COURT OF APPEAL FOR ONTARIO

CITATION: Stanbarr Services Limited v. Metropolis Properties
    Inc., 2018 ONCA 244

DATE: 20180314

DOCKET: C61872, C61878 and C61894

Doherty, Pepall and Hourigan JJ.A.

DOCKET:
    C61872 and C61894

BETWEEN

Stanbarr
    Services Limited, Janodee Investments Ltd., Meadowshire

Investments
    Ltd., Regard Investments Ltd., 1563503 Ontario Limited,

Beaver
    Pond Investments Ltd., The Canada Trust Company,

Rita
    Rosenberg and 527540 Ontario Limited

Applicants (Respondents)

and

Metropolis
    Properties Inc., Ginkgo Mortgage Investment Corporation,

Canada
    Investment Corporation,
2413913 Ontario Limited
,

2421955
    Ontario Inc.
and
Sai Mohammed

Respondents (
Appellants
)

DOCKET: C61878

AND BETWEEN

Stanbarr
    Services Limited, Janodee Investments Ltd., Meadowshire

Investments
    Ltd., Regard Investments Ltd., 1563503 Ontario Limited,

Beaver
    Pond Investments Ltd., The Canada Trust Company,

Rita
    Rosenberg and 527540 Ontario Limited

Applicants (Appellants)

and

Metropolis
    Properties Inc.,
Ginkgo Mortgage Investment Corporation
,

Canada
    Investment Corporation,
2413913 Ontario Limited
,

2421955
    Ontario Inc. and Sai Mohammed

Respondents (
Respondents
)

Ronald G. Slaght and Danielle Glatt, for the appellant/respondent,
    2413913 Ontario Limited

Brian Belmont, for the appellants, 2421955 Ontario Inc.
    and Sai Mohammed

Stephen Schwartz, for the respondents/appellants,
    Stanbarr Services Limited et al

Philip Polster, for the respondent, Ginkgo Mortgage
    Investment Corporation

Heard: January 24 and January 25, 2018

On appeal from the judgment of Justice Wendy Matheson of
    the Superior Court of Justice, dated August 21, 2015, with reasons reported at
    2015 ONSC 5249 and with further reasons dated February 22, 2016, reported at
    2016 ONSC 1258.

Hourigan J.A.:

[1]

These appeals arise from the exercise of a power of sale by a first
    mortgagee on a commercial/residential property. At issue is whether the
    purchaser of the property had actual notice of a defect in the power of sale
    process and, if not, whether the purchaser can rely on the registration of its
    transfer. Also at issue is the impact of the defect on the rights of the post-sale
    mortgagees of the property.

[2]

For the reasons I detail below, I have concluded that the trial judge
    erred in law in finding that the purchaser had actual notice of the defect.
    Contrary to the trial judges finding, the purchaser is a
bona fide
purchaser for value without notice of the defect and holds good title to the
    property. I am also of the view that the trial judges analysis of the post-sale
    mortgagees rights was flawed because it relied on her erroneous finding of
    notice and proceeded based on jurisprudence that was inapplicable.

Facts

[3]

Canada Investment Corporation (CIC) was the first
    mortgagee on property owned by Metropolis Properties Inc. (Metropolis) municipally
    described as 91-93 Scollard Street, Toronto, Ontario (the Property). The
    mortgage was in default and CIC sought to sell the Property under its power of
    sale rights in its mortgage. At the time, there were eleven subsequent
    mortgages registered against the Property. Those subsequent mortgages were held
    by the nine applicants in the proceeding below, either as sole mortgagees or
    along with other applicants (the pre-sale mortgagees).
[1]

[4]

The appellant 2413913 Ontario Inc. (241 Ontario)
    purchased the Property pursuant to CICs power of sale. The appellant Sai
    Mohammed is a director of 241 Ontario. The sale closed on June 6, 2014. The pre-sale
    mortgagees argued that they had never received a notice of sale, as required by
    the
Mortgages Act
,

R.S.O. 1990, c. M.40, and that the sale was therefore invalid. In
    the proceedings below, the trial judge accepted that 241 Ontario was a
bona
    fide

purchaser for value of the Property. The
    issue was whether 241 Ontario was without notice that the sale was defective.

[5]

There was no dispute that CICs lawyer in the power of
    sale proceedings, Rasik Mehta, prepared a notice of sale dated November 28,
    2013. The notice of sale stated that the amount due under the CIC mortgage
    totaled $3,271,947.36  quadruple the amount secured under the mortgage when
    CIC acquired it by assignment approximately five months prior. In the
    proceedings below, CIC attempted to justify the amount in the notice of sale
    through expenditures for property management and maintenance stretching back to
    2009, years before the mortgage assignment. Those pre-assignment expenditures
    and the interest that accrued on them resulted in the bulk of the substantial
    increase in the amount said to be owing under the mortgage.

[6]

Jonathan Ricci acted as counsel to Mr. Mohammed and 241
    Ontario in the sale. Mr. Ricci was originally retained by Metropolis, the owner
    of the Property before the impugned sale. On May 2, 2014, Mr. Ricci sent an
    email to Metropolis litigation counsel indicating that he was acting for
    Metropolis in connection with a pending sale of the Property. Mr. Riccis email
    was forwarded to other counsel in a receivership proceeding regarding the
    Property. Within five days of sending that email, Mr. Ricci had terminated his
    retainer with Metropolis and accepted Mr. Mohammeds retainer for the sale. On
    May 16, 2014, Doug Bourassa, one of the counsel to the pre-sale mortgagees,
    sent an email to Mr. Ricci. This email was key to the trial judges conclusion
    that 241 Ontario had notice of a defect in the power of sale process. Mr.
    Bourassa wrote:

You provided an email to [Metropolis litigation
    counsel] dated May 2, 2014in which you advised that you are acting for
    Metropolis Properties, and that you were in the process of receiving mortgage
    statements from mortgagees and preparation of documentation for closing.

Please note that my clients have never
    received any notice of sale from the 1
st
ranking mortgagee [CIC]
Any attempt by the 1
st
mortgagee to sell under power of
    sale will be invalid. [Emphasis added.]

[7]

Mr. Ricci conveyed this information to Mr. Mohammed. Mr.
    Ricci also contacted Mr. Mehta to confirm that the notice of sale was properly
    sent to the pre-sale mortgagees. In response, Mr. Mehta provided Mr. Ricci with
    a copy of the notice of sale and registered mail documentation. Additionally,
    prior to closing, Mr. Ricci obtained a statutory declaration from Mr. Mehta
    confirming proper service of the notice of sale. 241 Ontario closed the
    transaction. Mr. Ricci testified that he did not reply to Mr. Bourassas email
    because it was not clear to him who Mr. Bourassa represented, and because he
    was no longer retained by Metropolis.

[8]

As part of the impugned sale, Ginkgo Mortgage Investment
    Corporation (Ginkgo) provided financing to 241 Ontario and took a first
    mortgage on the Property. Mr. Mohammed was also involved as a mortgagee, personally
    or in his role as director of 2421955 Ontario Inc. (242 Ontario), in several subsequent
    post-sale mortgages. Mr. Mohammed and 242 Ontario (the post-sale subsequent
    mortgagees) also appeal.

Decision Below

[9]

The case proceeded before the trial judge as a hybrid
    trial. In reasons dated August 21, 2015, she answered the four legal questions
    at issue as follows:

1.

Was CICs Notice of Sale Valid?

No. Despite
    the preparation of the notice of sale, the trial judge found that the
pre-sale mortgagees
were not served with it.
    She found that it was more probable than not that, while Mr. Mehta intended to
    serve the notice of sale, he inadvertently mailed the wrong documents to the
pre-sale mortgagees
. Therefore, CIC failed
    to comply with the statutory conditions regarding notice in the
Mortgages
    Act
. Further, the pre-assignment expenditures were
    improperly included in the amount due under CICs mortgage, so the notice of sale
    was also invalid for that reason.

2.

Was 241 Ontario a bona fide purchaser for value
    without notice of the invalidity of sale?

No. 241 Ontario cannot rely on the relief from strict compliance
    with the requirements of a power of sale proceeding contained in ss. 35 and 36
    of the
Mortgages Act
. It had actual notice of
    the invalidity of the sale. Further, it cannot restore itself to without
    notice status by making reasonable inquiries into the validity of the sale.
    Even if it could, 241 Ontario did not make reasonable inquiries.

3.

If the answer to Question 2 is no, are the mortgages
    registered subsequent to the purchase valid?

The
post-sale subsequent mortgagees
(not including Ginkgo) are deemed to have the same notice received
    by 241 Ontario and therefore do not have valid charges as against the
pre-sale mortgagees
. The validity of
    Ginkgos mortgage was to be determined in subsequent reasons, pending further
    submissions.

4.

If the answer to Question 3 is no, do Ginkgo and the
    post-sale subsequent mortgagees have an equitable subrogated interest if they
    advanced funds?

The
pre-sale mortgagees
agreed that since CIC received the benefit of the new mortgage
    advances, Ginkgo and the other
post-sale subsequent
    mortgagees
are entitled to an equitable subrogated
    interest in the Property. The
pre-sale mortgagees
argued that any charges in priority to their mortgages should not
    exceed the amount properly secured by the CIC mortgage at closing. Since that amount
    was in dispute, as were other related issues, this issue was left to be
    determined pending further submissions.

[10]

Following further submissions, in reasons dated February 22, 2016,
    the trial judge determined the following issue:

5.

Is Ginkgos first mortgage on the Property valid?

Yes, relying on
Lawrence v. Maple Trust Company
,
2007 ONCA 74
,
84 O.R. (3d) 94,

the trial judge found

that

241 Ontario

was an intermediate owner and Ginkgo
    was a deferred owner. Thus Ginkgo was a
bona fide

encumbrancer for value without notice.

[11]

In this court, 241 Ontario appeals the order that it is a
bona fide
purchaser for
    value with actual notice of the defect in the exercise of the power of sale and
    therefore did not obtain valid title to the Property. The
post-sale
    subsequent mortgagees appeal the order that their mortgages are invalid.
    Finally, the
pre-sale mortgagees appeal the order that
    Ginkgo has a valid mortgage.

Issues

[12]

The following issues are relevant for the determination of these
    appeals:

1.

Did the trial judge
err in
    applying the wrong test
for actual notice sufficient to
    defeat a registered interest under the
Land Titles Act,
R.S.O. 1990, c. L.5
?

2.

If the answer to issue 1 is yes, can 241 Ontario rely
    on its registration of the transfer?

3.

Did the trial judge err in her analysis of the validity
    of the mortgages registered by the post-sale subsequent mortgagees?

4.

Did the trial judge err in her analysis of the validity
    of the mortgage registered by Ginkgo?

Analysis

[13]

Before
    turning to the issues in this appeal, it is helpful to consider the principles
    that underlie the
Land Titles Act

and review how the legislation has been interpreted in the jurisprudenc
e
.
    Epstein J. (as she then was) described those principles in
Durrani v. Augier

(2000),

50 O.R. (3d) 353
(S.C.), a
t
    para. 42, referencing Marcia Neaves article,
"Indefeasibility
    of Title in the Canadian Context" (1976), 26 U.T.L.J. 173
:

The philosophy of a land titles system embodies three
    principles, namely, the mirror principle, where the register is a perfect
    mirror of the state of title; the curtain principle, which holds that a
    purchaser need not investigate the history of past dealings with the land, or
    search behind the title as depicted on the register; and the insurance
    principle, where the state guarantees the accuracy of the register and
    compensates any person who suffers loss as the result of an inaccuracy. These
    principles form the doctrine of indefeasibility of title and [are] the essence
    of the land titles system

[14]

There
    is no question that fraud has always been recognized as an exception to the
    mirror principle:
Waimiha Sawmilling Company Limited v. Waione Timber
    Company Limited
, [1926] A.C. 101 (P.C.).

It was less clear whether
    notice of a defect in title not involving fraud could serve to defeat the
    interest of a registered owner or encumbrancer. That question was answered in
    the seminal case of
United Trust v. Dominion
    Stores
,

[1977] 2 S.C.R. 915
.
There the respondent owner was seeking to take
    title to a property free from an unregistered lease. The majority of the
    Supreme Court rejected the respondents submission that,
under the Ontario
Land Titles Act
,
apart from fraud, actual notice of a non-registered
    instrument is ineffective to put the burden of the encumbrance resulting
    therefrom upon a purchaser for value (at p. 948). In other words, the majority
    held that actual notice of an unregistered instrument could defeat the interest
    of a registered owner or encumbrancer even in the absence of fraud.

[15]

Spence J., writing for the majority, reasoned that the
    doctrine of actual notice has been well established in our law since the
    beginning of equity and that, such a cardinal principle of property law cannot
    be considered to have been abrogated unless the legislative enactment is in the
    clearest and most unequivocal of terms (at p. 952). Spence J. adopted the
    analysis of Arnup J.A. in the Court of Appeals decision in that case and
    found, the law of real property should not be found to have been altered by
    the Legislature except where such alteration had been made by clear or
    appropriate words (at p. 957).

[16]

The
    next case of interest is
Household Realty
    Corp. Ltd. v. Liu

(2005),

205 O.A.C. 141 (C.A.).

There,
    the appellants wife forged a power of attorney and used it to obtain three
    mortgages registered against their joint residence, unbeknownst to the
    appellant. The appellants submission that the mortgages were void was rejected
    on the motion below. This court dismissed the appeal, affirming the motion
    judges finding that the mortgagees were

bona fide

encumbrancers for value without notice of
    the fraud. In those circumstances, the court reasoned that while the mortgages
    were void at common law, they became valid upon registration.

[17]

The
    result was that as between the innocent parties, being the appellant and the
    mortgagees, the appellants rights were inferior. This finding was consistent
    with the immediate indefeasibility theory. Central to this theory is that the
Land Titles Act
creates a system of title
    by registration, not a system of registration of title. Thus, once registered
    an instrument is effective. There was no exception to this rule because the
    mortgagees had no knowledge of the fraud.

[18]

This
    court revisited its decision in
Household
    Realty
in
Maple Trust
.
In that case, an
    imposter posing as the appellant homeowner entered into an agreement of
    purchase and sale for the appellants home with a confederate. The purchaser
    then obtained mortgage financing from the respondent and the sale closed. When
    the appellant discovered what had happened, she brought an application to set
    aside the fraudulent transfer and the registration of the respondents
    mortgage. The application judge set aside the transfer but refused to set aside
    the mortgage on the basis that he was bound by
Household Realty
. The issue for this court was as between the
    innocent homeowner and the innocent mortgagee, whose rights should be
    paramount.

[19]

The
    court in
Maple Trust
found that
Household Realty
was
    incorrectly decided and that the theory of deferred indefeasibility rather than
    immediate indefeasibility was more consistent with the
Land Titles Act
:

[67] The theory of deferred indefeasibility accords with the
    Act and must be taken into consideration in an analysis of s.155 and its
    relationship with other provisions in the
Act
.
    Under this theory, the party acquiring an interest in land from the party responsible
    for the fraud (the "intermediate owner") is vulnerable to a claim
    from the true owner because the intermediate owner had an opportunity to avoid
    the fraud. However, any subsequent purchaser or encumbrancer (the
    "deferred owner") has no such opportunity. Therefore, in accord with
    s. 78(4) and the theory of deferred indefeasibility, the deferred owner
    acquires an interest in the property that is good as against all the world.

[20]

The
    result was that Maple Trusts interest as an intermediate encumbrancer did not
    defeat the interest of the true owner.

[21]

Following
    the release of this courts decision in
Household
    Realty
,

the legislature amended the

Land Titles Act

with the express
    purpose of protecting innocent homeowners from losing their homes as a
    consequence of fraud. Those amendments will be set out below in the analysis of
    Issue 4. For present purposes, it is sufficient to note that as a result of the
    amendments, fraudulent instruments are an exception to the rule, embodied in s.
    78(4) of the
Land Titles Act
, that a registered instrument is effective
    according to its nature and intent, to create, transfer, charge or discharge an
    interest in land. Importantly, the court in
Maple Trust
made no
    reference to these amendments as they were not effective for registrations made
    prior to October 19, 2006, and the registration in that case took place in
    2005.

[22]

A
    question arises from the foregoing. Does actual notice of a non-fraudulent
    defect continue to operate to defeat the interest of a
bona fide
purchaser or encumbrancer for
    value who has notice of such defect?

[23]

On
    the one hand, it could be credibly argued that such notice is no longer
    operative to defeat registered interests. This argument would be premised on
    the notion that the legislature has effectively occupied the field with its
    post‑
Household Realty
amendments.
    One view of the amendments impact is that only in cases of fraud will the
    registered owners or encumbrancers interest be vulnerable and then only in accordance
    with the statutory scheme provided therein.

[24]

On
    the other hand, applying the reasoning of the majority in
United Dominion
,
    it could be argued that notice of non-fraudulent defects is a well-established
    doctrine in property law and it should not be deemed to have been abrogated
    absent the manifestation of a specific intention to do so by the legislature through
    clear wording in an amendment to the
Land Titles Act
.

[25]

As
    will be discussed below, it is unnecessary for me to resolve this issue because
    I am satisfied that the trial judge erred in finding that 241 Ontario had
    actual notice of the defect in title. For the purposes of the analysis below, I
    will assume that notice of a non-fraudulent defect continues to operate to
    defeat the interest of a
bona fide
purchaser or encumbrancer for value who has notice of such defect.

(1)

Notice of Defect

[26]

Because
    notice has been considered to be one of a limited number of exceptions to the
    mirror principle, it has been strictly construed. Our courts insist on actual
    notice of a defect. Actual knowledge means just that; the party must actually know
    about the defect. It is not sufficient that it has become aware of facts that
    may suggest it should make inquiries:
Rose
    v. Peterkin
(1885)
,
    13 S.C.R. 677, at pp. 694-695. Constructive knowledge is insufficient. Thus,
    the factual analysis in considering a notice argument is limited to a
    consideration of what the party knew, not what it could have known had it made
    inquiries.
[2]

[27]

The
    issue that the trial judge had to determine was whether 241 Ontario had actual
    knowledge of non-compliance with s. 33 of the
Mortgages Act
, which
    mandates the manner of notice of the exercise of a power of sale. The trial
    judge erred in two respects in her knowledge analysis. First, she conflated
    actual knowledge with constructive knowledge, when she stated:

[111] Actual notice is knowledge, not presumed knowledge. The
    test is whether the registered instrument holder was in receipt of such
    information as would cause a reasonable person to make inquiries:
Durrani

at para. 61, citing
Canadian Imperial Bank of Commerce v. Rockway
    Holdings Ltd.

(1996), 1996 CanLII 8007
    (ON SC),
29 O.R. (3d) 350 (Gen. Div.)
.

[112]  Here, 2413913 had actual notice. Its counsel received an
    email that stated flatly that no notice of sale had been received from CIC and
    any attempt by CIC to sell would be invalid. This was sufficient information to
    put 2413913 on inquiry.

[28]

With
    respect, these passages demonstrate an impermissible blurring of the concepts
    of actual and constructive knowledge. In determining whether a party has actual
    knowledge of a defect, it is unnecessary and unhelpful to consider whether they
    received sufficient information to put them on inquiry. That is because receipt
    of such information does not amount to actual knowledge:
Rose
, at pp.
    694-695. Therefore, whether the party received such information and what steps
    it took to investigate the situation is wholly irrelevant to the actual
    knowledge analysis.

[29]

I
    also observe that the trial judges reliance on the two cases cited in paragraph
    111 of her reasons is misplaced. In
Rockway
    Holdings
, the issue was whether a bank took a registered mortgage
    subject to a pre-existing licence agreement. There was no issue that the bank
    was aware of the agreement. The question was whether the bank, having actual
    knowledge of the agreement, was obliged to make inquiries regarding its precise
    terms. Similarly,
Durrani
does
    not support the proposition cited by the trial judge. That was a case where the
    court found that the purchasers agent had actual knowledge of a fraud. Neither
    case attenuates the test for actual knowledge.

[30]

The
    second error in the trial judges knowledge analysis was her failure to
    properly identify the alleged defect in the power of sale process. She found
    that 241 Ontario had actual notice, noting that [i]ts counsel received an
    email [from Mr. Bourassa] that stated flatly that no notice of sale had been
    received from CIC and any attempt by CIC to sell would be invalid (para. 112).

[31]

Section
    33 of the
Mortgages Act
provides
    for service of a notice of sale by personal service or by registered mail to
    the partys usual or last known address, or, where the last known address is
    shown on the registered instrument under which the party acquired an interest,
    to that address. Pursuant to s. 34, a notice delivered by mail is deemed to
    have been given on the day on which it is mailed.

[32]

It
    is not a defect in a power of sale process that a notice is not received by the
    intended recipient; it is only a defect if the notice was not sent in the
    prescribed manner:
Wood v. Bank of Nova
    Scotia
(1980), 29 O.R. (2d) 35 (C.A.), at pp. 36-37. The trial
    judge erred in finding that 241 Ontario had actual notice of the defect because
    of Mr. Bourassas email, which said that no notice had been received. 241
    Ontario had no actual knowledge of a defect, i.e. that the notice was not sent in
    the prescribed manner. In my view, therefore, the trial judge erred in finding
    that 241 Ontario had actual knowledge of a defect.

(2)

Validity of 241 Ontarios Title

[33]

Because
    241 Ontario did not have actual notice, it submits that it is entitled to rely
    upon the protections in the
Land Titles Act
as a
bona fide
purchaser for
    value without knowledge of a defect. Subsection 78(4) of Act provides:

78(4) When registered, an instrument shall be deemed
    to be embodied in the register and to be effective according to its nature and
    intent, and to create, transfer, charge or discharge, as the case requires, the
    land or estate or interest therein mentioned in the register.

[34]

More
    specific to power of sale proceedings are ss. 99(1) and 99(1.1) of the
Land Titles Act
, which provide as follows:

99(1) Subject to the
Mortgages
    Act

the registered owner of a registered charge that contains a power of
    sale, upon registering the evidence specified by the Director of Titles, may
    sell and transfer the interest in the land or any part thereof that is the
    subject of the charge in accordance with the terms of the power in the same
    manner as if the registered owner of the registered charge were the registered
    owner of the land to the extent of such interest therein.

99(1.1) The evidence
    specified by the Director of Titles under subsection (1) is conclusive evidence
    of compliance with Part III of the
Mortgages Act
and, where applicable,
    with Part II of that Act and, upon registration of a transfer under that
    subsection, is sufficient to give a good title to the purchaser.

[35]

In
    the present case, CIC registered a Transfer: Power of Sale that fully
    complied with the requirements of s. 99(1.1), as specified by the Director of
    Titles. Accordingly, 241 Ontario submits that it can rely upon the registration
    to give it good title.

[36]

The
    pre-sale mortgagees submit that the provisions of the
Mortgages Act
operate to prevent 241
    Ontario from obtaining good title. They argue that s. 99(1) of the
Land Titles Act
provides that it is
    subject to the
Mortgages Act

and

there has not been compliance with the strict requirements for a power of
    sale proceeding under that Act. They also submit that 241 Ontario cannot rely
    on ss. 35 and 36 of the
Mortgages Act
,
which provide relief from non-compliance
.

[37]

Sections
    35 and 36 fall under Part III of the
Mortgages Act
, which is entitled
    Notice of Exercising Power of Sale. Part III includes the notice requirements
    for exercising powers of sale. Section 35 deems compliance with Part III where
    certain statutory declarations are made, whereas s. 36 deals with situations
    where there has been professed compliance with Part III:

35

Subject to the
Land Titles Act
and
    except where an order is made under section 39, a document that contains all of
    the following is conclusive evidence of compliance with this Part and, where
    applicable, with Part II, and is sufficient to give a good title to the
    purchaser:

1.

A statutory declaration by the mortgagee or the mortgagees solicitor or
    agent as to default.

2.

A statutory declaration proving service, including production of the
    original or a notarial copy of the post office receipt of registration, if any.

3.

A statutory declaration by the mortgagee or the mortgagees solicitor
    that the sale complies with this Part and, where applicable, with Part II.

36

Where a notice has been given in professed
    compliance with this Part and, where applicable, with Part II, the title of the
    purchaser is not liable to be impeached on the ground that the provisions of
    this Part or, where applicable, Part II respecting default and the provisions
    of this Part respecting notice, have not been complied with, but any person
    damnified thereby has a remedy against the person exercising the power of sale.

[38]

The pre-sale mortgagees adopt the trial judges analysis regarding
    the unavailability of ss. 35 and 36. They argue that s. 35 is unavailable to
    241 Ontario because the statutory declaration that Mr. Ricci obtained did not
    include all of the required elements. It also cannot rely on s. 36 of the
Mortgages
    Act
, because no notice was given to them and 241 Ontario
    had actual knowledge of the defect in the power of sale proceedings. Therefore,
    they submit that because there has been non-compliance with the
Mortgages
    Act
, 241 Ontario cannot rely on s. 99(1) of the
Land
    Titles Act
.

[39]

I would not give effect to this submission. Accepting for the moment
    that the trial judge was correct in her analysis of ss. 35 and 36 of the
Mortgages Act
, that only
    means that those two sections are unavailable. 241 Ontario is prohibited from
    relying on Mr. Mehtas statutory declaration and it cannot rely on s. 36
    because notice was not actually given. However, none of the cases the trial
    judge relied upon in her analysis dealt with the
Land Titles Act
, nor the interplay between the
Land Titles Act

and the
Mortgages Act
: see
Re
    Botiuk and Collison

(1979), 26 O.R. 2d) 580 (C.A.);
Cranberry
    Cove Tower Inc. v. Monarch Trust Co.
(2003), 125 A.C.W.S.
    (3d) 1074 (Ont. S.C.), affd
(2005), 136 A.C.W.S. (3d)
    949 (Ont. C.A.);

Re Hyde and Besserer

(1971),
1 O.R. 434 (Co. Ct.).

[40]

On
    my reading,
ss. 35 and 36 of the
Mortgages Act

do not purport to limit 241 Ontarios other rights,
    including the right to rely on the registration of evidence referred to in
ss.
    99(1) and 99(1.1) of the
Land Titles Act
.

[41]

Under
    s. 99 of the
Land Titles Act
, a registered owner of a registered
    charge that contains a power of sale may sell and transfer the interest in land
    in accordance with the terms of the power of sale. The owner may do so
    [s]ubject to the
Mortgages Act
 and upon registering the evidence
    specified by the Director of Titles. According to subsection (1.1), such
    evidence is conclusive evidence of compliance with Part III of the
Mortgages
    Act
. Thus, while the registered owner must comply with the
Mortgages
    Act
, subsection (1.1) deems compliance with Part III of the
Act
.

[42]

Section
    35 of the
Mortgages Act
also deems there to be compliance with Part
    III if certain conditions are satisfied: except where an order is made under s.
    39, a document containing the requisite declarations is conclusive evidence of
    compliance with Part III. However, s. 35 is [s]ubject to the
Land Titles
    Act
 and so, to the extent of any conflict between s. 35 and s. 99, the
    latter would prevail.

[43]

Section
    36 of the
Mortgages Act
operates as a saving provision where a notice
    has been given in professed compliance with Part III. I see no conflict
    between s. 36 of the
Mortgages Act
and s. 99 of the
Land Titles
    Act
.
Reading the provisions harmoniously, where there has been
    technical non-compliance with Part III of the
Mortgages Act
, both s.
    36 and s. 99(1.1) may be available.

[44]

Accordingly,
    as I read
ss. 35 and 36 of the
Mortgages Act
,

they do not purport to limit 241 Ontarios right to rely on
    the registration of evidence referred to in
ss. 99(1) and 99(1.1) of the
Land Titles Act
.

[45]

In
    contrast to my interpretation, the pre-sale mortgagees argument regarding the
    interplay between the
Mortgages Act
and the
Land Titles Act
would lead to conflict between the two
    statutes. According to their argument, if a purchaser could not rely on ss. 35
    and 36 of the
Mortgages Act
, it would automatically be prohibited from
    relying on ss. 99(1) and 99(1.1) of the
Land Titles Act
.
The
    latter sections would be rendered inoperative. Such an interpretation is
    inconsistent with the statutory interpretation principle that statutes are to
    be read harmoniously, in a manner that avoids conflict:
Bell ExpressVu
    Limited Partnership v. Rex
, 2002 SCC 42, [2002] 2 S.C.R. 559, at para. 27.

[46]

Further,
    the pre-sale mortgagees submission makes little sense from a policy
    standpoint. There is no policy imperative that would suggest that the failure
    to produce a statutory declaration that complies with s. 35 of the
Mortgages
    Act
renders the registration of the evidence provided for under the
Land
    Titles Act
a nullity. Section 35 of the
Mortgages Act
is not
    mandatory. A mortgagee may choose to prepare a statutory declaration or elect
    not to do so as it sees fit. A purchaser may similarly rely on the statutory
    declaration or choose not to do so. There is also no reason why notice under s.
    36 of the
Mortgages Act
must be relied upon given the availability of
    s. 99(1) of the
Land Titles Act
.

[47]

The
    better interpretation of the interaction of ss. 35 and 36 of the
Mortgages
    Act
and s. 99(1) of the
Land Titles Act
is that the provisions
    provide complementary methods of protecting
bona fide
purchasers for
    value without notice of a defect in a power of sale proceeding. This
    interpretation is also consistent with the curtain principle underlying the
Land
    Titles Act
, which holds that a purchaser need not investigate the history
    of past dealings with the land or search behind the title as depicted on the
    register.

[48]

I
    therefore find that that 241 Ontario is
a
bona fide

purchaser
    for value without notice of the defect in the power of sale proceedings and
    holds good title to the Property.

(3)

Post-Sale Subsequent Mortgagees

[49]

With
    respect to the post-sale subsequent mortgagees, the trial judge found that they
    were all deemed to have the same knowledge that Mr. Mohammed obtained by reason
    of his position as a director of 241 Ontario and his involvement with the
    post-sale subsequent mortgagees. For the reasons set forth above, the trial
    judges knowledge analysis was flawed. Therefore, I would set aside her finding
    with respect to the validity of these mortgages and find the post-sale
    subsequent mortgagees have valid encumbrances.

(4)

Ginkgo Mortgage

[50]

In
    her second set of reasons, the trial judge reached the correct conclusion with
    respect to the validity of the Ginkgo mortgage but her legal analysis was
    flawed. Her conclusion relied on the doctrine of deferred indefeasibility as
    described in
Maple Trust
. Before her, the pre-sale mortgagees argued
    that under that doctrine, Ginkgo was an intermediate owner and was thus limited
    to an equitable charge subordinate to their mortgages. Ginkgo submitted that it
    was a deferred owner under the doctrine, and that its mortgage was also valid
    under the
Land Titles Act
.

[51]

Relying
    on
Maple Trust
, the trial judge noted that
fraud had been
    alleged against CIC but had not been proved since that issue was not part of
    the hybrid trial. However, CIC was responsible for the defective power of sale
    proceedings. 241 Ontario dealt with CIC and thus 241 Ontario was the
    intermediate owner. Ginkgo was a deferred owner and a
bona fide

encumbrancer for value without notice. Accordingly, Ginkgo
    has a valid first charge against the Property.

[52]

The trial judge went on to find that the extent to which the
    pre-sale mortgagees are affected by Ginkgo having a legal charge, rather than
    only an equitable charge, depends on the amount due and owing under the CIC
    mortgage. That amount was left to be determined in the next stage of the
    proceedings.

[53]

This
    analysis is consistent with
Maple Trust
. However, as there was no
    fraud yet proven in this case,
Maple Trust
,
a fraud case
,
did
    not provide the proper framework. The proper analysis concerned only whether
    Ginkgo had actual notice of a non-fraudulent defect. As noted above, whether
    notice of such a defect creates an exception to the mirror principle is an open
    question that need not be determined on this appeal, as 241 Ontario and
    consequently the other post-sale mortgagees, including Ginkgo, did not have
    actual notice.

[54]

In
    any event, a proper fraud analysis required the trial judge to consider the
    amendments to the
Land Titles Act
enacted after this courts decision
    in
Household Realty
. Those amendments introduced the provisions
    pursuant to which a court is to analyze whether there has been fraud such that
    the mirror principle is defeated. The relevant sections of the Act are as
    follows:

1. In this Act,

fraudulent instrument means an instrument,

(a) under which a
    fraudulent person purports to receive or transfer an estate or interest in
    land,

(b) that is given under
    the purported authority of a power of attorney that is forged,

(c) that is a transfer of
    a charge where the charge is given by a fraudulent person, or

(d) that perpetrates a
    fraud as prescribed with respect to the estate or interest in land affected by
    the instrument; (acte frauduleux)

fraudulent person means a person who executes or
    purports to execute an instrument if,

(a) the person forged the
    instrument,

(b) the person is a
    fictitious person, or

(c) the person holds
    oneself out in the instrument to be, but knows that the person is not, the
    registered owner of the estate or interest in land affected by the instrument;
    (fraudeur)

* * *

78(4) When registered, an instrument shall be deemed
    to be embodied in the register and to be effective according to its nature and
    intent, and to create, transfer, charge or discharge, as the case requires, the
    land or estate or interest therein mentioned in the register.

78(4.1) Subsection (4) does not apply to a fraudulent
    instrument that is registered on or after October 19, 2006.

78(4.2) Nothing in subsection (4.1) invalidates the
    effect of a registered instrument that is not a fraudulent instrument described
    in that subsection, including instruments registered subsequent to such a
    fraudulent instrument.

[55]

Given
    that the trial judge proceeded on the basis that fraud had not been proved, she
    should have restricted her analysis to whether Ginkgo had actual notice of a
    non-fraudulent defect. If this were a case where she was considering a fraud
    argument, a proper analysis had to take into account the post-
Household
    Realty

amendments to the
Land Titles Act

and focus
    on whether the Ginkgo mortgage was a fraudulent instrument that fell within the
    exception found in s. 78(4.1).

[56]

On
    appeal, counsel for the pre-sale mortgagees argues that the Ginkgo mortgage is
    invalid because 241 Ontario is a fraudulent person under subsection (c) of the
    definition of that term. Therefore, he submits that 241 Ontarios purported
    transfer of an interest in the Property was caught by subsection (a) of the
    definition of the term fraudulent instrument. However, counsel concedes that
    his argument can only succeed if 241 Ontario had actual knowledge of the
    defect. I have found that it did not have such knowledge. Accordingly, this
    argument fails against Ginkgo and, to the extent it is made against the
    post-sale subsequent mortgagees, against them as well.

Disposition

[57]

I
    would dispose of the appeals as follows:

(i)

I would allow the appeal of 241 Ontario in appeal C61872 and grant
    judgment that 241 Ontario is
a
bona fide

purchaser for value
    without notice of the defect in the power of sale proceedings and therefore
    holds good title to the Property;

(ii)

I would allow the appeal of the post-sale subsequent mortgagees in
    appeal C61894, and grant judgment that they are

bona fide

mortgagees
    for value without notice of the defect in the power of sale proceedings; and

(iii)

I would dismiss the appeal of the pre-sale mortgagees in appeal C61878.

[58]

The
    parties have agreed on the costs of the appeals and the proceedings below. In
    accordance with their agreement, I would order that Stanbarr Services Limited
    on behalf of the pre-sale mortgagees pay:

(i)

$25,000
    to 241 Ontario in respect of its all-inclusive appeal costs;

(ii)

$7,500
    inclusive to 242 Ontario and Mr. Mohammed in respect of their all-inclusive
    appeal costs;

(iii)

$40,000 inclusive to 241
    Ontario, 242 Ontario, and Mr. Mohammed in respect of their all-inclusive trial
    costs; and

(iv)

$13,500 to Ginkgo inclusive in respect of its all-inclusive responding
    appeal costs.

[59]

In respect of Ginkgo, the trial costs as ordered
    by the trial judge stand.

Released: D.D. March 14, 2018

C.W.
    Hourigan J.A.

I
    agree. Doherty J.A.

I
    agree. S.E. Pepall J.A.

[1]

A thirteenth mortgage (or twelfth subsequent mortgage) was
    held by 2329916 Ontario Ltd. for a period of time, but it did not have a charge
    at the time of the sale and was not a party to the hybrid trial below.

[2]
As no party took the position that 241 was wilfully blind, I do not propose to
    comment on that issue.


COURT OF APPEAL FOR ONTARIO

CITATION: Sturino v. Crown Capital Corporation, 2018 ONCA 207

DATE: 20180302

DOCKET: C64228

Feldman, Benotto and Brown JJ.A.

BETWEEN

Frank Sturino

Applicant (Respondent)

and

Crown Capital Corporation,
Canada
    Investment Corporation
and Fenfam Holdings Inc.

Respondents (
Appellant
)

Rick Quance, for the appellant Canada Investment
    Corporation

Wojtek Jaskiewicz, for the Court Appointed Receiver MNP
    Ltd.

Mauro Marchoni, for the respondent Frank Sturino

Heard and released orally: February 26, 2018

On appeal from the order of Justice Michael R. Gibson of
    the Superior Court of Justice, dated February 6, 2017.

REASONS FOR DECISION

[1]

Canada Investment Corporation (CIC) appeals
    the order of the motion judge approving the recommendation of the receiver, MNP
    Ltd. (the Receiver), that no further distributions be made to CIC in respect
    of its first mortgage. CIC submits the motion judge erred by failing to find it
    was entitled to a distribution for the interest due on its mortgage.

[2]

We do not agree.

[3]

As described in the Receivers Third Report
    (paras. 43 and 49) and Supplement to the Third Report (paras. 13 and 14), the
    Receiver asked CIC for: (i) a breakdown of how the interest was arrived at; and
    (ii) clarification as to why CIC did not enforce its mortgage from Crown Capital
    Corporation (CCC) earlier than February 2014, if interest had not been paid
    since April 2012. Although Mr. Wilson of CIC provided an affidavit in response
    to the Receivers Third Report, CIC did not provide a breakdown of its interest
    calculation  relying on its discharge statements  nor did it provide the
    requested clarification.

[4]

As a result of its investigation, the Receiver
    had concerns that CIC and CCC were related companies. The mortgagor, CCC, did
    not allow the Receiver access to its financial records that would have allowed the
    Receiver to verify the amount due under the mortgage.

[5]

The burden was on CIC to prove its claim.

[6]

Given the failure of CIC to provide the
    information reasonably requested by the Receiver so that it could verify CICs
    mortgage interest claim, the Receivers recommendation that no distribution be
    made to CIC for mortgage interest was reasonable. We see no reversible error in
    the motion judges decision to accept that recommendation, given the state of
    the evidence concerning CICs mortgage.

[7]

The appeal is dismissed. The court did not accept the
    receivers position that it was not asking for costs because its costs would be
    paid out of the estate. Counsel for the creditor who has an interest in the
    funds remaining in the estate submitted that costs should be awarded. CIC shall
    pay costs to the Receiver fixed at $7,500.00, inclusive of disbursements and
    HST.

K.
    Feldman J.A.
M.L. Benotto J.A.
David Brown J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Susin v. Susin, 2018 ONCA 220

DATE: 20180305

DOCKET: M48645 (C61734)

Fairburn J.A. (Motions
    Judge)

BETWEEN

Fermino Susin

Applicant (Responding Party)

and

Dorino Susin,
John Susin
, Anita Rahman, Dianne Susin, Sister Stella
    Marie, Gloria Devenz,
Esther Susin
and Theresa
    Lensborn

Respondents (Moving Parties)

AND BETWEEN

John Susin

Applicant

and

Fermino Susin, Dorino
    Susin, Anita Rahman, Dianne Susin, Sister Stella Marie, Gloria Devenz, Esther
    Susin and Theresa Lensborn

Respondents

John Susin, in person

Sarah Whitmore, duty counsel

Margaret Hoy, via teleconference

Heard: March 1, 2018

ENDORSEMENT

[1]

The moving parties seek an extension of time to file a motion to set
    aside the August 2, 2017 order of Gillese J.A. requiring that they each post $15,000
    as security for costs in their appeal from the decision of
Susin v. Susin,
2016 ONSC 311. For the reasons that follow, the motion is dismissed.

[2]

By way of background, the parties father passed
    away in 1997. His estate was a modest one. After years of litigation, his estate
    is virtually non-existent.

[3]

John Susin represented himself on this motion to
    obtain an extension of time. Duty counsel assisted him. John Susin also purports
    to speak on behalf of the other moving party, his sister Esther, who was not
    present in court during the motion and was not represented by counsel.

[4]

In September 2015, Esther brought a motion in
    the Superior Court of Justice for directions in relation to her fathers estate.
    The motion was dismissed as an abuse of process. She then moved before Ramsay
    J. to set aside that finding, claiming that it had been obtained by fraud. She
    also asked to have the executor of the estate, her brother Fermino Susin (the
    respondent on this motion), cited in contempt. Esther was wholly unsuccessful
    in obtaining the relief she sought. I have read Ramsay J.s reasons for
    dismissing the motion and they appear to be factually based and entirely sound.

[5]

The moving parties appeal from Ramsay J.s
    decision. It is this appeal that forms the backdrop for Gillese J.A.s order
    for security for costs. The moving parties are not permitted to pursue their appeal
    until the security for costs are paid. Pursuant to s. 7(5) of the
Courts
    of Justice Act
, the moving parties now wish to move
    before a panel of this court to have the security for costs order set aside
.

[6]

Rule 61.16(6) requires that where a person
    wishes to move to set aside or vary the order of a single judge of an appellate
    court under ss. 7(5) or 21(5) of the
Courts of Justice Act,
he or she shall do so by a notice of motion that is served and
    filed, with proof of service, within four days after the order is made.

[7]

John Susin maintains that he served his notice
    of motion on August 8, 2017 but, through inadvertence, failed to file the
    notice of motion in court. According to John Susin, the failure to file the notice
    of motion only came to his attention in mid-December. It is now almost seven
    months past what the rules require.

[8]

The test for an extension of time for filing a notice
    of appeal provides guidance on the relevant criteria for consideration in this
    context. The question is whether the justice of the case requires that the
    extension be given. In
Howard v. Martin
2014
    ONCA 309, 42 R.F.L. (7th) 47, the court sets out the relevant criteria at para.
    26:

Each case depends on its own circumstances, but the court is to
    take into account all relevant considerations, including:

1. whether the moving party formed a
    bona fide intention to appeal within the relevant period;

2. the length of, and explanation for, the delay in filing;

3. any prejudice to the responding party that is caused,
    perpetuated or exacerbated by the delay; and,

4. the merits of the proposed appeal.

[9]

I accept that within six days of the security
    for costs order being made, the moving parties formed an intention to seek to
    have the order set aside. Although the rules require service and filing within
    four days, not much turns on this two day differential. For all intents and
    purposes, the moving parties formed a
bona fide
intention to challenge the security for costs order within the
    required time. For the sake of argument, I am also prepared to accept that the
    failure to file the notice of motion resulted from an oversight on the part of
    the moving parties. Although these factors could be said to pull toward
    allowing the extension of time, the other factors pull strongly against
    granting this order. Not only is there no merit to the motion to set aside the
    order of Gillese J.A., but the respondent will be significantly prejudiced by
    allowing this matter to be taken any further.

[10]

The moving parties have failed to show any
    reason why the order for security for costs is wrong. A decision about whether
    to require security for costs is a discretionary one that must be afforded
    deference:
Yaiguaje v. Chevron Corporation,
2017
    ONCA 827, 138 O.R. (3d) 1, at para. 20. In determining whether an order for
    security for costs should be made, the overarching principle to be applied to
    all the circumstances is the justness of the order sought:
Pickard
    v. London Police Services Board,
2010 ONCA 643, 268 O.A.C.
    153, at para. 17. This court set out the applicable test for deciding a motion
    for security for costs in
Chevron
, at para. 22:

[J]udges are obliged to first consider the specific provisions
    of the Rules governing those motions and then effectively to take a step back
    and consider the justness of the order sought in all the circumstances of the
    case, with the interests of justice at the forefront.

[11]

Justice
    Gillese approached the matter in exactly this way. The decision demonstrates
    that she considered the rules governing the motion and focussed on the justness
    of the order in the circumstances of the case. Among other things, Gillese J.A.
    specifically considered: (i) the length of time that this matter had been under
    litigation; (ii) the adverse impact that the moving parties actions have had
    on the respondent; (iii) the fact that there are many outstanding costs orders
    left unpaid by the moving parties and, in particular, John Susin; (iv) the fact
    that the moving parties should not be permitted to proceed with impunity; and
    (v) the fact that the appeal appeared to be wholly devoid of merit.

[12]

The
    moving parties have failed to show any basis upon which the order for security
    for costs could be set aside. The proposed motion to set aside the security for
    costs order is without any merit.

[13]

In addition, I find that there would be significant prejudice to
    the respondent if the extension of time were granted.
The
    estate is virtually without funds. The respondents counsel says that, at this
    point, the unpaid legal fees outstrip the $5,000 left in the estate. Given John
    Susins well-documented history of failing to pay costs orders, I have no confidence
    that costs resulting from what appears to be an entirely frivolous motion would
    be paid.

[14]

Indeed, the respondent filed evidence on this motion
    that demonstrates a continuous and blatant flouting of costs orders since 2007.
    I accept this evidence as true. Although John Susin suggests he has paid all of
    the costs orders up to 2009, the respondents counsel maintains that Mr. Susin
    has paid nothing. It is suggested that, to the extent that legal fees have been
    paid, they have come from the estate and not from John Susin. Regardless, even if
    I were to accept that John Susin has paid costs orders up to 2009, it still means
    that he has not paid many thousands of dollars in costs since that time.

[15]

Having regard to all of the circumstances,
    including the seemingly meritless attempt to challenge Gillese J.A.s order and
    the multiple and hefty unpaid costs orders, the interests of justice require
    that the request for an extension of time to bring a motion to set aside the
    security for costs order be dismissed.

[16]

I conclude by making the following observation.
    John Susin was declared a vexatious litigant by Quinn J. in 2008. This court
    upheld the vexatious litigant finding in
Susin v. Susin,
2009 ONCA 231, holding, at para. 1:

[T]he record shows that there was ample
    evidence to support his finding that the appellant is a vexatious litigant. His
    conduct in this case is indicative of his persistent and unwarranted pursuit of
    legal proceedings that are both meritless and frivolous. His conduct has
    resulted in enormous inconvenience and expense, over many, many years, to
    opposing litigants and in this era of strained court resources, he can no
    longer be permitted unrestrained access to the courts of Ontario.

[17]

Since this court dismissed John Susins effort
    to have the vexatious litigant designation set aside almost a decade ago, at a
    minimum, it appears that he has brought motions before over fifteen different
    judges, on over twenty different days, in at least four different
    jurisdictions. The respondent has faced the daunting task of attempting to navigate
    his way through this labyrinth of litigation brought by John Susin, all the
    while facing an increasingly dwindling estate.

[18]

The sea of court orders, endorsements and
    decisions in this matter reinforce the status of John Susin as a vexatious
    litigant, one who frequently manages to obtain court dates in defiance of the
    2008 order that he not commence or continue any judicial proceeding or motion
    except with leave of the Superior Court of Justice. As noted by Ramsay J. in
Susin
    v. Susin,
2015 ONSC 5896: This is one of the most
    extreme examples of persistent vexatious litigation that I have ever
    encountered. Further abuse of the court system must be halted decisively and
    without delay.

[19]

In the hope that it might assist those who may
    be confronted with John Susins attempts to file documents in court, I refer to
    the 2008 order of Quinn J. As noted in that order, John Susin is not permitted
    to commence or continue any judicial proceeding or motion except with leave of
    the Superior Court of Justice. Nor is he permitted to seek leave to commence or
    continue any judicial proceeding, action or motion against Fermino Susin or the
    estate or beneficiaries of the estate of John Susin Sr., or its executors,
    unless all outstanding cost awards owing to Fermino Susin and the Estate of
    John Susin Sr. by John Susin Jr. are paid in full. For convenience, I append
    the 2008 vexatious litigant order to these reasons.

Conclusion

[20]

The motion to extend time to file a notice of
    motion to set aside the security for costs order is dismissed. The moving
    parties are ordered to pay the respondent costs fixed in the amount of $1,000
    all inclusive.

Released: March 5, 2018

Fairburn J.A.

Appendix A


COURT OF APPEAL FOR ONTARIO

CITATION: The Catalyst Capital Group Inc. v. Moyse, 2018 ONCA
    283

DATE: 20180322

DOCKET: C62655

Doherty, MacFarland and Paciocco JJ.A.

BETWEEN

The Catalyst Capital Group Inc.

Plaintiff (Appellant)

and

Brandon Moyse and West Face Capital Inc.

Defendants (Respondents)

Brian H. Greenspan, David C. Moore and Michelle
    Biddulph, for the appellant

Robert A. Centa, Kristian Borg-Olivier and Denise
    Cooney, for the respondent, Brandon Moyse

Kent E. Thomson, Matthew Milne-Smith and Andrew Carlson,
    for the respondent, West Face Capital Inc.

Heard:  February 20 and 21, 2018

On appeal from the decision of Justice F. Newbould of the
    Superior Court of Justice, dated August 18, 2016, dismissing Catalysts action,
    reported at 2016 ONSC 5271, and an application for leave and, if leave is
    granted, an appeal from the costs decision of Justice F. Newbould, dated
    October 7, 2016.

REASONS FOR DECISION

I

[1]

The appellant, The Catalyst Capital Group Inc. (Catalyst), and the
    respondent, West Face Capital Inc. (West Face), two investment management
    firms, made separate efforts to acquire WIND Mobile Inc. (WIND) in 2014. In
    early August, it appeared that Catalyst and the principal shareholder of WIND
    had reached an agreement for the sale of WIND to Catalyst. Within days, that
    agreement had fallen apart and West Face, along with other entities (the
    consortium) had come forward with a new, and eventually, successful bid for
    WIND. The consortium and West Face later sold WIND for a very substantial
    profit to Shaw Communications.

[2]

In this lawsuit, Catalyst alleged that West Face effectively stole the
    WIND deal from Catalyst by improperly using confidential information West Face
    obtained about Catalysts strategies in respect of its negotiations for the
    purchase of WIND. According to Catalysts claim, the confidential information
    came from the respondent, Brandon Moyse (Mr. Moyse). He had worked for
    Catalyst as an analyst for about two years until May 2014 when he quit Catalyst
    to go to work for West Face.

[3]

Mr. Moyse had worked on the WIND file while at Catalyst, although the
    extent of his involvement in the file was a matter of dispute in the evidence. He
    also actively pursued employment with West Face while at Catalyst and while
    involved in Catalysts attempts to acquire WIND.

[4]

In the lawsuit, Catalyst alleged that the misuse of confidential
    information by West Face and Mr. Moyse caused damage to Catalyst. Catalyst also
    sought an accounting of the profits made by West Face and the consortium when Shaw
    Communications purchased WIND from the consortium.

[5]

In addition to the claims based on the misuse of confidential
    information, Catalyst sued West Face and Mr. Moyse for spoliation. This claim arose
    out of Mr. Moyses destruction of what Catalyst claimed was relevant evidence
    contained on Mr. Moyses cellphone and his personal computer. Catalyst advanced
    spoliation as a distinct tort claim, alleging damages equal to Catalysts costs
    in pursuing the misuse of confidential information claim. Catalyst also advanced
    spoliation as an evidentiary rule available to assist Catalyst in proving the misuse
    of confidential information by West Face and Mr. Moyse.

[6]

The trial judge dismissed all claims. He awarded costs to West Face on a
    substantial indemnity basis and costs to Mr. Moyse on a partial indemnity
    basis. Catalyst appeals from the dismissal of its claims and seeks leave to
    appeal from the costs order.

[7]

At the end of oral argument, the court dismissed Catalysts appeal from
    the judgment dismissing the action and reserved judgment on the costs-related
    appeals. These reasons address both.

II

[8]

To succeed on the misuse of confidential information claim, Catalyst had
    to prove that:

·

Mr. Moyse gave confidential information concerning Catalysts bid
    to purchase WIND to West Face;

·

West Face used that confidential information when pursuing its bid
    for WIND; and

·

The misuse of that confidential information caused detriment to
    Catalyst.

[9]

Catalyst did not have direct evidence to support its allegations. It
    relied on a body of circumstantial evidence and primarily on the testimony of
    its partners, Newton Glassman, Gabriel De Alba, and James Riley.

[10]

On
    the first issue, whether Mr. Moyse had provided confidential information about
    Catalysts strategies in respect of the acquisition of WIND to West Face,
    Catalyst relied heavily on inferences it claimed should be drawn from Mr. Moyses
    conduct while he was pursuing employment with West Face, immediately after he
    left Catalyst to join West Face, and after this litigation was commenced. That evidence
    included the following:

·

Mr. Moyse deliberately provided Catalysts confidential information
    to West Face when he was trying to get a job with West Face. This information did
    not relate to WIND.

·

Mr. Moyse erased emails that showed he provided that confidential
    information to West Face;

·

Mr. Moyse erased all of the contents of the BlackBerry Catalyst
    had provided to him for work purposes before he returned it to Catalyst after
    he quit;

·

Mr. Moyse made inaccurate and potentially misleading statements
    in affidavits filed on preliminary motions in this litigation;

·

Mr. Moyse deleted his internet browsing history from his personal
    computer and installed programs to scrub the computer registry where deletions
    could otherwise be detected, in the face of a court order requiring that he
    turn his computer over to his lawyer so that the computer could be forensically
    examined for the purposes of this litigation.

[11]

Catalyst
    claimed that Mr. Moyses conduct was consistent only with him having provided
    confidential information about Catalysts proposed acquisition of WIND to West
    Face.

[12]

Mr.
    Moyse gave various innocent explanations for his conduct. West Face also led
    evidence that when Mr. Moyse was hired by West Face, extensive measures were
    taken to ensure that Mr. Moyse had no knowledge of, or involvement in, West
    Faces ongoing negotiations for the purchase of WIND shares. The witnesses
    testified that there were no breaches of this confidentiality wall during the
    few weeks that Mr. Moyse was actually present in the West Face offices.

[13]

The
    respondents also introduced a body of evidence, which they claimed demonstrated
    that no confidential information from Catalyst had been used in the ultimately
    successful bid for WIND. The respondents argued that the approach taken by West
    Face and its consortium to the acquisition of WIND, particularly with respect
    to the need to obtain certain concessions from the government, was
    fundamentally different than the approach taken by Catalyst. Consequently, West
    Face had no use for any information pertaining to Catalysts strategies.

[14]

The
    respondents also defended on the basis that the appellant had not proved any
    damages. The respondents claimed that Catalysts bid to acquire WIND in August
    2014 failed, not because of any competing bid made by West Face and the
    consortium, but because Catalyst chose to terminate negotiations with the
    vendor of the WIND shares after the vendor demanded a significant break fee very
    late in its negotiations with Catalyst. The respondents contended at trial that
    the evidence showed that Catalyst chose to end the negotiations rather than
    agree to the break fee demanded by the vendor. On this argument, which did not
    depend on the trial judge accepting the testimony of Mr. Moyse, or the West
    Face witnesses, Catalyst suffered no damages or detriment, even if Mr. Moyse
    had given confidential information to West Face and West Face had attempted to
    use that information in its negotiations with the vendor of the WIND shares.

[15]

The
    trial judge gave lengthy and detailed reasons for judgment. He found against
    Catalyst on almost every contested factual issue. Specifically, he found
    (paras. 126-30) that the appellant chose to terminate its negotiations with the
    vendor of the WIND shares when the vendor demanded a substantial break fee.

[16]

In
    his reasons, the trial judge made strong credibility findings against the
    appellants primary witnesses, particularly Mr. Glassman, and equally strong
    credibility findings in favour of the respondents witnesses, including Mr.
    Moyse. The trial judge accepted the explanations offered by Mr. Moyse for his
    conduct outlined above, at para. 10. The trial judge found, as a fact, that Mr.
    Moyse had not provided any confidential information to West Face in relation to
    the appellants negotiations for the purchase of the WIND shares.

III

[17]

Catalyst
    advanced essentially three arguments on appeal. The first asserts alleged
    errors in the trial judges fact-finding process, the second alleges procedural
    unfairness, and the third relates to the trial judges treatment of the
    spoliation arguments.

A.

the alleged fact-finding errors

[18]

The
    appellant submits that the trial judges factual findings cannot stand, first,
    because they are the product of an unfair and uneven scrutiny by the trial
    judge of the competing versions of the relevant events and, second, because
    they are tainted by several material misapprehensions of the evidence.

[19]

Counsel
    for the appellant candidly acknowledge that they face an uphill climb in their
    assault on the fact-finding at trial. This was a hard-fought trial. The result
    was almost entirely fact-driven. The trial judges findings of fact turned on
    his assessment of the credibility of the key witnesses, the reliability of
    their evidence, and the inferences to be drawn from certain primary findings of
    fact. All of those tasks engage a myriad of considerations by the trial judge.
    His determinations are owed strong deference on appeal. The appellant must
    overcome that deference in the face of reasons by the trial judge that display a
    strong command of the evidentiary record and a full understanding of the issues
    and positions of the parties.

(i)

The Alleged Uneven Scrutiny of the Evidence

[20]

In
    support of the uneven scrutiny argument, counsel submits that the credibility
    of the Catalyst witnesses was subject to a hypercritical microscopic examination
    by the trial judge. Any misstep or inconsistency in their testimony, no matter
    how apparently minor, became, for the trial judge, a reason to reject the
    evidence of those witnesses. In contrast, argues counsel for the appellant, the
    trial judge forgave or ignored similar, and much more serious, defects in the
    evidence of witnesses for the respondents.

[21]

To
    demonstrate the unevenness of the trial judges consideration of the evidence,
    counsel compared the trial judges treatment of Mr. Moyses testimony with that
    afforded Mr. Glassmans evidence. The appellant argues that the trial judge excused
    the litany of serious misconduct by Mr. Moyse, including a deliberate breach of
    a court order, as mere mistakes or errors explainable by Mr. Moyses youth
    or his fatigue. Counsel contrasts the trial judges benign treatment of Mr.
    Moyses evidence with his aggressive rejection of Mr. Glassmans evidence on what
    counsel argues are much weaker and more subjective grounds.

[22]

The
    appellant submits that the trial judge totally rejected Mr. Glassmans evidence
    because on occasion he slipped into the role of advocate when testifying and overstated
    certain matters. Counsel submits that even if this characterization is
    accurate, Mr. Glassmans transgressions pale beside the egregious misconduct of
    Mr. Moyse. Counsel submits that the trial judges complete acceptance of Mr.
    Moyses evidence and his total rejection of Mr. Glassmans evidence can be
    explained only by the application of very different levels of scrutiny to their
    testimony.

[23]

Counsel
    devoted much of their oral argument to their uneven scrutiny submission. They
    referred to various examples from the trial judges reasons, which they claimed
    demonstrated his uneven scrutiny of the evidence.

[24]

Counsels
    submissions make a case for different credibility and reliability assessments
    than those made by the trial judge. Unfortunately for the appellant, that is
    not enough to warrant appellate intervention. It is not for this court to
    consider what alternative findings may have been reasonably available on the trial
    record.

[25]

The
    trial judge approached the evidence of the respondents witnesses no differently
    than he did the evidence of the appellants witnesses. The trial judges
    reasons must be considered in their entirety. Mr. Moyses evidence that he did
    not provide confidential information concerning the WIND negotiations to West
    Face did not stand alone. The evidence found considerable, largely
    uncontradicted support in the testimony of the West Face witnesses. It also gained
    some inferential support in the trial judges findings as they related to the West
    Face strategy in respect of the WIND negotiations, and the ultimate reason for
    the breakdown of the negotiations between the appellant and the vendor of the
    WIND shares.

[26]

The
    trial judge was alive to the details of the evidence said to demonstrate Mr.
    Moyses dishonesty and the unreliability of his evidence. He appreciated the appellants
    argument and the need to carefully and critically examine Mr. Moyses evidence.
    The trial judge examined the evidence at length, particularly as it related to
    the allegation that Mr. Moyse had deliberately deleted material from his
    personal computer and installed programming to hide that deletion and prevent
    any recovery of the material. In the end, the trial judge accepted Mr. Moyses
    explanations for what he had done, and concluded that it could not be
    established that Mr. Moyse had actually used the programs he had installed on
    the computer to hide the deletions.

[27]

The
    trial judge approached Mr. Moyses evidence by examining the substance of that
    evidence in the context of the entirety of the evidence. He also considered, as
    a trial judge is entitled to do, his impressions of Mr. Moyse as he testified.
    The trial judge took the same approach to Mr. Glassman and other witnesses for
    the appellant. As often occurs, the same approach to the evidence of different
    witnesses yielded very different credibility and reliability assessments. Those
    different assessments are not indicative of any flawed fact-finding process,
    but instead reflect the essential witness-specific nature of credibility and
    reliability determinations.

[28]

We
    do not propose to examine all of the passages from the trial judges reasons
    relied on by the appellant to demonstrate the asserted different levels of
    scrutiny of the evidence. Each argument fails for a variety of reasons.

[29]

For
    example, the appellant argues that the trial judge used Mr. Glassmans
    repetition of parts of his evidence as a reason for finding that Mr. Glassman was
    not credible, but did not give the same effect to the repetition of evidence by
    witnesses for the respondents. This submission is not supported by the reasons.
    The trial judge referred to repetition of parts of the evidence as a by-product
    of the manner in which the trial was conducted. We do not read his reasons as
    using the repetition of evidence as a basis for disbelieving Mr. Glassman or
    otherwise discounting his evidence.

[30]

The
    appellant also argues that the trial judge treated inconsistencies or
    overstatements in the evidence of the appellants witnesses much more harshly
    than he did similar deficiencies in the respondents witnesses. The appellant
    submits that the trial judge did the same thing when he faulted Mr. Glassman
    for not making obvious concessions, but made no comment when the same
    reluctance was evident in the testimony of witnesses for the respondents.

[31]

The
    evaluation of the impact on credibility and reliability of specific
    inconsistencies and similar flaws in a witnesss testimony lies at the very
    core of the trial judges function. His conclusion that a certain inconsistency
    negatively impacted on the credibility of one witness, while a different
    inconsistency did not have the same negative impact on the credibility of a
    different witness testifying about an entirely different topic, does not, on
    its own, establish that the trial judge applied different levels of scrutiny to
    the evidence of those witnesses. Instead, it demonstrates that credibility and
    reliability assessments are fact and witness-specific.

[32]

In
    support of the unequal scrutiny argument, the appellant also submitted that the
    trial judge proceeded from the assumption that the West Face witnesses were
    credible, while the appellant had to demonstrate the credibility of its
    witnesses. In support of this argument, counsel relies on observations made by the
    trial judge in his costs reasons.

[33]

Setting
    aside whether a judges comments in his costs reasons can assist in
    interpreting his reasons for judgment, the trial judges comments do not
    support the appellants submission. In his reasons for costs, the trial judge
    observed that the appellant could not have succeeded at trial without
    establishing that the West Face witnesses were lying when they claimed they had
    not received any confidential information from Mr. Moyse. This observation was
    correct, having regard to the nature of the claim advanced by the appellant,
    the respective positions of the parties, and the burden of proof on the
    appellant.

(ii)

The Alleged Misapprehensions of the Evidence

[34]

The
    appellant alleged three material misapprehensions of evidence in the body of
    its factum and listed several others in an appendix to the factum. We see no
    misapprehension of any material facts by the trial judge, and do not propose to
    review the appellants claims one-by-one.

[35]

Some
    of the appellants allegations of material misapprehensions of the evidence
    fail because the trial judge did not make the factual finding said to constitute
    the material misapprehension. For example, the appellant argues that the trial
    judge wrongly held that Mr. Moyse did not have any confidential information
    about the WIND negotiations when he left the employment of Catalyst. The trial
    judge did not make any such finding. He did find that Mr. Moyse was not aware
    of the negotiating strategy of Catalyst with the government of Canada and the
    vendor of the WIND shares (para. 48). That finding was open on the evidence of
    Mr. Moyse.

[36]

Other
    submissions made by the appellant alleging material misapprehensions of the
    evidence fail because, even if valid, they relate to factual issues that were
    relatively insignificant and not material to the outcome of the trial. For
    example, the appellant argues that the trial judge misapprehended the evidence pertaining
    to West Faces need for an analyst when it hired Mr. Moyse. Even if it could be
    said that the trial judge went beyond the evidence in describing the extent to
    which West Face needed an analyst, that error could not possibly have impacted
    on his overall assessment of the evidence, or the ultimate findings of fact he relied
    on in dismissing the claim.

[37]

Most
    of the appellants arguments, however, fail because they do not reveal any
    misapprehension of the evidence, but instead reveal that the trial judge
    preferred the evidence of the respondents witnesses and the inferences that
    flowed from that evidence over the competing evidence and inferences relied on
    by the appellant. For example, the trial judge found that West Face and others
    in the consortium did not have actual knowledge of the Catalyst bid for the
    shares of WIND in August 2014. That finding is supported by the respondents witnesses
    who testified that they deduced that Catalyst was a bidder in light of market
    chatter, comments in the media, and a statement made by counsel for the
    appellant to counsel for West Face when Mr. Moyse joined West Face.  This
    evidence provided ample grounds for the trial judges factual finding that West
    Face and the consortium had no actual knowledge of the bid.

[38]

The
    appellants submissions go no further than to suggest that the evidence could
    also have justified the further inference that West Face was aware of the
    actual bid. The trial judge did not make that inference, no doubt because he
    accepted the evidence of the West Face witnesses that West Face did not have
    knowledge of the actual bid. The trial judges preference for the direct
    evidence of the West Face witnesses over the inference urged by the appellant
    is a function of the trial judges fact-finding responsibilities and does not
    reflect any misapprehension of the evidentiary record.

B.

the procedural unfairness argument

[39]

The
    appellant argues that the trial judge made a series of factual findings against
    the appellant in respect of the dealings between the vendor of the WIND shares
    and West Face and the consortium in August 2014. The appellant argues that
    these findings were made despite the trial judge having refused to allow the
    appellant to amend its claim to allege that West Face had induced the vendor of
    the WIND shares to breach its agreement with the appellant in the course of those
    August dealings. The appellant contends that the trial judges findings were beyond
    the scope of the claim as framed in the pleadings before him and were based on
    an inadequate evidentiary record.

[40]

We
    do not accept this submission. The appellant did not move in this proceeding to
    amend its claim to include an allegation that West Face induced the vendor of
    the WIND shares to breach its contract with the appellant. The appellant did
    unsuccessfully seek to make that amendment in a related proceeding. That
    refusal had no impact on the conduct of this trial.

[41]

More
    to the point, evidence of the dealings between West Face and the consortium on
    one side and the vendor of the WIND shares on the other side in August 2014 was
    germane to the appellants claim and West Faces defence that it pursued its
    own strategies in seeking to purchase the WIND shares, which were very
    different from those employed by the appellant. That strategy was reflected, in
    part, in the unsolicited proposal to purchase the WIND shares made by West Face
    and the consortium in early August 2014.

[42]

The
    trial judge heard a great deal of evidence about the dealings between the
    vendor of the WIND shares and West Face and the consortium, particularly in
    August 2014. The appellant did not object to any of this evidence and, indeed,
    elicited most of it. In their closing arguments at trial, counsel for the
    appellant and the respondents urged the trial judge to make certain findings in
    respect of the dealings between West Face, the consortium and the vendor of the
    WIND shares. The trial judges findings reflect those arguments and a
    preference for the position put forward by the respondents. We see no
    unfairness to the appellant in the manner in which these issues were litigated
    at the trial. The trial judges findings of fact in respect of these issues are
    supported by the evidence.

C.

the spoliation argument

[43]

The
    spoliation submission began as an argument that the trial judge had failed to
    properly identify the elements of the tort of spoliation. In oral argument,
    counsel abandoned any reliance on the tort of spoliation.
[1]

[44]

Counsel
    argued that the trial judge erred in holding that an adverse evidentiary
    inference could be drawn against the respondents as a result of Mr. Moyses
    destruction of relevant evidence only if the appellant established that Mr.
    Moyse and/or West Face destroyed that evidence for the specific purpose of
    affecting the outcome of the litigation. Counsel submitted that the adverse
    inference was appropriately drawn if relevant evidence was destroyed in the
    face of pending or reasonably foreseeable litigation.

[45]

The
    appellants argument faces an insurmountable factual hurdle. Any inference that
    may be drawn against the respondents can arise only after a finding that Mr.
    Moyse destroyed relevant evidence. The trial judge found as a fact that Mr.
    Moyse did not destroy relevant evidence (paras. 147, 165). The appellant has
    not established any basis upon which this court can interfere with that factual
    finding. That finding puts an end to any argument that Mr. Moyses deletion of
    data from his computer and cellphone supports an adverse inference against Mr.
    Moyse or West Face.

[46]

As
    this argument runs aground on the trial judges factual finding, we need not
    consider the merits of the substance of the argument. We should not be taken as
    agreeing that the appropriate evidentiary approach to evidence that a party to
    a proceeding destroyed relevant evidence should be functionally different from
    the approach to be taken to other kinds of circumstantial evidence.

D.

the costs appeal

[47]

The
    appellant seeks leave to appeal the costs order. The appellant recognizes that
    this court grants leave to appeal from costs orders only sparingly. It submits,
    however, that the orders made in this case reveal errors in principle that
    warrant leave and intervention by this court.

[48]

The
    trial judge awarded costs to West Face on a substantial indemnity basis because
    the appellant had made serious and unfounded allegations impugning the honesty
    and integrity of West Face and its senior executives. He concluded that the
    lawsuit was precipitated primarily by Mr. Glassmans frustration over losing
    out on the acquisition of the WIND shares. The trial judge said, at para. 10:

He [Mr. Glassman] set out to prove his belief that the West
    Face witnesses were lying and that West Face had obtained confidential Catalyst
    information from Mr. Moyse that they used to defeat Catalysts bid to acquire
    WIND. He was certainly playing hardball, attacking the reputation and honesty
    of West Face. However, in spite of the best efforts of Catalysts very able and
    skilled lawyers, he utterly failed.

[49]

The
    appellant submits that the trial judge in effect awarded costs on a substantial
    indemnity basis because the appellant failed to prove its case at trial. The
    appellant argues that substantial indemnity costs are the exception and not the
    rule. To base an award of substantial indemnity costs on a failure to prove
    ones case is to ignore the exceptional nature of an award of costs on a
    substantial indemnity basis.

[50]

We
    are satisfied that the trial judge awarded costs on a substantial indemnity
    basis, not because the appellant failed to prove its case, but rather because
    the appellant chose to make very serious allegations against West Face,
    maintain those allegations in the face of substantial evidence refuting the
    allegations, and in the end utterly failed to substantiate any of the claims.

[51]

Unfounded
    allegations like those made by the appellant in this case can warrant the
    exercise of discretion in favour of costs on a substantial indemnity basis. We
    see no error in principle in the trial judges decision to award costs on a
    substantial indemnity basis to West Face. We would not grant leave to appeal
    the order as it relates to West Face.

[52]

The
    trial judge found that the appellant had made an unwarranted attack on the
    reputation and integrity of Mr. Moyse. He went on, however, to indicate, at
    para. 18:

However, the steps that Mr. Moyse took that he has readily
    acknowledged were mistakes, albeit with no intention to destroy any relevant
    evidence, must be considered in deciding what level of costs to be awarded to
    Mr. Moyse. In my view, it is a reason not to award costs on a substantial
    indemnity basis, and I award costs only on a partial indemnity basis.

[53]

The
    characterization of some of Mr. Moyses conduct as mistakes is charitable.
    This is particularly true in respect of his conduct when ordered by the court
    to turn his personal computer over to his lawyer so that it could be
    forensically examined. His decision to delete material from the computer
    without speaking to his lawyer and before turning the computer over to his
    lawyer was a serious breach of the court order, even given that he did not
    delete information relevant to the allegations.

[54]

The
    fact remains, however, that the trial judge recognized that Mr. Moyses conduct
    should be taken into account in assessing the appropriate costs order. He
    determined in the exercise of his discretion that it should reduce the order
    from one of costs of substantial indemnity to one of costs on a partial
    indemnity basis. Even if other judges might have gone further, the trial judge
    made no error in the exercise of his discretion in considering the impact of
    Mr. Moyses conduct on the costs award.

[55]

We
    would not grant leave to appeal from the order awarding costs to Mr. Moyse on a
    partial indemnity basis.

E.

conclusion

[56]

The
    appeal is dismissed. The application for leave to appeal the costs order is dismissed.

[57]

Counsel
    should exchange and file submissions on the costs of the appeal within 30 days
    of the release of these reasons. The submissions should not exceed 7 pages.

Doherty J.A.

J. MacFarland J.A.

D.M. Paciocco J.A.

[1]

The existence of an independent tort of spoliation is an open
    question in this court:
Robb Estate v. Canadian Red Cross Society
(2001), 152 O.A.C. 60, at 203-208.