COURT OF APPEAL FOR ONTARIO

CITATION: 1442810 Ontario Inc. v. Sarohia, 2016 ONCA 456

DATE: 20160609

DOCKET: C61108

Feldman, Rouleau and Huscroft JJ.A.

BETWEEN

1442810 Ontario Inc.

Plaintiff (Respondent)

and

Daljit
    S. Sarohia, Parmit K. Parhar, also known as Paramjit J.

Paraihari and Dalcan
    Enterprises Inc.

Defendants (Appellants)

AND BETWEEN

Daljit
    S. Sarohia, Parmit K. Parhar, also known as Paramjit J.

Paraihari and Dalcan Enterprises
    Inc.

Plaintiffs by Counterclaim (Appellants)

and

1442810 Ontario Inc.,
    Ahmed Mansury, Baljit S. Gill, Re/Max Realty

Defendants by Counterclaim (Respondents)

Cameron Fiske, for the appellants

John R. Hart, for the respondents 1442810 Ontario Inc.
    and Ahmed Mansury

Ron E. Folkes, for the respondents Baljit S. Gill and
    Re/Max Realty

Heard and released orally: May 19, 2016

On appeal from the judgment of Justice Michael G. Emery
    of the Superior Court of Justice, dated September 11, 2015.

ENDORSEMENT

[1]

The appellants appeal the trial decision enforcing a promissory note and
    dismissing their counterclaim and crossclaim. They raise three issues on
    appeal.

[2]

The first is that the trial judge found a breach of s. 33 of the
Real
    Estate and Business Brokers Act
, R.S.O. 1990, c. R. 4, which was in force
    at the time of the transaction, but gave no remedy. We do not give effect to
    this submission. The trial judge found that no damages flowed from the breach.
    The information contemplated by s. 33 had been provided by the broker well
    before the closing of the transaction. Further, the trial judge concluded,
    based on all of the evidence, that had there been compliance with s. 33,
    the appellants would nonetheless have closed the transaction.

[3]

The second issue raised is that the trial judge erred in finding that
    there was consideration for the promissory note. In our view, the trial judge
    was entitled to find on the evidence that the promissory note was a stand-alone
    document and that the appellants did not meet their burden to show that the
    note was unenforceable because there was no value given for it.

[4]

Third, the appellants argue that the trial judge erred in concluding
    that representations made in the MLS listing as to the weekly sales at the
    convenience store were superseded by the terms of the agreement of purchase and
    sale, including the entire agreement clause. On the facts as found by the trial
    judge, we see no error in the conclusion that he reached.

[5]

The appeal is therefore dismissed. Agreed costs of $15,000, inclusive of
    disbursements and HST, are payable to each set of respondents ($30,000 total).

K.
    Feldman J.A.

Paul
    Rouleau J.A.

Grant Huscroft J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: 2403177 Ontario Inc. v. Bending Lake Iron Group
    Limited,

2016 ONCA 485

DATE: 20160616

DOCKET: M46301 (C61637)

CV-14-274

Weiler, Cronk and Benotto JJ.A.

BETWEEN

2403177 Ontario Inc.

Applicant (Respondent)

and

Bending Lake Iron Group Limited

Respondent

(Appellant/Moving
    Party)

Robert MacRae, for the moving party, Bending Lake Iron
    Group Limited

Kenneth Kraft, John Salmas and Jordan Schultz, for the
    responding party, A. Farber & Partners Inc., in its capacity as
    court-appointed receiver of Bending Lake Iron Group Limited

Heard: In writing

On motion for leave to appeal from the order of Justice D.C.
    Shaw of the Superior Court of Justice, dated January 8, 2016, with reasons
    reported at 2016 ONSC 199.

BY THE COURT:

A.

Overview

[1]

On September 11, 2014, Bending Lake Iron Group Limited (BLIG) went
    into receivership (the Receivership Order). A. Farber & Partners Inc. was
    appointed receiver over BLIGs property (the Receiver) pursuant to s. 243(1)
    of the
Bankruptcy and Insolvency Act
, R.S.C. 1985, c. B-3 (the
BIA
).
    On November 27, 2014, the court approved a Sales and Investor Solicitation
    Process for BLIGs property (the SISP Order). BLIG consented to the SISP
    Order.

[2]

In December 2015, the Receiver moved for court approval of an asset
    purchase agreement with Legacy Hill Resources Ltd. (Legacy Hill) for the sale
    to Legacy Hill of substantially all BLIGs assets (the Sale Agreement). BLIG
    opposed the motion and brought its own cross-motion seeking various relief,
    including the postponement of the sale. On January 8, 2016, the motions judge
    approved the Sale Agreement and ordered the vesting of BLIGs property in
    Legacy Hill upon the filing of a receivers certificate (the Approval and
    Vesting Order).

[3]

BLIG filed a notice of appeal dated January 13, 2016, seeking to set
    aside the Approval and Vesting Order. By order of this court dated March 22,
    2016, Brown J.A. (In Chambers) ruled that BLIG required leave to appeal under
    s. 193(e) of the
BIA
.
Accordingly, he quashed BLIGs notice of
    appeal and set a timetable for the filing of BLIGs leave materials.

[4]

BLIG now seeks leave to appeal the Approval and Vesting Order.  Should
    leave be granted, it proposes to argue on appeal that the motions judge erred:
    i) in finding that the Receiver had acted reasonably and fairly in negotiating
    the sale of BLIGs property, and that the actions of BLIG in undertaking
    parallel negotiations with Legacy Hill contravened the Receivership and the
    SISP Orders; and ii) in failing to consider whether the Receiver discharged its
    obligation to consult with affected Aboriginal communities in approving the
    Sale Agreement. BLIG submits that the proposed appeal is of general significance
    to insolvency practice, is
prima facie

meritorious and would
    not unduly delay the insolvency proceedings.

[5]

For the reasons that follow, we are not satisfied that the test for
    granting leave to appeal has been met.  Accordingly, the leave application is
    dismissed.

B.

Facts

[6]

BLIG is an iron ore mining development company with its major asset
    being a mine site in Thunder Bay, Ontario. While BLIG was initially successful
    in raising equity financing to develop the mine site, it was unable to arrange
    any major financing in 2011 and 2012. In 2012, BLIG engaged in negotiations
    with a foreign company to raise significant debt and equity financing.  In
    anticipation of successful financing, 2403177 Ontario Inc. advanced a series of
    loans to BLIG to fund development of the mine. Unfortunately, the financing
    fell through and development of the mine was suspended in 2013.

[7]

At the date of its receivership in September 2014, BLIG owed in excess
    of $3.5 million to secured creditors, more than $8 million to unsecured
    creditors and approximately $450,000 to the Canada Revenue Agency.  Pursuant to
    the SISP Order, the Receiver compiled a list of interested parties, through
    consultation with BLIG and the Receivers network of investors in the mining
    and investment communities.  In excess of 120 interested parties were contacted
    by the Receiver and 12 signed confidentiality agreements. However, no offers or
    proposals for purchasing, refinancing or restructuring BLIG were received by
    the extended deadline of March 27, 2015.

[8]

While the SISP was underway, and without informing the Receiver, the
    President and CEO of BLIG, Henry Wetelainen, commenced separate discussions
    with an interested party, Legacy Hill.  Mr. Wetelainen claimed in a subsequent affidavit
    that he pursued these discussions as part of his continued effort on behalf of
    BLIG and its creditors, stakeholders, shareholders and affected Aboriginal
    communities to rescue BLIG from receivership. On March 12, 2015, BLIG and
    Legacy Hill entered into a Confidentiality Agreement and BLIG subsequently
    provided confidential documents to Legacy Hill.  The Receiver was unaware that
    the parties had signed a Confidentiality Agreement, and of the existence of
    many of the confidential documents BLIG provided to Legacy Hill.

[9]

When the Receiver learned of the discussions between Mr. Wetelainen and
    Legacy Hill, it notified Mr. Wetelainen that all negotiations with Legacy Hill
    would be conducted by the Receiver pursuant to the Receivership and the SISP
    Orders.  The Receiver then commenced its own discussions with Legacy Hill and
    entered into a Confidentiality Agreement with it.  It also undertook due diligence
    on Legacy Hill and provided the results of that due diligence in its Third
    Report, filed with the court in the insolvency proceedings.

[10]

From April to September 2015, the Receiver received no firm proposals or
    expressions of interest for the restructuring of BLIG or the purchase of its
    assets.  However, on September 30, 2015, Legacy Hill executed a non-binding
    letter of intent to purchase the assets of BLIG. The sale concluded on November
    27, 2015, with the Receiver and Legacy Hill signing the Sale Agreement.

[11]

On December 10, 2015, the Receiver moved for approval of the Sale
    Agreement.  It argued that the purchase price represented the best and highest
    offer for BLIGs assets in a depressed iron ore market.  It further argued that
    the actions of Mr. Wetelainen and BLIG, in undertaking a parallel sales process,
    failing to provide confidential documents to the Receiver, and negotiating
    agreements with Legacy Hill directly, contravened the Receivership Order.

[12]

BLIGs secured creditors approved the proposed sale.

[13]

BLIG opposed approval of the sale, arguing that the Receiver had shown a
    lack of impartiality in its conduct with Legacy Hill, that the Receiver had
    become an advocate for Legacy Hill, and that the Receiver should have made
    inquiries as to why there had been a parting of the ways between Legacy Hill and
    BLIG (in a movement away from refinancing/restructuring and toward sale of the
    assets). BLIG also maintained that, by agreeing to purchase BLIGs assets, Legacy
    Hill had breached its fiduciary duty to BLIG, its shareholders, stakeholders
    and Aboriginal communities under the Confidentiality Agreement.

[14]

In defence of its conduct, BLIG further argued that, because the
    Receiver had not been appointed manager of BLIG and did not take possession or
    control of BLIGs property, Mr. Wetelainen was entitled, on behalf of BLIG, to
    enter into the Confidentiality Agreement with Legacy Hill and provide the
    confidential documents in furtherance of a joint venture/restructuring and
    refinancing of BLIG.

[15]

Before the motions judge, BLIG did not pursue its argument that the
    Receiver had breached its duty to consult with affected Aboriginal
    communities. Rather, it argued that the sale should be postponed and that the
    Receiver should be required to develop a process to inform creditors,
    shareholders, stakeholders and affected Aboriginal communities of
    opportunities to participate in the funding of the amount set out in the Sale
    Agreement.

[16]

All parties agreed on the principles to be applied when reviewing a proposed
    sale by a court-appointed receiver, as set out in
Royal Bank of Canada v.
    Soundair Corp.
,

[1991] O.J. No. 1137 (C.A.).  Those principles
    require that a reviewing court should consider:

(a)   whether the receiver made a
    sufficient effort to obtain the best price and has not acted improvidently;

(b)   the interests of all parties;

(c)   the efficacy and integrity of the
    process by which the offers are obtained; and

(d)   whether there has been unfairness
    in the working out of the process.

[17]

Applying this framework to the facts of this case, the motions judge
    granted the Approval and Vesting Order.  He made the following critical
    findings:

(a)

the
    Receiver had made adequate effort at marketing the property and continued to
    market the property after the expiry of the bid deadline. The Receiver received
    no concrete proposals or expressions of interest for a restructuring or sale of
    BLIG, in what continued to be very depressed market conditions for the mining
    sector. Legacy Hills offer was the only offer made on the property;

(b)

although the Receiver owed a duty to all stakeholders, its primary duty
    was to maximize the return for the secured creditors. Even with the sale, the
    secured creditors stood to incur a shortfall on their security. Nevertheless,
    they supported the sale and did not want to hold out in the hopes of attracting
    a better offer. While the interest of the debtor must be taken into account, approval
    of the sale should not be denied, and the modest recovery by the secured
    lenders jeopardized, on the mere possibility that BLIG could match the Legacy Hill
    offer. BLIG presented no evidence on the motions that it was able to refinance
    or restructure the company;

(c)

the
    Receiver negotiated in good faith and had no reason to reject the only offer it
    received for the property. The court will not lightly interfere with the commercial
    judgment of a receiver or examine the minutiae of the circumstances leading up
    to the sale. Provided the Receiver has acted reasonably, prudently and fairly,
    its decision should be given deference. The speculative nature of BLIGs proposal
    to be given time to match or better the Legacy Hill offer would adversely
    affect the integrity of the process undertaken by the Receiver; and

(d)

the
    Receivership Order gave the Receiver broad powers, to the express exclusion of
    the debtor. Under paragraph 3(g), the Receiver alone had the right to market
    any and all of the assets, undertakings and properties of BLIG. Under the SISP
    Order, the Receiver was empowered to solicit offers to purchase, or to invest
    in, the debtor and/or the property. The SISP Order also contemplated
    confidentiality agreements between the Receiver and prospective purchasers.
    Even if the Receiver had been aware of the discussions between BLIG and Legacy
    Hill about possible refinancing or restructuring, the Receiver was not required
    to work toward restructuring or refinancing rather than an asset purchase. The
    SISP Order did not require the Receiver to consult with BLIG before finalizing
    the agreement, nor did any provision of the Receivership Order. Moreover, the
    Receiver was never presented with a refinancing/restructuring proposal from
    either BLIG or Legacy Hill, nor did BLIG present any evidence that it was able
    to refinance the company.

[18]

The motions judge also concluded that BLIGs pursuit of refinancing or
    restructuring without the knowledge or consent of the Receiver was contrary to
    the provisions of the Receivership and the SISP Orders. He rejected BLIGs submission
    that, because the Receiver was not appointed manager of BLIG and was not
    operating the business, Mr. Wetelainen had licence to engage in parallel
    negotiations with Legacy Hill.  In his view, if this submission was accepted,
    it would result in BLIG working at cross-purposes with the Receiver.

C.

proposed issues on appeal

[19]

BLIG identifies three proposed issues for argument on appeal:

(1)

Did
    the motions judge err in law in finding that representatives of BLIG acted in
    contravention of the Receivership Order?

(2)

Does
    the Receivership Order, which left the management of the company in the hands
    of existing management, deprive the existing management of the right to seek
    refinancing and/or restructuring of the company?

(3)

Did the motions judge err in approving the Sale Agreement by failing to
    address the rights of affected Aboriginal communities?

D.

test for leave to appeal in
bia

proceedings

[20]

Granting leave to appeal under s. 193(e) of the
BIA
is
    discretionary and must be approached in a flexible and contextual way. The
    threshold criterion for granting leave is whether the moving party has raised
    arguable points that create a reasonable prospect of success on appeal.  As Doherty
    J.A. of this court explained in
Ravelston Corp. (Re)
, 2005 CanLII
    63802, at paras. 28-29:

The inquiry into whether leave to appeal should be granted must
    [] begin with some consideration of the merits of the proposed appeal. If the
    appeal cannot possibly succeed, there is no point in granting leave to appeal
    regardless of how many factors might support the granting of leave to appeal.

A leave to appeal application is not the time to assess, much
    less decide, ultimate merits of a proposed appeal. However, the applicant must
    be able to convince the court that there are legitimately arguable points
    raised so as to create a realistic possibility of success on the appeal.
    Granting leave to appeal if the merits fall short of even that relatively low
    bar would be a waste of court resources and would needlessly delay and
    complicate insolvency proceedings.

[21]

In
Business Development Bank of Canada v. Pine Tree Resorts Inc.
,

2013 ONCA 282, 115 O.R. (3d) 617, at para. 29, Blair J.A. (In Chambers)
    incorporated this consideration in proposing a unified approach to granting
    leave to appeal:

Beginning with the overriding proposition that the exercise of
    granting leave to appeal under s. 193(e) is discretionary and must be exercised
    in a flexible and contextual way, the following are the prevailing
    considerations in my view. The court will look to whether the proposed appeal,

(a)

raises
    an issue that is of general importance to the practice in bankruptcy/insolvency
    matters or to the administration of justice as a whole, and is one that this
    Court should therefore consider and address;

(b)

is
prima facie
meritorious, and

(c)

would
    unduly hinder the progress of the bankruptcy/insolvency proceedings.

[22]

At para. 31 of
Pine Tree Resorts
,
Blair J.A. explained
    that, although the
prima facie
meritorious criterion is different
    than the arguable point notion referred to in some other decisions of this
    court, the somewhat higher standard of a
prima facie
meritorious case
    on appeal is more in keeping with the evolution of the case law in this area.

[23]

Finally, at para. 32, Blair J.A. noted that, given the evolution in the
    applicable jurisprudence, the test for leave to appeal is not simply
    merit-based.  Rather, it requires a consideration of all the factors set out above.

[24]

This articulation of the test has been affirmed on numerous occasions by
    this and other courts: see
Enroute Imports Inc., Re
, 2016 ONCA 247, at
    para. 7;
Global Royalties Ltd. v. Brook
,
2016 ONCA 50, at para.
    26;
Farm Credit Canada v. Gidda
,
2015 BCCA 236, at paras. 11-12;
Impact Tool & Mould Inc. (Receiver of) v. Impact Tool & Mould
    (Trustee of)
,
2013 ONCA 697, at para. 3.

E.

ANALYSis

[25]

In our view, the first two proposed grounds of appeal identified by
    BLIG, which concern the motions judges findings that BLIG contravened the
    Receivership Order, do not raise questions requiring consideration by this court.
    Both grounds involve highly fact-driven issues. The question whether particular
    conduct contravenes a Receivership Order will be determined by the particular
    facts of each case. In this case, the motions judges interpretation and
    application of specific terms within the Receivership and the SISP Orders,
    leading him to conclude that BLIGs conduct contravened those terms, are not of
    general importance to bankruptcy/insolvency practice or the administration of
    justice as a whole.  Rather, his conclusions on this issue were highly fact
    and case  specific.

[26]

Further, BLIGs materials provide no support for its contention that the
    motions judge erred in concluding that BLIGs disclosure of confidential
    information (without the Receivers knowledge or consent) and withholding
    information from the Receiver, violated the clear provisions of the Receivership
    Order.  In reaching his conclusion on this issue, the motions judge noted and
    applied the well-recognized principle that a debtor has a duty to make full and
    frank disclosure and production of information and documents to the Receiver.
    We see no merit to BLIGs challenge to the motions judges approach to or his
    conclusion and reasoning on this issue.

[27]

We also see little, if any, merit to BLIGs argument that Mr. Wetelainen
    had authority to negotiate directly with Legacy Hill. BLIGs reliance on the
    indoor management rule is misplaced. BLIGs actions, in negotiating directly
    with Legacy Hill and disclosing confidential information to it without first
    notifying the Receiver, did not reflect standard practices and procedures for a
    company in receivership. The power to engage in negotiations regarding the
    companys assets was specifically assigned to the Receiver under the Receivership
    and the SISP Orders. As the motions judge pointed out, at para. 83, The fact
    that the Receiver did not operate the business does not derogate from the
    exclusivity of the powers that the Receiver was given under the Receivership
    Order and the SISP Order. We agree.

[28]

In any event, the motions judges reasons reveal that he approved the
    Sale Agreement based on the totality of the circumstances and application of the
    factors set out in
Soundair
. His findings about BLIGs conduct had no
    bearing on those factors and were not part of his assessment whether the
    Receiver had negotiated fairly and in good faith.

[29]

Finally, the proposed appeal would unduly hinder the insolvency
    proceedings, as Legacy Hill is not prepared to close the Sale Agreement until
    BLIG has exhausted its appeal rights in this court.

[30]

We reach a similar conclusion regarding BLIGs final proposed ground of
    appeal, namely, that the Receiver breached its duty to consult with affected
    Aboriginal communities.  In our view, given the history of the proceedings, it
    is not open to BLIG to now raise this issue on appeal.

[31]

There is no question that the Crown (or a Crown agent) has a duty
    to consult with affected Aboriginal communities where the Crowns actions
    might adversely impact potential or established Aboriginal or treaty rights. In
Haida Nation v. British Columbia (Minister of Forests)
, 2004 SCC 73, [2004] 3 S.C.R. 511 and
Taku River
    Tlingit First Nation v. British Columbia (Project Assessment Director)
,
2004 SCC 74, [2004] S.C.J. No. 69,
the Supreme
    Court indicated that the Crown's duty to consult with Aboriginal peoples and
    accommodate their interests is grounded in the Honor of the Crown, which
    derives from the Crown's assertion of sovereignty in the face of prior
    Aboriginal occupation.

[32]

The duty to consult arises when the Crown has
    knowledge, real or constructive, of the potential existence of the Aboriginal
    right or title and contemplates conduct that might adversely affect it. The Supreme
    Court has also confirmed that the Honor of the Crown cannot be interpreted
    narrowly or technically, but must be given full effect in order to promote the
    process of reconciliation between the Crown and Aboriginal peoples mandated by
    s. 35(1) of the
Constitution Act, 1982
:
Taku
, at para. 24.

[33]

BLIG raised the issue of affected Aboriginal
    communities before Brown J.A. in the context of arguing that it was entitled
    to leave to appeal in this case as of right under ss. 193 (a), (b) and (c) of
    the
BIA
.
In
    particular, BLIG argued that the proposed issues on appeal implicate the
    future rights of affected Aboriginal communities and other cases of a
    similar nature, namely, its motion seeking leave to commence an action against
    the Receiver for damages for the Receivers alleged breach of its fiduciary
    duty to Aboriginal peoples.

[34]

In concluding that an appeal did not lie as of right under ss. 193(a),
    (b) or (c) of the
BIA
,
and that

leave to appeal was
    required
,
Brown J.A. comprehensively reviewed the evidence placed before
    the motions judge about affected Aboriginal communities. He made a number of
    findings that bear on the issue of BLIGs ability to raise this issue on
    appeal.

[35]

First, and importantly, BLIG did not raise the issue of the Receivers
    duty to consult in the context of the SISP proceeding and, in fact, consented
    to the order allowing the Receiver to proceed with the sale process. At para.
    26, Brown J.A. found that the time to raise the issue of the affected
    Aboriginal communities was in the SISP process. We agree.

[36]

Second, Brown J.A. held, at para. 35, that BLIG did not advance the
    argument that the Receiver failed in its duty to consult affected Aboriginal
    communities before the motions judge on the motion to approve the sale.  This
    finding is supported by the record.

[37]

Given that the issue was not raised before the motions judge, BLIG is
    faced with the burden of establishing that all the facts necessary to address this
    issue are before this court as fully as if the matter had been raised in the
    court below:
Kaiman v. Graham,
2009 ONCA 77, at para. 18. BLIG has not
    discharged this burden.

[38]

Specifically, the record before this court does not clearly establish
    which Aboriginal communities, if any, have interests in the property affected
    by the sale, the extent and nature of those interests, and how the actions of
    the Receiver will negatively impact those interests. A clear articulation of
    the nature and extent of the asserted right is necessary, in the interest of
    balancing any Aboriginal rights at stake with the rights of others.  As Binnie
    J. noted in
Lax Kw'alaams Indian Band v. Canada (Attorney General)
,
2011 SCC
56, [2011] S.C.J. No. 56, at para. 12:

At this point in the evolution
    of Aboriginal rights litigation, the contending parties are generally well
    resourced and represented by experienced counsel. [] It is true, of course, that
    Aboriginal law has as its fundamental objective the reconciliation of Canadas
    Aboriginal and non-Aboriginal communities, and that the special relationship
    that exists between the Crown and Aboriginal peoples has no equivalent to the
    usual courtroom antagonism of warring commercial entities. Nevertheless,
    Aboriginal rights litigation is of great importance to non-Aboriginal
    communities as well as to Aboriginal communities, and to the economic well-being
    of both.
The existence and scope of Aboriginal rights protected as
    they are under s. 35(1) [] must be determined after a full hearing that is
    fair to all the stakeholders
.  [Emphasis
    added.]

[39]

In our view, it would be prejudicial and unfair to the interests of
    BLIGs secured creditors, and contrary to the normal rules of procedure, to
    permit BLIG to raise this issue at this late stage, when it elected not to
    raise it in the SISP proceeding or before the motions judge on the motion to
    approve the sale.  As a result of its failure to raise the matter on a timely
    basis, there is no adequate evidentiary record supporting the claim. Nor does
    this court have the benefit of the motions judges consideration and ruling on
    the issue.

[40]

Third, and in any event, we agree with Brown J.A.s observation that it
    is doubtful whether BLIG has standing to assert this claim on behalf of
    Aboriginal communities. As LeBel J. indicated in
Behn v. Moulton
    Contracting Ltd.
, 2013 SCC 26, [2013] S.C. J. No. 26, at para. 30, the
    Crowns duty to consult is intended to protect the s. 35 constitutional rights
    of Aboriginal peoples, which are collective in nature. While an Aboriginal
    group can authorize an individual or organization to represent it for the
    purpose of asserting its s. 35 rights, there is no evidence that this occurred
    in this case.

[41]

Moreover, regardless of the standing issue, as the record does not
    disclose the nature and extent of any Aboriginal communitys interests, if any,
    in BLIGs property, we are unable to conclude that this proposed ground of
    appeal warrants the granting of leave to appeal.

F.

disposition

[42]

For the reasons given, the application for leave to appeal is dismissed.
    The Receiver is entitled to its costs of this motion and the motion for advice
    and directions before Brown J.A., fixed in the total amount of $3,000,
    inclusive of disbursements and all applicable taxes.

K.M. Weiler J.A.

E.A. Cronk J.A.

M.L. Benotto J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Antunes v. Limen Structures Ltd.,
    2016 ONCA 509

DATE: 20160624

DOCKET: C60563

MacPherson, Sharpe and Miller JJ.A.

BETWEEN

John Antunes

Plaintiff (Respondent)

and

Limen Structures Ltd.

Defendant (Appellant)

Arnold Schwisberg, for the appellant

J. Van Wiechen, for the respondent

Heard: June 21, 2016

On appeal from the judgment of Justice Carole J. Brown of
    the Superior Court of Justice, dated June 2, 2015.

ENDORSEMENT

[1]

The appellant Limen Structures Ltd. appeals the judgment of C. Brown J.
    of the Superior Court of Justice dated June 2, 2015. In the judgment, the trial
    judge awarded the respondent $105,228.54 in damages for wrongful dismissal and
    $500,000 in damages for the non-delivery of shares in the appellant pursuant to
    the employment contract. The appellant appeals the second component of this
    judgment.

[2]

The appellant contends that the $500,000 in damages was both a palpable
    and overriding error of fact and an error of law. Central to both submissions
    is the assertion that, at trial, there was no evidence of the liquidity of the
    shares of the appellant that could possibly ground the $500,000 amount.

[3]

We do not accept the appellants submissions. There are two major
    defects in them.

[4]

First, the issue as to the liquidity of the shares is a new issue not
    raised in the evidence or argument at trial.

[5]

Second, the appellant called no evidence at trial.

[6]

The Employment Contract explicitly dealt with the shares issue:

3.       Company Share: John Antunes shall be issued       5%
    of the Company shares at the start of the      employment contract.

[7]

The respondent testified that Antonio Lima, the appellants President
    and the signatory of the Employment Contract, told him that the appellant was
    worth $10,000,000. This would make the 5% share component of the Employment
    Contract worth $500,000.

[8]

At trial, the appellant called no evidence on this or any other issue.
    The trial judge reasoned:

[70]    No one was called from the defendant company to
    testify. Critically, Mr. Lima, with whom Mr. Antunes had negotiated his
    employment and the employment contract, and who would have direct knowledge of
    the negotiations and discussions, was not called. Further, while undertakings
    were requested at examinations for discovery as regards Mr. Limas knowledge
    concerning the negotiations and specific aspects thereof in issue in this
    action, no answers were given to those undertakings/advisements. Nor was there
    any documentary evidence as regards negotiations concerning the terms of his
    employment, or to refute the evidence of the plaintiff. Mr. Lima would have
    been a key material witness in this case, given his involvement in the negotiation
    of the employment agreement. The evidence indicates that he was the only person
    from the defendant corporation who negotiated the employment contract with the plaintiff
    or spoke to him prior to his hiring. The only reason given to the Court for his
    not being called was that he was president of the company. I do not accept this
    as a reason for his not being called as a witness. Only the transcript of the
    examination of Mr. Micciola, Controller-Finance & Operations, was in
    evidence.

[71]    I draw an adverse inference against the defendant
    corporation regarding the failure to produce Mr. Lima as a witness. He was a
    material witness with direct and relevant knowledge of the negotiations
    regarding the employment agreement.

[72]    In all of the circumstances, and based on the evidence
    before me, I accept the evidence of Mr. Antunes as regards the representations
    made to him. I further accept his evidence that he relied on these
    representations in accepting the offer of employment. While the defendant
    argues that such reliance is not reasonable, as the plaintiff did not request
    supporting documentation as to the financial circumstances of the company and
    knew or should have known that the company was not in such good financial
    circumstances, I do not find the plaintiffs reliance to be unreasonable. Mr.
    Antunes testified that he knew or believed, given his familial relationship
    with Mr. Lima, that Mr. Lima was a successful businessman with a successful
    company. Further, and for the same reason, he trusted Mr. Limas
    representations.

[9]

We agree with this reasoning.

[10]

The
    appeal is dismissed. The respondent is entitled to his costs of the appeal and
    motion fixed at $11,000, inclusive of disbursements and HST.

J.C.
    MacPherson J.A.

Robert
    J. Sharpe J.A.

B.W.
    Miller J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Best v. Ranking, 2016 ONCA 492

DATE: 20160621

DOCKET: C61271

Blair, Pardu and Brown JJ.A.

BETWEEN

Donald Best

Plaintiff

and

Gerald
    Lancaster Rex Ranking, Sebastien Jean Kwidzinski,

Lorne
    Stephen Silver, Colin David Pendrith, Paul Barker

Schabas,
    Andrew John Roman, Ma'anit Tzipora Zemel,

Fasken
    Martineau Dumoulin LLP, Cassels Brock and

Blackwell
    LLP, Blake, Cassels & Graydon LLP, Miller

Thomson
    LLP,
Kingsland Estates Limited
,
Richard Ivan Cox
,

Eric Iain
    Stewart Deane,
Marcus Andrew Hatch
,
Philip St.

Eval
    Atkinson
,
PricewaterhouseCoopers East Caribbean

(Formerly
    'PricewaterhouseCoopers')
, Ontario Provincial Police,

Peel
    Regional Police Service a.k.a. Peel Regional

Police,
    Durham Regional Police Service, Marty Kearns,

Jeffery
    R. Vibert, George Dmytruk, Laurie Rushbrook,

James
    (Jim) Arthur Van Allen, Behavioural Science

Solutions
    Group Inc., Tamara Jean Williamson,

Investigative
    Solutions Network Inc., Toronto Police

Association,
    Jane Doe #1, Jane Doe #2, Jane Doe #3, Jane Doe #4,

Jane Doe
    #5, John Doe #1, John Doe #2, John Doe #3, John Doe #4,

John Doe #5

Defendants (Respondents)

Paul J. Pape and Justin H. Nasseri, for the appellant,
    Paul Slansky

Mark Polley and Eric Brousseau, for the respondents

Heard: May 24, 2016

On appeal from the judgment of Justice Susan E. Healey of
    the Superior Court of Justice, dated October 13, 2015, with reasons reported at
    2015 ONSC 6279.

Pardu J.A.:

[1]

Paul Slansky, counsel for the plaintiff Donald
    Best, appeals from a decision requiring Mr. Slansky to pay costs personally, in
    the sum of $84,000, on a joint and several basis with his client. He submits
    that the motion judge erred in two respects:

·

The hearing was unfair, because he did not have adequate notice of
    the grounds upon which the motion judge grounded her decision to order him to
    pay costs personally.

·

The motion judge awarded costs against him because he took on a weak
    case, not on the basis pleaded by the respondents, which was that he had taken
    procedural steps which wasted costs.

[2]

More generally, Mr. Slansky submits that the
motion judge should not have ordered him to pay costs personally, and would not
    have done so had she exercised the extreme caution required.

[3]

For the following reasons, I would dismiss the
    appeal.

A.

Background

(1)

The first action

[4]

Donald Best was the appellants client. In 2007,
    Mr. Best, not then represented by the appellant, started an action for
    negligence and economic loss against 62 defendants  including three of the
    respondents on this appeal, Richard Ivan Cox, Kingsland Estates Limited and
    PricewaterhouseCoopers East Caribbean. This action (Action 1) was stayed on
    jurisdictional grounds in 2009: 75 C.P.C. (6th) 58 (Ont. S.C.J.).

[5]

Several of the defendants in Action 1, among
    them the respondents named above, moved for a finding of contempt against Mr.
    Best for failure to comply with court orders related to attempts to collect
    costs from him. Mr. Best failed to appear at the hearing of the motion and was
    held in contempt: 2010 ONSC 569. He failed to purge his contempt when given an
    opportunity to do so on February 22, 2010, choosing instead to live outside
    Canada for a period of time.

[6]

In 2012, Mr. Best returned to Canada and applied
    to purge the contempt. He swore an affidavit that contained accusations of
    perjury, conspiracy, fraud, obstruction of justice and fabrication of evidence
    by opposite parties and their counsel. These accusations were rejected as
    baseless by the contempt judge, who dismissed Mr. Bests application: 2013 ONSC
    9025. Mr. Best served 60 days in prison for contempt.

[7]

It was at this point that Mr. Slansky first
    appeared in court on behalf of Mr. Best. The latter sought to appeal to
    this court the finding of contempt and the dismissal of his application to set that
    finding aside. As part of his appeal, he brought a motion before Feldman J.A.
    on October 29, 2013 to remove counsel of record for the opposing parties.

[8]

At that time, Mr. Best, through Mr. Slansky,
    repeated his allegations of serious misconduct on the part of opposite counsel.
    Feldman J.A. indicated that the repetition of these allegations, in the face of
    express judicial findings rejecting them, required the court to express its
    condemnation by awarding costs on the full indemnity scale: 2013 ONCA 695.

[9]

A panel of this court rejected Mr. Bests
    attempt to review the order of Feldman J.A. and ordered him to pay costs owing
    to the defendants by April 1, 2014, failing which his appeal from the decision
    dismissing his action on jurisdictional grounds would be dismissed by the
    Registrar: 2014 ONCA 167.

[10]

Attempts by Mr. Best to stay the Court of Appeal
    decision and to obtain leave to appeal from the Supreme Court of Canada were
    unsuccessful. He did not pay the costs and his appeal was dismissed.

(2)

The second action

[11]

Before the Supreme Court released its decision
    on leave, Mr. Best started a new action, with the appellant as his counsel of
    record.

[12]

This action (Action 2) named 39 defendants, including
    the five respondents to this appeal. It added claims against opposing counsel from
    Action 1 and their firms, and claims against police and private investigators,
    alleging intentional torts committed during the contempt proceedings. The
    allegations included intentional infliction of harm and mental suffering,
    misfeasance of public office and abuse of authority, malicious prosecution,
    conspiracy to injure and invasion of privacy.

[13]

Once Action 2 was started, counsel for the respondents
    wrote to Mr. Slansky on October 24 and November 6, 2014 indicating that
    they intended to contest jurisdiction. They advised that for that reason they
    did not propose to file a defence and asked that he not note their clients in
    default.

[14]

The letters also noted that other defendants
    were bringing a motion to strike the claim entirely. Counsel proposed that the
    parties defer the jurisdiction motion until that other motion was decided. If
    the action were struck, there would be no need to proceed with the jurisdiction
    motion and the respondents would not incur the costs of so doing. By this
    point, Mr. Best owed $375,000 in unpaid costs awards to the three respondents
    who had been involved in Action 1.

[15]

Mr. Slansky responded that he would not agree to
    defer the jurisdiction motion until after the motion to strike. He demanded
    that the respondents serve either a defence or a notice of motion to challenge
    jurisdiction by November 25, 2014, failing which he would note them in default.

[16]

Counsel asked Mr. Slansky to reconsider his
    position on noting the respondents in default on November 17, 2014. He did not
    agree but extended his deadline for a Statement of Defence or notice of motion to
    contest jurisdiction to December 2. Failing receipt of either, Mr. Slansky
    noted the respondents in default on December 8 and advised their counsel.

[17]

At a case conference held on December 16, Mr.
    Slansky refused to agree to set aside the noting in default, and the case
    conference judge set a timetable to deal with a motion to set aside the noting
    in default.

[18]

On February 6, 2015, Mr. Slansky served counsel
    with notices of examination for two of the respondents. The respondents refused
    to produce themselves for cross-examination, and Mr. Best, in turn, brought a
    motion to compel them to give evidence. Justice McCarthy dismissed this motion
    on February 27, noting that there was nothing the respondents could add that
    would be relevant to the narrow issue to be determined on the motion to set
    aside.

[19]

Mr. Slansky eventually consented to an order
    setting aside the default judgment on March 9, 2015, just four days before the
    motion to set aside the noting in default was to be argued. Motion materials
    had already been prepared and exchanged. In a letter written two days later,
    counsel for the respondents informed Mr. Slansky that they intended to seek
    costs against him personally.

[20]

A hearing to determine the costs of the
    examination motion and the motion to set aside the noting in default took place
    on April 10, 2015. Justice McCarthy ordered substantial indemnity costs against
    Mr. Best, holding that Mr. Best had used the rules to create the need for an
    unnecessary and time-consuming motion. He described the plaintiffs conduct as
    reprehensible, requiring strong disapproval from the court. He said the
    plaintiffs conduct in noting the defendants in default and then opposing the
    setting aside of that step was entirely unnecessary and unreasonable.

[21]

Mr. Bests motion for leave to appeal the April
    10 costs order to the Divisional Court was dismissed: 2015 ONSC 5075. Upon
    learning that Mr. Best sought leave to appeal, counsel for the respondents
    again wrote to Mr. Slansky on April 29, 2015, informing him that they were
    considering seeking costs against him personally.

[22]

A further letter from counsel for the
    respondents followed on May 7, 2015, again warning of their intention to seek
    costs personally from him:

[I]t is not just a mere disagreement with your
    clients positions or actions that leads us to this drastic step of seeking
    costs against you personally.
Fundamentally, your approach to
    this litigation has been abusive and continues to waste an astonishing amount
    of money on legal costs.
You personally have caused
    these costs to be incurred without any reasonable cause by either acquiescing
    to absolutely unreasonable instructions from your client, or worse by advising
    your client to take the unreasonable steps he has taken through you. Either
    way, you personally are liable for these costs. [Emphasis added.]

(3)

The hearing of the motions to strike

[23]

From June 15 to 18,
the motions to strike brought by 21 of the 39 defendants in Action 2
    were argued before Healey J. The defendants sought to dismiss Action 2 as frivolous,
    vexatious and an abuse of process, or to strike the claim as disclosing no
    reasonable cause of action, without leave to amend.

[24]

On the first day of argument, nearly eight
    months after the issue was first raised, Mr. Slansky conceded that the
    respondents jurisdictional motion should await the outcome of the motions to
    strike.

[25]

On the third day of argument, counsel for the
    respondents again notified Mr. Slansky of their intention to seek costs against
    him personally.

[26]

On the fourth day of argument, Justice Healey
    dismissed the action as an abuse of process, making the jurisdiction motion
    moot. In her endorsement dated that same day, she ordered costs of the action to
    the respondents on a full indemnity basis. She noted that the respondents would
    be moving for an order under rule 57.07, requiring Mr. Slansky to be jointly
    and severally liable for the costs of the action. In reasons released later, she
    found that Action 2 had not a scintilla of merit and that it was the most
    vexatious and abusive claim to ever come before her: 2015 ONSC 6269, at para.
    7.

[27]

Mr. Best attempted to appeal from the dismissal
    of his action, but the appeal was dismissed after he failed to comply with an
    order to provide security for costs.

B.

The Notice of Motion

[28]

As noted, counsel for the respondents provided written
    notice of the respondents intention to seek costs personally against the
    appellant on four occasions during the course of Action 2: March 11, 2015;
    April 29, 2015; May 7, 2015 and June 17, 2015.

[29]

On July 22, 2015, the respondents served their Notice
    of Motion. Pursuant to rule 57.07(1)(c) of the
Rules of Civil
    Procedure
, they sought that Mr. Slansky be held jointly
    and severally liable with Mr. Best for all costs awarded in the respondents
    favour in Action 2  an amount totaling over $160,000. The motion was heard on
    September 3, 2015. On October 13, 2015, Healey J. ordered Mr.

Slansky to pay costs fixed at $84,000 on a joint and several basis
    with Mr. Best.

[30]

Rule 57.07 provides in part:

(1)

Where a lawyer for a party
    has caused costs to be incurred without reasonable cause or to be wasted by
    undue delay, negligence or other default, the court may make an order,

(c) requiring the lawyer personally to pay the
    costs of any party.

(2)

An order under subrule (1)
    may be made by the court on its own initiative or on the motion of any party to
    the proceeding, but no such order shall be made unless the lawyer is given a reasonable
    opportunity to make representations to the court.

[31]

The grounds advanced in support of the motion
    emphasized, but were not limited to, the unreasonable procedural steps taken.
    The Notice of Motion included factors related to the merits of Action 2 at
    paras. (c) and (n):

Mr. Slansky counselled the plaintiff or
    otherwise allowed his client to proceed with a series of unmeritorious steps
    and to take unreasonable positions to achieve unattainable goals in this action;

On June 18, 2015, Justice Healey dismissed the
    entire action from the bench for being vexatious and an abuse of process and
    stated that Mr. Bests position lacked a scintilla of merit[.]

C.

Motion Judges decision

[32]

The motion judge observed that the onus lay upon
    the moving parties, the respondents, to establish that Mr. Slansky should pay
    costs personally, and that a two-step inquiry was required:

·

Did the lawyers conduct fall within rule 57.07(1) in that he caused
    costs to be incurred unnecessarily?

·

As a matter of discretion, applying the extreme caution principle,
    was the imposition of costs against the lawyer personally warranted? (See
Galganov v. Russell (Township)
, 2012 ONCA 410,
350 D.L.R. (4th) 679, application for leave to
appeal to
    S.C.C. discontinued, [2012] S.C.C.A. No. 382.
)

[33]

Counsel agreed that it was not necessary to show
    negligence, bad faith or reprehensible conduct in order to justify an award of
    costs under rule 57.07.

[34]

In addressing the first step of the inquiry, counsel
    for the respondents (who were referred to below as the Caribbean defendants)
    urged the motion judge to rely on the procedural steps undertaken by Mr.
    Slansky, rather than focusing on the lack of merit to Action 2. The motion
    judge described counsels submissions:

[Counsel] argues that it is sufficient that Mr. Slansky
    took unnecessary and vexatious steps that wasted costs, regardless of whether
    he was acting on his clients instructions. She focusses on five particular
    steps taken that she alleges were unreasonable, unnecessary and wasted costs:

(i)    the
    decision to note the Caribbean defendants in default;

(ii)    opposing
    the motion to set aside the noting in default;

(iii)   bringing
    an urgent motion to examine two of the Caribbean defendants for purposes of the
    above motion;

(iv)   opposing
    and delaying the determination of costs in the above motions; and

(v)   insisting
    that the jurisdiction motion had to be argued in June 2015, with the motions to
    dismiss/strike.

[35]

The motion judge found that Action 2 was an abuse of
    process, doomed to failure, and that Mr. Slansky should have known this. She explained
    that the specific examples of unnecessary costs provided by the respondents had
    to be seen within the context of the action as a whole. That action was
    dismissed as an abuse of process  a transparent attempt to re-litigate issues
    that had already been decided. Rather than being in the interests of justice,
    the litigation taxed the resources of a strained judicial system. It also taxed
    the resources of the respondents, who faced significant unpaid costs orders
    from the previous action.

[36]

The motion judge stated:

Both of these facts should have been known to Mr. Slansky,
    and should have guided his judgment in accepting this retainer to commence and
    conduct such an unmeritorious action. Further, for the reasons given, the
    arguments advanced by Mr. Slansky to justify commencing a second proceeding did
    not have a scintilla of merit. It is Mr. Slansky, who has legal training and
    expertise, upon whom responsibility for that act must lie. While Mr. Best may
    have given instructions to proceed, it would be within the purview of Mr.
    Slansky to guide him as to what causes of action could be supported on the
    facts presented to him; his judgment was misguided, at the expense of the
    moving parties.

[37]

The motion judge observed that the Statement of Claim in Action 2 was 90
    pages and 234 paragraphs. It made scandalous and unsupported allegations of
    dishonesty and fraud against lawyers and law firms, and it sought to extend
    those allegations by way of conspiracy theory to impugn the professional
    reputations of police officers, a private investigator and various police
    services, along with the Caribbean defendants.

[38]

The motion judge continued:

The responsibility for drafting such a claim rests ultimately
    with Mr. Slansky. The choice to repeat such allegations in affidavits and facta
    drafted by him, and to repeat those allegations on the record during
    submissions, was the exercise of Mr. Slanskys professional judgment.

[39]

The motion judge found that the entire action
    incurred and wasted costs unnecessarily, and that Mr. Slansky was instrumental
    in both starting and advancing the action in the manner that he did. The
    specific steps she found to have wasted costs were:

·

He drafted a claim that was an abuse of process because it was a
    collateral attack on prior rulings and sought to relitigate the same issues.

·

He issued and served the claim.

·

He based his legal rationale for commencing the action on a theory
    that had no chance of success.

·

The causes of action were not properly pleaded and lacked any
    factual basis.

·

He advanced serious and scandalous allegations in the claim, factum
    and oral submissions of fraud, dishonesty, criminal conduct, false
    representations and other improper conduct against various professional
    individuals knowing that courts had previously ruled that those same
    allegations were baseless.

·

He acted on unreasonable instructions from his client, or provided
    unreasonable advice to his client, regarding the scheduling of the respondents
    jurisdiction motion.

[40]

The motion judge observed that, had Mr. Slansky consented
    to deferring the respondents jurisdiction motion at the outset, the respondents
    would have incurred only minimal costs. Given the absence of prejudice to Mr.
    Best, in the event of such forbearance, the motion judge concluded that the
    tactic was adopted to place pressure on the Caribbean defendants for an
    improper purpose: retribution for Mr. Bests ill-conceived notion that they and
    their former lawyers were responsible for his incarceration, and to drive up
    their legal fees.

[41]

Turning to the second arm of the test, the
    motion judge concluded that this was one of the rare cases in which counsel
    should personally pay costs for the following reasons:

·

The need to deter the commencement of a third unmeritorious claim,
    potentially bearing Mr. Slanskys name as counsel of record.

·

Mr. Slansky should have known Action 2 was an abuse of process.

·

He advanced arguments that had no chance of success, despite what he
    described as his good faith belief to the contrary.

·

He drafted and advanced a claim that made spurious and unsupported
    allegations that maligned the professional reputation of lawyers and others,
    for which contrary findings had already been made by the court.

·

He may have deferred to his client on a matter of scheduling of a
    motion without evidence of prejudice to his client, or alternatively advised
    his client to take a position that unnecessarily incurred costs, without
    evidence that he needed to do so to safeguard his clients rights.

D.

Analysis

[42]

In oral argument on appeal, the appellant submits
    that the appellant did not have a reasonable opportunity to make representations
    to the court on the particular ground upon which the motion was decided, which was
    that the action lacked merit and should never have been brought by the
    appellant on behalf of Mr. Best. He indicated that the grounds listed in his
    factum distill down to that.

[43]

As I explain below, I do not accept the
    appellants argument. First, Mr. Slansky did have adequate notice that the
    merits of Action 2 would be a component of the rule 57.07 motion. Second, it
    was not merely the meritless nature of Action 2 that was a factor in the motion
    judges award of costs against Mr. Slansky, but rather that Action 2 was an
    abuse of process.

[44]

The motion judge exercised her discretion as to
    costs with extreme caution, as was required, and her decision is entitled to
    deference.

(1)

Was the requisite notice provided to Mr.
    Slansky?

[45]

I do not accept the argument that Mr. Slansky
    did not have adequate notice of the reliance upon the meritless nature of
    Action 2.

[46]

The Notice of Motion making the claim for costs
    against him included amongst the grounds:

·

He counselled the plaintiff or otherwise allowed his client to proceed
    with a series of unmeritorious steps and to take unreasonable positions to
    achieve unattainable goals in this action: para. (c).

·

On June 18, 2015, Justice Healey dismissed the entire action from
    the bench for being vexatious and an abuse of process and stated that Mr. Bests
    position lacked a scintilla of merit: para. (n).

[47]

Mr. Slansky was represented by counsel on the
    motion. He was aware, as of June 18, that the action had been dismissed as an
    abuse of process. His own factum filed on the motion devoted argument to the
    merits of the action. Overall, there was no unfairness in the notice given to
    him of the claim for costs.

[48]

While the lack of merit and abusive nature of
    the overall action was emphasized in the motion judges reasons, the motion
    judge also found that Mr. Slansky wasted costs unnecessarily by acting on
    unreasonable instructions from or providing unreasonable advice to his client
    on the scheduling of the respondents jurisdiction motion. In particular, she
    found that almost all of [the respondents] costs would have been saved had
    it not been insisted that the jurisdiction motion be argued in June 2015
    together with the motions to strike.

[49]

This core finding supporting the motion judges
    ruling  that counsel caused costs to be incurred without reasonable cause  is
    unassailable. It was open to the motion judge to conclude that it was a waste
    of costs to require the respondents to move to contest jurisdiction immediately
    rather than await the motion to strike by other defendants. It was also open to
    her to conclude that there was no justification for Mr. Slansky to require
    this, whether it was insisted upon by Mr. Best or not.

(2)

Does a lawyer become liable to pay costs
    personally because he starts an action that has little chance of success?

[50]

I agree with the submission of the appellant
    that the fact that a lawyer starts an action which is unlikely to succeed is
    not, on its own, a basis to award costs personally against that lawyer.

[51]

Rule 57.07 is designed to protect and
    compensate a party who has been subjected to costs being incurred without
    reasonable cause, not to punish a lawyer:
Galganov
, at para. 14.

[52]

The motion judge here did not make Mr. Slansky
    liable for costs personally simply because he started a case that was weak. As
    the motion judge pointed out, the nature of the proceedings is an important
    contextual factor in assessing whether costs wasted by a solicitor justify an
    order that he pay costs personally.

[53]

As this court held in
Galganov
, at para. 20:

[R]ule 57.07(1) requires an examination of the entire course
    of litigation that went on before the application judge so that the application
    judge can put in proper context the specific actions and conduct of counsel. This
    holistic examination of the lawyers conduct produces an accurate tempered
    assessment. [Citation omitted.]

[54]

The motion judge examined the entire course of
    the litigation in assessing the specific actions and conduct of counsel, as she
    was required to do. In particular, she focused on the vexatious or abusive
    nature of the proceeding. This is not a necessary element of an award of costs
    against counsel personally but is not unfamiliar in this context. (See e.g.
Soderstrom v. Hoffman-LaRoche Limited
(2008), 58 C.P.C.
    (6th) 160 (Ont. S.C.J.);
Donmor Industries Ltd. v. Kremlin
    Canada Inc. (No. 2)
(1992), 6 O.R. (3d) 506 (Gen. Div.); and
Baryluk
(Wyrd Sisters) v. Campbell
(2009), 81
    C.P.C. (6th) 172 (Ont. S.C.J.).)

[55]

On appeal, Mr. Slansky argues that Action 2 was
    not abusive. It was against many different parties and for different causes of
    action. That issue has now been conclusively determined by the dismissal of Mr.
    Bests appeal from the decision striking Action 2 as an abuse of process. Action
    2 made similar allegations of impropriety as had been voiced in the course of
    Action 1. The motion judge did not err in considering that Mr. Slansky
    incorporated into the pleading in Action 2 accusations of criminal misconduct
    against opposing counsel that had repeatedly been judicially rejected as
    baseless.

[56]

Finally, as this court indicated in
Galganov
, at paras. 23-25, deference is
    owed to a motion judges decision as to whether a lawyer should pay costs
    personally:

The determination as to costs is a matter within the discretion
    of the application judge. An appellate court may set aside a costs award if the
    application judge made an error in principle or if the costs award is plainly
    wrong.

In
Rand Estate
, this court held that:

The application judge who managed the proceedings was in a much
    better position than this court to make the necessary assessments underlying
    the findings of fact he eventually made. Those findings are, by their nature,
    somewhat subjective and the cold paper record cannot, in our view, capture all
    of the considerations that would be relevant to those findings. We defer to the
    [application] judges findings unless they are clearly in error and clearly
    material to his ultimate determination.

As a result, this court owes a high degree of deference to the
    application judges holding. [Citations omitted.]

[57]

I see no basis to interfere with the motion
    judges discretionary decision to order Mr. Slansky to pay some portion of
    the costs wasted.

[58]

In the event leave to appeal a costs order
    against counsel personally is necessary, I would grant leave.

E.

disposition

[59]

For these reasons, the appeal is dismissed with
    costs payable by Mr. Slansky in favour of the respondents in the agreed
    sum of $30,000 inclusive of HST and disbursements.

Released: RAB June 21, 2016

G. Pardu J.A.

I agree R.A. Blair
    J.A.

I agree David Brown
    J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Bortnikov v. Rakitova, 2016 ONCA 427

DATE: 20160601

DOCKET: C60474

Hoy A.C.J.O., Blair and Roberts JJ.A.

BETWEEN

Aleh Bortnikov

Applicant (Appellant/
Respondent by way of cross-appeal)

and

Marina Rakitova

Respondent (Respondent/
Appellant by way of cross-appeal)

Aleh Bortnikov, in person

Eric Shapiro, for the respondent/appellant by way of
    cross-appeal

Heard: April 18, 2016

On appeal from the judgment of Justice Michael A. Penny
    of the Superior Court of Justice, dated April 29, 2015, with reasons reported
    at 2015 ONSC 2546 and 2015 ONSC 3898, and from the costs order, dated June 17,
    2015, with reasons reported at 2015 ONSC 3898.

By the Court:

[1]

The parties were married on August 9, 2002 and separated on February 7,
    2011. The parties appeal and cross-appeal from the trial judgment of April 29,
    2015, in which the trial judge granted the parties a divorce and dealt with
    equalization of property, spousal support, and various other claims, including
    costs.

[2]

For the reasons that follow, we would allow the appeal with respect to
    one aspect of the equalization calculation, but would otherwise dismiss the
    appeal and cross-appeal.

Equalization

[3]

The principal asset in issue in these proceedings is a motel property
    called the Grand Motel, owned by 1291937 Ontario Inc. (the numbered company).
    The respondent is the sole shareholder of the numbered company. During the
    marriage, the parties resided in a two-storey house attached to the motel,
    which was their matrimonial home. On separation, the appellant left the
    matrimonial home and lived in the parties cottage property until it was sold
    and the proceeds divided between them.

[4]

The appellant raises again on appeal his claims for a share of the
    income and equity of the numbered company and his request that the motel
    property be sold. Although the appellant argues that he is pursuing those
    claims in the context of equalization, we agree with the trial judge that, as
    reflected in the January 26, 2015 Trial Management Conference Endorsement of
    Kiteley J., the appellant abandoned those claims before trial. He therefore
    cannot resurrect them on appeal.

[5]

The parties submit that the trial judge erred in his evaluation of the
    motel property, and the respondent challenges the trial judges evaluation of
    the matrimonial home.

[6]

We would not give effect to those grounds of appeal and cross-appeal.

[7]

The trial judge was entitled to rely on some, all or none of the
    experts report. His reasons demonstrate that he was alert to the deficiencies
    in the report and that he made appropriate adjustments in his calculation of
    the values of the motel and matrimonial home to account for those deficiencies.
    For example, he increased the value of the motel to take into account the
    comparable property that the expert had mistakenly excluded from his valuation.
    The trial judge also considered other relevant factors in his determination of
    value, such as the nature and size of the motel property and the motel market.
    It was within his discretion to increase the value of the property by
    $100,000.00. We see no error and would not interfere.

[8]

With respect to the matrimonial home, the trial judge acknowledged the
    difficulty in assessing the value of this property because of its uniqueness as
    part of the motel property. His calculation of the value of the matrimonial
    home was logical, fair and based on the portions of the experts report that he
    did accept. In particular, it was common ground that the house could not be
    sold other than in the context of a sale of all of the motel property. It
    therefore was appropriate to use a percentage of the value of the entire
    property as the basis for his evaluation. We see no error in his reasoning and
    would not interfere.

[9]

The appellant further submits that the trial judge erred in deducting
    notional real estate fees from the value of the motel because there was no
    evidence that the prospect of such a sale was reasonably likely.

[10]

The
    respondent included in her calculation of net family property debts and other
    liabilities, consisting of capital gains and real estate fees as disposition
    costs for the motel property. The motion judge did not deduct the notional
    capital gains, finding that he did not have enough information to be able to
    determine that those gains were reasonably likely on disposition. He concluded,
    however, that notional real estate fees of 5% of the date of separation value
    of the motel property should be deducted because It is clear that sooner or later
    the respondent will sell the Grand Motel and the prospect of a sale [was]
    sufficiently likely within the foreseeable future. While the trial judge noted
    that there was evidence that standard real estate fees are 5%, he did not
    indicate what evidence or inference led him to the conclusion concerning the
    foreseeability of the sale of the motel property.

[11]

As
    a general rule, in determining whether disposition costs should be deducted
    from an assets value, the analysis should take into account evidence of the
    probable timing of the assets disposition. It is appropriate to deduct
    disposition costs from net family property if there is satisfactory evidence
    of a likely disposition date and if it is clear that such costs will be
    inevitable when the owner disposes of the assets or is deemed to have disposed
    of them:
Sengmueller v. Sengmueller
(1994), 17 O.R. (3d) 208 (C.A.),
    at pp. 216-17. An allowance for disposition costs from net family property
    should not be made in the case where it is not clear when, if ever, a sale or
    transfer of property will be made:
McPherson v. McPherson
(1988), 63
    O.R. (2d) 641 (C.A.), at p. 647.  However, it is not necessary for the court to
    determine whether the disposition of the assets is inevitable; rather, the
    court should determine on the basis of the evidence whether it is more likely
    than not that the assets would be sold, at which point disposition costs would
    inevitably be incurred:
Buttar v. Buttar
, 2013 ONCA 517, at para. 20.

[12]

Specifically,
    when dealing with a business, as is the case here, this court gave the
    following guidance in
Sengmueller
, at p. 215:

In dealing with a business, one should fairly consider the
    nature of the business, the possible requirement that the business could only
    operate if the owner spouse continued to be involved, any shareholder agreement
    which required sale of his or her shareholding in specified circumstances, and
    myriad other possible considerations in the individual case.

[13]

In
    the present case, there was no clear and satisfactory evidence that the
    respondent was contemplating the possible sale of the motel property or her
    shares of the numbered company in the foreseeable future. Rather, the evidence
    and the respondents submissions appeared to the contrary.

[14]

At
    the time of the parties separation, there seems to have been some discussion
    between the respondent and her former husband about his repurchasing the
    business. However, in a subsequent email dated February 23, 2011, the
    respondent confirmed that she did not need to sell the motel in the near
    future, although she asked her former husband if he would agree to the
    transfer of the business shares to her children for the reason, among others,
    that in case of a good offer and sale of the motel this will cut the taxes.
    When cross-examined about this email, the respondent did not agree that she had
    received an offer to sell the motel property nor did she testify that she
    intended to sell the motel property in the foreseeable future. The respondent
    also testified that she had not transferred the shares to her children. In any
    event, the transfer of the shares to the respondents children would not
    require the sale of the motel property and therefore give rise to real estate
    commission fees.

[15]

Finally,
    in his opening and closing submissions, counsel for the respondent indicated
    her objection to the sale of the motel property, as requested by the appellant,
    and submitted that the respondent was capable of financing an equalization
    payment to the appellant without selling the motel property. As counsel stated
    in his opening submissions, the motel property represented not only the
    respondents livelihood but also her residence. At 55 years of age at the time
    of the hearing, and based on her counsels submissions, it was unlikely and
    there was no evidence that the respondent would retire in the foreseeable
    future.

[16]

As
    a result, without indicating the basis for his conclusion that the prospect of
    a sale [was] sufficiently likely within the foreseeable future and without an
    evidentiary foundation supporting it, the trial judge erred in allowing
    notional real estate fees of 5% to be deducted from the respondents net family
    property calculation. The notional fees calculated by the trial judge totalled
    $80,000.00. That figure is material and must be added back in to the
    equalization calculation, resulting in an increase of $40,000.00 to the
    equalization payment owing to the appellant.

Spousal support

[17]

The
    trial judge ordered the respondent to pay $35,000.00 as a tax neutral lump sum
    support payment to the appellant.

[18]

The
    appellant submits that the trial judge erred in calculating the spousal support
    on the basis of net rather than gross amounts and in reducing the support to
    make it tax neutral.

[19]

We
    disagree.

[20]

First,
    the trial judge correctly arrived at an average gross income figure for the
    purpose of calculating spousal support. It is clear that the trial judge
    considered gross as well as averaged figures in his estimate. In particular,
    the trial judge used the gross income figure of $36,000.00 from the
    respondents financial statement and the averaged amount of $40,000.00 that was
    given to the respondents children and then returned to the respondent. As a
    means of testing his estimate, the trial judge compared the gross average of
    $76,000.00 against a rough average of amounts representing deposits to the
    respondents bank account. There is no evidence that all of the deposits in the
    respondents bank account were net income amounts. Indeed, the respondents
    evidence was that some of the deposits did not represent net income amounts.
    Accordingly, not all of the deposits to her bank account were the respondents
    net income.

[21]

The
    trial judge was also entitled to make the lump sum figure tax neutral. He
    reasoned that consistency required him to exercise his discretion and make the
    amount tax neutral because he had treated the amount awarded as overdue spousal
    support bearing interest from the date of separation. This was fair and
    reasonable. There is no basis for interfering.

[22]

The
    respondent argues that the trial judge erred in awarding any spousal support to
    the appellant. While not pursued in oral argument, in her factum, the
    respondent submits that the trial judge erred by disallowing the respondents
    counsel to fully explore in cross-examination of the appellant whether the
    appellant was receiving support from his good friend, who was also his
    landlord. Further, the respondent contends that the trial judge erred in
    failing to apply
Novakovic v. Kapusniak
, [2005] O.T.C. 554 (S.C.),
    varied 2008 ONCA 381, to reject the appellants claim for spousal support.

[23]

We
    see no merit in those submissions.

[24]

The
    trial judge did not improperly curtail cross-examination of the appellant and
    correctly identified the relevant issue of whether the appellant was receiving
    financial support. The trial judge was entitled to accept the appellants
    evidence that he intended to use his equalization payment to satisfy his debt
    to his friend. In his reasons, the trial judge was alert to the fact that the
    appellant was receiving limited financial assistance from others.

[25]

We
    also see no error in the trial judges determination that the appellant was
    entitled to spousal support, which was based on the evidence before him that
    the appellant worked at the motel at the respondents request and to the
    respondents benefit. Those factors distinguish the present case from
Novakovic
,
    where the husband had an independent career and was paying his own way. The
    trial judges decision as to spousal support is entitled to deference and we
    would not interfere.

Other claims

[26]

The
    appellant argues that the trial judge erred in dismissing his claims for
    occupation rent from the respondent in relation to the matrimonial home, and
    for payment of a portion of the carrying costs of the cottage where he resided
    after the separation.

[27]

We
    agree with the trial judges determination that the appellant was not entitled
    to those amounts. As we have already noted, the appellant had abandoned any
    claims in relation to the business. He had no beneficial ownership in the motel
    or the matrimonial home. We also agree that the circumstances did not warrant
    requiring the respondent to pay the carrying costs of the appellants
    residence.

[28]

The
    appellant submits that the trial judge erred in rejecting his evidence and
    accepting the respondents evidence concerning the value of the respondents
    household goods because of her alleged bad faith conduct throughout these
    proceedings. We see no error in the trial judges rejection of the appellants
    estimate or the argument challenging the respondents credibility. The trial
    judge was entitled to accept the respondents figures.

Costs

[29]

Both
    parties accuse each other of bad faith conduct that supports their respective
    claims for costs. The parties claims are without merit. The trial judge did
    not err in concluding that neither partys conduct met the very high threshold
    for bad faith under r. 24(8) of the
Family Law Rules
, O. Reg. 114/99.
    While this was a high conflict case, there was no evidence of bad faith
    sufficient to invoke an entitlement by either party to full recovery costs.

[30]

The
    respondent cross-appeals the costs award to the appellant. The respondent
    submits that the trial judge pre-judged the appellants entitlement to costs
    and gave no reasons for his award, and that the appellant is not entitled to
    any costs. The respondent maintains that she should be awarded costs in the
    amount of $75,000.00. Although we would grant leave to appeal the costs award,
    we would not give effect to the respondents submissions.

[31]

The
    trial judges observation that the appellant was the substantially successful
    party and that he might seek costs was not a determination in relation to
    entitlement or quantum of costs prior to the parties submissions, but merely
    an observation that the appellant could seek costs.

[32]

While
    the trial judge gave no specific reasons for his determination that the appellant
    enjoyed greater success in the proceedings, it was obvious from the outcome of
    the trial that the appellant had been the more successful of the two.
    Specifically, the appellants equalization payment and spousal support were
    significant. As such, there was no reason for the trial judge to depart from
    the ordinary rule that the successful party is entitled to costs.

[33]

The
    respondent submits that the trial judge erred in failing to exclude from the
    costs award the appellants costs from a case conference before Klowak J.,
    because the endorsement was silent as to costs.

[34]

Islam
    v. Rahman
, 2007 ONCA 622, 228 O.A.C. 371, at para. 2, confirms that a
    trial judge should not make an order for costs in relation to any earlier step
    where no costs were ordered or where there was silence on the issue.

[35]

The
    trial judges order allowed two-thirds of the appellants out-of-pocket
    payments to his former lawyers, which included the costs in relation to the
    case conference before Klowak J. This was an error.

[36]

Nevertheless,
    we would not alter the quantum of the costs award. In our view, the amount of
    $31,894.00 awarded was reasonable, fair and proportionate in the circumstances
    of this case.

Disposition

[37]

Accordingly,
    the appeal is allowed with respect to the deduction of notional real estate
    fees. As a result, the equalization payment must be increased by the amount of
    $40,000.00. The appeal and cross-appeal are otherwise dismissed.

[38]

Success
    was divided on the appeal and cross-appeal. There shall be no order as to costs
    and the parties shall absorb their own costs of the appeal and cross-appeal.

Released: June 1, 2016

Alexandra
    Hoy A.C.J.O

R.A.
    Blair J.A.

L.B.
    Roberts J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Brown v. Rigsby, 2016 ONCA 521

DATE: 20160630

DOCKET: C61049

Simmons, Pepall and van Rensburg JJ.A.

BETWEEN

Judy Brown, Brenda Dale and Bruce Shackleton

Applicants (Respondents)

and

Janet Rigsby and Paul Shackleton

Respondents (Appellants)

Ondrej Sabo, for the appellants

Lou-Anne F. Farrell, for the respondents

Heard: February 10, 2016

On appeal from the Order of Justice Lynne C. Leitch of
    the Superior Court of Justice, dated March 30, 2015.

Pepall J.A.:

Background Facts

[1]

This action involves a familial dispute over an estate. The parties to
    this estate action are five of the six children of the deceased mother. The six
    children are the residual beneficiaries under the mothers will. The two
    appellants are the estate trustees of their mothers estate and attorneys
    pursuant to a power of attorney granted to them by their mother.

[2]

In August 2008, the three respondents commenced an application
[1]
against the appellants in which they sought the appellants removal as estate
    trustees, a passing of accounts, and an order that the appellants repay to
    their mothers estate amounts found to have been improperly taken or,
    alternatively, pay damages for breach of fiduciary duty. The sixth child opted
    not to participate in the action but supported the position of the appellants
    throughout.

[3]

The action was settled shortly before the commencement of the trial in
    2014. However, the parties were unable to agree on the costs of the action. They
    agreed that entitlement of the parties to costs was to be determined by the
    court.

Parties Positions Before the Motion Judge

[4]

Before the motion judge, the appellants sought an order of costs of
    $74,299.37 on a substantial indemnity scale, plus HST, to be paid by the
    respondents. The respondents sought costs personally from the appellants in the
    amount of $80,380.63 on a substantial indemnity scale, plus HST. While the
    parties had agreed that entitlement to costs was to be determined by the motion
    judge, no one asked that the estate be burdened with payment of anyones costs.

Motion Judges Reasons

[5]

The motion judge gave extensive reasons for her decision. She found:

·

the application did not relate to a challenge to a will, but
    began with a request that the attorneys pass their accounts and answer
    questions raised by the appellants;

·

the commencement of the application by the respondents was
    reasonable;

·

the appellants did not adequately address the reasonable
    questions of the respondents early in the application;

·

a statement in the affidavit of one of the appellants was untrue:
    that as attorneys, they had not used the power of attorney to manage their
    mothers affairs. The power of attorney was used to sign the mortgage discharges
    in favour of the appellant Shackleton;

·

the reference to the doctors assertion of the mothers capacity
    was unhelpful as he last saw her on March 15, 2007 and the mortgage discharges
    were signed in June 2007;

·

although requested as a priority, the notes of the mothers
    lawyer, which were relevant to the instructions given on the discharge of the
    two mortgages, continued to be outstanding in June 2009;

·

the respondents questions remained unanswered for a considerable
    period of time;

·

undertakings given by the appellants on their cross-examinations
    were not fulfilled and a motion was required;

·

another motion was brought by the respondents to have the
    appellants found in contempt because the order compelling answers to undertakings
    remained unfulfilled; and

·

the answers given were not fully responsive and many were still
    outstanding as of October 2013.

[6]

The motion judge reviewed the parties offers, including one delivered
    by the appellants, which provided that the appellants costs be paid out of the
    estate with the respondents being responsible for their own costs. She also
    reviewed the parties positions on costs and the jurisprudence. With respect to
    the latter, she noted
McDougald Estate v. Gooderham
(2005), 255 D.L.R.
    (4th) 435 (Ont. C.A.), for the proposition that the historical practice of
    ordering an estate to bear the costs of all parties had been replaced by the
    modern approach that reflected the loser pays costs regime applicable in
    civil litigation.

[7]

The motion judge concluded that the settlement of the substantive issues
    in dispute between the parties reflected divided success. She stated that she
    could not conclude that one party was more successful than the other and these
    were not circumstances where a loser should pay. She was satisfied that the
    appropriate order was that each party be responsible for their own costs.

[8]

The appellants successfully sought leave to appeal the costs order,
    which was granted by this court on September 1, 2015.

Grounds of Appeal

[9]

The appellants submit that the motion judge erred in principle in
    finding that, as estate trustees, the appellants were responsible for their own
    costs. They state that they were duty bound to respond to the action and to
    defend the estate and that absent serious misconduct, or self-interested or
    unreasonable conduct, an estate trustee is entitled to costs payable out of the
    estate.

[10]

The appellants acknowledge that no one asked the motion judge for an
    order that costs be paid out of the estate, but they submit that this should
    not be considered fatal. First, the only issue before the motion judge was
    which side was to bear the costs of the action. Secondly, there was no
    evidentiary basis to support the motion judges conclusion that the appellants
    should bear their own costs. Put differently, there was no basis on which the
    motion judge could have concluded that the appellants were guilty of serious misconduct,
    acted in their own self-interest or were unreasonable and that they therefore
    should be denied payment of their costs from the estate.

Analysis

(a)

Legal Fees of Estate Trustees

[11]

Estate trustees are entitled to be indemnified for all reasonably
    incurred costs in the administration of an estate. This includes the legal
    costs of an action reasonably defended, to the extent these costs are not
    recovered from another person. However, a court may order otherwise if an
    estate trustee has acted unreasonably or in substance for his or her own
    benefit, rather than for the benefit of the estate:
Geffen v.
Goodman
    Estate
,
[1991] 2
    S.C.R. 353, at 391. The principles described in
Geffen
were not
    displaced by this courts decision in
McDougald Estate
.

[12]

In
Sawdon Estate v. Watch Tower Bible and Tract Society of Canada
,
    2014 ONCA 101, 119 O.R. (3d) 81, at para. 82, this court reiterated the
    principle that estate trustees are entitled to be fully indemnified by the
    estate for their reasonably incurred legal costs to the extent they are not
    recovered from any other person. That is the general rule.

[13]

Most recently, in
Neuberger Estate v. York
, 2016 ONCA 303, [2016]
    O.J. No. 2151, Gillese J.A. addressed the costs of parties engaged in estates
    litigation.  At paras. 24 and 25, she wrote:

In estates litigation in Ontario, the historical approach to
    costs has been displaced in favour of one in which
the costs rules in civil litigation apply both at first instance and on
    appeal, unless the court finds that one or more of the relevant public policy
    considerations dictate that costs (or some portion thereof) should be paid out
    of the assets of the estate
:
McDougald Estate v. Gooderham
(2005), 255 D.L.R. (4th) 435 (Ont. C.A.), at para. 80; see also
Sawdon
    Estate v. Sawdon
, 2014 ONCA 101, 370 D.L.R. (4th) 686, at para. 101. The
    public policy considerations at play in estate litigation are primarily of two
    sorts: (1) where the difficulties or ambiguities that give rise to the
    litigation are caused, in whole or in part, by the testator; and (2) the need
    to ensure that estates are properly administered.

Blended costs awards, in which a portion of costs is payable by
    the losing party and the balance is payable out of the estate, are available at
    first instance and on appeal, in the discretion of the court, where one or more
    of the relevant public policy considerations are found to be engaged:
Sawdon
,
    at paras. 93-100 and 107.

[14]

In summary, subject to the discretion of the court, the general rules
    governing an estate trustees ability to recover legal costs from an estate are
    as follows:

-

an estate
    trustee is entitled to indemnification from the estate for all reasonably
    incurred legal costs;

-

if an estate
    trustee acts unreasonably or in his or her own self-interest, he or she is not
    entitled to indemnification from the estate; and

-

if an estate
    trustee recovers a portion of his or her costs from another person or party, he
    or she is entitled to indemnification from the estate for the remaining  reasonably
    incurred costs.

(b)

Standard of Review for Cost Awards

[15]

An appellate court should set aside a costs award only if the trial
    judge has made an error in principle or if the costs award is plainly wrong: see
Hamilton v. Open Window Bakery Ltd.
, 2004 SCC 9, [2004] 1 S.C.R. 303,
    at para. 27.

(c)

Merits of Appeal

[16]

On their face, the motion judges reasons appear to conflate the issues
    of trustee indemnification and the civil litigation costs regime. She did not
    engage in an analysis of whether the appellants conduct rose to the level of
    unreasonableness or self-interest that would justify denying them
    indemnification for the legal costs associated with defending the action.

[17]

That said, the parties agreed that the issue of a trustees ability to
    obtain indemnification from the estate was not advanced before the motion
    judge. This explains the motion judges failure to focus on the issue of
    indemnification.

[18]

However, I would deny the appellants indemnification from the estate on
    the grounds of both unreasonableness and self-interest. In large measure, the
    parties dispute centred on a need for the appellants to make disclosure. Their
    failure to be forthcoming resulted in elevated costs for all parties. Although
    prior cost awards addressed some of the appellants conduct, as illustrated by
    the motion judges findings, the appellants behaviour is fairly characterized
    as unreasonable.

[19]

Moreover, the conduct under scrutiny, and the appellants failure to
    exhibit timely candour, related for the most part to conduct that pointed to an
    aggrandizement of their personal holdings at the expense of the estate and the
    other residual beneficiaries. In substance, their dilatory conduct served to
    protect their own interests, not those of the estate.

[20]

For these reasons, I agree with the motion judges conclusion. The
    appellants are not entitled to recovery of their costs from the estate in this
    case.

Disposition

[21]

Accordingly, I would dismiss the appeal. As agreed, I would order the
    appellants to pay the respondents costs fixed in the amount of $5,000 on a
    partial indemnity scale, inclusive of disbursements and HST.

Released:

JUN 30 2016                                     S.E.
    Pepall J.A.

JS                                                     I
    agree Janet Simmons J.A.

I
    agree K. van Rensburg J.A.

[1]
The application was subsequently converted into an action.


COURT OF APPEAL FOR ONTARIO

CITATION: Burns v. Sohi, 2016 ONCA 478

DATE: 20160615

DOCKET: C55817

MacPherson, Juriansz and Pardu JJ.A.

BETWEEN

Stephen Burns

Plaintiff (Respondent)

and

Sharan Sohi and Sohi Holdings Inc.

Defendants (Appellants)

Francis Thatcher, for the appellants

Stephen Burns, respondent acting in person

John J. Adair,
amicus curiae

Heard: June 10, 2016

On appeal from the judgment of Regional Senior Justice Helen
    M. Pierce of the Superior Court of Justice, dated June 27, 2012.

ENDORSEMENT

[1]

The appellants Sharan Sohi and Sohi Holdings Inc. appeal from the Order
    of Pierce J. of the Superior Court of Justice dated September 6, 2012.

[2]

Following a nine-day trial, the trial judge found that the appellants
    had breached their contract with 1164280 Ontario Inc. (1164) and induced
    Christine Favuzzi, a tenant and franchisee of 1164, to breach her contract with
    1164. The trial judge awarded damages of $144,228.69.

[3]

At the trial, the successful plaintiff was Stephen Burns, in both his
    personal capacity and on behalf of his brothers corporation 1164.

[4]

The litigation arose out of a lease relating to a restaurant in a
    commercial mall in Thunder Bay. The trial judge found that the appellants were
    liable for two breaches of contract.

[5]

First, the trial judge found that the appellants refusal to provide
    written consent for 1164 subletting the relevant premises to Robert and Cheryl
    Favuzzi was unreasonable and, therefore, contrary to the Sub-Lease. The trial
    judge came to this conclusion because she found that the Sub-Lease imported,
    from the Head-Lease, a requirement that any refusal of consent to the Sub-Lease
    must be reasonable. She further found that Mr. Sohi had implicitly consented to
    the Sub-Lease when he asked Cheryl Favuzzi to operate the restaurant, thereby
    making Sohi Holdings subsequent refusal unreasonable.

[6]

Second, the trial judge found that the early termination of the
    Head-Lease was a breach of the Sub-Lease. Pursuant to Article 12 of the
    Sub-Lease, Sohi Holdings was required to provide notice of any amendments to
    the Head-Lease that materially diminished 1164s rights. The trial judge
    concluded that the early termination materially diminished 1164s rights.

[7]

The appellants appeal the findings of liability and the damages award.

[8]

The appellants contend that the trial judge erred by finding that they
    consented to 1164 subletting the premises to the Favuzzis.

[9]

We do not accept this submission. The plaintiff Dennis Burns and Mr.
    Favuzzi testified that Mr. Sohi gave his consent. The trial judge was entitled
    to believe them. Moreover, the surrounding circumstances, including the legal
    steps taken and expenses incurred by 1164 in creating the Sub-Lease, support
    this conclusion.

[10]

The appellants submit that the trial judge erred in finding that Mr.
    Sohi improperly induced Ms. Favuzzi to breach her contract with 1164 that
    flowed from the settlement between 1164 and Ms. Favuzzi in July 1999.

[11]

We are not persuaded by this submission. The testimony of Mr. Sohi is in
    direct conflict with that of Ms. Favuzzi on this issue. Ms. Favuzzi was not
    cross-examined. The trial judge was entitled to believe Ms. Favuzzi and
    disbelieve Mr. Sohi on this issue.

[12]

The appellants assert that the trial judge erred by finding that Mr.
    Sohis conduct was driven by malice  i.e. driven by a desire to prevent the
    respondent from commencing legal proceedings concerning an unrelated business
    venture involving a nightclub called Coyotes.

[13]

We disagree. The facts accepted by the trial judge, especially those
    relating to the improper inducement of Ms. Favuzzi to breach her contract with
    1164 thereby robbing 1164 of important revenue, support the trial judges
    conclusion that Mr. Sohis conduct was intentional and malicious.

[14]

The appellants contend that the damages award, especially $100,000 for
    inducement to breach of contract at large, was excessive.

[15]

We do not accept this submission. The trial judge said:

Mr. Sohi engaged in a pattern of conduct directed at
    manipulating 1164s tenants in order to punish the plaintiff for litigating
    another dispute.

Mr. Sohi was indifferent as to whether Dennis Burns or his
    corporation were harmed in the process. His interference forced 1164 to waste
    time and legal fees in suing Ms. Favuzzi and soliciting Mr. Sohis consent to
    her sublease.

There is no commercial justification for Mr. Sohis conduct. It
    did not arise out of legitimate business objectives or promote his corporate
    interests In short, Mr. Sohis conduct was reprehensible. It is deserving of
    punishment.

[16]

The appeal is dismissed. Although self-represented, the respondent is
    entitled to costs fixed at $750 inclusive of disbursements and HST to offset
    his costs of $750 on the dismissed cross-appeal.

J.C. MacPherson J.A.

R.G. Juriansz J.A.

G. Pardu J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Business
    Development Bank of Canada v. Almadi, 2016 ONCA 428

DATE: 20160601

DOCKET: C61411

Doherty, Tulloch and Benotto JJ.A.

BETWEEN

Business Development Bank of Canada

Plaintiff (Respondent)

and

Joanne M. Almadi also known as Jo-Anne Almadi also known as Joanne Hill
    and Gordon M. Almadi also known as Gordon Almadi

Defendants
    (Appellants)

Brandon Jaffe, for the defendants (appellants)

Sean N. Zeitz, for the plaintiff (respondent)

Heard and released orally:  May 24, 2016

On appeal from the judgment of Justice Bale of the Superior
    Court of Justice, dated November 10, 2015, with reasons reported at 2015 ONSC
    6912.

ENDORSEMENT

Issue #1  Did the motion judge err in granting relief to the
    respondent under s. 95 of the
Bankruptcy and Insolvency Ac
t (
BIA
)?

[1]

This submission mischaracterizes the motion judges reasons and the
    order he made.  He was careful not to grant any relief under s. 95 of the
BIA
.
    Instead, he granted judgment to the respondent on the guarantee.

[2]

In coming to that conclusion, the motion judge made two important
    findings of fact:

·

The respondent took payment on the debt from the primary debtor
    based on the misrepresentation by the guarantor (Mr. Almadi, the appellant) on
    behalf of the primary debtor that the primary debtor would be closing its
    business and paying all of its creditors (see reasons para. 22); and

·

At the time of the payment to the respondent, the primary
    debtor was insolvent, rendering the payments a preference under s. 95 of the
BIA
(see reasons paras. 18-20).

[3]

We see no basis upon which to interfere with either findings of fact.
    Those findings were available in the context of a summary judgment motion.

[4]

On the facts as found by the motion judge, the respondents decision to
    effectively return the improper payment to RBC, which stood in the shoes of the
    Trustee who in turn stood in the shoes of the primary debtor, revived the
    guarantors obligation under the debt.  To hold otherwise, would be to require
    a needless litigation in the context of the bankruptcy proceeding and, on the
    facts of this case, would allow the guarantors to shelter behind the
    misrepresentations made to the respondent by Mr. Almadi.

Issue #2  Did the respondent fail to make demand on the
    guarantee as required by the terms of the guarantee?

[5]

The motion judge did not make a finding whether the respondents demand
    complied with the terms of s. 7 of the guarantee.  There was evidence going both
    ways on this point.  The motion judge instead rejected this submission on the
    basis that any failure to make the formal demand as required by s. 7 caused no
    prejudice to the appellant (see paras. 25-27).  In our view, it was open to the
    motion judge on the evidence to reject this submission on that basis:  see
Alberta
    Opportunity Co. v. Schinnour
, [1990] A.J. No. 1125 (Alta. C.A.), leave to
    appeal refused, [1991] S.C.C.A.

[6]

The appeal is dismissed.

[7]

We agree with the respondents submission that the respondent is
    entitled to substantial indemnity costs in light of para. 2 of the guarantee.  Costs
    to the respondent on the appeal in the amount of $15,000, inclusive of
    disbursements and relevant taxes.

Doherty J.A.

M. Tulloch J.A.

M.L. Benotto J.A.