees. Could you please [-]

1. Vincent, could you please have Marco send a CART to MFRP immediately to have the January 30th switch to Cdn income fund reversed as a right of withdrawal for the client (put everything back the way it was).

2. Vincent, Harbans, and Gus, could you pls investigate the 2 employees roles and activities in how they dealt with this client as there may be an ASG issue (see details below). Cecilia has also offered to discuss this part further if you need.

Thanks… Ted

[47] Ms. Grewall was Mr. Tse’s manager. Ms. Grewall did not testify. On February 8, 2012 Ms. Grewall sent an e-mail to CIS, requesting that the matter be investigated. CIS investigates criminal matters against RBC, and code of conduct issues with RBC employees. Those who work in CIS are investigators or analysts who have backgrounds in law enforcement, audit, or banking.

[48] Mr. Lau testified that on February 7, Mr. Fong spoke to him and told him about MW’s complaint. Mr. Fong told him that it was a formal mutual fund complaint and that it could involve CIS. Mr. Fong asked him questions about the meeting he had with MW January 27, and about Mr. Tse. He tried his best to remember everything at that moment, but it was not easy because he had seen many clients since then and it was a busy time of year. Mr. Fong then told him that MW claimed that she never authorized the investment switch, she was not aware of what she signed, and that Mr. Tse was not at the meeting. He told Mr. Fong that MW agreed to the switch in investments, he explained everything in detail to her, and she left the meeting with no complaints. He also told Mr. Fong that when Mr. Tse first came to the branch in late 2011 as a new IRP, he told him and other AMs, that it they referred a sale to him and wrapped up the sale as new money, it would show up on their sales reports as new money. Mr. Fong then explained to him the effect of reporting sales as new money when they were not. He admitted to Mr. Fong that how he had been tracking sales was wrong. Mr. Fong instructed him not to make any changes or corrections to any of his previous sales tracking. Mr. Fong also asked him to send him an e-mail outlining the events of January 27. Mr. Lau e-mailed Mr. Fong later in the day on February 7. His e-mail to Mr. Fong reads:

From: Lau, Marco

Sent: 2012, February, 07 5:07 PM

To: Fong, Vincent

Subject: Jan 27th

Hi Vincent,

Here are the events on January 27th and forward with CLIENT [MW]

January 27th

Joint session with IRP, Anson Tse. Met with client to review TFSA and RSP. Proposed TFSA contribution and long-term funds, CLIENT [MW] agreed to try switching her TFSA investment to funds because she does not have plans in placed to use funds. We also reviewed maturing RSP gic in February and switched all to long-term funds as we explained to CLIENT [MW] she is not redeeming her RSP for another 4-5 years. Manual form completed and signed by client to switch RSP gic to funds, provided IRP Anson Tse to complete the trade from his computer.

A few days later…

CLIENT [MW] came in the morning to discuss her TFSA & RSP. Clt request to not switch or invest in any mutual funds. When asked for reason why she changed her mind, client explained to me that her daughter REDACTED does think they are the right investment. I asked CLIENT [MW] what she thought about the discussion we had during the previous meeting and if she had any questions, client said she just prefer to not switch or invest in mutual funds because her family don't like it. I asked CLIENT [MW] one last time if we could potentially speak with her REDACTED to better explain what type of investment we suggested, and client still said no. I proceed to cancel all pending trades in TFSA & RSP, except advised clt that there is $5000 in TFSA that had already been switched and short term trading will result in a fee. Advised and asked CLIENT [MW] if it would be fine for her to leave the $5000 invested in mutual funds, CLIENT [MW] agreed.

Marco

[49] Mr. Lau testified that he knew that MW’s complaint was serious because it could involve CIS.

[50] Mr. Stassinopoulos testified that some time in February 2012 before he left the branch, Mr. Lau came unsolicited to his office and apologized to him for not recording his sales correctly. He told Mr. Lau that the matter was under investigation and “we’d have to see where it ended up”. At that time, he was not aware that there were other AMs doing the same thing as Mr. Lau, that is, tracking retained money as new money. He made no attempts to obtain any information regarding the sales tracking activities in the branch and testified that it was something his assistant BM was looking into or investigating “to get our employees’ side of the story” and find out what was happening.

[51] After Mr. Stassinopoulos left the Main and Hastings branch, he had no further involvement in the investigation. However, he testified that before he left the branch, no issues of concern relating to Mr. Lau had ever surfaced.

[52] On February 22, 2012 Mr. Fong sent the following e-mail to Ross Genge, an investigator with CIS, setting out how Mr. Lau, along with others were “mistracking” retained funds as new funds.

From: Fong, Vincent

Sent: 2012, February, 22 3:38 PM

To: Genge, Ross

Cc: Stassinopoulos, Gus

Subject: Main & Hastings

Hi Ross,

Thanks so much for visiting us today.

Here are the sequence of events:

Feb 7th:

- Vincent and Gus reviewed sales team results and noticed discrepancy between Sale Platform report and Sales Effectiveness Portal report for Account Manager Marco Lau

- Pull detailed sales report for Jan 2012. Looked into 987k investment. Pull client profile. Read MF compliant (sic) comments from BBY Main branch.

- The complaint was initially directed to our Regional Compliance Office, then it was deemed to be not a formal MF compliant (sic) and branch to investigate employee conducts.

- Had discussion with Marco (see Marco's email [Feb. 7, 2012]). Both Marco and Anson confirmed that client was met in Marco's office as a joint session.

- Discovered that sales tracking was wrong in that "old" money is being tracked as "new" external business.

- Discovered that sales misrepresentation was coached to Marco by Anson Tse (IRP), who claims that there's a loop hole in the system and that they won't get caught.

- Marco admitted that he shouldn't have mistracked the sales and he showed great remorse for his actions

- Asked the entire AM team whether this type of coaching was delivered to everyone.

- [PC] at first stated that she misunderstood new vs. old funds, asked again if anyone taught her to do this, she came clean and said she was coached by Anson Tse. She was asked to reverse out the mistracked sales.

- So far we are aware of these AMs who were approached: Marco Lau, [PC], [JK], [CL], [RA] (SAM) and [AC] (SAM)

- [JK] was adamant that he knows that this type of cheating is wrong and that he would never do it.

- [CL] also claims to have no part in it.

- ASG contacted and files started for Marco and [PC]

Feb 21st:

- Vincent and Gus reviewed team sales results and notice [JK] had negative sales, which only happens if an adjustment has been made to the sales platform tracking.

- Questioned [JK] regarding the matter and Jason first said that it's his common practice to track all funds as “new” then later correct to appropriate amounts.

- Writer asked [JK] whether this type of practice seem redundant and [JK] claims to have always done it like that.

- Writer then pulled [JK]'s 2011 sales report and for the entire year there was only one correction.

- [JK] then said that due to his father's health condition and his grandfather passing away, he was careless.

- Writer expressed sympathy but questioned how he was careless 16 times and why the corrections all of a sudden began 2 days after the initial questioning of whether Anson was coaching this wrong behaviour and [JK] confirmed he would not be involved.

- No admission of wrongful doing nor any remorse for the actions taken.

- [JK] then [went] on to make the comment that management is unfair if the branch wants to take his situation seriously, while neglecting other staff’s similar behaviour.

- Writer asked what the “similar” behaviours were and he claimed that a SAM was mistracking credit card sales and Travel health protector sales. A quick look into the sales person in question cannot confirm the accusation.

Currently our branch is validating a sample from each of our salespeople to ensure that there are no other parties involved.

Thanks again,

Vincent

[53] Mr. Fong did not testify. Neither did Mr. Genge.

[54] Ms. McCarthy testified that the managers at the Main and Hastings branch “identified” that there were several individuals who were inappropriately tracking existing funds as new funds, and that Mr. Tse had coached them to track funds inappropriately. CIS was investigating Mr. Tse, Mr. Lau, JK, and AC. JK is an AM, and AC is a SAM.

[55] Lawrence Kwai works in CIS as analyst, investigations. He has been employed by RBC for 27 years and with CIS for approximately 11 years. He testified that Mr. Genge was the CIS investigator who initially had conduct of the file until sometime in March 2012 when Paul Crowther took over the investigation and Mr. Genge had no further involvement. Mr. Crowther was also the manager of the CIS department.

[56] Heather Hammer has worked for RBC for 33 years, and 23 of those years have been with CIS as analyst, investigations. She analyzes and gathers evidence for “fraud type files”, and in the course of her daily work, reviews surveillance videos, photographs, and electronic data. She does the same work as Mr. Kwai but they have “different expertise”. She handles “a lot of the electronic data and video requests for fraud files”, and has access to RBC’s camera system.

[57] Mr. Kwai testified that he became involved in the investigation around late February, early March 2012. His role in the investigation was to gather and organize documents, and to report his findings to Mr. Crowther.

[58] Mr. Kwai explained how and what documents he obtained to support the findings in his report to Mr. Crowther.

[59] Mr. Kwai testified that CIS has access to various internal systems. He accessed client activity monitoring protection system (CAMPS) which allows him to identify which clients and which accounts RBC employees are viewing at any specific date and time. He used CAMPS to determine which accounts Mr. Tse and Mr. Lau viewed on January 27, 2012. He reviewed various “statements” in the e-mail dated April 16, 2012 to him from Harbans Grewall, which contains an e-mail thread, including Mr. Wiens’s e-mail of February 3, 2012.

[60] Mr. Kwai reviewed sales platform to retrieve the appointment calendar of Mr. Lau and Mr. Tse, as well as MW’s records. He testified that the appointment calendar “tells us” that Mr. Lau had a face to face appointment with MW on January 27, 2012 from 2:06 pm to 2:16 pm to discuss a maturing GIC. The sales portal screen shot shows an appointment “start time” at 2:06:13 p.m. and an “end time” at 2:16:13 p.m. The sales platform calendar shows that Mr. Tse had an appointment for MW starting at 3:56:39 p.m. and ending at 4:05:12 p.m. on January 27, 2012, and an appointment with a different client KCL between 1:30 p.m. and 2:00 pm. An internal search showed Mr. Tse was accessing KCL’s account from 1:53 p.m. to 1:58 p.m. on January 27. Mr. Kwai said that he does not know whether employees are required to record the meeting at the time of its actual occurrence.

[61] Mr. Kwai also relied on searches and reviews conducted by Ms. Hammer.

[62] Security administration facility (SECAF) is a number assigned to employees and governs their access to various banking systems. CIS uses SECAF to determine what clients employees are viewing and the application requests at any given time. In conjunction with CAMPS, Ms. Hammer generated an internal fraud search document listing all of Mr. Tse’s “client activity” or computer access on January 27, 2012. The listing discloses that from precisely 13.39.38 to 13.52.16 or 1:39 p.m. to 1:52 p.m., and from 13.52.48 to 14.23.57 or 1:52 p.m. to 2:23 p.m. Mr. Tse had no system access. Mr. Kwai concedes that during those two intervals it is not possible to determine what Mr. Tse was doing. All that is known is that there is a gap in time.

[63] Ms. Hammer testified that she searched for all system access by Mr. Tse for a 24-hour period on January 27, 2012 and found that he first accessed MW’s account from 2:06 a.m. to 2:08 a.m., and then again at 3:32 p.m., off and on until to 4:11 p.m. She also generated an internal fraud search document disclosing all of Mr. Tse’s client activity computer access from 1:39 p.m. to 2:24 p.m. on January 27, 2012. During that time frame, Mr. Tse used only a desktop computer in an office that was not Mr. Lau’s office.

[64] Ms. Hammer did not contradict Mr. Kwai’s evidence that from 1:39 p.m. to 1:52 p.m., and from 1:52 p.m. to 2:23 p.m., Mr. Tse had no system access.

[65] Mr. Kwai confirmed with a “counterpart” in Toronto that the following notes regarding a meeting with MW were made and input into sales platform by Mr. Tse on January 27, 2012. Those notes read in part:

27 Jan 2012

Anson Tse IRP

Meeting Purpose: Joint session with AM Marco Lau to review investments

Source of Business: Branch referred by Marco Lau@ 07120 for MOS

Tools Used: Investment Performance Tool

HAA [Horizons Asset Allocation]: Very Conservative

KYC [Know Your Client] Risk Tolerance: Below Average

Solutions:

TFSA: HAA and KYC completed. Traditional GIC investor. Risk averse but had discussion on impact of inflation and purchasing power, clt understands that in order to beat inflation for the next few years, investing in GIC wouldn’t be the best way for achieving it. Time frame is 2-4 yrs. Goal: general contingency savings fund. Switched all Maturing GIC’s to short term income fund.

RSP: Also reviewed rsp. RSP also has GIC maturing in FEB and MARCH. Concluded that GIC rates are too low at the moment so after completing brand new HAA and KYC. Switched all maturing GIC to short term income fund.

Anchored with: AM

Client understands Mutual Funds are not guaranteed, not CDIC insured and that the [principal] value will fluctuate.

Clt is currently looking for a property within the yr. Will be using the $900k cashable interest rate of 1.28% (discretion rate of .28% given)

[66] Mr. Kwai also confirmed that Mr. Tse was the sales person for MW’s GIC transaction of $987,000, and her other RRSP mutual fund transactions. He had Mr. Tse’s manager confirm Mr. Tse’s signature as the signature signing off on the mutual fund trades, and that it was Mr. Tse’s signature and Mr. Lau’s signature on the account opening information form.

[67] Mr. Kwai testified that he never interviewed anyone. The decision whether to interview anyone rested with Mr. Crowther.

[68] Therefore, Mr. Kwai did not interview Mr. Lau or Mr. Tse before he wrote his April 25, 2012 report to Mr. Crowther. He never interviewed Mr. Suen who spoke to MW in Cantonese, and provided a translation to Mr. Wiens. Mr. Kwai never interviewed Mr. Wiens. Mr. Kwai’s understanding of MW’s complaint is based on the February 3, 2012 e-mail from Mr. Wiens, and what he refers to as Mr. Tse’s “statement”. The statement, which is undated and untitled, is a series of questions and answers, and appears to be the document referred to by Ms. Grewall in her February 8, 2012 e-mail to CIS as her “fact finding interview” with Mr. Tse.

[69] Mr. Tse’s statement reads:

Re Client complaint from MW as per attached email from Ted Wiens BM Burnaby Main branch

Upon LJ (CIS)’s recommendation conducted interview with Anson Tse at 2:30pm (as it was previously scheduled)

Fact finding interview with Anson Tse

Feb 8th at New Westminster Main branch

Asked Anson about his meeting with MW on Jan 27 as indicated in CSS, Anson could not remember the meeting by name as he said he had seen several [Ws] over the last month. We pulled and printed the profile with Anson’s css comments

Anson remembered meeting the client (as prompted by his comments).

Did you meet the client by yourself?

Anson -NO, it was joint session with Marco, the Account Manager and Main and Hastings in Marco’s office.

Who conducted the interview?

Anson- We both jointly spoke with client and presented to the client about appropriate investment. Marco was on the computer and I sat beside him.

Who completed the horizon asset allocation?

Anson - Marco did the horizons, as I presented and had dialogue with client around inflation

What did that sound like or look like?

Anson- talked about inflation - as client understood real estate and explained using house prices

Who purchased the investment?

Anson- I did as I had the client sign the manual forms for the purchase as GIC‘s were not maturing until Feb.

When did you input the sale

Anson- Later on the same day as I did not want to inconvenience the client to take them to my office to process the sale.

Do you recall anything else about this client?

Anson - Client liked the investment solution offered but talked about her daughter who might not like her investment choice.

How many times did you see this client?

Anson Only once on Jan 27th with Marco

I remember this client as I suggested and gave her better rate on her GIC which client anticipated needing, I understand the client came to see Marco to cancel the trade when I got out of order documents for my trade (and cancelled trade) as it was not imaged on ecourier.

[Underlining added.]

[70] Mr. Kwai also confirmed that Mr. Lau completed the sales platform showing MW’s transactions as new money when it should have been noted as retained money.

[71] On April 13, 2012 Mr. Kwai e-mailed Heather Hammer regarding the client MW. He wrote:

On January 27/12 she went to Main & Hastings Branch to see account manager Marco LAU. On Sales Platform there are comments entered by Anson TSE, so this would be a joint session with TSE/LAU with client. Client complaint states that there was no other person that it was just Marco she met with.

Client would have went to reception area for appointment. Can you run video to see if Anson was present. It’s suspected Anson was not present and he is counting this as a sale. The appointment was held in Marco’s office.

[72] Mr. Kwai’s April 13, 2012 e-mail to Ms. Hammer forwards an e-mail thread between Mr. Fong and Mr. Stassinopoulos on February 17 and 18, indicating that MW visited the branch on January 27 at 2:00 p.m. and that the “camera is the one monitoring CSR workstations (closest to the main entrance) 1, 2, and 3.”

[73] In direct examination Ms. Hammer was asked how she first became involved with Mr. Lau, and she first answered, “I was asked to review video to see if Anson entered an office”. She was then referred to Mr. Kwai’s April 13, 2012 e-mail to her, and Ms. Hammer then testified that she was “asked to see if Anson entered Marco Lau’s office”. She was then referred specifically to the second paragraph of the e-mail and asked what she understood her duties were, and she testified that she understood that she was asked to review the video to see if there was the presence of another employee entering or exiting Mr. Lau’s office.

[74] Ms. Hammer testified that the camera that monitored CSR computer and work stations 1, 2, and 3 closest to the main entrance did not show the entrance to Mr. Lau’s office so she viewed a different angle from camera 4-3. Camera 4-3 is set up to cover the teller wickets work station 4-3, in the foreground, so that what can be seen of the entrance to Mr. Lau’s office is in the background. However, none of the cameras clearly showed the entrance to Mr. Lau’s office.

[75] Ms. Hammer testified that she viewed the surveillance video from 1:30 p.m. until 2:15 p.m. when two individuals left Mr. Lau’s office. She testified that she viewed the video for more than 45 minutes, but she has no record of how long she viewed the video. She does not recall if she made any notes while viewing the video. She saved or downloaded to her computer four photographs from the video. She testified about three of the four photographs.

[76] One photograph shows eight persons, including two RBC employees at two different CSR counters, a security guard, a person in a wheelchair by the reception desk, a woman sitting in the waiting area, and three persons in the background, including a taller man and a smaller woman in a red hat who have been identified as Mr. Lau and MW entering Mr. Lau’s office (although to me, that is not entirely clear from the photograph). Mr. Lau is behind MW, and in between them is the head of a security guard who is watching the CSR counters, and part of the head of another person facing in the opposite direction or away from Mr. Lau’s office. The photo is date stamped 13:45:46 (Pacific Standard Time) or 1:45 p.m. Another photograph date stamped 14:15:25 or 2:15 p.m. shows two persons, Ms. Hammer testified are the same two persons who entered the office. Mr. Lau has identified the two persons as himself and MW.

[77] Another photograph shows MW on January 27 at 2:41 p.m. making an in-branch transaction at a CSR counter. Ms. Hammer obtained a photograph of MW inserting her PIN number for a branch transaction on March 2, 2012 and identified MW based on her PIN number.

[78] Ms. Hammer testified that Tyco is the “camera provider” who creates “video downloads for RBC”. The videos are stored for three months and then recorded over. When she viewed the video on April 16, 2012, there were still some 10 days remaining before the video would be erased over.

[79] During that time – or before that time – RBC took no steps to see that the video was retained, downloaded, or a copy of it made. The video is therefore no longer available.

[80] Ms. Hammer was cross-examined on the fact that the video she viewed is no longer available. She testified that if there is a robbery, “a request for video” would be made to Tyco for CIS investigative files. She insisted and kept emphasizing at different points in her testimony that she was not asked to retain the video, she was not asked “to pull” the video, she was not asked to order streaming video, it is not standard procedure to request the video “for this type of file”, and there is no digital recording of the video.

[81] On April 16, 2012 Ms. Hammer sent the following e-mail to Mr. Kwai:

Video viewed from 13:30 Jan 27, 2012, client enters office at 13:45 with one male employee. No other person enters this office within the timeframe prior and until the clients leaves the office 14:10.

Client does not however leave the branch after leaving the office.

Photos are attached for your review.

[82] On the basis of Ms. Hammer’s April 16, 2012 e-mail, Mr. Kwai concluded that MW only met with Mr. Lau on January 27, 2012.

[83] On April 16, 2012 Mr. Kwai and Ms. Ma had the following e-mail exchange:

From: Kwai, Lawrence

Sent: 2012, April, 16 12:53 PM

To: Ma, Shirley Y

Subject: FW: [JK]

Shirley

Please advise on:

- If input as new funds, how does this benefit the account manager compared to if input as existing funds.

- If joint sale with IRP, how does coding as new funds benefit the IRP.

Please confirm if all these clients on the report were joint sales with Anson TSE.

Regards,

Lawrence

From: Ma, Shirley Y

Sent: 2012, April, 16 1:05 PM

To: Kwai, Lawrence

Subject: RE: [JK]

Hi Lawrence,

If input as new funds:

1. The account [manager] will benefit as increase in volume, there is an expectation on each sales staff to grow the branch assets. At this branch, each account [manager] has a 8.4 million grow target

2. For IRP- he will get commission on the new money. I don’t know their compensation detail which you have to go to his manager.

Thanks

Shirley Ma

[84] Mr. Kwai prepared a report dated April 25, 2012 to Mr. Crowther. The “subjects” of his report were Mr. Tse, Mr. Lau, JK, and AC and their code of conduct violation. The report refers to and appends all of the documents he had gathered “that support my findings”.

[85] Mr. Kwai’s April 25, 2012 report to Mr. Crowther summarized each of the documents and states in part:

CIS was notified by HG of a Mutual Fund related client complaint (App 1) [February 8, 2012 e-mail H. Grewall to CIS email thread, including February 3, 2012 e-mail from T. Wiens]. … The complaint details are reported below:

…

· CSS notes entered by Anson TSE on January 27, 2012 regarding client trades.

· Client confirmed that she has never met Anson TSE nor heard of his name.

· Client said that only Marco LAU was present in the appointment.

The following details were provided by Assistant Manager, Vincent Fong (App 2) [February 22, 2012 e-mail V. Fong to R. Genge]

· Both Marco and Anson confirmed that client was met in Marco’s office as a joint session.

· Management discovered that old money was being tracked as “new” external business.

· Management discovered that reported sales as “new” money was being coached by Anson TSE, who claims that there is a loop hold in the system and they won’t get caught.

· Account Manager PC admitted she was coached by Anson TSE to report funds as “new” instead of existing. She was asked to reverse out the mistracked sales.

· Account Manager [JK] advised management that he knows this type of cheating is wrong and that he would never do it. Two days later, [JK] amended 16 of his sales from new funds to existing funds.

Clarification was obtained from management on the benefit of recording sales as new funds (App 2.1) [April 16, 2012 e-mail S. Ma to L. Kwai]. The following should be noted:

· The account manager will benefit as increase in volume, there is an expectation on each sales staff to grow the branch assets.

· The IRP will get commission on new money.

…

TSE provided a statement to management regarding his appointment with [MW] (App 4) [Tse fact finding review]. The following should be noted:

…

· TSE said it was a joint session with Marco LAU in Marco’s office.

· Both LAU & TSE both jointly spoke with the client and presented to the client about appropriate investment.

…

A review of LAU’s schedule revealed that a face to face appointment with [MW] on January 27, 2012 from 2:06PM to 2:16PM (App 5) [Sales Portal screen shot January 27, 2012]

LAU provided a statement to management regarding his appointment with [MW] on January 27, 2012 (App 6) [February 7, 2012 e-mail M. Lau to V. Fong]. The following should be noted:

· Joint session with IRP Anson Tse.

…

As reported in App 2.1 [April 16, 2012 e-mail S. Ma to L. Kwai], it is suspected that the sale was reported as new so both TSE and LAU would receive a greater benefit than if the sale was reported as existing.

The review by CIS revealed that TSE was not with LAU during the appointment with MW. This supports the client’s statement “that only Marco LAU was present in the appointment”.

Video footage was reviewed for Marco LAU’s office on January 27, 2012 (App 12) [April 16, 2012 e-mail H. Hammer to L. Kwai]. The following should be noted:

· Video viewed from 1:30 PM to 2:15 PM - time of [MV]’s appointment.

· Client enters LAU’s office at 1:45PM (App 12.1) [Photo]

· Client leaves LAU’s office at 2:15PM (App 12.2) [Photo]

· During the time period 1:30 to 2:15 footage does not show any other person entering LAU’s office.

Footage reveals that TSE did not enter LAU’s office to conduct a joint appointment with the client. This is contrary to LAU and TSE’s statement to their manager that they had both met with [MW].

It should be noted that TSE had an appointment booked with client i/n/o [KL] on January 27, 2012 from 1:57PM to 2:05PM (App 13) [Sales Platform screen shot].

A Camps Search revealed that TSE accessed [KL]’s profile at 1:39, 1:52 and 1:53PM (App 14) [Camps internal fraud search for Tse January 27, 2012].

…

Note that TSE’s appointment with [KL] and TSE’s access to [KL]’s profile occurred while [MW] was in Marco LAU’s office. TSE was dealing with another client and was not with Marco LAU conducting a joint session.

It’s suspected that LAU and TSE reported the appointment with [MW] as a joint session so TSE would receive benefit from the sale.

As a result the following should be noted:

· Anson Tse and Marco Lau’s statement to their manager that they both met with [MW] is false.

· Notes entered by Anson TSE on Sales Platform regarding the joint session with [MW] on January 27, 2012 is false.

…

· The recording of the GIC i/a/o $987404.48 as new funds by LAU as opposed to existing funds is false. It’s suspected that TSE coached LAU to report as new so they both would benefit.

…

[JK]

As reported in App 2:

· [JK] said that it’s his common practice to track all funds as new then later correct to appropriate amounts.

…

· Two days later, [JK] amended 16 of his sales from new funds to existing funds.

Review of [JK]’s sales report revealed that he amended 17 sales from new to existing.

As reported by Manager, Vincent Fong, the changes were posted 2 days after his discussion with [JK]. It should be noted 12 out of the 17 sales are attached to IRP Anson TSE

…

[AC]

…

It has been confirmed that [AC]’s signature is on the signature line where TSE is listed as the Mutual Fund Salesperson

This is of concern due to the following:

· This is a compliance violation. The signature of the trade form is incorrect and two licensed representatives acknowledge that the signatures are incorrect on a Mutual Fund trade form. It’s suspected they did not follow up to correct this error as a revised form with the correct signature was not on file.

· The client has a copy of the Trade Form with the incorrect signature.

· The honesty and integrity of the licensed representatives are of concern.

· Integrity of Bank Records as employees were aware of the error.

[86] On December 5, 2012 (nearly seven months after Mr. Lau’s termination) Ms. Hammer e-mailed Mr. Kwai and set out what she testified was “an overview of her findings”. There are large portions of the e-mail that have been redacted. In the e-mail she states in part:

Anson Tse does not show any system access from 13.58:10 to 14.23:56

[87] However, there is nothing in Ms. Hammer’s December 5, 2012 e-mail indicating where or how the system access information was obtained. It contradicts the internal fraud search document she earlier generated for Mr. Kwai that shows that Mr. Tse had no system access from 13.39.38 to 13.52.16 and from 13.52.48 to 14.23.57.

[88] To the extent that the contents of Ms. Hammer’s e-mail of December 5, 2012 conflicts with Mr. Kwai’s evidence on Mr. Tse’s system access, I prefer Mr. Kwai’s evidence that from 1:39 p.m. to 1:52 p.m. and from 1:53 p.m. to 2:23 p.m., Mr. Tse had no system access.

[89] Mr. Lau testified that on May 2, 2012 he had his first contact with CIS. He was called to meet with Mr. Crowther and Mr. Kwai in a conference room on the second floor of the Main and Hastings branch. Mr. Crowther did all of the talking and the questioning. Mr. Kwai sat beside Mr. Crowther and assisted him by showing him various documents.

[90] Mr. Lau said that Mr. Crowther asked him if he was aware of what the interview was about and he told him that he knew it was about the meeting of January 27 with MW. Mr. Crowther then showed him a black and white photo from a video and asked if he could identify the person in the image. The black and white photo was not all that clear, and he told Mr. Crowther that he could not definitively identify the person. Mr. Crowther told him it was MW, and that was “one piece of evidence” against him. The second “evidence” against him was a note he had input into sales platform about his meeting with MW. Mr. Lau testified that he cannot recall the “third and final evidence” that Mr. Crowther put in front of him. He does not recall speaking to Mr. Kwai, and he does not recall if he was given an explanation of the complaint against him. The meeting was tape recorded. At the end of the meeting he was told to go home. He returned to his office, grabbed his bag, and went home. He never returned to the branch until he was told to come in on May 10, 2012 when his employment was terminated.

[91] Mr. Kwai testified that Mr. Crowther was the lead investigator and “the lead” on the interview with Mr. Lau, although throughout his evidence he used the plural subject pronoun such as “they asked”. He identified two pages of handwritten notes dated May 1, 2012 as being Mr. Crowther’s handwriting, and testified that the notes were made by Mr. Crowther in preparation for their interview of Mr. Lau. The handwritten notes list 20 items starting with “1. Introduction, 2. Ack. of Rights, 3. Ack. Code of Conduct, followed by a list of questions beginning with “explain”, “how”, “who”, “where”, including item 20: Anson with other client while this client was in your office.” Mr. Kwai also identified two pages of handwritten notes as Mr. Crowther’s handwritten notes of the interview of Mr. Lau on May 2, 2012.

[92] Mr. Kwai made no notes of the interviews and cannot recall whether Mr. Crowther made his notes during the interviews. However, he testified that Mr. Crowther’s notes accurately reflect what was discussed in the interview.

[93] Mr. Kwai said that the CIS interview of Mr. Lau began at 10:30 a.m. because before they began the interview, they had Mr. Lau sign the form “Acknowledgement Of Rights Regarding My Interview with Corporate Investigation Services” which reads:

I, MARCO LAU, ACKNOWLEDGE:

* THE INVESTIGATOR(S) PROPERLY IDENTIFIED THEMSELVE(S)

* THE INVESTIGATOR EXPLAINED THE CIRCUMSTANCES REQUIRING THE INTERVIEW

AND I FURTHER ACKNOWLEDGE THAT:

* I AM AWARE THAT I AM FREE TO LEAVE THE INTERVIEW AT ANY TIME.

* I AM AWARE THAT I HAVE THE RIGHT TO ANOTHER EMPLOYEE PRESENT DURING THIS INTERVIEW.

* I HAVE THE RIGHT TO RETAIN AND INSTRUCT COUNSEL, AND ANYTHING I SAY MAY BE GIVEN IN EVIDENCE.

* THIS INTERVIEW WILL BE TAPE RECORDED.

[94] Mr. Kwai testified that he saw Mr. Lau sign and date the acknowledgment form on May 2, 2012 at 10:30 a.m.

[95] The CIS interview of Mr. Lau was recorded on a digital recorder so that it could be downloaded onto a computer. RBC produced no copy of the recorded interview. Mr. Kwai testified that his manager, Bob Montgomery, would have conducted searches for the tape, Ms. Hammer would have retrieved some files in an attempt to locate the recording, RBC’s information technology department did a review that “came back negative”, and while he never personally searched for Mr. Crowther’s files, “the department did”.

[96] Mr. Kwai testified that he recalled that they (he and Mr. Crowther) discussed with Mr. Lau the coding of new versus existing funds or sales. Mr. Lau indicated that he input the sales the way he did because he assumed that the system would fix it. He said that he was coached to input it the way he did, and admitted that between December 2011 to around January or February 2012 he had miscoded sales results as new when it should have been coded as existing, between 10 to 20 times. He said that it would help him reach his goals and targets. He said that he had discussed this with his manager Vincent Fong, and Mr. Fong told him not to make any changes to the mistracked sales as it was being investigated. When they discussed the joint session, he asked Mr. Lau if Mr. Tse came to his office before or after MW arrived. Mr. Lau said that he met the client first and then went and got Mr. Tse. They told Mr. Lau that from their review of the video footage they did not see Mr. Tse entering his office. Mr. Lau replied that he could not explain why the video does not show Anson because Anson was in his office. When they discussed MW’s complaint, Mr. Lau said that she was influenced by family members to say that Mr. Tse was not there so that she could get her trades reversed.

[97] In his examination for discovery, Mr. Lau testified:

Q Okay. Paragraph 19 of your notice of civil claim says:

“The full detail of the complaint and report was never disclosed or shown to the Plaintiff.”

What do you mean by that?

A I believe I remember when I was being interviewed by the corporate investigators I requested whether there was an actual formal complaint filed; where is the report? And they claimed -- I don't remember what they said. But they didn't show me anything.

Q But your evidence has been here that when you went to the meeting with the investigators they told you what it was about. You knew what the meeting was about; they showed you the documents; they told you what the other evidence was.

A No, they showed three evidence, but they never showed me the report that was filed, the official -- well, the formal mutual fund complaint. I never saw anything, like. So I never saw that or any other statements from the client.

Q Okay. So paragraph 19 refers to the fact that you weren't provided with documentation of the client's complaint or the client's report? Is what paragraph 19 --

A Right.

Q But I'm putting to you that during the course of the meeting with the investigators you knew what the complaint was about.

A Because they were telling me what it was about.

[98] Mr. Kwai testified that Mr. Lau’s interview lasted “about an hour and a bit”, and then he and Mr. Crowther began their interview of Mr. Tse at about 12:20 p.m. Mr. Tse, like Mr. Lau, signed an Acknowledgement Of Rights Form at 12:20 p.m.

[99] Mr. Kwai identified two brief pages of handwritten notes dated May 2, 2012 as in Mr. Crowther’s handwriting and testified that the notes appear to relate to the interview with Mr. Tse. The word “TSE” is in capital letters at the top of the document which reads:

TSE May 2, 2012

- already in the office with Marco

- older lady - short hair

- can’t identify client - sees a large of elders

- mutual funds - his handwriting and client signature on form (different than Marco).

- perhaps might not have met with client based upon video

- two places at one time? during meeting doesn’t show come and go to meeting with binder

- guess so possible didn’t meet with client

normally I try to meet with all clients

really busy during RRSP time of year

- assumed system would record as new funds

- didn’t report to manager about looking new money - I’ve heard - passed along signatures always on form

#19 - “I believe so” meet client

doesn’t remember client

not signature

didn’t meet client for this track (#19)

posted trade but never met with client

[AC] didn’t tell him that she signed form.

“not joint sessions” - even though input

based upon influence

did not bring to manager’s attention - protect [AC].

#10 - his writing - maybe it’s not my writing

never met client - against policy.

[100] Mr. Kwai testified that Mr. Crowther did most of the questioning of Mr. Tse. However, throughout his testimony of what occurred during their interview, similar to his testimony of what occurred in their interview of Mr. Lau, Mr. Kwai continually used phrases such as “we brought up” or “we asked”, and so I will similarly use the plural subject pronoun.

[101] Mr. Kwai testified that Mr. Tse acknowledged that it was a joint session, and said that he had entered Mr. Lau’s office prior to MW getting there. They asked him about reporting sales as new instead of existing, and Mr. Tse said that he thought it was set up on the system that way, and he did not bring to his manager’s attention that existing funds were being coded as new. They brought up his appointment with KCL (sales platform showed that he had an appointment booked with another Chinese client KCL between 1:30 p.m. and 2:00 p.m.) and asked him how he could be in two places at the same time, and he said “maybe I wasn’t at the appointment then”. When they brought up the review of the video footage, he said “maybe I wasn’t at the appointment then”. He then admitted that he was not at the appointment with the client and Mr. Lau, and he had never met the client. One of his excuses was that it was RRSP season, and there was pressure on him to reach his target. Throughout the interview, Mr. Tse was evasive. They questioned him about a mutual fund transaction in relation to AC, and he said that he did not meet the client, he was aware that AC signed his signature on the trade form, and he took no steps to correct it.

[102] Documents “# 19” and “# 10” on Mr. Crowther’s handwritten notes refer to the documents as numbered in Mr. Kwai’s April 25, 2012 report to Mr. Crowther. Document 19 is a mutual fund trade ticket dated signed January 26, 2012 by AC for Mr. Tse who did not meet the client. Document 10 is a mutual funds transaction posted by Mr. Tse for MW.

[103] In direct examination Mr. Kwai was asked what was Mr. Tse’s statement regarding document 10, and he testified that Mr. Tse said that he had never met the client.

[104] Mr. Kwai testified that at the end of Mr. Tse’s interview, based on his response that he did not meet MW, they asked Ms. Ma to bring Mr. Lau up for a second interview. They asked Mr. Lau if there was anything he wanted to change from his first interview, and he said no.

[105] There is no evidence that either Mr. Crowther or Mr. Kwai told Mr. Lau anything about what Mr. Tse said during their interview of him. It is only during the course of this proceeding that Mr. Lau learned of Mr. Tse’s alleged confession or admission he made during the CIS interview of him on May 2, 2012.

[106] Mr. Kwai testified that after their brief second interview with Mr. Lau, his involvement with the investigation ended.

[107] In cross-examination Mr. Kwai was asked whether he and Mr. Crowther had a discussion following the interviews. He testified that they probably did because their normal practise was to have a discussion following an interview, but he does not remember if they did or not.

[108] CIS never interviewed AC or JK. Neither of them were terminated.

[109] Mr. Crowther did not testify. There is no evidence that anyone from or on behalf of RBC attempted to contact him in an effort to obtain his digital recording of the interviews of Mr. Lau and Mr. Tse. Counsel for RBC informed the court at one point during the trial that shortly after the interviews on May 2, 2012 Mr. Crowther “went on leave”, and never returned to RBC.

[110] Mr. Crowther sent his May 3, 2012 defalcation report regarding Mr. Lau to Ms. McCarthy. It is apparent from reviewing the report that Mr. Crowther relied on and paraphrased Mr. Kwai’s April 25, 2012 report to him. The defalcation report forwarded none of the supporting documents. Mr. Crowther’s defalcation report reads in part:

Investigation:

[MW]’s complaint contained the following details.

· Her appointment was booked on January 27, 2012 with account manager, Lau to discuss a maturing GIC in TSFA account.

· Lau asked her to consider investing in Short Term Income Fund and was asked to sign mutual fund forms 03220 & 03209. She was unaware of why the bank needed these forms.

· She was provided mutual fund forms and was instructed to sign the forms without knowing what they were about

· She came back to the branch on January 31 to see Lau who advised that GIC in the TSFA had been invested into the Short Term Income Fund.

· She then went to Burnaby main branch and reported her concerns on how her investments were handled at Main & Hastings. In reviewing the CSS notes the business noted that Tse handled the investments.

· [MW] then affirmed that she has never met Tse nor heard of his name and that only Lau was present in the appointment.

Burnaby Main branch escalated this complaint to the Main & Hastings branch which was followed up by Vincent Fong (Fong) the assistant branch manager. Fong reported that both Lau and Tse confirmed that they met the client in Lau’s office as a joint session.

…

The CIS investigation revealed that Tse was not with Lau during the appointment with MW based upon a video footage review for Lau’s office on January 27. A review of the video from 1:30 PM to 2:15 PM the time of [MW]’s appointment showed

· Client [MW] entering Lau’s office at 1:45PM

· Client [MW] leaving Lau’s office at 2:15 PM

The review did not show any other person entering Lau’s office which is contrary to Lau and Tse’s statements that they both met [MW].

In addition to the video surveillance bank records show that Tse had an appointment booked with client [KL] on January 27 from 1:57PM to 2:05 PM; and bank records show Tse accessing [KL]’s profile at 1:39, 1:52 and 1:53PM while [MW] was in Lau’s office.

Lau was interviewed and stated that

· he did meet the client [MW] with Tse. This contradicts the client’s statement, video surveillance, bank records and Tse’s confession that he was not with Lau during the meeting with [MW]

· Tse coached him with respect to claiming new money versus old

· he claimed new money ten to twenty times when he knew that this was not correct and his actions contravened the Code of Conduct.

Conclusions:

Lau was cooperative throughout the interview. Lau acknowledged the seriousness of his actions and how it breached the Code of Conduct.

This case is a defalcation calling into question Lau’s Honesty and Integrity, specifically:

· Failure to tell the truth about the meeting with [MW]

· Failure to maintain the bank’s records with scrupulous integrity

Lau was sent home pending further investigation at the end of the interview. He was offered Ceridian services.

Paul Crowther

[111] Mr. Crowther’s report of May 3, 2012 makes no mention of Mr. Tse’s alleged confession or admission on May 2, 2012 that he never had a joint session with Mr. Lau and MW.

[112] In his examination for discovery, Mr. Lau was questioned about the statement in the defalcation report that the CIS review of the video footage “did not show any other person entering Lau’s office which is contrary to Lau and Tse’s statement that they both met” MW:

Q Okay. And then on the next page they go on to the review of the videotape. That they reviewed the footage from Mr. Lau’s office from 1:30 to 2:15, and it shows the client entering Mr. Lau’s office at 1:45 and the client leaving Mr. Lau’s office at 2:15. And the review did not show any other person entering Mr. Lau’s office, which is contrary to the statements.

Now, your evidence has been that Mr. Tse was there in the office. But the review doesn’t show Mr. Tse coming or going from your office during that time period.

A It says “entering.” So, no, I guess, if, based on my recollection, he was already in the meeting, then he wouldn’t be entering the meeting.

[113] Ms. McCarthy testified that she first became involved on February 23, 2012 when she visited the branch and was told at a meeting with Mr. Stassinopoulos and Mr. Fong that there had been a client complaint and that sales had been tracked inappropriately. She advised the managers to follow the regular process of beginning an investigation at the branch and engaging the CIS team.

[114] Ms. McCarthy referred to an internal activity log dated February 23, 2012 generated by an HR advisor from the HR advisory services group that reads:

Description of the Activity Performed:

February 17, 2012 updated

manager concerned with tracking by employee - identified 10 deals for 41.7 million of existing funds tracked as external

CIS contacted

[115] Counsel for RBC states that the document relates to the number of deals that Mr. Lau said that he mistracked. The maker of the document is not identified or called, but RBC contends that the document goes to weight. If that is the case, the document discloses that Mr. Lau mistracked 10 sales as new sales instead of existing funds.

[116] Ms. McCarthy testified that after she received Mr. Crowther’s May 3, 2012 defalcation report, she booked a conference call with Bob Lynn, employee relations advisor, HR Advisory Services, Mr. Kwai, and Ms. Ma to deal with the findings of the report. They concluded that Mr. Lau had contravened the code of conduct around integrity in two very serious ways: 1. failing to tell the truth, as he had continued to lie about the existence of a joint session when all of the evidence indicated that it never happened; and 2. failing to maintain bank records with scrupulous integrity as he was required to do.

[117] Ms. McCarthy testified that the consequences of not following the code of conduct cannot be overemphasized and pointed out that the code of conduct expressly states:

The importance of Our Code of Conduct cannot be overemphasized. Your understanding of it and your cooperation in adhering to it is critical to the integrity of our industry and to maintaining the trust that our clients have placed in RBC. Accordingly, any employee who fails to meet the standards set out in this Code will be subject to corrective or disciplinary action, including immediate or eventual dismissal.

[118] The outcome of the conference call was taken by Mr. Lynn to a panel consisting of other senior HR advisors who deliberate and make an oral and written submission back to Ms. McCarthy as regional vice-president.

[119] Ms. McCarthy referred what she described as an activity log from a senior HR manager, who she believed to be Mr. Lynn, setting out a summary of Mr. Lau’s case. The activity log shows a “date of activity” as May 8, 2012 and reads in part:

May 8 - CIS has completed the investigation and found that the employee lied about the joint session with the client to discuss her investments. Sending manager dismissal docs

…

The CIS investigation revealed that the IRP was not with employee during the appointment with client based upon a video footage and bank records show that the IRP had an appointment booked with another at that same time and accessed that client's profile at the same time the employee was meeting with his client. In a separate interview, the IRP confessed to CIS that he was not in that meeting with the employee and the client.

Lau was interviewed and maintained that he did meet the client with the IRP. This contradicts the client's statement, video surveillance, bank records and the IRP's confession that he was not with the employee during the meeting with the client. The employee further advised that the IRP coached him with respect to claiming new money versus old and that he had claimed new money ten to twenty times when he knew that this was not correct. Despite all of the evidence, the employee maintained that he had met jointly with the IRP.

Sending manager dismissal docs.

[120] Ms. McCarthy received a dismissal for cause summary dated May 8, 2012 which at the top sets out particulars of Mr. Lau’s employment, and then reads as follows:

A client filed a complaint regarding the manner in which her Mutual Funds were being handled. The initial review by the business showed that Mr. Lau and an Investment Retirement Planner (the “IRP”) conducted a joint session with the client to review her investments. Bank records show that the IRP booked the client’s investments while Mr. Lau claimed her $987,404.48 Guaranteed Investment Certificate as new money rather than existing money.

The client complained that when she met with Mr. Lau on January 27, 2012 she was asked to consider investing in Short Term Income fund and that she was then asked to fill out forms without understanding what they were or why they were needed. The client advised that she had only met with Mr. Lau and had never heard of, or met with, the IRP. Corporate Investigation Services (CIS) was contacted to conduct an investigation.

Mr. Lau provided a statement to his manager regarding the appointment with the client indicating it was a joint session with IRP. By claiming a joint session both employees gained an opportunity for compensation either by earning a commission, or in Mr. Lau's case, meeting target goals.

A review of comments entered on Sales Platform by the IRP for the client indicated “Joint meeting with Tse and Lau”. The GIC and Mutual Fund Trade were posted by the IRP and the manual trade ticket for the Mutual Fund was also signed by the IRP.

The CIS investigation revealed video evidence confirming the IRP was not with Mr. Lau during the appointment with the client on January 27, 2012. Additional bank records show that the IRP had an appointment booked with another client at the time when Mr. Lau was meeting with the client. Moreover, when the IRP was interviewed by CIS he retracted his previous statement, admitting he was not in the meeting with Mr. Lau and the client.

When Mr. Lau was interviewed by CIS and he maintained his statement that he and the IRP met with the client despite evidence to the contrary including: the client’s statement, video surveillance, bank records and the IRP’s admission. Mr. Lau also advised that the IRP coached him with respect to claiming new money versus old and admitted that he claimed new money ten to twenty times even though he knew that it was wrong.

Based on the above, we recommend immediate dismissal for cause at it relates to Integrity, specifically Integrity of Records and Telling the Truth.

[Underlining added.]

[121] The dismissal for cause summary attached a copy of Mr. Crowther’s defalcation report, and appears to have been authored by Mr. Lynn.

[122] Ms. McCarthy testified that her job is to review the dismissal for cause summary form and determine whether she supports it or not. She stated that she fundamentally concurred with the dismissal for cause summary because she felt that they had lost trust in Mr. Lau and she could not have someone on her team that she could not trust having responsibility with their clients’ money.

[123] Ms. McCarthy was “not aware” whether Mr. Lau had any warning letters, or any corrective actions noted on his employment file relating to any disciplinary action before she concurred with the dismissal summary recommendation for “immediate dismissal for cause”. I take from her answer that either she made no enquiries, or that information was not made known to her.

[124] Ms. Ma signed Mr. Lau’s termination letter dated May 10, 2012. It reads in part:

May 10, 2012

Hand Delivered

…

Mr. Marco Lau

400 Main Street

Vancouver, BC

Dear Mr. Lau:

This letter will confirm our discussion of May 10, 2012 wherein we advised you that your employment with Royal Bank of Canada is terminated for cause effective May 10, 2012 (the “Termination Date”) as a result of your falsification of bank records and failing to tell the truth when questioned regarding an alleged joint session with a client. In particular, you claimed existing money as new to bolster your sales, and maintained that you participated in a joint session with a client despite evidence to the contrary.

Your actions demonstrate a serious lack of good judgment. Of further concern is the fact that you have acted contrary to our Code of Conduct, specifically Integrity, Integrity of Records and Telling the Truth. Through your actions, we have lost confidence in your honesty, integrity and trustworthiness.

All wages and accrued vacation pay owed to you up to and Including the Termination Date will be paid out to you on a regular pay day, less applicable deductions. Given the circumstances of the termination of your employment, you are not entitled to any notice of termination or pay in lieu of notice or severance pay, including any income protection payments.

[125] Mr. Lau testified that he was told to return to the branch on May 10, 2012. When he arrived, he was told to go to the upstairs conference room where he sat down with Ms. Ma and Ms. McCarthy. Ms. Ma informed him that his employment was being terminated and she proceeded to read to him from a document she had in her hand. She then gave him the document which was the termination letter dated May 10, 2012, and a package of materials, including details of an employee assistance program with Ceridian Lifeworks. He voiced disagreement with his termination, and asked to view the surveillance video, but Ms. McCarthy said that the decision was made and it was not up for debate. Ms. McCarthy then left the room, and Ms. Ma brought another woman into the room (whose name he forgets) and then Ms. Ma left the room. When the woman began explaining to Mr. Lau the services offered by Ceridian, Mr. Lau said he got up and left the room. Ms. Ma and the new assistant BM accompanied Mr. Lau back to his office where he packed up his personal belongings and he left the branch.

[126] Ms. McCarthy testified that as regional vice-president, it was normal for her to be present when Mr. Lau was being terminated. She testified that Mr. Lau asked if he could see the video but she told him that was not possible; the decision terminating his employment was final, and as noted in the termination letter, they had counselling support for him on site. They all stood up, Mr. Lau was given an opportunity to speak to counsellors, and an opportunity to collect his belongings before being escorted out of the building.

[127] Ms. McCarthy testified that the “day we delivered the dismissal notice”, she called CIS to confirm their “confidence” in the video and “that was confirmed to me”. She also confirmed that RBC had no direct statement from MW.

[128] There is no evidence about who Ms. McCarthy spoke to at CIS “to confirm their confidence in the video”, or how CIS was confident in the video, when by that time, the video no longer existed.

[129] Ms. Macharia testified that if a licensed mutual fund employee is terminated by RBC, then RMFI has a statutory obligation pursuant to Securities Act, National Instrument 33-100, B.C. Reg. 226B/209 to submit Form 33-109F1, Notice of Termination of Registered Individuals and Permitted Individuals, to the regulators, including the BC Securities Commission.

[130] Ms. Macharia testified that she first became aware of Mr. Lau’s termination when RMFI’s registration department sent her for her review, the Form 33-109F1 prepared by the BCO. The form clearly states that “[i]t is an offence under securities legislation and/or derivatives legislation, including commodity futures legislation to give false or misleading information on this form.”

[131] Under the heading “Details about the termination” of Form 33-109F1 are a number of questions, including the following question and the answer which reads as follows:

7. Did the firm or any affiliate of the firm investigate the individual relating to possible material violations of fiduciary duties, regulatory requirements or the compliance policies and procedures of the firm or any affiliate of the firm? Examples include making unsuitable trades or investment recommendations, stealing or borrowing client money or securities, hiding losses from clients, forging client signatures, money laundering, deliberately making false representations and engaging in undisclosed outside business activity.

Yes

[132] Under the heading “Reasons/Details”, it reads:

The termination was a result of his falsification of bank records and failing to tell the truth when questioned regarding an alleged joint session with a client. In particular, he claimed existing money as new to bolster his sales, and maintained that he participated in a joint session with a client despite evidence to the contrary.

[133] By then, Ms. Macharia had Mr. Crowther’s defalcation report dated May 3, 2012. She testified that the defalcation report provided her with all of the information she needed to conclude that there had been breaches of RMFI policies and procedures, and that the Form 33-109F was accurate and consistent with the findings of CIS. As a result, RMFI’s registration department filed the Form 33-109F1 with the BC Securities Commission.

[134] Ms. Macharia testified that the Form 33-109F1 can only be amended if RBC or RFMI know of information that was not taken into account at the time of submitting the notice to the regulators. At times RFMI will conduct its own investigation to determine if there were any securities breaches, and in that case, a notice of termination could be amended to reflect any findings of securities breaches, but that is not the case here.

[135] Ms. Macharia’s evidence suggested that the Form 33-109F1 would not be amended in Mr. Lau’s case.

[136] Following his termination, Mr. Lau obtained a copy of the Form 33-109F1 that RMFI filed with the BC Securities Commission. He was never otherwise provided a copy by RMFI or RBC. After he obtained a copy of the Form 33-109F1, he received a letter dated July 13, 2012 from RBC terminating his banking relationship, and informing him that no later than August 13, 2012, the termination date, he had to obtain an alternate financial institution for his banking needs and that on August 13, 2012 his accounts with RBC would be closed.

[137] Following his termination, Mr. Lau tried, but was unsuccessful in obtaining employment with TD Bank, Canadian Western Bank, and True North Mortgage. He has had three job interviews. He also searched on the internet for job postings. He then looked to applying for his real estate licence, but saw on the relevant website that his application would need to be reviewed if he had a criminal record or other charges, including the BC Securities Commission. To compound difficulties, he paid his application fees with a cheque written on his RBC account, and his cheque bounced because his account was closed by RBC. He admits that he ought to have sent a cheque from another financial institution. He decided against proceeding with obtaining his real estate licence in large part because of the Form 33-109F1.

[138] At the end of 2012 he obtained temporary seasonal employment as a warehouse shipper for Lush Canada for three months until sometime in January 2013, and earned a total of $1,613.05. He remained unemployed for 2013. In the summer of 2013 he began studying 30 to 40 hours a week to become a mortgage broker. He submitted his application to UBC and because of his work experience at RBC, is studying at home in what is a “part-time” shorter course instead of attending classes for the full course at UBC. He plans to write the exam, but to this day, he has not written the exam. He testified that he has not been able to focus on his studies, despite attempts to prepare for the exam. He said that he has not felt confident enough or felt prepared enough to register for the exam, knowing that he has only one shot to pass or not pass.

[139] Mr. Lau testified that since his termination, the one thing he has been focussed on is “for this case to have a result”. He wants to move on, but finds it difficult to move on with the record that he now has, and the accusations that have been made about him by RBC.

[140] There is no medical evidence about Mr. Lau’s medical condition, or the impact that the termination has had on him. However, I could not help but gain the impression from the slow, quiet, and almost monotone manner in which he testified, that he is depressed.

[141] In closing argument the defendants provided 80 case authorities, and following trial, provided a further five authorities. I do not intend to review all of the 85 case authorities as each case must be decided on its own facts. There are however, general principles that must be recognized. RBC alleges that Mr. Lau was terminated for cause on the grounds that he falsified bank records and lied when he claimed that he and Mr. Tse had a joint session with a client.

[142] Generally, absent a contract for a fixed term or a contractual notice provision, it is an implied term of a contract of employment that an employer may dismiss an employee by giving reasonable notice or salary in lieu of notice. If an employer establishes just cause, the employee may be dismissed without notice or salary in lieu of notice: Ansari v. British Columbia Hydro and Power Authority, [1986] B.C.J. No. 3005 (S.C.), aff’d 55 B.C.L.R. (2d) xxxiii.

[143] In Roe v. British Columbia Ferry Services Ltd., 2015 BCCA 1, the Court of Appeal referred to McKinley v. BC Tel, 2001 SCC 38 and the two-part test set for determining whether an employer is justified in terminating an employee on the grounds of dishonesty or deceit and stated:

[26] In McKinley v. BC Tel, 2001 SCC 38 at para. 49, the Court set out a two-part test for determining whether an employer is justified in dismissing an employee on the grounds of dishonesty. The court must determine: (i) whether the evidence establishes the employee’s deceitful (dishonest) conduct on a balance of probabilities; and (ii) if so, whether the nature and degree of the dishonesty warrant the employee’s dismissal. Both parts of the test involve factual inquiries (paras. 48-49). Absent palpable and overriding error, it is common ground that an appellate court may not interfere with a trial judge’s findings of fact.

[27] In particular, the test requires an assessment of whether the employee’s misconduct gave rise to a breakdown in the employment relationship justifying dismissal, or whether the misconduct could be reconciled with sustaining the employment relationship by imposing a more “proportionate” disciplinary response (paras. 48, 53 and 57). A “contextual approach” governs the assessment of the alleged misconduct at this stage of the test (para. 51). That assessment includes a consideration of the nature and seriousness of the dishonesty, the surrounding circumstances in which the dishonest conduct occurred, the nature of the particular employment contract, and the position of the employee (paras. 48-57). The ultimate question to be decided is whether the employee’s misconduct “was such that the employment relationship could no longer viably subsist” (para. 29).

[28] Mr. Justice Iacobucci, writing for the Court in McKinley, summarized the contextual approach to the assessment of whether the employee’s dishonesty gives rise to a breakdown of the employment relationship as follows:

[48] … I am of the view that whether an employer is justified in dismissing an employee on the grounds of dishonesty is a question that requires an assessment of the context of the alleged misconduct. More specifically, the test is whether the employee’s dishonesty gave rise to a breakdown in the employment relationship. This test can be expressed in different ways. One could say, for example, that just cause for dismissal exists where the dishonesty violates an essential condition of the employment contract, breaches the faith inherent to the work relationship, or is fundamentally or directly inconsistent with the employee’s obligations to his or her employer .

…

[51] … I conclude that a contextual approach to assessing whether an employee’s dishonesty provides just cause for dismissal emerges from the case law on point. In certain contexts, applying this approach might lead to a strict outcome. Where theft, misappropriation or serious fraud is found, the decisions considered here establish that cause for termination exists. This is consistent with this Court’s reasoning in Lake Ontario Portland Cement Co. v. Groner, [1961] S.C.R. 553, where this Court found that cause for dismissal on the basis of dishonesty exists where an employee acts fraudulently with respect to his employer. This principle necessarily rests on an examination of the nature and circumstances of the misconduct. Absent such an analysis, it would be impossible for a court to conclude that the dishonesty was severely fraudulent in nature and thus, that it sufficed to justify dismissal without notice .

[Italic emphasis in McKinley; underline emphasis in Roe.]

[144] In McKinley, Mr. Justice Iacobucci also stated:

53 Underlying the approach I propose is the principle of proportionality. An effective balance must be struck between the severity of an employee's misconduct and the sanction imposed. The importance of this balance is better understood by considering the sense of identity and self-worth individuals frequently derive from their employment, a concept that was explored in Reference Re Public Service Employee Relations Act (Alta.), [1987] 1 S.C.R. 313, where Dickson C.J. (writing in dissent) stated at p. 368:

Work is one of the most fundamental aspects in a person's life, providing the individual with a means of financial support and, as