COURT OF APPEAL FOR ONTARIO

CITATION: Leighton v. Best, 2014 ONCA 667

DATE: 20140926

DOCKET:
M43926

Weiler J.A. (In Chambers)

BETWEEN

Randy Leighton and Denise Leighton

Moving Parties

and

Matthew Best

Responding Party

Ashlee L. Barber, for the moving parties

Robert Kerr, for the responding party

Heard: September 19, 2014

Motion for an order to extend the time to appeal from the
    order of Justice James A.S. Wilcox of the Superior Court of Justice dated
    September 13, 2013.

Weiler J.A.:

Introduction

[1]

The issue on this motion is whether Leightons
[1]
time to serve and file a
    notice of appeal should be extended. The test on such a motion is well-settled:
Howard v. Martin,
2014 ONCA 309, 42 R.F.L. (7th) 47, at para. 26. It
    is whether the justice of the case requires that the extension be granted
    having regard to the circumstances of the particular case and all relevant
    considerations including: 1) whether the moving party formed a
bona fide
intention to appeal during the time permitted for an appeal; 2) the length of
    the delay and the explanation for the delay; 3) the merits of the proposed
    appeal; and 4) any prejudice to the responding party. (The order in which the
    third and fourth factors are considered is sometimes reversed.)

Facts

[2]

A brief summary of the facts as found by the trial judge will be of
    assistance. During a gentlemans hockey game, Randy Leighton highsticked
    Matthew Best, causing Bests face to bleed. When the referee stopped play, an
    altercation ensued. In retaliation for the high stick, Best removed Leightons
    hockey helmet and punched Leighton with such force that he broke Leightons jaw
    in three places and caused him to fall to his knees. The trial judge concluded
    that:

Best exceeded the scope of the implied consent [to physical
    contact] by removing Leightons helmet to land a punch of such force that there
    must have been an intention to injure or at least recklessness as to the
    consequences of such a hard blow.

[3]

Based on his findings, the trial judge held Best civilly liable
    to Leighton for damages for injuries sustained as a result of the punch:
Leighton
    v. Best
, 2009 CanLII 25972 (ON SC). Best did not appeal the decision.

[4]

Leighton commenced garnishment proceedings against Best and
    received funds between September 2010 and August 2011. In September 2011, Best
    made an assignment in bankruptcy, which resulted in a stay of the garnishment
    proceedings.

[5]

Leighton brought a motion for a declaration that his award of
    damages
would survive Bests discharge from bankruptcy
pursuant
    to s. 178(1)(
a.1
)(i) of the
Bankruptcy and Insolvency Act
,

R.S.C. 1985, c. B-3 (
BIA
)
, because it
was the result of
    bodily harm that was intentionally inflicted
.

[6]

The motion judge dismissed Bests motion on September 13,
    2013. It is this decision that Leighton seeks an extension of time to appeal.
    The reason is that in the intervening period, the legal landscape has changed.
    In dismissing Bests motion, the motion judge relied on
Dickerson v.
    1610396

Ontario Inc.
,
2013 ONSC 403, 98 C.B.R. (5th) 40. In that case,

the
    motion judge held that although the defendant had intended to apply force to
    the plaintiff by punching him, that did not mean he intended to injure the plaintiff
    as required under s. 178(1)(a.1) of the
BIA.
On October 31, 2013,
    the Court of Appeal reversed the decision at first instance in
Dickerson
and
    held that where there is direct proof of intentional infliction of harm or
    where such intent can be reasonably inferred on the facts, s. 178(1)(a.1)(i)
    will apply. See
Dickerson v. 1610396 Ontario Inc.
, 2013 ONCA 653, 369
    D.L.R. (4th) 738. The court added, at para. 40, that [i]n all the reported
    cases of assault, the section was found to apply.

[7]

Leightons affidavit filed in support of this motion is to the effect
    that on October 31, 2013, his counsel, Rachel Leck, brought the Court of
    Appeals decision to his attention and he instructed her to appeal. On the same
    day, she wrote to the motion judge, copying Bests counsel, and asked him to
    reconsider his decision as the order dismissing the motion had not yet been
    issued and entered. The motion judge refused to do so on November 19, 2013.
    That same day, Leightons counsel asked Bests counsel to consent to the late filing
    of the notice of appeal. On December 23, 2013, Best refused.

[8]

This notice of motion requesting an extension of time was not brought
    until June 16, 2014. On August 12, 2014, the motion was adjourned to permit
    Leighton to file further and better material in support of the motion and
    counsel for Best was given the opportunity to cross-examine if he so desired.
    No cross-examinations have occurred.

Application of the Test

[9]

Leighton concedes he did not intend to appeal within the prescribed time
    period. However, when Leighton heard of the Court of Appeals decision in
Dickerson
from his lawyer about two weeks after the appeal period had expired, he
    acted promptly and instructed his lawyer to appeal. In
Rizzi v. Mavros
,

2007 ONCA 350, 85 O.R. (3d) 401,

a delay of 15 months in forming an intention to appeal was accepted on the
    basis that prior to the release of the Supreme Court of Canadas decision in
Resurfice
    Corp. v. Hanke
,

2007 SCC 7,

[2007] 1 S.C.R. 333
, conflicting
    appellate authority on causation made success on appeal very uncertain. In this
    case, success on appeal appeared to be unlikely until the
Dickerson
decision was reversed. The delay respecting intention to appeal is short.

[10]

Insofar
    as the length of the delay in seeking an extension of time to appeal and an
    explanation for the delay are concerned, Leighton simply says that he left the
    matter in the hands of his lawyer to take whatever steps [were] necessary.

[11]

Leightons
    lawyer has sworn an affidavit that addresses her delay in waiting until June
    2014 to bring this motion. She advises that in the summer of 2013, her husband
    suffered from a serious health problem that required a brief period of
    hospitalization and regular and ongoing treatment. She states that managing
    all the household responsibilities, raising her children and concern for her
    husbands health took an emotional and physical toll on her. Yet she did not
    take a leave of absence from work. She states, however, I was in the office
    less frequently between the fall of 2013 to the present and was distracted by
    my situation at home which caused me to be less vigilant following up with
    matters in the workplace.

[12]

Bests
    counsel submits that Leightons counsel is not a sole practitioner and could
    have assigned the file to someone else in her office because it was time
    sensitive.

[13]

The
    steps Leightons counsel took until December 23, 2013, are a satisfactory
    explanation for the delay until that date. I am not satisfied with the
    explanation for the delay for the first six months of this year. Leck was
    actively engaged on the file for some six months after her husbands illness
    and, if the cumulative effect of her responsibilities was overwhelming, I agree
    that she ought to have transferred the file within the office.

[14]

The
    failure of Leightons counsel to provide a satisfactory explanation for the
    delay is not necessarily fatal in itself, however, because in deciding whether
    the overall justice of the case requires that leave be granted, consideration
    must be given to all of the factors. In
Howard,
Gillese J.A. commented,
    at para. 36, The merits of a proposed appeal can be decisive on a motion to
    extend the time for filing. Even if the other factors militate against
    extending time, the merits may be so significant as to justify extending time.

[15]

In
    this case, the motion judge stated, at para. 20 of his reasons, I find the
Dickerson
case and the present case to be similar in important aspects. In both,
    the punches were intentional. The merits of appeal are strong.

[16]

Best
    submits that he suffers prejudice by being deprived of a timely discharge from
    bankruptcy. He states, The fundamental policy of the bankruptcy regime is to
    relieve a debtor of an insupportable burden of debt and allow [him] to return
    to a productive economic life. Bests prescribed period of bankruptcy was 21
    months. It has now reached 36 months and will continue if the motion is
    allowed. The incident giving rise to the civil judgment took place more than 10
    years ago and Best submits he should be permitted to move forward with his
    life.

[17]

Leighton
    submits that Best is not prejudiced by the delay because he has known since
    shortly after the Court of Appeals decision reversing
Dickerson
that
    Leighton was seeking to have the motion judges decision reconsidered or
    appealed. The parties had their day in court. Enforcement of Leightons judgment,
    which he submits is in accordance with the policy in s. 178(1)(1.a)(i) of the
BIA
,
    should not be thwarted because the legal landscape changed only after the
    appeal period had expired and the total delay here is about the same as in
Resurfice.

[18]

I
    agree that the prejudice to Best from being unable to obtain an earlier
    complete discharge should not prevent an extension from being granted. Overall,
    I am of the opinion that it is in the interest of justice to extend the time to
    file a notice of appeal. The motion is allowed. Leighton shall have five days
    from the release of these reasons to file a notice of appeal.

[19]

Although
    Leighton has been successful on this motion, he has received an indulgence from
    the court. Consequently, Leighton is ordered to pay costs to Best fixed in the
    amount of $1500 inclusive of all disbursements and applicable taxes.

Released: September 26, 2014

KMW                                                                            K.M.
    Weiler J.A.

[1]
Although the applicants are Randy Leighton and his wife, Denise Leighton, I
    will refer to them collectively and individually as Leighton.


COURT OF APPEAL FOR ONTARIO

CITATION: Magine Construction Inc. v. The Moro Group Builders
    Inc., 2014 ONCA 663

DATE: 20140924

DOCKET: C58509

Juriansz, LaForme and Lauwers JJ.A.

BETWEEN

Magine Construction Inc.

Plaintiff (Appellant)

and

The
    Moro Group Builders Inc., John Gallucci, Anthony

Moro, Marc Anthony Moro,
    HP Bloor Street Ltd. and The Address Inc.

Defendants (Respondents)

Neil Kotnala, for the appellant

Jeffrey A. Armel, for the respondents

Heard and released orally: September 19, 2014

On appeal from the judgment of Justice Edward M. Morgan
    of the Superior Court of Justice, dated February 14, 2014.

ENDORSEMENT

[1]

This is an appeal from summary judgment granted to the defendants,
    dismissing the appellants entire claim.

[2]

Counsel began by pointing out that the motion judges reasons do not
    reference the alternative claim of unjust enrichment, which was included in the
    amended statement of claim. On this basis, he argued that the claim should not
    be considered to have been dismissed.

[3]

We refused to entertain this new argument. It was not contained in the
    factum and was advanced without notice to the respondents counsel.

[4]

The motion judge had jurisdiction to dismiss the entire claim and, in
    any event, we see no merit in the argument.

[5]

We would dismiss the appeal for essentially the reasons provided by the
    motion judge, in which we find no error.

[6]

Costs to the respondent are fixed at $6,000.00 all inclusive.

R.G. Juriansz J.A.

H.S. LaForme J.A.

P.
    Lauwers J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Martenfeld v. Collins Barrow Toronto LLP, 2014 ONCA
    625

DATE: 20140910

DOCKET: C57525

Doherty, Cronk and Hourigan JJ.A.

BETWEEN

Marvin Martenfeld and Jekel Enterprises Inc.

Plaintiffs (Respondents)

and

Collins
    Barrow Toronto LLP and

Collins
    Barrow Toronto Inc.

Defendants (Appellants)

Lou Brzezinski and Catherine MacInnis, for the
    appellants

Michael Tamblyn and Ryan Hauk, for the respondents

Heard: April 22, 2014

On appeal from the judgment of Justice Joan L. Lax of the
    Superior Court of Justice, dated July 24, 2013, with reasons reported at 2013
    ONSC 4792.

Cronk J.A.:

[1]

This appeal concerns the financial consequences of an equity partners withdrawal
    from an accounting partnership to join a competitor firm.  The principal issue
    is the proper interpretation of a provision in the partnership agreement that
    requires a withdrawing and competing equity partner to pay liquidated damages
    to the partnership, in an amount equal to two times the partners Permanent
    Capital.

I.        Background

(1)

The Parties

[2]

The respondent, Marvin Martenfeld (Martenfeld), is a chartered
    accountant and a former partner of the appellant, Collins Barrow Toronto LLP
    (CBT LLP or the partnership), an accounting firm.  He has practised his
    profession for almost 40 years.  Over the decades, he carried on his accounting
    practice in various large accounting firms.  In about 1992, he merged his
    practice with those of several other accountants to form Daren, Martenfeld,
    Carr and Company.

[3]

In approximately 1996, Daren, Martenfeld, Carr and Company dissolved.  The
    former partners worked under a decentralized arrangement until 2003, when Martenfeld
    and others merged their practices under the name DMCT LLP.  From 2003 to 2005,
    Martenfeld served as DMCT LLPs managing partner and a member of the Executive
    Committee.

[4]

In the mid-1990s, Martenfeld and other partners created a management
    company to provide administrative and consulting services to their partnership,
    and to permit the partners to engage in income-splitting with related persons,
    typically their spouses or other family members.

[5]

In 2008, the DMCT LLP partners joined the Collins Barrow franchise of
    accounting firms, adopting the name of CBT LLP and renaming the management
    company Collins Barrow Toronto Inc. (CBT Inc.).

[6]

The shareholders of CBT Inc. are holding companies owned or controlled,
    directly or indirectly, by each of CBT LLPs partners.  In Martenfelds case,
    the respondent, Jekel Enterprises Inc. (Jekel), a company owned by
    Martenfelds wife, was a shareholder of CBT Inc.

[1]

(2)

2004 Partnership Agreement

[7]

Sometime in 2003, the DMCT LLP partners decided to enter into a written
    partnership agreement.  The partners executed the agreement in about June 2004,
    with an effective date of January 1, 2004 (the Partnership Agreement).

[8]

In conjunction with the Partnership Agreement, the predecessor
    management company to CBT Inc.  DMCT Consultants Inc.  executed promissory
    notes in favour of each of its shareholders that were attached as Schedule D
    to the Partnership Agreement.  Jekels promissory note, dated January 1, 2004,
    was in the amount of $269,841 (the Jekel Loan).  By the terms of Jekels
    promissory note, payment of the principal owing on the Jekel Loan, without
    interest, was due on such date as may be determined by [the partnership] or
    on such earlier date as may be provided in the [Partnership Agreement].

[9]

The Partnership Agreement contains several provisions governing the financial
    rights and obligations of the parties on the withdrawal of an equity partner.

[10]

Section
    11.2.2 of the Partnership Agreement is the key provision at issue on this
    appeal.  This section creates a financial disincentive for equity partners to
    leave the partnership and enter into competition, by imposing an obligation on
    the withdrawing partner to pay liquidated damages to CBT LLP.  The amount of
    the damages payable is equal to two times the withdrawing partners Permanent
    Capital, subject to set-off against identified sums owed by the CBT Group to
    the withdrawing partner.  Section 11.2.2 reads in part:

Any Equity Partner who withdraws from the Partnership and
    competes with the Partnership
within the meaning of Section 11.2.1,
agrees
    to pay the Partnership, as a genuine pre-estimate of liquidated damages, and
    not a penalty, an amount equal to two times his or her then Permanent Capital
    (as paid-up or required to be paid-up)
and agrees that any balance in his
    or her Capital Account, if any, as well as any capital loans made as
    contemplated in Section 4.7, will constitute a down-payment that may be
    retained by (or paid by the Corporation to) the Partnership by way of set-off
    to be applied against any amounts owing in respect of this obligation. Any
    balance of the Capital Account owing to the Partner shall be paid out as
    contemplated in Section 11.5 and any balance of any capital loans made as
    contemplated in Section 4.7 shall be paid out as contemplated therein.  [Emphasis
    added.]

[11]

The
    term Permanent Capital is defined under s. 1.1 of the Partnership Agreement
    in this fashion:

Permanent Capital in respect of an Equity Partner in a Fiscal
    Year, means the lowest level of capital required of such Equity Partner at any
    time during such Fiscal Year, and which amount may not be reduced at any time
    during such Fiscal Year, as determined at the beginning of each Fiscal Year for
    each Equity Partner by Special Resolution.

[12]

Section
    1.1 of the Partnership Agreement also contains the following relevant
    definitions:

Capital Account shall mean each Partners capital account as
    maintained pursuant to Section 9.2.

.

Equity Partner means a Partner who has an interest in the
    profits and losses of the Partnership as well as an interest in the capital
    (i.e. equity) of the Partnership and whose name is set out in Schedule A
    attached hereto, together with those persons who become Equity Partners
    pursuant to the provisions of this Agreement from time to time, excluding an
    ex-Partner.

.

Related Person means a Person related to an Equity Partner
    within the meaning of the Income Tax Act and designated by the Equity Partner
    in writing.

.

Withdrawal shall mean the withdrawal of a Partner pursuant
    to Section 11.1, other than by reason of Expulsion, death, retirement or
    disability, and Withdrawing or Withdrawn shall have a similar meaning.

[13]

Article
    9 of the Partnership Agreement deals with CBT LLPs capital.  Sections 9.1 and
    9.2 state in part:

The paid-up capital of the Partnership shall consist of the
    Permanent Capital contributions made by the Equity Partners as determined by
    Special Resolution from time to time, including upon admission to the
    Partnership.  An Equity Partner will be notified of his or her required paid-up
    capital contribution and this required paid-up capital must be injected into
    the Partnership within 30 days of the date of notification of the paid-up
    capital requirement from the Partnership or as agreed by the Partnership (by
    Special Resolution, excluding the applicable Partner) [s. 9.1].

An individual Capital Account shall be established and
    maintained for each Equity Partner.  Each Equity Partners Capital Account in a
    Fiscal Year shall consist of his or her Permanent Capital for such Fiscal Year
    and (a) shall be increased by the Equity Partners allocable share of income
    allocated pursuant to this Partnership Agreement, and (b) shall be decreased by
    (i) all amounts distributed to that Equity Partner and (ii) that Equity
    Partners allocable share of losses allocated pursuant to this Partnership
    Agreement [s. 9.2].

[14]

The
    Partnership Agreement also imposes financial obligations on the CBT Group on
    the withdrawal of an equity partner from CBT LLP.  Section 4.7 states:

Upon an Equity Partner ceasing to be an Equity Partner, the
    Corporation may, subject to applicable law, distribute to the related
    Shareholder such dividends as may be determined by the Board of Directors of the
    Corporation.  After the distribution of such dividends, if any, the Corporation
    shall, subject to applicable law, redeem the related Shareholders Shares for
    the stated redemption price thereof specified in the Corporations articles.

Any capital loans due to the Equity Partner or a Related Person
    by the Corporation shall be repayable over twenty-four months following the
    redemption of the Shares on the same basis as the Equity Partners Permanent
    Capital of the Partnership as contemplated in Section 11.5, mutatis mutandis,
    for greater certainty subject to the set-off or similar rights set out in
    Sections 11.2.2 and 11.5.

[15]

Thus,
    by reason of s. 4.7, on the withdrawal of an equity partner CBT Inc. is
    authorized or obliged: 1) to distribute dividends to shareholders related to
    the withdrawing partner; 2) after the distribution of such dividends, if any, to
    redeem shares in CBT Inc. held by shareholders related to the withdrawing
    partner; and 3) following such share redemption, to repay any capital loans due
    to the withdrawing partner or a related shareholder.

[16]

Under
    s. 11.5 of the Partnership Agreement, the CBT Group is obliged to pay a
    withdrawing equity partner: 1) his or her Permanent Capital, if any, standing
    to the credit of the withdrawing partner in his or her Capital Account as at
    the end of the partnership fiscal year immediately preceding the partners
    departure date (s. 11.5(a)); 2) the amount, if any, of any declared dividends
    on his or her shares in CBT Inc. and the required amount for redemption of those
    shares (s. 11.5(b)); and 3) his or her share of net income for the year of
    withdrawal, pro-rated to the date of the partners departure (s. 11.5(c)).

(3)

Events Preceding the Partnership Agreement

[17]

Both
    before and after the creation of CBT LLP, the partners prepared three sets of
    annual financial statements: 1) financial statements concerning the business
    and financial affairs of their accounting practice (the LLP Statements); 2)
    financial statements regarding the business and financial affairs of the firms
    management company (the Inc. Statements); and 3) financial statements combining
    the LLP and the Inc. Statements (the Group Statements).

[18]

In
    April 2004, two months prior to the formal execution of the Partnership
    Agreement, Martenfeld, then the managing partner of DMCT LLP, circulated a
    memorandum to the partners (the April 2004 Memorandum), attaching the LLP,
    Inc. and Group Statements as of December 31, 2003 and a Capital Equalization
    Schedule for the 2003 year-end.  The CBT Group maintains that the Capital
    Equalization Schedule reflected the year-end capital of each partner, based on the
    Group Statements, and the amount of each equity partners Permanent Capital, as
    well as other capital requirements for the forthcoming year.

[19]

At
    annual meetings, the CBT LLP partners approved the annual LLP Statements and Capital
    Equalization Schedule.  The approved schedule as of December 31, 2003 included
    a column entitled 2004 Permanent Capital.  In 2005, this heading was replaced
    with the phrase Anchor Capital Required, a term not mentioned in the
    Partnership Agreement.

[20]

The
    CBT Group maintains that, after 2003, each partners Permanent Capital in any
    year was the amount of his or her Anchor Capital disclosed in the annual
    Capital Equalization Schedule.

[21]

As
    of December 31, 2003, the Group Statements recorded a balance of $321,301 in
    Martenfelds Capital Account, while the Capital Equalization Schedule showed
    his 2004 Permanent Capital as $230,000.  In contrast, the LLP Statements for
    the same period indicated that Martenfelds Capital Account had a negative
    balance of ($334).

(4)

Conversion of Partnership Capital to Shareholder Loans

[22]

In
    November 2004, some months after the execution of the Partnership Agreement, the
    CBT LLP partners decided to convert some of the partnership capital into
    capital loans (the Capital Conversion).  The Capital Conversion had two objectives:
    first, to limit the partners potential personal liability to creditors of the
    partnership; and, second, to equalize the amounts in each partners Capital Account
    so as to eliminate discrepancies among the amounts that individual partners had
    at risk in the partnership.  To effect the Capital Conversion, the partners
    moved amounts from their Capital Accounts in CBT LLP to shareholder loan
    accounts in CBT Inc., and each partners Capital Account was flattened to
    $10,000.

[23]

The
    Capital Conversion was reflected in the 2004 LLP Statements, which showed the
    year-end balance in the Capital Account of each partner as $10,000.  From 2004
    onwards, the partners Capital Accounts were again reconciled to the agreed
    $10,000 at the end of each fiscal year, and this amount was consistently
    recorded in the annual LLP Statements.  The Inc. Statements, in turn, recorded
    the specific amounts of each of the shareholder loans as Loans Payable to
    Shareholders or Loans Payable to Related Parties.

(5)

Proposed 2007 Amendments to the Partnership Agreement

[24]

In
    the fall of 2007, the Executive Committee of CBT LLP proposed several amendments
    to the Partnership Agreement.  These included the deletion of the s. 1.1 Permanent
    Capital definition and the introduction of the term Capital Loan, defined to
    mean shareholder loans from related corporations.  In addition, a significant revision
    of s. 11.2.2 was proposed.  If approved, the s. 11.2.2 revision would have
    required a withdrawing equity partner to pay liquidated damages equal to two
    times his or her Capital Account and Capital Loan, rather than two times his
    or her Permanent Capital.

[25]

The
    CBT LLP partners never approved the proposed 2007 amendments.
[2]

(6)

Martenfelds Withdrawal from CBT LLP

[26]

Martenfeld
    was a full equity partner in CBT LLP.  On June 30, 2009, he delivered written
    notice of his withdrawal from the partnership.  CBT LLP accepted his withdrawal
    on July 2, 2009 and the parties agreed to a departure date of August 31, 2009.
    The following day, September 1, 2009, Martenfeld joined a competing accounting firm.

[27]

Under
    the terms of the Partnership Agreement, Martenfeld was entitled to leave CBT LLP
    and join a competing firm.  However, his decision to do so triggered serious
    personal financial consequences for him.  Upon withdrawal from CBT LLP, Martenfeld
    lost his vested retirement benefits, valued at approximately $600,000 at the
    time of his departure.  He also became obliged to pay CBT LLP liquidated
    damages under s. 11.2.2 of the Partnership Agreement.

[28]

Unfortunately,
    Martenfelds departure from CBT LLP rapidly became acrimonious and disputes
    arose regarding his rights and obligations on withdrawal, as well as his
    conduct as a partner.  The parties disagreed about the amount of his Permanent
    Capital for the purpose of his liquidated damages obligation under s. 11.2.2,
    and whether CBT Inc. was obliged to repay the Jekel Loan.  In addition, CBT LLP
    alleged that Martenfeld had breached his contractual and professional obligations
    to the partnership in numerous ways, entitling CBT LLP to substantial damages.

[29]

The
    Martenfeld Group eventually sued.  It took the position that Martenfelds Permanent
    Capital was $10,000, as reflected in his Capital Account with CBT LLP and
    recorded in the LLP Statements.  On this basis, Martenfelds indebtedness for liquidated
    damages under s. 11.2.2 totalled $20,000 (two times his Permanent Capital).

[30]

The
    Martenfeld Group also claimed that the Jekel Loan to CBT Inc. formed no part of
    the calculation of Martenfelds Permanent Capital and that it was to be paid on
    Martenfelds departure, together with Martenfelds share of CBT LLPs 2009
    income, his Permanent Capital of $10,000, and Jekels share of dividends and
    management fees from CBT Inc., under ss. 4.7 and 11.5 of the Partnership
    Agreement.

[31]

Finally,
    the Martenfeld Group sought damages against the CBT Group, including punitive,
    aggravated and exemplary damages, for alleged misconduct by CBT LLPs Executive
    Committee in relation to Martenfelds departure from the partnership and in the
    conduct of the litigation.

[32]

The
    CBT Group resisted these claims on several bases.  First, it maintained that Martenfelds
    Permanent Capital was his Anchor Capital listed in the partnerships 2009 annual
    Capital Equalization Schedule.  Since Martenfelds recorded Anchor Capital was
    $160,494 as of December 31, 2008, this would yield $320,988 in liquidated
    damages owing by Martenfeld under s. 11.2.2.

[33]

Second,
    according to the CBT Group, the shareholder loans to CBT Inc., including the
    Jekel Loan, were not intended to be genuine loans but, instead, formed part of
    CBT LLPs partnership capital.  The CBT Group argued that after set-off of the
    Jekel Loan (in the amount of $176,201 as of December 31, 2009) and the $10,000
    shown on the LLP Statements as Martenfelds Permanent Capital, Martenfeld owed
    $134,787 as liquidated damages ($320,988 - $186,201).

[34]

Further,
    and in any event, the CBT Group claimed that the Martenfeld Group was not
    entitled to payment of the Jekel Loan or other amounts under ss. 4.7 and 11.5
    because Martenfeld had breached his contractual and professional duties,
    including his fiduciary duties, to his partners prior to his departure from the
    partnership.  The CBT Group counterclaimed against the Martenfeld Group for significant
    damages and/or disgorgement of profits on account of Martenfelds alleged
    misconduct.

II.       Trial Judges Decision

[35]

The
    trial judge rejected the CBT Groups urged construction of the Partnership
    Agreement, described above.  She made the following critical findings:

(1)

only the
    LLP Statements reflected the partners     s. 9.2 Capital Accounts in the
    partnership. After 2004, the LLP Statements consistently listed the amount in
    each partners Capital Account as $10,000;

(2)

the Group
    Statements reflected the financial picture of the accounting practice as a
    whole.  However, the Group Statements had no bearing on the obligation of a
    withdrawing equity partner to pay liquidated damages;

(3)

Martenfelds
    Permanent Capital at the time of his departure from CBT LLP was $10,000  the
    amount in his Capital Account as set out in the December 31, 2009 LLP
    Statements, and did not include the Jekel Loan;

(4)

pursuant to
    ss. 11.5(a) and (c), CBT LLP owed Martenfeld $10,000 on account of his Permanent
    Capital and $33,500 on account of his share of partnership profits pro-rated to
    the date of his departure;

(5)

Martenfeld,
    in turn, owed CBT LLP $20,000 on account of liquidated damages under s. 11.2.2;

(6)

the CBT
    Group was required to repay the Jekel Loan in accordance with s. 4.7.  Pending
    any agreement to the contrary by the parties, the trial judge fixed the amount
    of the Jekel Loan at $198,450, as set out in the June 2009 Inc. Statements; and

(7)

under ss. 4.7 and
    11.5, Jekel was entitled to its share of declared dividends, and its pro-rata
    share of management fees for the month of August 2009 from CBT Inc.

[36]

The
    effect of these findings was that the CBT Group owed the Martenfeld Group the
    net aggregate amount of $260,788.25, after deduction of the $20,000 in
    liquidated damages owed by Martenfeld to CBT LLP.

[37]

The
    trial judge also dismissed the parties competing assertions of misconduct as
    against each other and their associated damages claims, including the CBT
    Groups counterclaim.

III.      Issues

[38]

The
    CBT Group advances three main issues on appeal:

1)

Did
    the trial judge err by holding that Martenfelds Permanent Capital for the
    purpose of s. 11.2.2 of the Partnership Agreement was $10,000 as of the date of
    his departure from CBT LLP?

2)

Did
    the trial judge err by holding that the CBT Group is obliged to repay the Jekel
    Loan, in the amount of $198,450?

3)

Did
    the trial judge err by holding that Jekel is entitled to its share of declared dividends,
    together with its share of management fees for the month of August 2009, and
    that Martenfeld is entitled to his pro-rata share of CBT LLPs 2009 profits?

IV.     Analysis

(1)

Approach to Contractual
    Interpretation and Standard of Review

[39]

In
    determining the legal rights and obligations of the parties under a written
    contract, the primary task of a reviewing court is to ascertain the objective
    intentions of the parties and the scope of their understanding regarding the
    rights and obligations at issue.  Recently, in
Sattva Capital Corp. v.
    Creston Moly Corp.
, 2014 SCC 53, the Supreme Court, at para. 47,
    reiterated the well-established principle that courts are to undertake this
    task with a view to the contract as a whole, giving the words used their
    ordinary and grammatical meaning, consistent with the surrounding circumstances
    known to the parties at the time of formation of the contract.

[40]

This
    interpretive approach governs the construction of the Partnership Agreement.
    Under this approach, while the circumstances surrounding the formation of the
    disputed contract are relevant as an interpretive aid, they cannot overtake the
    written words used by the parties.  As the
Sattva
court explained, at
    para. 57, [t]he interpretation of a written contractual provision must always
    be grounded in the text and read in light of the entire contract.

[41]

The
Sattva
court also held, at para. 50, that: Contractual interpretation
    involves issues of mixed fact and law as it is an exercise in which the
    principles of contractual interpretation are applied to the words of the
    written contract, considered in light of the factual matrix.  Thus, questions
    of contractual interpretation generally attract a deferential standard of
    review:
Sattva
at para. 52.  Further, although it may be possible to
    identify an extricable question of law from within what was initially
    characterized as a question of mixed fact and law, courts should be cautious
    in identifying extricable questions of law in disputes over contractual
    interpretation since, among other considerations, the goal of contractual
    interpretation, to ascertain the objective intentions of the parties, is
    inherently fact specific:
Sattva
at paras. 53-55.

[42]

On
    this appeal, the CBT Group challenges the trial judges findings regarding the
    meaning of Permanent Capital and her quantification of the amount of
    liquidated damages owed by Martenfeld under s. 11.2.2.  The CBT Group also
    attacks her findings concerning the relevance of the Capital Equalization
    Schedules, the Group Statements, and the parties discussions leading up to the
    formation of the Partnership Agreement.  These findings are either findings of
    fact or, on the authority of
Sattva
, findings of mixed fact and law.
    In either case, they attract significant deference from this court.  Absent
    palpable and overriding error, appellate intervention with these findings is
    precluded.

(2)

Martenfelds Permanent Capital

(i)

Contractual Definition of Permanent Capital

[43]

The
    trial judge held that Martenfelds Permanent Capital was the same as the
    amount stated in his Capital Account, as reflected in the LLP Statements.  She
    also held that shareholder loans to CBT Inc., specifically, the Jekel Loan, are
    irrelevant to the quantification of a partners Permanent Capital under s.
    11.2.2.

[44]

The
    CBT Group challenges these core holdings on four main grounds.  First, it
    argues that the trial judges interpretation of the phrase Permanent Capital
    under s. 11.2.2  that a partners Permanent Capital is the same as the
    amount in his or her Capital Account  renders the s. 1.1 definition of Permanent
    Capital meaningless.

[45]

As
    I will explain, I do not accept that the trial judges interpretation of the
    phrase Permanent Capital renders the s. 1.1 definition of that term
    ineffective or devoid of meaning.

[46]

Under
    s. 1.1, Permanent Capital is defined as the lowest level of capital
    required of an equity partner in a partnership fiscal year, which amount may
    not be reduced at any time during the relevant year.  The use of the term
    lowest level allows for the possibility that the amount of capital required
    from an equity partner may fluctuate during the course of a fiscal year.
    However, only the lowest required amount of capital in any fiscal year
    constitutes the partners Permanent Capital in that year.

[47]

Section
    1.1 also contemplates that the partnership will pass a special resolution
    fixing each partners Permanent Capital at the beginning of each fiscal year.
    During the fiscal year, a partners Permanent Capital may only change if the
    partnership agrees to increase his or her required capital investment.

[48]

Section
    1.1 defines the term Capital Account as each partners capital account as
    maintained pursuant to s. 9.2.  Section 9.2 says that an equity partners
    Capital Account is to consist of his or her Permanent Capital for a given
    fiscal year, and increase on account of the partners allocated share of
    partnership income and decrease on account of his or her draws and allocated
    share of partnership losses.  Accordingly, under s. 9.2., the amount of a
    partners Capital Account is subject to fluctuation during the course of a
    fiscal year, to account for his or her share of partnership income and losses,
    and distributions received.

[49]

The
    combined effect of these provisions, in my view, is that a partners Capital Account
    consists of his or her Permanent Capital plus an adjustment for his or her flow
    of income, draws and losses.  In other words, a partners Capital Account is
    made up of his or her Permanent Capital, subject to change only by agreement of
    the partners, and an amount calculated with reference to the partners
    allocated share of partnership income and losses and the partners draws during
    the fiscal year.  In this fashion, the amount of a partners Capital Account
    may increase and decrease throughout a fiscal year, while the amount of his or
    her Permanent Capital remains constant.

[50]

The
    CBT LLP partners gave effect to these provisions by agreeing to equalize the
    partners Capital Accounts.  In the first LLP Statements after the Capital
    Conversion, regardless of any fluctuations in a partners Capital Account
    during the fiscal year, the partnership set each partners Capital Account at
    $10,000.  Thereafter, both at the beginning of a new fiscal year and at the end
    of the preceding fiscal year, the amount of a partners Capital Account was the
    same fixed amount of $10,000.  Each new fiscal year, the partnership approved
    this amount, thereby fixing the amount of each partners Permanent Capital for
    that year.

[51]

The
    partners confirmed this equalization on an annual basis in successive
    partnership fiscal years.  On the trial judges undisputed findings, both CBT
    LLP and CBT Inc. filed income tax returns based on this fixed amount for each
    partners Capital Account.

[52]

It
    follows, in my opinion, that while the trial judge erred when she held, without
    qualification, that a partners Capital Account and Permanent Capital are one
    and the same, this error was not overriding.  The result is the same.  The
    trial judge held that the amount in Martenfelds Capital Account at the time of
    his withdrawal was $10,000, and so his liquidated damages under s. 11.2.2 were
    $20,000.  As I read the relevant provisions of the Partnership Agreement, the
    partnerships approval of all partners $10,000 Capital Account balances for
    each new fiscal year set all partners Permanent Capital at $10,000, regardless
    of intra-year fluctuations in the amount in their individual Capital Accounts.
    Thus, Martenfelds Permanent Capital was $10,000, both in 2008 and 2009, and
    his liquidated damages obligation was $20,000  two times the amount of his
    Permanent Capital  at the time of his withdrawal from CBT LLP.

[53]

I
    see nothing in this interpretation of the s. 1.1 definitions of Permanent
    Capital and Capital Account and s. 9.2 of the Partnership Agreement, as
    implemented under the Capital Conversion, that renders the definition of the
    term Permanent Capital ineffective.  To the contrary, it recognizes the
    partners agreement that an equity partners Capital Account was to consist of
    his or her Permanent Capital on a year-to-year basis.  It was open to the
    partners to also agree, as they did in November 2004, that the amounts of the
    partners Capital Accounts were to be fixed on an annual basis, to achieve the
    risk reduction and income-enhancing benefits afforded by the Capital Conversion.
    This arrangement neither contradicted nor denuded the definition of Permanent
    Capital under s. 1.1 of the Partnership Agreement.

[54]

I
    also fail to see any palpable and overriding error in the trial judges ruling that
    the term Permanent Capital in s. 11.2.2 of the Partnership Agreement does not
    extend to shareholder loans, specifically, the Jekel Loan, shareholder capital,
    the management company or Related Persons. The provisions of the Partnership
    Agreement overwhelmingly support this conclusion.

[55]

Neither
    the s. 1.1 definitions of Permanent Capital and Capital Account nor s. 9.2
    refer to shareholder or capital loans, the partnerships management company or
    Related Persons.  The phrase Permanent Capital is defined under s. 1.1
    solely with reference to equity partner capital contributions  not amounts
    loaned to the management company by way of shareholder or capital loan, from either
    an equity partner or a person related to an equity partner.

[56]

Similarly,
    under both ss. 9.1 and 9.2, the focus of the partners approach to the firms capitalization
    is on Permanent Capital contributions made by the equity partners from time to
    time.  Sections 9.1 and 9.2 contain no mention of shareholder or capital loans,
    or financial contributions made to the partnerships management company by
    partners or persons related to them.  Instead, s. 9.1 states that the paid-up
    capital of the partnership shall consist of the Permanent Capital
    contributions made by the Equity Partners and that an equity partner would be
    notified of his or her required paid-up capital contribution.  Section 9.1
    also provides for the timing of payment of a partners paid-up capital requirement.
    Thus, s. 9.1 equates Permanent Capital contributions with required paid-up
    capital contributions
by an equity partner
, to the partnership.

[57]

In
    addition, s. 4.7 of the Partnership Agreement, quoted above, differentiates
    between capital loans due to a departing equity partner or a Related Person
    by the management company, on the one hand, and the departing partners Permanent
    Capital, on the other hand.  Section 4.7 stipulates that such loans are
    repayable by CBT Inc. over 24 months on the same basis as the Equity Partners
    Permanent Capital of the Partnership.  If a partners Permanent Capital included
    shareholder or capital loans to CBT Inc., this language would be redundant.

[58]

Moreover,
    s. 11.2.2, also quoted above, expressly distinguishes between: 1) a partners Permanent
    Capital and capital loans, and 2) the balance in a departing partners Capital Account
    and capital loans.

[59]

In
    light of all these provisions, I see no error in the trial judges holding that
    a partners Permanent Capital under s. 11.2.2 of the Partnership Agreement is
    contained in the partners Capital Account recorded in the LLP Statements and
    does not include shareholder or capital loans to CBT Inc.

[60]

Consequently,
    I would reject the CBT Groups contention that a partners Permanent Capital is
    the same as his or her Anchor Capital as set out in the Capital Equalization
    Schedules.  Recall that the Capital Equalization Schedules derive from the
    Group Statements, which reflect the combined financial position of both CBT LLP
    and CBT Inc.  The financial affairs of CBT Inc. include shareholder loans.  Nothing
    in the Partnership Agreement provides that a partners Permanent Capital is to
    be quantified by reference to the financial position of the entirety of the CBT
    Group enterprise.  As I have said, Article 9 and ss. 1.1 and 11.2.2 do not
    mention the combined financial position of the partnership and the management
    company, the terms Anchor Capital or Related Persons, or shareholder or
    capital loans.

[61]

I
    therefore agree with the trial judges ruling that neither the Group
    Statements, nor the Capital Equalization Schedules that are based on them, are
    the appropriate reference to quantify liquidated damages under s. 11.2.2 of the
    Partnership Agreement.

(ii)

Commercial Absurdity Claim

[62]

The
    CBT Group also argues that the trial judges interpretation of s. 11.2.2 of the
    Partnership Agreement results in commercial absurdity.

[63]

In
    support of this argument, the CBT Group points out that under s. 11.2.2, a
    departing equity partner is afforded three years from the date of his or her departure
    within which to pay liquidated damages to CBT LLP.  Based on this and similar
    payment terms set out under the Partnership Agreement, the CBT Group submits
    that it is illogical and commercially nonsensical to calculate liquidated
    damages at two times $10,000, based on the fixed amount of a departing partners
    Permanent Capital reflected in the LLP Statements.  In other words, three years
    would not be required to pay such a nominal amount.

[64]

The
    CBT Group also emphasizes the material discrepancies that existed in the
    amounts of the partners Capital Accounts at the time the Partnership Agreement
    was entered into.  On the trial judges interpretation of s. 11.2.2, given
    these discrepancies, if two equity partners withdrew from CBT LLP after the
    date of the Partnership Agreement but before the Capital Conversion, the amount
    of their respective liquidated damages obligations would have varied
    significantly, based on the different amounts in their Capital Accounts.  This
    result, the CBT Group submits, would be inequitable and nonsensical.

[65]

Again,
    I disagree.  In my opinion, neither the three-year payment term under s. 11.2.2
    nor the fact that equity partners who left CBT LLP prior to the Capital
    Conversion might be obliged to pay disparate amounts of liquidated damages leads
    to commercial absurdity.

[66]

But
    for the Capital Conversion, s. 11.2.2 could have tied the amount a departing
    partner owed for liquidated damages to the partners stake in the partnership.
    The loss to the partnership of a higher contributing partner, who had a larger
    stake in CBT LLP, would be more detrimental to the partnership than the loss of
    a lower contributing partner, who had a smaller stake in CBT LLP.

[67]

In
    such a case, a discrepancy between the amounts of liquidated damages payable by
    two departing partners would not lead to inequitable or nonsensical results.
    The greater liquidated damages due from the partner with a larger stake in the
    partnership would simply reflect the greater adverse impact on the partnership of
    his or her departure and, hence, the need for a greater withdrawal
    disincentive.  In these circumstances, a three-year payment term may well have
    been required for, and benefitted, the departing partner who had a significant
    balance in his or her Capital Account.

[68]

However,
    on implementation of the Capital Conversion, the potential for such
    discrepancies was eliminated.  By equalizing the amounts in each partners Capital
    Account, the partners also quantified and equalized the amounts of each
    partners Permanent Capital.  After the date of the Capital Conversion,
    therefore, the amount of liquidated damages payable to CBT LLP by departing
    equity partners was similarly equalized, and capped at two times $10,000.

[69]

It
    is important to emphasize that the CBT LLP partners were free to introduce appropriate
    amendments to the Partnership Agreement at the time of the Capital Conversion or
    at any time thereafter to avoid the consequences of a post-Capital Conversion
    application of s. 11.2.2.  This could have been achieved in a variety of ways,
    including, for example, by amending the Partnership Agreement to state that
    Permanent Capital under s. 11.2.2 was to be quantified in accordance with the
    Capital Equalization Schedules or Group Statements.  Suitable amendments were
    not made.  Indeed, when proposed in 2007, they were not pursued or
    implemented.  The consequences that flow from this omission must be borne by CBT
    LLP.

(iii)    Consideration of
    Surrounding Circumstances

[70]

The
    CBT Group next argues that the trial judge erred in her interpretation of s.
    11.2.2 by failing to consider the context surrounding the formation of the Partnership
    Agreement.  The CBT Group complains, in particular, that the trial judge failed
    to take account of the amount of Permanent Capital listed in the April 2004 Memorandum
    and of the discussions of the CBT LLP partners about liquidated damages at the
    time of formation of the Partnership Agreement.

[71]

I accept that the trial judges reasons do not expressly
    mention the April 2004 Memorandum.  I also accept that both the April 2004
    Memorandum and the various financial documents attached to it formed part of
    the circumstances surrounding the formation of the Partnership Agreement.

[72]

That
    said, I conclude that the trial judges failure to specifically allude to the
    April 2004 Memorandum and to the partners pre-contract discussions about
    liquidated damages is of no consequence.

[73]

First,
    contrary to the CBT Groups assertion in its factum, the April 2004 Memorandum
    does not set out the partners Permanent Capital.  Rather, the Group Statements
    attached to the April 2004 Memorandum include a Statement of Partners Capital
    Accounts and the attached Capital Equalization Schedule lists each partners
    2004 Permanent Capital.  The trial judge noted the 2004 Permanent Capital
    list, as well as the post-2004 introduction in the schedules of the term
    Anchor Capital.

[74]

Second,
    the trial judge was mindful of the principles governing contractual
    interpretation.  Although the Supreme Courts decision in
Sattva
was
    released after this trial, the principle that the circumstances or factual
    matrix surrounding the making of a contract are relevant to its interpretation
    was well-established under the applicable authorities: see for example,
Dumbrell
    v. The Regional Group of Companies Inc.
, 2007 ONCA 59, 85 O.R. (3d) 616, at
    paras. 53-54;
Ventas, Inc. v. Sunrise Senior Living Real Estate Investment
    Trust
, 2007 ONCA 205, 85 O.R. (3d) 254, at para.45.

[75]

The
    trial judge referred specifically to
Dumbrell
and
Ventas
, as
    well as
Eli Lilly & Co. v. Novopharm Ltd
., [1998] 2 S.C.R. 129 and
    stated, at para. 37:

[T]he goal of interpretation of contracts is to determine the
    intention of the parties with reference to the words used in drafting the
    document, possibly read in light of the surrounding circumstances prevalent at
    the time. Evidence of one partys subjective intention is irrelevant. Extrinsic
    evidence need not be considered at all when the document is clear and
    unambiguous on its face. It should be presumed that the parties intended the
    legal consequences of their words. This makes it possible to interpret a
    plainly-worded document in accordance with the true contractual intent of the
    parties and not by the intent they ascribe to it with hindsight once
    differences have arisen.

[76]

This
    description of the controlling interpretive principles, and the trial judges
    application of those principles, reflect no error.  The trial judges statement
    that the surrounding circumstances of a contract are possibly relevant to determining
    the intention of the contracting parties derives from the language of the
    Supreme Court in
Eli Lilly
, at para. 54.
Sattva
confirms
    prior provincial appellate court decisions that evidence of the surrounding
    circumstances of a contract is relevant in the contractual interpretive
    exercise, within limits.  The
Sattva
court put it this way, at para.
    57:

The goal of examining [evidence of surrounding circumstances]
    is to deepen a decision-makers understanding of the mutual and objective
    intentions of the parties as expressed in the words of the contract.  While
    the surrounding circumstances are relied upon in the interpretive process,
    courts cannot use them to deviate from the text such that the court effectively
    creates a new agreement. [Citations omitted.]

See also
Sattva
at para. 58.

[77]

Third,
    the trial judges reasons reveal that she did take account of those
    circumstances relevant to the interpretation of the Partnership Agreement, in
    particular, the general import and significance of the Group Statements and the
    Capital Equalization Schedules and the use of the term Anchor Capital in the
    Capital Equalization Schedules after the date of the Partnership Agreement.

[78]

Having
    considered these matters, it was unnecessary for the trial judge to
    specifically mention the April 2004 Memorandum or the values ascribed to the
    partners Capital Accounts and Permanent Capital in the 2003 year-end documents
    attached to the April 2004 Memorandum.  The reasons confirm that the trial
    judge understood and came to grips with the CBT Groups argument that
    Martenfelds Anchor Capital as set out in the 2008-2009 Capital Equalization
    Schedule was the proper basis for quantifying his Permanent Capital under s.
    11.2.2.  The trial judge rejected this interpretive argument, for clear and
    cogent reasons.  I see no error in her having done so.

[79]

For
    similar reasons, I also cannot accept that the trial judge erred by failing to
    treat the CBT LLP partners discussions about liquidated damages as a relevant
    consideration when interpreting s. 11.2.2 of the Partnership Agreement.  Extrinsic
    evidence regarding the intention of contracting parties need not be considered
    when the words employed in the contract in question are unambiguous.  More
    precisely, evidence of the contracting parties subjective intentions is
    irrelevant to the interpretation of the final language employed by the parties
    in a contract:
Eli Lilly
at paras. 54 to 58;
SeaWorld Parks &
    Entertainment LLC v. Marineland of Canada Inc
., 2011 ONCA 616, 282 O.A.C.
    339, para. 16.  I do not read the
Sattva
decision as altering this
    principle.

[80]

In
    this case, the trial judge concluded, in effect, that the term Permanent
    Capital in s. 11.2.2 was unambiguous and that, on a proper reading of the
    Partnership Agreement as a whole, its meaning was clear.  For the reasons set
    out above, I agree.  It follows that the trial judge did not err by declining
    to resort to the evidence of the partners pre-contract discussions regarding
    liquidated damages to interpret s. 11.2.2.

(iv)      Trial Judges Consideration of the LLP
    Statements

and the 2007 Proposed Amendments

[81]

The CBT Group advances one further argument in aid of its contention
    that the trial judges interpretation of Permanent Capital under s. 11.2.2 is
    fatally flawed.  It submits that by taking account of the 2009 LLP Statements
    and the 2007 proposed amendments to the Partnership Agreement, the trial judge
    relied on the wrong extrinsic evidence to quantify Permanent Capital.  I
    disagree.

[82]

With
    respect to the 2009 LLP Statements, the CBT Groups argument, at heart, is that
    the trial judge should have relied on the 2009 Group Statements, rather than
    the 2009 LLP Statements, when interpreting s. 11.2.2.  I would reject this
    argument.

[83]

The
    trial judge found, correctly, that only the LLP Statements set out the balance
    in Martenfelds Capital Account in the CBT LLP partnership, as distinct from
    the entire CBT Group enterprise, at the time of his withdrawal from the
    partnership.  The trial judge relied on the 2009 LLP Statements only to
    quantify the amount of Martenfelds Permanent Capital, rather than to interpret
    the meaning of Permanent Capital under the Partnership Agreement.  She was
    right to do so.

[84]

I
    would also reject the CBT Groups complaint concerning the trial judges treatment
    of the 2007 proposed amendments to the Partnership Agreement.

[85]

As
    I read her reasons, the trial judge did not rely on the fact or nature of these
    proposed amendments to interpret s. 11.2.2 of the Partnership Agreement, or to
    quantify Martenfelds Permanent Capital.  She simply observed that the effect
    of the CBT Groups urged interpretation of s. 11.2.2 was to accord that section
    a meaning that corresponded with the unapproved 2007 proposed amendments,
    rather than with the language of s. 11.2.2 as it exists under the Partnership
    Agreement.  This was an accurate observation.

[86]

The
    conclusion that the trial judge did not rely on the 2007 proposed amendments to
    interpret s. 11.2.2 is bolstered by the placement in her reasons of her challenged
    comments regarding the amendments.  Before alluding to the amendments, the trial
    judge had already held that the meaning of Permanent Capital was clear on the
    face of the Partnership Agreement and that the Group Statements and the Anchor
    Capital values relied on by the CBT Group did not provide the basis for
    quantifying Martenfelds Permanent Capital.

(3)

Repayment of the Jekel Loan

[87]

In
    its factum, the CBT Group argued that it was not obliged to repay the Jekel
    Loan and that the amount of that loan could be set-off against the amount of
    liquidated damages owing by Martenfeld to CBT LLP.  However, during oral
    argument, the CBT Group acknowledged that if Martenfelds Permanent Capital at
    the time of his departure is properly to be quantified in the manner adopted by
    the trial judge, the Jekel Loan is repayable, presumably after deduction of the
    $20,000 in liquidated damages owed by Martenfeld.

[88]

Since
    I have concluded that the trial judge did not commit a palpable and overriding
    error in her quantification of the liquidated damages payable by Martenfeld
    under s. 11.2.2 of the Partnership Agreement, it is unnecessary to address this
    ground of appeal.  As conceded by the CBT Group and as found by the trial
    judge, the Jekel Loan is repayable by the CBT Group.

(4)

Other Amounts Awarded by the Trial Judge

[89]

It
    remains to consider the CBT Groups challenge to certain of the trial judges
    other awards to the Martenfeld Group.  The CBT Group argues that the trial
    judge erred by holding: 1) that Jekel is entitled to its share of declared
    dividends, and management fees for the month of August 2009 from CBT Inc.; and 2)
    that Martenfeld is entitled to his pro-rata share of the CBT LLP 2009
    partnership profits.  These claims may be dealt with summarily.

[90]

First,
    with respect to Jekels share of dividends declared by CBT Inc., there is no
    dispute that, in 2009, CBT Inc. declared and distributed a dividend to its
    shareholders in the total amount of $375,642, without allocating any amount of
    that dividend to Jekel.  Under ss. 4.7 and 11.5(b) of the Partnership
    Agreement, quoted above, CBT LLP was obliged on Martenfelds departure from the
    partnership to pay any declared dividends on Jekels shares in CBT Inc. prior
    to the redemption of Jekels shares.  In mid-April 2010, CBT Inc. redeemed
    Jekels shares, effective August 31, 2009.

[91]

In
    these circumstances the trial judge held, at para. 56:

While dividends are within the discretion of the Board of
    Directors [of CBT Inc.], the Board had an obligation to exercise this
    discretion fairly and with an even hand as the shares provided to the related
    corporations carried identical rights. The partnership was obliged to pay
    dividends declared up to the date of Martenfelds departure prior to [the
    redemption of] Jekels shares.

[92]

I
    agree.  While the declaration of dividends by CBT Inc. was discretionary, the
    CBT Group has been unable to point to any provision in the Partnership Agreement
    that authorizes CBT Inc. to differentiate among similarly situated shareholders
    to award dividends to some shareholders but not others.  Absent such a
    provision, the terms of ss. 4.7 and 11.5(b) apply and CBT LLP is indebted to
    Martenfeld for Jekels share of the 2009 declared dividend.  The trial judge
    fixed this amount at $35,557.  I did not understand the CBT Group to challenge
    the quantum of Jekels share of the 2009 dividend.

[93]

Next,
    the CBT Group attacks Martenfelds $33,500 award on account of his pro-rata
    share of CBT LLPs 2009 partnership profits, up to the date of his withdrawal
    from the partnership (eight months).  In support of its challenge to this
    award, the CBT Group renews some of its complaints, advanced at trial,
    concerning Martenfelds conduct prior to and at the time of his departure from
    CBT LLP, which the CBT Group says breached the Partnership Agreement.

[94]

The
    trial judge reviewed the CBT Groups complaints concerning Martenfelds conduct
    in detail.  She provided lengthy reasons for her findings that virtually all
    these complaints lacked any evidentiary support or merit.  With respect to
    those aspects of Martenfelds conduct that she viewed as problematic or
    deserving of censure, the trial judge held that the CBT Group failed to
    establish any factual or legal basis for its damages claims or that
    Martenfelds conduct had occasioned any harm.

[95]

The
    CBT Group has not demonstrated that these findings are tainted by any palpable
    and overriding error.  It simply disagrees with the trial judges findings.
    This affords no basis for appellate interference with the trial judges award
    of a share of the 2009 partnership profits to Martenfeld.

[96]

I
    come, finally, to the question of the management fees awarded to Jekel for the month
    of August 2009.

[97]

The
    trial judges reasons provide no explanation for this award, which the trial
    judge fixed in the amount of $3,281.25.  The CBT Group argues that there was no
    evidence at trial that CBT Inc. paid management fees to its shareholders,
    separate and apart from dividends.  The Martenfeld Group has pointed to no
    evidence to the contrary.  In these circumstances, there being no apparent
    evidentiary or contractual support for this award, I would set aside the award
    of management fees made by the trial judge.

V.      Disposition

[98]

For
    the reasons given, save only for the trial judges $3,281.25 award of
    management fees in favour of Jekel, which I would set aside, I would dismiss
    the appeal.

[99]

Since
    it has succeeded on virtually all issues on appeal, I would award the
    Martenfeld Group its costs of the appeal on the partial indemnity scale, as
    agreed by the parties.  The Martenfeld Group may submit its brief written
    submissions regarding the quantum of those costs to the Registrar of this
    court, within 14 days from the date of these reasons.  The CBT Group may
    deliver its brief responding submissions on costs, within 14 days thereafter.

Released:

SEP 10 2014                                    E.A.
    Cronk J.A.

DD                                                  I agree
    Doherty J.A.

I
    agree C.W. Hourigan J.A.

[1]
I will refer in these reasons to CBT LLP and CBT Inc., collectively, as the CBT
    Group, and to Martenfeld and Jekel, collectively, as the Martenfeld Group.

[2]
Prior to trial, the CBT Group claimed that Martenfeld was bound by a new
    partnership agreement, effective July 1, 2009.  The alleged 2009 agreement
    contained substantively different partnership withdrawal terms from those in
    the 2004 Partnership Agreement.  The CBT Group abandoned this claim on the eve
    of trial.  As a result, the trial proceeded on the accepted basis that the 2004
    Partnership Agreement governed the respective rights and obligations of the
    parties.


COURT OF APPEAL FOR ONTARIO

CITATION: Mauldin v. Cassels Brock & Blackwell LLP, 2014
    ONCA 641

DATE: 20140916

DOCKET: C52912/M43992

Strathy C.J.O. (In Chambers)

BETWEEN

Fred Mauldin, Dan Meyers, Robert Blomberg,

Theodore Landkammer, Lloyd Chelli, Stephen Yee,

Marvin Cleair, Carolyn Cleair, Richard Hanna,

Douglas Laird, Charles Ivans, Lyn White and Athena Smith

Plaintiffs

(Moving Parties)

and

Cassels Brock & Blackwell LLP,

Gregory Jack
    Peebles and Robert Hryniak

Defendants

(Responding Parties)

R. Douglas Elliott and Ruzbeh Hosseini, for the moving
    parties

Sarit Batner, for the responding party, Robert Hryniak

Luisa Ritacca, for the responding party, Cassels Brock
    & Blackwell LLP

Jonathan Rosenstein, for the responding party, Gregory
    Jack Peebles

Heard: July 15, 2014

ENDORSEMENT

[1]

This is the end of a piece of the protracted
Combined Air
litigation.
[1]
The successful plaintiffs, the Mauldin Group, seek payment of about $1
    million in funds posted by the defendant, Robert Hryniak, to the Accountant of
    the Superior Court of Justice pursuant to a prior order of this court. This
    money would partially satisfy their judgment. The motion is opposed by Hryniak.
    He says the majority of the money should be paid to his lawyers, McCarthy Tétrault
    LLP (McCarthys).

[2]

Hryniak claims that McCarthys outstanding fees of about $825,000 should
    be paid fully and in priority to the Mauldin Group. He relies upon:

a)

an order of this court in 2011, requiring that he post a letter of
    credit in the amount of $950,000 as a condition of granting his request for an
    extension of time to perfect his appeal;

b)

the assertion by McCarthys of a solicitors lien under s. 34(1) of the
Solicitors
    Act
, R.S.O. 1990, c. S.15; and

c)

case law in the
Mareva
injunction context that suggests a party
    should not be deprived of the means to mount a legal defence.

[3]

For the reasons that follow, I would not give effect to any of Hryniaks
    submissions.

background

[4]

The Mauldin Group is made up of elderly American investors. They brought
    an action against Hryniak, alleging that he had defrauded them of some $1.2
    million. They also sued Hryniaks law firm, Cassels Brock & Blackwell LLP
    (Cassels), and a lawyer at Cassels named Gregory Peebles (Peebles).

[5]

In May 2010, the Mauldin Group brought a motion for summary judgment
    against all three defendants. It was heard along with a motion for summary
    judgment against the same defendants in a companion action, referred to as the
    Bruno Action.

[6]

The motions judge granted summary judgment against Hryniak, finding that
    he had engaged in fraud. He was ordered to pay damages of approximately $1.2
    million USD to the Mauldin Group and $1 million USD to the Bruno Action plaintiffs:
Bruno Appliance and Furniture Inc. v. Cassels Brock & Blackwell LLP
,

2010 ONSC 5490, [2010] O.J. No. 4661.

[7]

The motions judge dismissed the motions for judgment against Cassels and
    Peebles on the basis that there were issues requiring a trial.

[8]

Hryniak filed notices of appeal dated November 8, 2010, staying the
    judgments against him.

[9]

Shortly thereafter, it was discovered that Hryniak had taken steps to
    encumber his only known asset in favour of his wife  his interest in the
    matrimonial home.

[10]

As
    Hryniak failed to perfect his appeals within the required time, he brought a
    motion for an extension of time.

[11]

At
    the same time, the Mauldin Group and the plaintiff in the Bruno Action brought
    a motion for: (1) an order lifting the automatic stay on enforcement pending
    appeal; (2) an order that Hryniak post security for costs; and (3) an order
    requiring Hryniak to pay the amounts awarded by summary judgment.

[12]

In
    December 2010, Rosenberg J.A. adjourned the motions and lifted the automatic
    stay pending appeal: (1) to permit the plaintiffs in the two actions to
    register judgments against Hryniaks home; and (2) to allow them to examine Hryniak
    in aid of execution.

[13]

In
    January 2011, the motions came before Weiler J.A. She granted Hryniaks motion
    for an extension of time but imposed conditions, including that he post an
    irrevocable letter of credit with the Accountant in the amount of $950,000:
Bruno
    Appliance and Furniture Inc. v. Cassels Brock & Blackwell LLP
,

2011
    ONCA 67, 274 O.A.C. 353.

[14]

After
    the motion before Weiler J.A., Hryniak retained McCarthys to pursue his appeals
    since his original lawyers had removed themselves from the record as a result
    of a conflict of interest.

[15]

Between
    January 2011 and June 2011, Hryniaks wife, Suzanna Mandryk, paid his legal
    bills. Since then, McCarthys has essentially gone unpaid.

[16]

In
    February 2011, Doherty J.A. varied Weiler J.A.s order:
Bruno Appliance and
    Furniture Inc. v. Cassels Brock & Blackwell LLP
,

2011 ONCA
    126, [2011] O.J. No. 1507. His order:

·

permitted a bank to put a charge in the amount of $1 million on Hryniaks
    home for the purpose of providing to Mr. Hryniak the funding necessary to
    obtain a letter of credit;

·

postponed the judgments of the Mauldin Group and the Bruno Action
    plaintiff, which were registered on title, in favour of the banks charge;

·

postponed Mandryks charge to third position behind the banks
    charge and the plaintiffs judgments;

·

ordered Hryniak to post an irrevocable letter of credit in the
    amount of $950,000 with the Accountant by February 22, 2011, which was to be
    held pending further order of this court; and

·

ordered Hryniak to provide an undertaking not to encumber or
    dispose of any assets pending the outcome of his appeals, in accordance with
    Weiler J.A.s reasons.

[17]

At
    para. 10 of his reasons, Doherty J.A. commented that should Hryniaks appeal be
    dismissed, the plaintiffs would presumably apply for an order directing that
    the proceeds of the letter of credit be paid out to them in partial
    satisfaction of the trial judgments.

[18]

Instead
    of a letter of credit, Hryniak deposited a $950,000 bank draft with the
    Accountant. With interest, this deposit is now worth just over $1 million.

[19]

In
    December 2011, this court dismissed Hryniaks appeal in the Mauldin Group
    action; it granted his appeal in the Bruno Action:
Combined Air Mechanical
    Services Inc. v. Flesch
, 2011 ONCA 764, 108 O.R. (3d) 1. This court
    requested submissions on costs of the appeal. In his costs submissions, Hryniak
    proposed for the first time that some of the funds that were paid into court be
    released to him to pay for his legal fees.

[20]

This
    court released its reasons on costs in May 2013:
Mauldin v. Cassels Brock
    & Blackwell LLP
, 2013 ONCA 307, 361 D.L.R. (4th) 646. Hryniak had
    since sought leave to appeal from this courts decision in the Mauldin Group
    action. As a result, this court deferred the question of how to deal with the
    amount paid into court until after the release of the Supreme Court of Canadas
    decision.

[21]

In
    January 2014, the Supreme Court granted leave but dismissed Hryniaks appeal:
Hryniak
    v. Mauldin
, 2014 SCC 7, [2014] 1 S.C.R. 87. Hryniak brought a motion for
    rehearing by the Supreme Court, which that court dismissed on May 1, 2014.

[22]

Following
    the dismissal, the Mauldin Group demanded payment of all the amounts owing by Hryniak
    in this action. It was told that Hryniak had no funds to pay, other than the
    amount posted with the Accountant.

[23]

It
    is estimated that the outstanding judgments and orders against Hryniak in both
    the Mauldin Group action and the Bruno Action amount to over $1.9 million.

[24]

There
    are also outstanding costs orders against the Mauldin Group, including costs
    payable to Cassels in the Bruno Action. The Mauldin Group undertakes to satisfy
    the outstanding amounts from funds held by the Accountant, if those funds are
    released to it.

[25]

Cassels
    and Peebles also make a claim on the funds held by the Accountant to satisfy an
    outstanding partial Sanderson order, dated March 11, 2011, against Hryniak.

[26]

The
    Mauldin Group, Cassels and Peebles have reached an agreement whereby they will
    share any funds paid out of court.

analysis

[27]

I
    will examine the three alternative grounds relied upon by Hryniak in support of
    his motion.

(1)

The Order of Weiler
    J.A.

[28]

Hryniak
    submits that the order of Weiler J.A. is dispositive and requires that
    McCarthys fees be paid in full, in priority to all other claims. The
    submission is based on the assertion that Weiler J.A. knew that the $950,000
    was Hryniaks only asset and that if he was to continue with the appeal he
    would necessarily incur legal fees that he would have to pay out of these
    funds. Hryniak attaches significance to the fact that the funds were not
    payable to the credit of the action but only to the Accountant.

[29]

There
    is nothing in the express terms of the order that supports this conclusion. Nor
    is there anything in Weiler J.A.s reasons to suggest that there was any
    concern for Hryniaks ability to pay his legal fees in order to pursue his
    appeal. It is apparent that the overriding concern behind the order was to
    protect the Mauldin Groups interest in ensuring that they may enforce the
    motion judges court order if Hryniak loses his appeal (at para. 41). The
    purpose of the order was, quite obviously, to preserve the asset and to prevent
    its dissipation.

[30]

Moreover,
    it is incorrect to state that Weiler J.A. knew that the funds were Hryniaks
    only assets. She adverted to the possibility that he had other assets (at paras.
    37, 40) and noted that the funds were his only
known
asset (para. 39).

[31]

Nor
    does the fact that the letter of credit was to be paid to the Accountant
    support the inference Hryniak advances. The issue of his legal fees was not
    raised before Weiler J.A. and no inference can be drawn from the manner in
    which the funds were to be provided.

[32]

In
    considering the order of Weiler J.A., it needs to be remembered that Hryniak
    came to the court seeking an indulgence. He had failed to perfect his appeal in
    time and he was seeking an extension. The Mauldin Group discovered that he was
    attempting to encumber his interest in the matrimonial home, presumably to
    avoid paying their judgment. They wanted to enforce their judgment. It would
    have been open to Hryniak to raise the issue of his legal fees at that time,
    but he did not do so.   Had he done so, the Mauldin Group may have requested
    additional security.

(2)

Solicitors Lien

[33]

Hryniak
    submits that McCarthys has a charge on the funds held in court pursuant to s.
    34(1) of the
Solicitors Act
:

Where a solicitor has been employed to prosecute or defend a
    proceeding in the Superior Court of Justice, the court may, on motion, declare
    the solicitor to be entitled to a charge on the property recovered or preserved
    through the instrumentality of the solicitor for the solicitors fees, costs,
    charges and disbursements in the proceeding.

[34]

Hryniak
    submits that it was only by virtue of McCarthys efforts on the contested
    motion before Doherty J.A. that he was able to mortgage his home and post the
    funds with the Accountant. Counsel characterizes these actions as
    instrumental in preserving the funds.

[35]

Generally,
    courts have been predisposed to exercise their discretion in favour of charging
    orders. In
Taylor v. Taylor
(2002), 60 O.R. (3d) 138, this court explained
    why, at para. 29:

Historically, courts have exercised their discretion liberally
    in favour of charging orders, which are said to benefit both the lawyer and the
    client, since they encourage lawyers to represent clients who are unable to pay
    as their cases progress.

[36]

In
    my view, however, McCarthys is not entitled to a solicitors charge under s.
    34(1) in the circumstances of this case.

[37]

First,
    the amount held by the Accountant was not property recovered or preserved
    through the instrumentality of the solicitor for the purposes of s. 34(1).

[38]

Here,
    what McCarthys accomplished in having Weiler J.A.s order varied was to permit Hryniak
    to comply with a pre-condition for obtaining an extension of time.  Had he not
    complied, he would have been precluded from bringing his appeal. In those
    circumstances, it is difficult to see how McCarthys motion to vary Weiler
    J.A.s order amounts to the recovery or preservation of property through the
    instrumentality of McCarthys. Rather, the property was preserved through Weiler
    J.A.s order.

[39]

Second,
    an order under s. 34(1) is discretionary. In
The Law

of Costs
,
    loose-leaf (Rel. August 2010), 2d ed. (Toronto: Canada Law Book, 1998), Mark M.
    Orkin discusses this aspect of s. 34(1) at p. 3-99:

As appears from the wording of s. 34 the order is
    discretionary.  A court will determine firstly whether the property was subject
    to a solicitors lien, that is, whether it was preserved through the
    instrumentality of the solicitor, and then whether in the circumstances of the
    case a lien should attach.  In exercising its discretion a court should balance
    the equities. [Citations omitted.]

See also:
Taylor v. Taylor
, at para. 34.

[40]

In
Foley v. Davis
(1996), 93 O.A.C. 114 (Ont. C.A.), at para. 2, this
    court also noted the discretionary nature of s. 34 (1):

We have considered s. 34 of the Solicitors Act, and cases cited
    to us by the appellant. We can find no per se rule that, absent improper
    conduct, the solicitor is always entitled to a charge in first priority on
    funds "salvaged" by the efforts of the solicitor. In our view, while
    the solicitor will be entitled to a first charge on such funds in the normal
    course, the court retains a discretion to order otherwise.

[41]

The law firm in
Foley
was denied a charge in priority to
    an earlier order granting support to the appellants ex-spouse.

[42]

In
    my view, the equities in this case are overwhelmingly
against
granting
    a charge. McCarthys says Hryniak told it from the outset that his interest in
    the matrimonial home was his only asset. Thus, McCarthys accepted a risk of
    non-payment from the very beginning.  While Hryniaks wife did initially pay
    his bills for the months of January to May and part of June 2011, she stopped
    paying his bills after that point, other than a few small amounts. As of June
    2011, the risk of non-payment became a reality. Still, McCarthys kept working
    without seeking directions or seeking to amend Weiler J.A.s order to provide
    for the payment of Hryniaks legal fees from the amount paid into court.

[43]

Another
    important factor in weighing the equities is the original purpose of Weiler
    J.A.s order. It was meant to protect the Maudlin Groups ability to collect on
    its judgment if successful on appeal. However, if McCarthys is successful in
    obtaining a priority charge on the full amount of its claim, the Mauldin Group
    will get very little or nothing, even though it was successful on the summary
    judgment motion, on the appeal to this court, on the appeal to the Supreme
    Court and on the motion for rehearing before the Supreme Court. The equities
    weigh against such an unjust result.

(3)

Mareva
Jurisprudence

[44]

Hryniak
    submits that
Mareva
jurisprudence confirms that defendants are
    entitled to access to their own funds in order to pay legal expenses. In
    particular, he points to
Canadian Imperial Bank of Commerce v. Credit
    Valley Institute of Business and Technology
, [2003] O.J. No. 40 (S.C.), at
    para. 26, in which Molloy J. discusses the test for varying the terms of an
    injunction to permit payment of various expenses from frozen assets.

[45]

There
    are several answers to Hryniaks submission. First, a
Mareva
order may
    provide for the payment of legal fees. If it does not, the defendant will
    generally bring a motion to permit payment of fees: Robert J. Sharpe,
Injunctions
    and Specific Performance
, loose-leaf, (Rel.
    November, 2013) (Toronto: Canada Law Book, 2012+) at pp. 2-93 to 2-94. No such
    request was made at the time of Weiler J.A.s order or on the motion for variation
    before Doherty J.A.

[46]

Second,
    the order is generally made while the litigation is ongoing, not after a
    judgment has been rendered:
B& M Handelman Investments Ltd. v. Curreri
,
    2011 ONCA 395, 278 O.A.C. 199. I was referred to no case in which payment of
    legal fees on a full indemnity basis has been authorized after the fact.

[47]

Third,
    there is no unfairness to Hryniak. Payment of his legal fees at this time is
    not required to permit him to proceed with the litigation. To the extent there
    is unfairness, it falls on McCarthys which will be unpaid for much of its work.
    However, McCarthys accepted that risk in continuing to work when it was no
    longer being paid, without any assurance that it would be paid. That it
    continued to work, presumably out of a sense of professional responsibility in
    an important case, is commendable. The potential unfairness to the Mauldin
    Group, which would recover almost nothing, far outweighs any unfairness to
    either Hryniak or McCarthys.

disposition

[48]

For
    these reasons, the motion is
allowed
,
with costs. The Accountant
    is directed to release the funds deposited to counsel for the Mauldin Group, to
    be distributed, pro rata, to the Mauldin Group, Cassels and Peebles.

[49]

There
    were no submissions as to costs. If the parties are unable to reach agreement
    on costs within 15 days, they may make written submissions, not to exceed five
    pages in length (excluding costs outlines). The moving party shall file its
    submissions within 30 days of the release of this endorsement and the
    respondent shall have 15 days within which to reply.

[1]
See:
Combined Air Mechanical Services Inc. v. Flesch
, 2011 ONCA 764, 108
    O.R. (3d) 1.


COURT OF APPEAL FOR ONTARIO

CITATION: McNally Construction Inc. v. Hamilton Port
    Authority,

2014 ONCA 651

DATE: 20140924

DOCKET: C58292

Simmons, Rouleau and Hourigan JJ.A.

BETWEEN

McNally Construction Inc.

Plaintiff

and

The Hamilton Port Authority

Defendant (Appellant)

and

Golder Associates Ltd.

Third Party (Respondent)

and

Mar-Land Engineering Limited

Fourth Party

Mark Abradjian and Renata Kis, for the appellant

P. John Brunner, for the respondent

Heard: September 17, 2014

On appeal from the order of Justice Dale Parayeski of the
    Superior Court of Justice, dated December 30, 2013, with reasons reported at
    2014 ONSC 1180.

By the
    Court:

[1]

On a motion for summary judgment brought by the third party, Golder
    Associates Ltd., against the defendant, The Hamilton Port Authority, the motion
    judge dismissed the Port Authoritys claim for contribution and indemnity
    against Golder.

[2]

In reaching his decision, the motion judge found that the plaintiff and
    plaintiffs counsel had made formal and informal admissions at examinations for
    discovery and at the hearing of the summary judgment motion that conclusively
    established that the plaintiff had no claim against Golder.

[3]

The Port Authority does not dispute that its third-party claim for
    contribution and indemnity against Golder can only succeed if the plaintiff has
    a viable cause of action against Golder.

[4]

However, the Port Authority submits that the motion judge erred in
    relying on the plaintiffs counsels alleged admissions at the summary judgment
    motion hearing when, among other things, any such admissions were not in
    evidence, were qualified and, in any event, were contrary to the plaintiffs
    pleadings.

[5]

We agree. At para. 7 of his reasons, the motion judge described the
    statement of plaintiffs counsel on which he relied:

In addition, at the motion before me, counsel for the plaintiff
    confirmed on the record that the plaintiff takes no issue with the location of
    the bore holes dug by [Golder].

[6]

The statements of plaintiffs counsel at the motion hearing on which the
    motion judge relied read as follows:

[Counsel for the Plaintiff]:  [W]hat I can do is say to you
    again Ive just simply taken the page from the transcript  where [counsel for
    Golder] says:

So  I take it  that [the plaintiff] accepts that there
    was, there were no representations in the Golder Report of June 07, the
    preliminary geo-technical evaluation, which was either false, inaccurate or misleading?

[Counsel for Golder]: You have no facts or evidence to
    suggest otherwise?

[Counsel for the plaintiff]: None.

[Counsel for the Plaintiff]: My clients position
may be
at trial that there was nothing that they know of that was negligent in the way
    in which Golder prepared this report.

The Court: Im going to ask a much more direct question and if
    you cant answer it I respect that.
Does the phraseology in that [discovery]
    transcript that talks about nothing misleading, nothing inaccurate, does that
    or does that not encompass location of the bore holes?

[Counsel for the Plaintiff]:
I think it does
encompass
    location because the larger context of what the parties understood was,
and
    the evidence will have to bear itself out
but the decision making process
    as to where the locations were for bore holes were initially those of Mr.
    McFarland who

The Court: From the fourth party.

[Counsel for the Plaintiff]: From the fourth party but who was,
    we say, a representative of [the Port Authority], so it was [the Port
    Authoritys] decision where to put bore holes. We heard at examinations for
    discovery that it was open to Golder to make a suggestion as to where bore
    holes might be and in fact at an adjacent pier they apparently made some
    suggestions. Beyond that we also heard that there was a decision about costs
    associated with going out into the water and that would have presumably had
    some governing effect on do we spend the extra money to provide those bore
    holes. Beyond that my client who was not part of the process, appreciate, they
    come on after the fact, get the information. They know nothing more than what
    they heard at discovery so we know of no negligence by Golder in any decision making
    process.... [Emphasis added.]

[7]

Assuming, without deciding, that an admission made by plaintiffs
    counsel at the hearing of Golders summary judgment motion against the Port
    Authority would be binding on the plaintiff at trial, we are not satisfied that
    plaintiffs counsels comments were capable of constituting an admission that
    the plaintiff did not have a claim against Golder.

[8]

Central to the plaintiffs claim is the decision taken as to where the
    test holes would be bored and the role, if any, that Golder played. The key
    statement by plaintiffs counsel at the summary judgment motion related to the
    location of bore holes was that I think that a prior statement made by a
    representative of his client on discovery encompass[ed the] location of the
    bore holes. Plaintiffs counsel added that the evidence [would] have to bear
    itself out.

[9]

The qualifications that plaintiffs counsel made do not support the
    motion judges statement that counsel had confirmed  that the plaintiff takes
    no issue with the location of the bore holes. In fact, the plaintiff maintains
    its plea in its statement of claim that, in effect, it relied on the
    representations made in the Golder report and that, either alone or taken together
    with the balance of the tender documents, the representations were inaccurate
    and negligently made. In our view, the motion judges finding is a palpable and
    overriding error. His subsequent conclusion, at para. 11 of his reasons, that
    the plaintiff has no claim against Golder based on the plaintiffs admissions is
    tainted by this error and cannot stand.

[10]

Although
    plaintiffs counsel acknowledged at the motion hearing that the plaintiff did
    not, at that stage, have any evidence of a claim against Golder, plaintiffs
    counsels remarks did not exclude the possibility that such a claim would be
    made out at trial on the whole of the evidence.

[11]

The
    respondent argued that, even if we agreed with the appellants submission, we
    should nonetheless dismiss the appeal. This is because the third party claim
    was issued more than one year after Golder had substantially completed its
    work. The contract between the appellant and Golder has a one-year limitation
    clause that serves to bar the third party claim.

[12]

Although
    the limitation defence was raised in the court below, the motion judge did not consider
    it as he dismissed the third party claim on other grounds. In our view, this
    court should not rule on the issue as part of this appeal. The appellant has
    raised questions as to whether the limitation period has run and whether it
    applies to claims for contribution and indemnity. The limitation issue is therefore
    best left to be resolved at trial.

[13]

As a
    result, we allow the appeal and set aside the motion judges dismissal of the
    third and fourth party claims.

[14]

The
    parties have agreed that the successful party should be awarded costs fixed in
    the amount of $10,000 plus disbursements and HST. We agree and award the
    appellant costs in that amount.

Janet Simmons J.A.

Paul
    Rouleau J.A.

C.W.
    Hourigan J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Orgaworld Canada Ltd. v. Ontario (Environment and
    Climate Change), 2014 ONCA 654

DATE: 20140924

DOCKET: C58575

Simmons, Rouleau and Hourigan JJ.A.

BETWEEN

Orgaworld Canada Ltd.

Applicant

(Appellant)

and

Her Majesty the Queen

Respondent

(Respondent in Appeal)

Thomas J. Corbett, for the appellant

Justin Jacob and Andrea Huckins, for the respondent

Heard and released orally: September 19, 2014

On appeal from the judgment of Justice K.A. Gorman of the
    Superior Court of Justice, dated March 13, 2014.

ENDORSEMENT

[1]

We reject the appellants submission that the application judge erred in
    declining to entertain the appellants s. 24(1)
Charter
application
    which was premised on post-trial delay  the Justice of the Peace gave his
    decision about 15 months after the close of submissions.

[2]

The appellant was entitled to raise the s. 11(b)
Charter
issue
    of post-hearing delay in an appeal to the Provincial Offences Appeal Court
    under the
Provincial Offences Act
and had done so.  In these
    circumstances, the application judge had discretion to decline to entertain the
    appellants s. 24(1)
Charter
application to the Superior Court.  We
    see no error in her exercise of discretion.

[3]

On appeal, we are now informed that the issue has been argued before the
    Provincial Offences Appeal Court and is under reserve.  While we are advised
    that the Crown argued in the Provincial Offences Appeal Court that that court
    should not entertain the s. 11(b) argument because it should have been raised
    before the Justice of the Peace, that same argument would have been available
    to the Crown before the application judge.  The appellant, therefore, is under
    no disadvantage in proceeding in the Provincial Offences Appeal Court.  Rather,
    it has the advantage of having a full record.

[4]

The appeal is therefore dismissed.

Janet Simmons
    J.A.

Paul Rouleau
    J.A.

C.W.
    Hourigan J.A.