COURT OF APPEAL FOR ONTARIO

CITATION: Healthy Body Services Inc. v. 1261679 Ontario Ltd.
    (Raytek Communications), 2015 ONCA 516

DATE: 20150709

DOCKET: C57889

Juriansz, MacFarland and Lauwers JJ.A.

BETWEEN

Healthy Body Services Inc.

Plaintiff (Appellant)

and

1261679
    Ontario Ltd., formerly c.o.b. as

Raytek
    Communications
, Utpal Bhogilal Patel,

Milton L. Ramsawak
and Jignashaben Utpal Patel

Defendants (
Respondents
)

J. Thomas Curry and Brian Kolenda, for the appellant

Simon Schneiderman, for the respondents

Heard: April 21, 2015

On appeal from the judgment of Justice Sandra Chapnik of
    the Superior Court of Justice, dated October 11, 2013.

ENDORSEMENT

[1]

Healthy Body Services Inc. (HBS) appeals from
    the dismissal of its action in which it sought to recover monies of which it
    was defrauded. It sought to recover those monies from the fraudster, Patel, as
    well as from an earlier victim of Patel, 1261679 Ontario Ltd. (Raytek), and from
    Mr. Ramsawak, a Raytek shareholder/director. Patel pleaded guilty to stealing
    CAD$670,000 from Raytek. Patel has been deported, and Raytek is no longer in
    operation. This appeal concerns HBS claim against Mr. Ramsawak.

[2]

Pursuant to an arrangement made on his
    sentencing, Patel made restitutionary payments of CAD$390,000 to Raytek through
    the Crowns office. Some of those payments benefited Mr. Ramsawak. In its
    action, HBS claimed Patel made the restitutionary payments with funds he stole
    from it. At trial, HBS limited its claim to CAD$282,000 of the restitutionary
    payments.

[3]

The trial judge found that the money that Patel
    stole from HBS could not be traced to the money received by Raytek. The trial
    judge did not stop there. Instead, she continued her analysis on the assumption
    that the HBS funds could be traced to Raytek. In that continued analysis, she
    found that Raytek and Mr. Ramsawak were not in knowing receipt of the funds,
    and that Mr. Ramsawak was not unjustly enriched because there was a juristic
    reason for any enrichment.

[4]

On appeal, the appellant limits its claim to two
    payments of CAD$150,000 and CAD$40,000.

Did the trial judge err by excluding Patel statements?

[5]

Patel was not available at trial because he had
    been deported. HBS submits the trial judge erred by excluding Patels
    statements that he used HBSs money to make the restitutionary payments to
    Raytek. In particular, HBS points to the statement Patel made when he pleaded
    guilty to an obstruction of justice charge. HBS submits that the trial judge,
    in her analysis, relied on
R. v. Starr
, 2000 SCC 40, [2000] 2
    S.C.R. 144, and failed to apply the principles set out in
R. v.
    Khelawon,
2006 SCC 57, [2006] 2 S.C.R. 787.

[6]

The trial judge considered whether Patels
    statements were made against interest and carefully reviewed all the
    circumstances in which they were made. She noted Patels abundant dishonesty;
    that he had made the contradictory statements about the source of the
    restitutionary payments; and that there was evidence the CAD$100,000 he said
    was paid out of funds from HBS actually came from a different source.

[7]

We are not persuaded there is any basis to
    interfere with the trial judges decision to admit only the fact of Patels
    guilty pleas and nothing more.

The CAD$150,000 payment

[8]

HBS claims that a restitutionary payment in the amount of CAD$150,000,
    deposited into Rayteks bank account on April 24, 2008, came out of its funds.

[9]

HBS led evidence that Patel deposited a forged cheque drawn on its
    account in the amount of USD$175,198.13 into his ICICI account on February 25,
    2008; that on April 10, 2008, Patel made a withdrawal of USD$165,000 from his
    ICICI account; and that on April 10, 2008, Patel provided the Crowns office
    with an ICICI bank draft in the amount of CAD$150,000 as a restitutionary
    payment. The Crown provided that bank draft to Raytek on April 24, 2008. On May
    5, 2008, CAD$150,000 was paid out of the Raytek bank account to reduce Mr.
    Ramsawaks personal line of credit held jointly with his wife.

[10]

HBS
    called an expert who testified that on these facts, he was satisfied that the
    CAD$150,000 paid to Raytek through the Crowns office was funded by the forged
    HBS check for US$175,198.13.

[11]

The
    trial judge did not accept the experts opinion and found HBS had failed to
    establish on a balance of probabilities that the CAD$150,000 bank draft came
    from its funds. The trial judge explained that although there was a symmetry
    of date and amounts, there is no clear evidence as to the actual funds used
    for the bank drafts as there were two pools of funds available to Patel at the
    relevant time.

[12]

HBS
    submits that the trial judge made an overriding and palpable error in failing
    to infer that the restitutionary payment of CAD$150,000 had come from funds
    stolen by HBS. It seems to me HBS invites us to follow the approach put forward
    by Bastarache J. in dissent in
Housen v. Nikolaisen
, 2002 SCC 33,

[2002]
    2 S.C.R. 235. At para. 103 he said:

In reviewing the making of an inference, the
    appeal court will verify whether it can reasonably be supported by the findings
    of fact that the trial judge reached and whether the judge proceeded on proper
    legal principles ... While the standard of review is identical for both
    findings of fact and inferences of fact, it is nonetheless important to draw an
    analytical distinction between the two. If the reviewing court were to review
    only for errors of fact, then the decision of the trial judge would necessarily
    be upheld in every case where evidence existed to support his or her factual
    findings. In my view, this Court is entitled to conclude that inferences made
    by the trial judge were clearly wrong, just as it is entitled to reach this
    conclusion in respect to findings of fact.

[13]

The
    majority found two problems with the dissents approach. It said at paras.
    21-22:

First, in our view, the standard of review is not to verify
    that the inference can be
reasonably supported
by
    the findings of fact of the trial judge, but whether the trial judge made a
palpable and overriding
error in coming to a factual
    conclusion based on accepted facts, which implies a stricter standard.

Second, with respect, we find that by drawing an analytical
    distinction between factual findings and factual inferences, the above passage
    may lead appellate courts to involve themselves in an unjustified reweighing of
    the evidence. Although we agree that it is open to an appellate court to find
    that an inference of fact made by the trial judge is clearly wrong,
we
    would add the caution that where evidence exists to support this inference, an
    appellate court will be hard pressed to find a palpable and overriding error
.
    As stated above, trial courts are in an advantageous position when it comes to
    assessing and weighing vast quantities of evidence. In making a factual
    inference, the trial judge must sift through the relevant facts, decide on
    their weight, and draw a factual conclusion.
Thus, where evidence exists
    which supports this conclusion, interference with this conclusion entails
    interference with the weight assigned by the trial judge to the pieces of
    evidence
. [Underlining emphasis in original; italicized emphasis added.]

[14]

In
H.L. v. Canada,
2005 SCC 25, [2005] 1 S.C.R. 401, Fish J., writing for the
    majority, explained at para. 74:

Not infrequently,
different
inferences may reasonably be drawn from facts found by the trial judge to have
    been directly proven. Appellate scrutiny determines whether inferences drawn by
    the judge are "reasonably supported by the evidence". If they are,
    the reviewing court cannot
reweigh the evidence
by
    substituting, for the reasonable inference preferred by the trial judge, an
    equally - or even more - persuasive inference of its own. [Emphasis in
    original.]

[15]

Here,
    given the exclusion of Patels admission, there was no direct evidence that
    HBSs money had been used to make the restitutionary payments to Raytek.
    Indisputably, there was evidence before the trial judge that Patel had a pool
    of money available to him other than the money he stole from HBS. Only
    CAD$77,000 of the CAD$670,000 he had stolen from Raytek had been recovered, and
    he had made a restitutionary payment of CAD$100,000 that had not come out of
    HBS funds.

[16]

There
    was no evidence connecting the ICICI bank paid in restitution and Patels ICICI
    account, into which he deposited the forged HBS cheque for USD$175,198.13. The
    bank statement of his account shows a withdrawal for USD$165,000, but does not
    show what happened to it. There is no evidence of how Patel paid for the bank
    draft. The amounts of the withdrawal and the bank draft do not match, though
    the withdrawal is sufficient to cover the bank draft. Both transactions, the
    withdrawal and the purchase of the bank draft, took place on the same day, but
    the evidence does not indicate which transaction took place first. HBSs expert
    admitted he did not know that the CAD$150,000 did not come from the CAD$670,000
    stolen from Raytek.

[17]

Different
    inferences may reasonably be drawn from these facts. HBS invites us to reweigh
    the evidence. For example, HBS submitted that the trial judge placed too much
    weight on its experts concession that he did not know where the CAD$150,000
    had come from and on his comment that it could have come from the money Patel
    had stolen from Raytek. It was for the trial judge to weigh the experts testimony
    in the light of all the evidence. In our view, the trial judge could reasonably
    decline to make the inference the CAD$150,000 came from HBSs funds.

[18]

The
    trial judges finding that HBS had not established the CAD$150,000 could be
    traced back to its funds completely disposes of HBSs claim for the
    CAD$150,000. It is unnecessary to consider the other arguments advanced.

The CAD$40,000 payment

[19]

Patel
    deposited CAD$48,735.40 he stole from HBS into a TD bank account on September
    11, 2008. He provided the Crown with a TD bank draft dated September 16, 2008
    in the amount of CAD$40,000 as a restitutionary payment. The banking records
    indicate that the cost of the bank draft was debited to Patels TD account. On
    October 6, 2008, Mr. Ramsawak was advised that the restitution cheques had been
    fraudulently obtained and that there would be no more restitutionary funds
    coming to him. On October 7, 2008, Raytek made a payment of CAD$40,000 to the
    CRA towards its outstanding tax liability created by Patels earlier fraud.

[20]

In
    the case of the CAD$40,000, the direct evidence shows that stolen HBS funds can
    be traced into Patels bank account where it was mixed with other funds. We
    accept HBSs argument that trust funds may be traced into mixed accounts.
    Nevertheless, we still find it unnecessary to address HBSs arguments about
    knowing receipt and about unjust enrichment in relation to the CAD$40,000.
    Assuming the $40,000 are traced into Rayteks account, there is no basis for
    finding liability on the part of Mr. Ramsawak personally. At the time Raytek
    paid out those funds towards its own tax indebtedness, Mr. Ramsawak was not
    liable for that indebtedness.

[21]

Raytek
    is no longer operating, and HBS did not seek judgment only as against Raytek.

Conclusion

[22]

The
    appeal is dismissed with Mr. Ramsawaks costs fixed in the amount of $25,000 as
    agreed by counsel.

R.G.
    Juriansz J.A.

J.
    MacFarland J.A.

Lauwers J.A. (Dissenting):

[23]

I
    have read the reasons of my colleague and dissent for the reasons set out
    below.

[24]

The
    fraudster, Patel, stole $670,000 from his employer, Raytek, pleaded guilty to
    the crime and was sentenced. Under a scheme administered by the Crown, Patels
    sentence would be reduced if he repaid the money he stole. Patel then stole
    $490,000 from his next employer, HBS, some of which he allegedly paid as
    restitution to Raytek. On this appeal, HBS pursues $190,000 of this amount.

[25]

I
    would grant judgment to the appellant in the amount of $190,000. In my view,
    the trial judge made reviewable errors in dismissing HBSs claim.

A.

the $40,000 payment

[26]

It
    is common ground that on October 6, 2008, Mr. Ramsawak, the directing mind of
    Raytek, was advised that the restitutionary funds received from Patel had been
    fraudulently obtained and that no more funds would be forthcoming. The very
    next day, Mr. Ramsawak caused Raytek to pay $40,000 to the CRA towards its
    outstanding tax liability.

(1)

Tracing

[27]

I
    agree with my colleague that the direct evidence shows that stolen HBS funds
    can be traced into Patels bank account where [they were] mixed with other
    funds. I also agree that it is appropriate to accept HBSs argument that trust
    funds may be traced into mixed accounts. My colleagues statement that it is
    permissible to trace funds into a mixed account corrects the trial judges
    legal error, at para. 99, that this was not possible.

[28]

The
    trial judge relied on
Citadel General Assurance Co. v. Laurence Bank Canada
[1997] 3 S.C.R. 805, at para 58, but the Supreme Court made it clear in
BMP
    Global Distribution Inc. v. Bank of Nova Scotia
, 2009 SCC 15, [2009] 1 SCR
    504, at para. 85, that mixing of funds is not a bar to recovery if it is
    possible to identify the funds, as it is in this case: See Mitchell McInnes,
The
    Canadian Law of Unjust Enrichment and Restitution
(Markham, Ontario: LexisNexis,
    2014), at p. 1376.

[29]

The
    tracing evidence proves that the $40,000 restitutionary payment was stolen from
    HBS and was used by Mr. Ramsawak to pay down Rayteks tax liabilities.

(2)

Knowing Receipt

[30]

A
    consideration of the principles of the knowing receipt cause of action
    exposes a significant gap in the trial judges reasoning, although she stated
    the law correctly at paras. 90-93, citing
Holmes v. Amlez International
    Inc.
[2009] O.J. No. 4513 (S.C.J), at para. 12, and
Citadel General
    Assurance Co. v. Lloyds Bank Canada
,

[1997] 3 S.C.R. 805, at
    paras. 44-49.

[31]

As
    noted by the trial judge, at para. 90, the first element of knowing receipt is
    that strangers to the trust receive or apply trust property for their own use
    and benefit. This is indisputably what happened here with respect to the
    $40,000.

[32]

Since
    that money was obtained by fraud, a constructive trust is imposed on it: Peter
    D. Maddaugh & John D. McCamus,
The Law of Restitution
, looseleaf
    (Toronto: Canada Law Book, last updated 2014), at pp. 7-12  7-13, citing
Goodbody
    v. Bank of Montreal
(1974), 4 O.R. (2d) 147 (H.C.J.) and
Simpsons-Sears
    Ltd. v. Fraser
(1974), 7. O.R. (2d) 61 (H.C.J.).

[33]

Although
    the trial judge assumed the $40,000 constituted trust funds, she found that Mr.
    Ramsawak did not apply them for his own use and benefit. My colleague takes the
    position that Mr. Ramsawak did not benefit from these trust funds because he
    was not liable for Rayteks tax indebtedness at the time he used the trust
    funds to pay it down. I would disagree. Mr. Ramsawak testified that in reducing
    Rayteks indebtedness, he was also reducing his personal exposure. Therefore,
    in my view, both Raytek and Mr. Ramsawak benefitted from the $40,000
    restitutionary payment stolen from HBS. The first element of knowing receipt is
    made out.

[34]

The
    trial judge identified the second element of knowing receipt, at para. 91:
    [T]he defendant must be shown to have had knowledge of facts that would have put
    a reasonable person on notice or inquiry as to the source of the funds. Error
    crept into her consideration of this second element.

[35]

The
    trial judge accurately noted, at para. 124, that Mr. Ramsawak did not have
    constructive knowledge of any facts that would have put a reasonable person on
    notice or inquiry prior to October 6, 2008. But the real problem is raised in
    the immediately following paragraphs, where she noted that on October 6, 2008,
    the Crown Attorney, David Fisher, told Mr. Ramsawaks lawyer, Michael Title,
    that the restitutionary funds received had been obtained by fraud and no more
    funds would be forthcoming. Mr. Title transmitted this information to
    Mr. Ramsawak. The trial judge then asked herself the right questions about
    this evidence, at para. 127:

Was this sufficient information to have put a reasonable person
    on an inquiry? Did the defendants dissipate property in the face of actual
    knowledge, as alleged?

[36]

However,
    the trial judges negative answers to these questions do not withstand scrutiny.
    There are at least two places in her reasons where an unresolved contradiction
    is manifest. First, at para. 67, the trial judge pointed out the timing
    coincidence:

When [Mr. Ramsawak] learned of the second fraud on October 6,
    2008 from Mr. Title, he was also told there would be no more restitutionary
    funds coming to him as expected. Then on October 7, 2008 Raytek made a payment
    to CRA of $40,000.

[37]

The
    trial judge did not reconcile this evidence with an exchange she recorded three
    paragraphs before, at para. 64, and on which she relied. Mr. Ramsawak was
    asked this question and gave this answer:

Question:     Was there any reason to question the source of
    the restitution?

Answer:       No.

With respect, the trial judge was obliged to explain
    how she could accept this evidence in the face of the evidence she noted at
    para. 67. Mr. Ramsawaks answer was clearly unsupportable and unreliable.

[38]

Second,
    the trial judges reluctance to confront the implausibility of
    Mr. Ramsawaks testimony was repeated, at paras. 130-31 of her decision,
    where she noted that Mr. Ramsawaks belief that the $40,000 he paid to CRA
    belonged to Raytek was not challenged in cross-examination. But Mr. Ramsawak
    was challenged, as shown by the testimony she quoted in the immediately
    preceding paragraph 129:

Question:     You just said you had no idea where the monies
    had come from, but you will agree with me, Sir, that you knew by October 6,
    though, that the Crown was alleging at that point, that the monies had come
    from a fraud of my client?

Answer:       Yes

In other words, Mr. Ramsawak plainly admitted knowing
    by October 6, the day before he caused the funds to be paid to CRA, that the
    restitutionary money was the result of a fraud. Despite this evidence, the
    trial judge concluded, at para. 133:

As noted, a recipient of trust funds is not expected to be
    unduly suspicious. In my view, it has not been shown that Ramsawak went ahead
    without further inquiry and circumstances of which an honest and reasonable
    person would have realized that monies taken were probably trust monies and
    were being misapplied.

[39]

With
    respect, this conclusion simply does not follow from the evidence outlined by
    the trial judge. I am compelled to find she made a palpable and overriding
    error. At the moment that Mr. Ramsawak caused Raytek to pay $40,000 to CRA, he
    knew that the funds had been obtained by fraud. They were impressed with a
    constructive trust, a trust that he and Raytek both breached.

[40]

In
    my view, both elements of knowing receipt were made out by the appellant with
    respect to the $40,000 payment, and the funds were correctly traced to Raytek.
    Accordingly, Raytek and Mr. Ramsawak personally should each be liable for
    breach of trust.

(3)

Unjust Enrichment

[41]

If,
    as McInnes suggests, at pp. 296-97, the appellant must also demonstrate that
    Raytek was unjustly enriched under the three-part test set out in
Garland
    v. Consumers' Gas Co
., 2004 SCC 25, [2004] 1 S.C.R. 629, 2004 SCC 25 at para.
    30, that is easily done with respect to the $40,000 sum.

[42]

First,
    Raytek was enriched by that sum, which it expended for its own purposes.
    Second, HBS was correspondingly deprived. Third, once Mr. Ramsawak,
    Rayteks directing mind, was told by Mr. Title that the money was tainted by
    fraud, any juristic reason for Rayteks enrichment instantly vanished. The
    finding of the trial judge, at para 137, that the factors she listed at para.
    136 combined to constitute a valid juristic reason, is simply wrong in law.
    Mr. Ramsawak knew the money belonged to someone else, making him a
    constructive trustee over it: McInnes, at p. 293.

(4)

Change in Position

[43]

At
    para. 138, the trial judge stated, Ramsawak changed his position in good faith
    by applying the restitutionary funds to the financed shortfalls caused by
    Patel's fraud on Raytek. With respect, Mr. Ramsawaks claim to have acted in
    good faith evaporates once he is found to be in knowing receipt, as I believe
    he must have been for the reasons set out above. In any event, McInnes points
    out, at p.1509, that the defence does not apply where the funds are used to defray
    debt:

Liability will not be reduced merely because the defendant has
    used an enrichment to discharge debts that arose regardless of the impugned
    transfer. Since debts must be satisfied in any event, such expenditures do not
    constitute a change of position.

[44]

McInnes
    cites
RBC Direct Investing Inc. v Khan
, 2010 ONSC 3100, [2010] O.J.
    No. 2241, which states, at para. 13, that the party who received the funds by
    mistake cannot expect to be able to profit from their receipt by a reduction in
    a debt it would otherwise have. Put another way, at para. 21:

It stands to reason that if a person is the recipient of funds
    he, she or it know it should not have, but spends it anyway, they cannot then
    rely on a materially-changed circumstance to claim they should not be compelled
    to return the funds.

[45]

In
    my view, for these reasons, neither Raytek nor Mr. Ramsawak can escape their
    obligation, as constructive trustees in knowing receipt, to repay the $40,000
    by which they were unjustly enriched to the appellant.

B.

The $150,000 Payment

[46]

The
    issues with respect to Patels $150,000 payment also involve tracing, knowing
    receipt, unjust enrichment and change of position.

(1)

Tracing

[47]

The
    following facts relevant to tracing are not in dispute:

·

February 25, 2008  Patel deposited a forged cheque drawn on
    HBSs account in the amount of USD $175,198.13 into his ICICI account;

·

No other significant deposits or withdrawals were made from
    Patels ICICI account until April 10, 2008;

·

April 10, 2008  Patel withdrew USD $165,000 from his ICICI
    account;

·

April 10, 2008  Patel provided the Crowns office with an ICICI
    bank draft in the amount of $150,000 as a restitutionary payment to Raytek;

·

April 24, 2008  the Crown provided the ICICI bank draft to
    Raytek;

·

May 5, 2008  Mr. Ramsawak caused Raytek to pay $150,000 to
    reduce the personal line of credit he held jointly with his wife, secured
    against their home;

·

October 6, 2008  Mr. Ramsawak was told that the restitutionary
    funds had been obtained by fraud and no more funds would be forthcoming; and

·

October 29, 2008  Mr. Ramsawak borrowed $309,000 from the
    personal line of credit.

·

October 31, 2008  Mr. Ramsawak paid $309,000 to CRA.

[48]

The
    appellant relied on the evidence of James B. Hoare, a Certified Chartered
    Accountant who was qualified as an expert in forensic accounting. Mr. Hoare
    provided a written report in which he tracked the cash flows carefully. He
    linked them to the accounts in his evidence. Mr. Hoare gave the expert opinion
    that the $150,000 ICICI bank draft delivered by Patel to the Crown came from
    the USD $175,198.13 that Patel had taken from the appellants and deposited into
    his ICICI account. He explained his reasoning in chief and in
    cross-examination.

[49]

The
    trial judge was not satisfied that the appellant had proven the connection through
    Mr. Hoares evidence and the documents. She relied particularly heavily on a
    snippet of Mr. Hoares cross-examination, which she clearly considered
    important, since she quoted it at para. 59, and again at para. 106:

Regarding the $150,000 bank draft that went to Raytek, Mr.
    Hoare opined that it came out of the ICICI account in the sum of $165,000. He
    pointed out that the bank draft and the date of withdrawal were the same; and
    he concluded that the $150,000 bank draft delivered to the Crown on April 10,
    2008 must have come from the $175,000 USD that went into the account on
    February 25, 2008. The following exchange in cross-examination is telling:

Q.      But we do know, do we not, Mr. Hoare, that Mr. Patel
    had stolen other money, right?

A.      From HBS?

Q.      From my client [Raytek], $670,000.

A.      Yes.

Q.      How do you know that the $150,000 didn't come from
    my client's 670,000 that was stolen from him?

A.      I don't know that.

Q.      You don't.

A.      That's correct.

[50]

The
    trial judge also referred, at para. 107, to the evidence of Mr. Fisher, the
    Crown Attorney who had carriage of the criminal fraud proceedings against
    Patel. She stated, The fact that Mr. Fisher understood that Patel had received
    a cheque for $175,000 purportedly from a rich uncle, and had taken $25,000 to
    pay other debts, does not support the conclusion that the plaintiffs money
    funded the restitution. The possible existence of a rich uncle was also
    referred to by the trial judge at paras. 39, 42, 54, and 86.

[51]

The
    trial judge concluded, at para. 108:

As previously noted, a tracing order at common law is only
    available in respect of funds that have not lost their identity by becoming
    part of a mixed fund. In this case, the plaintiff has been unable to identify
    the restitutionary funds paid to Raytek as trust funds taken from the
    plaintiff, on a balance of probabilities. Although there is symmetry of date
    and amounts in some cases, there is no clear evidence as to the actual funds
    used for the bank drafts as there were two pools of funds available to Patel at
    the relevant time.

[52]

There
    are, in my view, palpable and overriding errors in the trial judges reasoning
    process, quite apart from the legal error she made concerning mixed funds,
    which I addressed above. The errors are that the trial judge:

(i)      took
    Mr. Hoares cross-examination evidence out of context;

(ii)      imposed
    a higher standard of proof on the appellant than the      civil standard of the
    balance of probabilities; and

(iii)     took
    into account information that was not evidence.

[53]

I
    address each of these in turn.

(i)

The trial judge took Mr. Hoares cross-examination evidence out of
    context

[54]

The
    uncontradicted evidence is that Patel stole $670,000 from Raytek, but only
    about $70,000 in assets were recovered from Patel. The trial judge relies on
    the notion that Patel has the balance of the money he stole hidden somewhere
    and that it is somehow available to him.

[55]

The
    trial judges focus on the cross-examination snippet excerpted above was
    misplaced. As an expert witness, Mr. Hoare was obliged to testify in an
    impartial way and to answer questions fairly. He did so when he said that he
    did not know for sure if the funds for the $150,000 payment came from a secret
    fund, rather than Patels ICICI account, which he had already identified as the
    likely source of the money. He would have given the same answer to any
    cross-examination question requiring him to identify the source of the funds
    with one hundred per cent certainty, such as How do you know the $150,000 didnt
    come from my clients rich uncle? or How do you know the $150,000 didnt come
    from my clients lottery winnings?

[56]

In
    my view, these are all logically equivalent questions and answers. There is no
    evidence, but only speculation, that a secret fund exists under Patels
    control. The same is true of the putative rich uncle.

[57]

In
    my view, Mr. Hoares answer to the cross-examination question does not
    undermine, in the slightest, the expert tracing evidence that he put forward in
    his report and in his evidence. At no point did the cross-examination undermine
    the substance of his evidence, as I explain below. This snippet was taken out
    of context by the trial judge.

(ii)

The trial judge imposed a higher standard of proof on the appellant than
    the civil standard of the balance of probabilities

[58]

It
    is trite law that in a civil case, the plaintiff is obliged to prove his or her
    case on the balance of probabilities. This burden does not increase in cases
    involving misfeasance or fraud:
F.H. v. McDougall
, 2008 SCC 53, [2008]
    3 S.C.R. 41, at para. 40.

[59]

However,
    the trial judge did not apply this standard to Mr. Hoares evidence. By relying
    so heavily on the cross-examination snippet, she effectively imposed on the
    appellant the requirement of certainty. Mr. Hoare said that he did not know
    that the $150,000 did not come from Patels stolen funds. He could never know
    that without being beside Patel as he was implementing the transactions.

[60]

All
    Mr. Hoare could do is what he did: undertake the expert task of tracing. On the
    balance of probabilities, he demonstrated that the $150,000 came from the ICICI
    bank account, which contained HBS funds stolen by Mr. Patel. As acknowledged by
    the trial judge, there is both symmetry of date and sufficiency of funds
    between Mr. Patels withdrawal of funds and $150,000 restitutionary payment.
    Further, and importantly, the bank draft used to make the $150,000 payment was
    issued by the same bank from which Mr. Patel withdrew $165,000.

[61]

There
    is no suggestion in the evidence or in the argument that Mr. Hoare failed to
    apply the presumptive rules of tracing. See Peter D. Maddaugh & John D. McCamus,
    at pp. 7-21 to 7-27; Bradley Crawford,
The Law of Banking and Payment in
    Canada
,
vol. 2, looseleaf (Canada: Reuters
    Thomson, 2013) at pp. 3-73 - 3-76; Paul McGrath,
Commercial Fraud in
    Civil Practice
, 2d ed. (New York: Oxford University Press, 2014), at pp.
    465-79.

[62]

The
    trial judges requirement of clear evidence in para. 108 relates back to her
    expectation that the expert must know with certainty where the money came
    from. That, however, was not the burden on the appellant.

[63]

The
    trial judges reasoning led my colleague to conclude:

There was no evidence connecting the ICICI bank [draft] paid in
    restitution and Patels ICICI account, into which he deposited the forged HBS
    cheque for USD$175,198.13. The bank statement of his account shows a withdrawal
    for USD$165,000, but does not show what happened to it. There is no evidence of
    how Patel paid for the bank draft. The amounts of the withdrawal and the bank
    draft do not match, though the withdrawal is sufficient to cover the bank
    draft. Both transactions, the withdrawal and the purchase of the bank draft,
    took place on the same day, but the evidence does not indicate which
    transaction took place first. HBSs expert admitted he did not know that the
    CAD$150,000 did not come from the CAD$670,000 stolen from Raytek.

[64]

I
    agree with my colleague that it is always better to have better evidence. The
    tracing evidence about Patels $40,000 payment and its genesis is of better
    quality than the evidence about Patels $150,000 payment, but that does not
    diminish the actual evidence that Mr. Hoare put forward in support of his
    professional opinion that the $150,000 cheque came from HBS funds. The
    substance of that evidence was not shaken on cross-examination, certainly not
    by the snippet the trial judge relied on.

(iii)

The trial judge took into account information that was not evidence

[65]

I
    readily accept, as the case law requires, that the weighing of evidence is the
    province of the trial judge. But, to be weighed in the balance, the information
    must actually be evidence. In my view, the trial judge took bits of information
    and combined them to counterbalance Mr. Hoares evidence, without pausing to
    consider whether they were facts proven on the balance of probabilities that
    were entitled to any weight whatsoever.

[66]

The
    first, and most obvious, related to Patels putative secret fund. The existence
    of this fund and its accessibility to Patel is a matter of speculation. There
    is no evidence that such a fund exists, only a surmise based on the fact that
    so little of the money he stole was actually recovered. This, in my view, is
    not sufficient to clothe the fund with status as actual countervailing
    evidence.

[67]

The
    trial judge appears to rely on the evidence of Mr. Title, counsel for Raytek,
    who was the primary contact with Crown counsel in the disbursement of
    restitutionary funds. She noted, at para. 35, In his view, based on his review
    of seized documents, Patel maintained control of funds stolen from Raytek
    overseas and could reassemble them when needed. She repeated the reference, at
    para 76: Mr. Title believed that wherever Patel lodged Raytek's funds,
    "he was able to assemble them and repay them" as part of the stated
    restitution. With respect, Mr. Titles belief is not evidence. (I observe too
    that Mr. Titles belief serves his clients interest.)

[68]

The
    trial judge then said, evocatively, Indeed, in July 2008 some of the funds
    were "brought" to the TD bank near Patel's home where he had a bank
    draft issued for $50,000. There is no evidence about the source of the funds
    "brought" to the TD bank near Patel's home.

[69]

The
    trial judge took a similar approach to Mr. Fishers evidence in para. 107 of
    the decision, which I repeat for convenience: The fact that Mr. Fisher
    understood that Patel had received a cheque for $175,000 purportedly from a rich
    uncle, and had taken $25,000 to pay other debts does not support the
    conclusion that the plaintiffs money funded the restitution. This is
    logically true, but Mr. Fishers understanding is logically probative of
    nothing, including the opposite conclusion that the appellants money
did
fund the restitution. Mr. Fishers understanding does not undermine Mr.
    Hoares evidence that the likely source of the funds from which the $150,000
    payment was made was Patels ICICI USD account, where he earlier deposited the
    USD $175,000 stolen from the appellant.

[70]

To the
    extent that the trial judge may be understood to have drawn an inference about
    the existence and accessibility of Patels secret fund, in my view, such an
    inference would not be reasonably supported by the actual evidence and thus
    constitutes a reviewable error.

[71]

In
H.L.
    v. Canada (Attorney General)
, 2005 SCC 25, [2005] 1 S.C.R. 401, the
    Supreme Court reconsidered the standard of review applicable to inferences of
    fact. Justice Fish explained, at paras. 73-74:

These passages from the majority reasons in
Housen
should not be taken to have decided that inferences of fact drawn by a trial
    judge are impervious to review though unsupported by the evidence. Nor should
    they be taken to have restricted appellate scrutiny of the judge's inferences
    to an examination of the primary findings upon which they are founded and the
    process of reasoning by which they were reached.

I would explain the matter this way. Not infrequently,
different
inferences may reasonably be drawn from facts
    found by the trial judge to have been directly proven. Appellate scrutiny
    determines whether inferences drawn by the judge are "reasonably supported
    by the evidence". [Emphasis in original.]

[72]

To
    conclude this section of the reasons, in my view, the trial judge improperly
    applied a higher standard of proof than the balance of probabilities to Mr.
    Hoares expert evidence. She diminished its weight by taking a snippet of
    cross-examination entirely out of context. She relied on spurious items of
    information that were not found as facts on the balance of probabilities, but
    were merely speculative in nature.

[73]

I
    would find that the appellant proved on a balance of probabilities, through Mr.
    Hoares quite conventional expert tracing evidence, that the $150,000 paid by
    Patel came from funds stolen from HBS. There was no evidence to the contrary.

[74]

It
    is not in dispute that Mr. Ramsawak used the $150,000 payment from Patel to pay
    down the line of credit held jointly with his wife, and then used his line of
    credit to pay down Rayteks debt to CRA.

[75]

This
    completes the tracing exercise and confirms that the $150,000 Mr. Ramsawak
    paid to CRA was stolen from HBS, and thus impressed with a trust. However, the
    appellants right to restitution further depends on whether the elements of
    knowing receipt and unjust enrichment can be established. For the reasons set
    out below, I find that both claims are proved on the fact of this case.

(2)

Knowing Receipt

[76]

To
    review the pertinent facts briefly, Mr. Ramsawak received Patels bank draft
    for $150,000 through the Crown on April 24, 2008. On May 5, 2008, he caused
    Raytek to pay $150,000 to reduce the personal line of credit he held jointly
    with his wife, which was secured against their home. On October 6, 2008, Mr.
    Ramsawak was told that the restitutionary funds had been obtained by fraud. On
    October 29, 2008, Mr. Ramsawak borrowed $309,000 from the personal line of
    credit. On October 31, 2008 he paid $309,000 to CRA.

[77]

As the
    trial judge accurately observed, at para 92, citing
Holmes
, at para.
    12:

The requisite level of knowledge need not arise prior to or at
    the time of the receipt of the monies. Even if received innocently, once the
    recipient learns of the fraud or breach of trust, whether actually or
    constructively, he is liable to return any of the property he then holds.

[78]

When Mr. Ramsawak
    got the money in April, and used it to pay down his personal debt in May, he
    did not know that the money was tainted. But when he made the payments to CRA
    in October, he was fully aware that it was tainted. Therefore, the knowledge
    requirement of knowing receipt is clearly made out.

[79]

In my
    view, it does not matter that the $150,000 was first used to pay down a line of
    credit taken jointly by Mr. and Mrs. Ramsawak, which was secured by the family
    home, as the trial judge suggested at para. 114. The trial judge refers to this
    fact as the basis for concluding that only a portion of the monies ($150,000)
    used to pay down their joint debt would enure to the benefit of Mr. Ramsawak.

[80]

However,
    the reduction of the joint line of credit is not the benefit at issue in this
    knowing receipt analysis, as Mr. Ramsawak had no reason to question to source
    of the $150,000 when the payment to the line of credit was made. Rather, it is
    the payment of Rayteks CRA debt, at a time when Mr. Ramsawak was aware that
    the $150,000 was obtained by fraud, that is relevant. As explained above with
    respect to the $40,000 payment, a reduction in Rayteks tax liability
    constituted a benefit for both Raytek and Mr. Ramsawak personally. Therefore,
    the use and benefit element of knowing receipt is also met. This has nothing
    to do, with respect, with his wifes liability on the joint line of credit.

(3)

Unjust Enrichment

[81]

The
    three key elements of unjust enrichment are also plainly made out with respect
    to the $150,000. First, Mr. Ramsawak and Raytek were enriched by reducing
    Rayteks debt to CRA, which Mr. Ramsawak admitted also reduced his personal
    exposure. Second, this enrichment corresponds with an equivalent deprivation to
    HBS, from whom the $150,000 was stolen. Third, and finally, there can be no
    juristic reason for the enrichment, since Mr. Ramsawak was fully aware that the
    $150,000 he received was obtained by fraud at the time he paid it to CRA.

(4)

Change in Position

[82]

The
    defence of change in position does not apply to the $150,000 for the same
    reasons that it did not apply to the $40,000 payment.

[83]

By
    using the $150,000 to pay down Rayteks CRA debt, Mr. Ramsawak applied those
    trust funds to his own use and benefit at a time when he had knowledge of facts
    that would have put a reasonable person on notice or inquiry as to the source
    of the funds.

[84]

Mr.
    Ramsawak cannot claim to be an innocent party acting in good faith in paying
    down the CRA debt when he knew the money he used to do so was stolen. Further,
    the debt to CRA would have been due regardless of his receipt of the $150,000
    from Mr. Patel; his position was not meaningfully changed by his receipt of the
    stolen funds.

Disposition

[85]

In this
    case the trial judge was faced with rival claims from two fraud victims. She
    was manifestly sympathetic to the plight of Mr. Ramsawak and his wife, whose
    house was implicated in these proceedings. She described Mr. Ramsawak, at para.
    62, as an older gentleman of retirement age. She noted, at para. 70, that
    Raytek went out of business because, according to Mr. Ramsawak, they couldnt
    afford to continue, largely as a result of Patels predations. (No similar
    details are recorded about the appellant.) But the case must be resolved by the
    application of legal principles, not judicial sympathy.

[86]

For these
    reasons I would grant judgment in favour of the appellant in the amount of
    $190,000 plus interest and costs.

Released:  July 9, 2015 (RGJ)

P.
    Lauwers J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Hybridyne Power Generation Corp. v. SAS Company
    Global Investments Inc., 2015 ONCA 496

DATE: 20150706

DOCKET: C60536

Laskin, Pardu and Brown JJ.A.

BETWEEN

Hybridyne Power Generation Corp.

Plaintiff
(Respondent)

and

SAS Company Global Investments Inc.

Defendant
(Appellant)

Romesh Hettiarachchi, for the appellant

Gregory Roberts, for the respondent

Heard: June 25, 2015

On appeal from the judgment of Justice Laura A. Bird of
    the Superior Court of Justice, dated May 15, 2015, with reasons reported at 2015
    ONSC 3153.

Brown J.A.:

I.

Overview

[1]

The appellant, SAS Company Global Investments Inc. (SAS), appeals from
    the judgment of Bird J. dated May 15, 2015 (the Judgment), granting summary
    judgment in favour of the respondent, Hybridyne Power Generation Corp.
    (Hybridyne). The dispute between the parties concerns their interests in a
    proposed solar power generating facility in Clarington, Ontario (the
    Project). Because of the imminent expiration of regulatory approvals for the
    Project, the appeal was expedited. At the hearing, the appeal was dismissed,
    with reasons to follow. These are those reasons.

II.

Background facts

[2]

On October 27, 2010, the parties entered into a Master Agreement and
    three related agreements for the development of the Project: a Share Purchase
    Agreement, a Fixed Price Services Agreement, and a Buy/Sell Agreement.

[3]

The Project is owned by Hybridyne Power Generation Site A Inc. (Site
    A), at the time a wholly-owned subsidiary of Hybridyne. Under the Share
    Purchase Agreement, SAS acquired 75% of the issued and outstanding shares in
    the capital of Site A, and the agreement entitled it to buy a further 22.5% of
    the shares at a later date.

[4]

Under the Fixed Price Services Agreement (FPSA), SAS retained
    Hybridyne to perform all services necessary to enable Site A to obtain a Notice
    to Proceed (NTP) for the Project under its Feed-In Tariff Contract (FIT Contract)
    with the Ontario Power Authority. The FPSA specified the amounts and the timing
    of payments by SAS for the development services performed by Hybridyne. There
    is no dispute that Hybridyne performed all of the services necessary to obtain
    the NTP, which was issued on December 6, 2012.

[5]

After securing the NTP, Hybridyne took the position that SAS had failed
    to make all of the required payments under the FPSA. Section 8 of the FPSA
    provided that in the event SAS failed to pay any amount due under the agreement
    and failed to cure its default within 30 days of receipt of notice from
    Hybridyne, the latter could terminate the FPSA provided that Hybridyne had
    never defaulted on any of its own obligations under the FPSA and related
    agreements.

[6]

On January 15, 2013, Hybridyne gave SAS notice that it had defaulted on
    the final payment due under the FPSA. The notice stated that if SAS did not
    cure the breach within 30 days, Hybridyne would initiate the process to take
    back ownership of the Project in accordance with the terms of the agreements
    between the parties.

[7]

Subsequent negotiations between the parties failed to resolve the
    dispute. On June 18, 2013, Hybridyne gave SAS notice that it was terminating
    its relationship with SAS pursuant to FPSA s. 8 and that Hybridyne would
    purchase the shares of Site A held by SAS (the Shares) in accordance with the
    terms of the FPSA.

[8]

Section 9 of the FPSA provided that upon termination of the agreement as
    a result of an event of default, SAS would be relieved of the obligation to pay
    any amounts it owed under the FPSA and Hybridyne was to pay a termination fee
    to SAS equal to half of the funds that SAS had advanced. At its option,
    Hybridyne could repay the termination fee in three equal annual instalments. As
    well, section 9(c) of the FPSA stated:

The shares of [Site A] owned by [SAS] shall be sold as
    contemplated by Article 7 of the Buy/Sell Agreement dated October 7, 2010 made
    between the parties upon payment in full of the termination fee described in
    Section 8(b).

[9]

Article 7 of the Buy/Sell Agreement states that upon the occurrence of
    an event of default, SAS shall sell to Hybridyne all of the Shares for $1.00
    per Share provided Hybridyne has paid in full all amounts due to [SAS] as a
    result of the termination of the Fixed Price Services Agreement as required
    therein.

[10]

In
    September, 2013, Hybridyne commenced this action seeking a declaration
    confirming its termination of the FPSA, a declaration of the amount of the
    termination fee it owed to SAS, and a declaration that all of the Shares
    belong to or vest in the name of the plaintiff upon the payment of the
    termination fee. In defending the action, SAS pleaded that it had made all
    payments to Hybridyne required by the FPSA and it denied that Hybridyne was
    entitled to purchase the Shares.

[11]

In
    April, 2014, Hybridyne brought a motion for summary judgment seeking the relief
    pleaded in its statement of claim. Although originally returnable in May 2014,
    Hybridynes motion was adjourned several times because SAS changed lawyers who,
    in turn, sought adjournments. After a years worth of adjournments, the motion
    finally was heard by the motion judge on May 15, 2015.

III.

Motion for Fresh Evidence

[12]

SAS
    moves for leave to file fresh evidence on this appeal; Hybridyne opposes the
    motion. SAS seeks leave to introduce evidence on the following three points:

(i)

the lawyer who acted for SAS on the summary judgment motion failed to
    make relevant inquiries of the directors and officers of SAS before the hearing
    of the motion;

(ii)

the evidence of Mr. Thomas Cleland, the principal of Hybridyne, filed on
    the motion to expedite the appeal demonstrates that Hybridyne was not in a
    position to pay any monies to SAS for the Shares; and,

(iii)

SAS has invested significant sums into the Project that would be lost in
    the event its appeal was dismissed.

[13]

SAS
    has not satisfied the requirements to adduce fresh evidence on the appeal:
R.
    v. Palmer
, [1980] 1 S.C.R. 759. The proffered evidence about the former
    counsel for SAS would not be conclusive of any issue on the appeal. Although
    the counsel for SAS who appeared on the summary judgment motion had filed a
    motion to be removed as lawyer of record, the transcript of the motion hearing
    disclosed that counsel met with his client the day before the hearing and, in
    fulfillment of his duties as counsel of record, filed a factum and book of
    authorities, and made oral submissions on the motion. Although SAS alleged that
    its former counsel had failed to provide effective representation because he did
    not make relevant inquiries of the officers and directors of the company, SAS
    offered no particulars to support this bald allegation.

[14]

As
    to the evidence of Mr. Cleland that Hybridyne lacked the funds to acquire the
    Shares, that evidence is not relevant to the issues SAS raised on this appeal. The
    FPSA does not require Hybridyne to use its own corporate funds to purchase the
    Shares, and Mr. Clelands evidence disclosed that Hybridyne intends to rely on
    third-party financing to acquire the Shares.

[15]

Finally,
    the evidence about investments made by SAS into the project concerned the
    drawdown by Hydro One Networks Inc. in April, 2013 of a standby letter of
    credit SAS had posted. That evidence could have been obtained by the exercise
    of reasonable diligence prior to the summary judgment motion, and SAS provided
    no explanation about why it had failed to adduce that evidence in its response
    to the motion.

[16]

For
    those reasons, I would dismiss the motion by SAS for leave to file fresh
    evidence.

IV.

Issues on appeal

[17]

SAS
    advances the following main arguments on appeal:

(i)

FPSA s. 8 provides that Hybridyne can only exercise its right to
    terminate the agreement if it is not in default of its own obligations under
    the FPSA and related agreements. The motion judge failed to consider the
    allegations made by SAS in its pleading that Hybridyne was in default of its
    obligations at the time it gave notice terminating the FPSA and therefore was not
    entitled to terminate the agreement;

(ii)

The motion judge erred in finding that SAS must transfer the Shares to
    Hybridyne upon payment of the termination fee, without taking into account the need
    to finalize the precise amount of the termination fee and the obligation of
    Hybridyne under the Buy/Sell Agreement to pay SAS the Share purchase price;
    and,

(iii)

The motion judge erred in concluding that Hybridyne was entitled to the
    Shares notwithstanding its pleading that SAS had repudiated the FPSA.

SAS acknowledges that these arguments were not raised before
    the motion judge.

V.

Standard of review

[18]

In
Hryniak v. Mauldin
, 2014 SCC 7, [2014] 1 S.C.R. 87, the Supreme Court
    of Canada held that absent an error of law, the exercise of powers by a motion
    judge under Rule 20 of the
Rules of Civil Procedure
attracts
    deference. Whether a genuine issue requiring a trial exists is a question of
    mixed fact and law. Where there is no extricable error in principle, findings
    of mixed fact and law should not be overturned, absent palpable and overriding
    error.

[19]

The
    interpretation of a contract involves an issue of mixed fact and law on which
    an appellate court should defer to the motion judge, except in cases of a
    palpable and overriding error or where it is possible to identify an extricable
    error of law:
Sattva Capital Corp. v. Creston Moly Corp.
, 2014 SCC 53,
    [2014] 2 S.C.R. 633, at paras. 50-55.

VI.

Analysis

A.

The issues argued before the motion judge

[20]

At
    para. 11 of her reasons, the motion judge clearly described the issue the
    parties were asking her to decide on the summary judgment motion:

The parties agreed that the precise dollar amounts are not
    important and should not be resolved by me on this motion. The issue is whether
    I am satisfied that there has been a breach of the contract. In other words,
    did the defendant pay the full amount owing under the FPSA, or some lesser
    amount. A payment of anything other than the full amount owing would put the
    defendant in breach of the contract, thereby triggering the plaintiffs right
    to terminate the agreement in accordance with the terms set out in paragraph
    nine of the FPSA.

[21]

On
    the motion, SAS filed an expert affidavit from Mr. Tom Strezos addressing whether
    SAS had paid all amounts it owed under the FPSA. At para. 13 of her reasons the
    motion judge stated:

The plaintiff claims that several amounts in Mr. Strezos chart
    were not paid, as alleged by the defendant pursuant to the FPSA. Mr. Strezos
    acknowledged under cross-examination that his opinion that the defendant had
    fulfilled his financial obligations was dependent on all of the amounts in the
    Difference column having been paid. If the defendant did not pay any one of
    those amounts, it did not comply with the terms of the FPSA.

[22]

The
    motion judge found that SAS had not paid all amounts shown in the Difference
    column, specifically a personal cheque in the amount of $50,000 allegedly paid
    on January 8, 2008, as well as HST on a $150,000 deposit. The motion judge also
    found that a January 4, 2013 payment in the amount of $50,000 was not a payment
    made by SAS for services Hybridyne had provided under the FPSA. Based on those
    findings of fact, the motion judge concluded that SAS had breached the terms of
    the FPSA and Hybridyne was entitled to terminate the agreement in accordance
    with s. 8 of the FPSA.

[23]

On
    this appeal, SAS does not challenge those findings of fact by the motion judge.
    As a result, there is no reason to interfere with her finding that SAS failed
    to pay Hybridyne the amounts it was obligated to pay under the FPSA and
    therefore was in breach of the FPSA.

B.

The new issues raised by SAS on appeal

[24]

SAS
    raises three issues which it did not argue before the motion judge. In
Kaiman
    v. Graham
, 2009 ONCA 77, 245 O.A.C. 130, this court stated, at para. 18,
    that:

The general rule is that appellate courts will not entertain
    entirely new issues on appeal The burden is on the appellant to persuade the
    appellate court that all the facts necessary to address the point are before
    the court as fully as if the issue had been raised at trial In the end,
    however, the decision of whether to grant leave to allow a new argument is a
    discretionary decision to be guided by the balancing of the interests of
    justice as they affect all parties

[25]

The
    new issues raised by SAS on this appeal essentially involve either the
    interpretation of the Master Agreement, FPSA, and Buy/Sell Agreement, or the state
    of the evidentiary record on the motion in respect of the SAS counterclaim. Accordingly,
    all the facts necessary to address the new issues are before the court.

First new issue: Hybridyne did not establish its claim as
    pleaded

[26]

SAS
    submits that the motion judge erred in granting summary judgment because
    Hybridyne failed to prove its claim as pleaded. SAS argues that in its
    statement of claim Hybridyne had framed its action as one based on its
    acceptance of SAS repudiation of the FPSA, not as one in which it sought to
    enforce its termination rights and remedies under FPSA ss. 8 and 9.

[27]

I
    do not accept this argument. A pleading must be read as a whole. In paras. 15
    through 17 of its Amended Statement of Claim, Hybridyne specifically pleaded
    its rights under FPSA ss. 8 and 9, including its right to purchase the Shares
    in the event of a default by SAS. Hybridynes right to purchase the Shares
    obviously survived the termination of the FPSA.  By its terms, the FPSA made
    that remedy available to Hybridyne in the event the agreement terminated by
    reason of SAS default.

Second new issue:  The motion judge ignored Hybridynes
    obligation to pay the Share purchase price and the need to finalize the amount
    of the termination fee

[28]

SAS
    submits that the motion judge erred by ignoring the effect of s. 7.5 of the
    Buy/Sell Agreement which provides that if Hybridyne is entitled to purchase the
    Shares because of an event of default by SAS under the FPSA, the closing of the
    Share purchase transaction shall take place 30 days after the date of the
    Event of Default is deemed to have occurred. SAS contends that because
    Hybridyne took the position that an event of default had occurred on January
    14, 2013, Hybridyne was obliged under the Buy/Sell Agreement to purchase the Shares
    within 30 days. Since it did not, SAS argues that Hybridyne was not entitled
    under the agreements to purchase the Shares thereafter.

[29]

I
    do not accept this argument. When Hybridyne gave notice terminating the FPSA on
    the basis that SAS had failed to pay all amounts owing, SAS took the position
    that it had made all required payments, so therefore Hybridyne was not entitled
    to terminate the agreement or acquire the Shares. As a result of SAS position,
    Hybridyne was not able to proceed with the Share purchase until the disposition
    of this lawsuit. SAS cannot rely on the delay caused by the legal position it
    took to deprive Hybridyne of its right to purchase the Shares.

[30]

In
    light of this conclusion, no practical consequence flows from the apparent
    conflict between the 30-day closing language contained in section 7.5 of the
    Buy/Sell Agreement and FPSA s. 9(b) which affords Hybridyne the option to repay
    the termination fee over three years.    As stated, SAS cannot rely on its own
    delay to defeat Hybridynes right to purchase the Shares, and Hybridyne sought
    and obtained a Judgment that allows it to pay the termination fee into court in
    one lump-sum. As a related argument, SAS submits that it was not open to the
    motion judge to direct a reference to determine the amount Hybridyne must pay
    as the termination fee under FPSA s. 9(b), but then order SAS to deliver up the
    Shares simply upon Hybridynes payment of $600,000 into court, before the
    reference had been conducted. SAS makes two points: first, until the precise amount
    of the termination payment is known and paid, Hybridyne is not entitled to
    purchase the Shares under FPSA s. 9(c); and, second, the motion judge ignored
    Hybridynes obligation under the Buy/Sell Agreement to pay SAS a Share purchase
    price in order to acquire the Shares.

[31]

I
    do not accept these arguments. As was clear from the transcript of the motion
    hearing, the matter was an urgent one, requiring a timely adjudication of the
    parties dispute in order to preserve the viability of the Project given the
    regulatory deadlines it faces. During the submissions on the motion,
    Hybridynes counsel informed the motion judge that he had discussed with
    opposing counsel referring the determination of the precise amount of the
    termination fee to a master, and requiring Hybridyne to pay into court an
    amount which likely would cover Hybridynes net obligation in respect of the
    termination fee. This amount was estimated by taking $772,000 (the amount of
    the termination fee calculated by Hybridynes expert),  and subtracting
    $100,000 for the judgment obtained by Sustainable Power Capital Inc. against
    Site A, as well as the costs due from SAS to Hybridyne on the motion, which the
    motion judge fixed at $68,617.45.

[32]

The
    motion judges resulting order that Hybridyne pay into court $600,000 before
    SAS was required to sell the Shares was a reasonable exercise of her remedial
    discretion under rule 20 of the
Rules of Civil Procedure
because it
    was consistent with the Share purchase terms contained in the FPSA and Share
    Purchase Agreement and afforded SAS adequate security for the payment of the
    termination fee due to it. There is no reviewable error in the remedy granted
    by the motion judge.

[33]

In
    order to acquire the Shares, Hybridyne must pay not only the termination fee,
    but also the purchase price of $1.00 per Share stipulated in Article 7 of the
    Buy/Sell Agreement. Although the motion judge did not address that issue  no
    doubt because it was not in dispute  Hybridyne expressly acknowledges, in
    para. 52 of its factum, that it is required to pay that purchase price to SAS
    on the closing of the Share purchase.

Third new issue: Hybridyne had defaulted on its obligations
    under the FPSA

[34]

SAS
    further argues that when Hybridyne purported to terminate the FPSA, Hybridyne
    had not met the condition in FPSA s. 8(b) that it is not then and has not been
    in default of any of its obligations hereunder, under the Master Agreement or
    under any other agreement referred to in the Master Agreement. In para. 18 of
    its statement of defence, SAS pleaded that Hybridyne had breached the FPSA,
    Master Agreement, and Share Purchase Agreement by (i) failing to perform
    services that would enable Site A to construct and operate the Project in a
    cost-effective manner, (ii) failing to perform services in a proper and
    workmanlike manner, and (iii) withholding from SAS facts material to Site A. SAS
    did not provide any particulars of those allegations in its statement of
    defence.

[35]

However,
    in its counter-claim SAS offered some details, alleging that Hybridyne had
    breached its obligations because (i) it had caused Site A to enter into an
    excessively costly grid connection agreement, (ii) it had failed to obtain an
    appropriate solar inverter for the Project which prevented SAS from securing
    financing for the project, and, (iii) it had made unspecified
    misrepresentations to SAS contrary to the requirements of the Share Purchase
    Agreement. SAS argued that because the motion judge had failed to deal with
    these allegations contained in its counter-claim, she was not in a position to
    find that Hybridyne had satisfied the conditions of FPSA s. 8(b) entitling it
    to terminate the agreement.

[36]

On
    the motion for summary judgment, it was clear Hybridyne was taking the position
    that it was entitled to terminate the FPSA under s. 8 of that agreement. Consequently,
    in order for SAS to demonstrate that a genuine issue requiring a trial existed
    on that claim, SAS was obliged to adduce evidence addressing its allegations
    that Hybridyne had breached its obligations under the agreements and,
    therefore, was not entitled to terminate under FPSA s. 8. SAS was not entitled
    to rely simply on the allegations in its pleading.

[37]

SAS
    failed to adduce such evidence. It filed evidence from only one fact witness,
    its Chief Operating Officer, Michael McKie. In his affidavit, McKie made no
    reference to the first allegation that Hybridyne had caused Site A to enter
    into an excessively costly grid connection agreement.

[38]

As
    to the second allegation, while McKie did adduce some evidence touching on the
    solar inverter, he did not depose that any obligation Hybridyne may have had
    regarding a solar inverter arose under the Master Agreement or under any other
    agreement referred to in the Master Agreement, a requirement of FPSA s. 8(b). Indeed,
    none of the Master Agreement, FPSA, Share Purchase Agreement or Buy/Sell
    Agreement make any reference to an obligation by Hybridyne regarding a solar inverter,
    with the result that McKies evidence about the solar inverter was irrelevant
    to the issue of whether Hybridyne was entitled to exercise its termination
    rights.

[39]

Finally,
    in his affidavit McKie suggested that Hybridyne failed to comply with a change
    of control provision in the FIT Contract with the Ontario Power Authority,
    thereby breaching a representation in the Share Purchase Agreement that the FIT
    Contract for the Project was in good standing. McKie failed to file the
    evidence necessary to support this allegation. He did not file the executed FIT
    Contract entered into for the Project, so it is not possible to assess who made
    what representation to the Ontario Power Authority. Moreover, there is an air
    of commercial unreality to this allegation. It flies in the face of the position
    advanced by SAS at the hearing of the appeal that it wanted to control the
    future construction of the Project and, to that end, was prepared to pay into
    court the financial arrears it owed under the FPSA. Commercial common sense
    would suggest that SAS is prepared to make such a payment because the FIT
    Contract remains in good standing and the Project continues to have value.

C.

Conclusion on the granting of summary judgment

[40]

In
    sum, I see no error in the motion judges conclusions that SAS had breached the
    FPSA and Hybridyne was entitled to purchase the Shares in accordance with the
    mechanism set out in the Judgment. Accordingly, I would dismiss the appeal.

VII.

Request for a stay of execution of the Judgment

[41]

SAS
    submits that this court should stay the Judgment pending the determination of
    its counter-claim. SAS did not ask the motion judge to grant a stay of
    execution pursuant to rule 20.08 of the
Rules of Civil Procedure
. Nor
    is there any just reason to grant a stay at this stage of the proceeding. As
    observed, SAS did not adduce evidence to substantiate the allegations made in
    its counter-claim. Further, the pending expiry of the Projects Renewable
    Energy Approval in late November, 2015 means that granting a stay probably
    would jeopardize the viability of the Project to the detriment of both parties.
    Finally, SAS proposes, as a condition of the stay, that it pay into court the
    amount of the final payment which it failed to make in late 2012, in return for
    Hybridyne releasing its interest in the Shares. Imposing such a condition would
    be most unjust: it would completely defeat Hybridynes claim and would re-write
    the bargain between the parties contained in s. 9 of the FPSA.

VIII.

Disposition

[42]

By
    way of summary, I would dismiss the motion by SAS for leave to file fresh
    evidence, dismiss its appeal, and dismiss the request of SAS for a stay of
    execution of the Judgment pending determination of its counter-claim. I would
    award Hybridyne its costs of the appeal and the motions heard on June 20, 2015,
    fixed in the amount of $40,000, inclusive of disbursements and HST, and would consequently
    vary para. 3 of the Judgment to read that Hybridyne pay into court the sum of
    $560,000.

Released: July 6, 2015 (J.L.)

David
    Brown J.A.

I
    agree John Laskin J.A.

I
    agree G. Pardu J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Kassian Estate v. Canada (Attorney General), 2015
    ONCA 544

DATE: 20150722

DOCKET: C59819, C59820, C59849

Hoy A.C.J.O, Sharpe and Benotto JJ.A.

BETWEEN

The Estate of Edward Kassian, Deceased, By Its
Administrator, Michael E. Kassian, The Estate of Eileen
Kassian, Deceased, By Its Administrator, Michael E.
Kassian, Michael E. Kassian, Kathleen E. Kassian and
Evan M. Kassian By Their Litigation Guardian, Michael
E. Kassian, Douglas E. Kassian, Alycia L. Kassian,
Andrew D. Kassian and Sylvia K. Bayle

Plaintiffs/Respondents (Respondents)

and

The Attorney General of Canada, The Akwesasne
    Police
Services Board, The Mohawk Council of Akwesasne,
Her
Majesty the Queen in Right of Ontario as Represented By
The Minister of Community Safety and Correctional
Services
, The Estate of Dany Gionet By Its Litigation
Administrator, Peter Hagen, Constable Michael Biron and
Sergeant Kenneth Chaussi and
The Attorney General of
Quebec

Defendants/Appellants (
Appellants
)

Lise Favreau and Sunil Mathai, for Her Majesty the Queen
    in Right of Ontario

Mathieu Verner and Sylvie Labbé, for the Attorney
    General of Quebec

Sharon Johnston and Orlagh OKelly, for the Attorney
    General of Canada

William J. Sammon and Amanda Estabrooks, for the
    respondents

Heard: June 23 and 24, 2015

On appeal from the order of the Divisional Court
    (Justices J.M. Wilson and M.T. Linhares de Sousa, Justice J.A. Thorburn
    dissenting), dated June 2, 2014, with reasons reported at 2014 ONSC 844.

ENDORSEMENT

[1]

On November 14, 2008, Edward and Eileen Kassian, both 77 years old, were
    driving through Cornwall Island where Mohawk land straddles the provinces of
    Ontario and Quebec and borders New York State. While stopped at a stop sign,
    they were struck by a driver who was being pursued at high speed by the
    Akwesasne Mohawk Police Service (the AMPS). They were killed instantly  as
    was the driver. Their estate and family members brought an action against the
    AMPS and others including the Attorneys General of Ontario, Quebec and Canada.
    The allegation against Ontario and Quebec was based on vicarious liability for
    the negligent actions of the officers involved in the high speed chase.

[2]

Ontario and Quebec brought a motion for summary judgment seeking
    dismissal of the action against them. The respondents also brought a motion to amend
    their pleadings by: (1) adding a claim for direct negligence against Ontario,
    Quebec and Canada on the basis that they had failed to implement
    recommendations in an Audit Report prepared in 1991 in connection with the AMPS
    and (2) alleging that the police cruisers used by officers of the AMPS were
    beneficially owned by Ontario, Quebec and Canada.

[3]

The motions judge dismissed the summary judgment motion of Ontario and
    Quebec and allowed the amendments to the claim in part. The decisions were upheld
    by the majority of the Divisional Court. Ontario, Quebec and Canada appealed
    with leave of this Court. For the reasons that follow, we allow the appeal.

Claims against Ontario and Quebec for vicarious liability
    Summary Judgment Motions

[4]

The respondents claim against Ontario and Quebec for vicarious
    liability is based upon a quadripartite agreement (the Agreement) between the
    Mohawk Council of Akwesasne, Ontario, Quebec and Canada. The Agreement provided
    for the funding of a policing service in Akwesasne. The preamble to the Agreement
    provides that the Mohawks of Akwesasne shall have an autonomous and
    independent policing service and that such service shall be provided by the
    AMPS in keeping with the needs of the public safety aspirations of the Mohawks
    of Akwesasne.

[5]

Article 6 of the Agreement is entitled Autonomy and Independence of
    AMPS and provides that:

The Chief of Police and AMPO [Akwesasne Mohawk Police Officers]
    are employed by the Council. However, with respect of police operations and
    investigations, the Chief of Police and AMPO shall act independently and free
    from any type of interference and in that respect, they cannot receive any
    direct or indirect instructions from the Council, its employees or any other
    entirety created or established by Council.

[6]

Article 15 of the Agreement mandates the establishment of a Liaison
    Committee to monitor the implementation of the Agreement, review issues of
    mutual concern, resolve through discussion any disputes that may arise, and
    make recommendations relating to the implementation of the Agreement.  However,
    no Liaison Committee was ever set up.

[7]

Article 21.2 of the Agreement provides that nothing in the agreement is
    to be construed as conferring on the personnel employed as a result of the
    agreement, the status of employee, officer, or agent of Ontario or Quebec or
    the status of a person acting in partnership or joint venture with Ontario or
    Quebec.

[8]

The respondents allege that the terms of the Agreement created a
    partnership or enterprise between Ontario, Quebec and the Mohawk Council of
    Akwesasne to conduct policing on the First Nations territory. As such, their
    position is that Ontario and Quebec are vicariously liable for the actions of the
    officers who conducted the high speed chase.

[9]

The decision of the motions judge, upheld by the Divisional Court, was
    that a trial was required to determine the nature of the relationship created
    by the Agreement. The admitted error of the motions judge in articulating the
    test for summary judgment was not directly in issue in this court.

[10]

In
    our view, the majority of the Divisional Court erred in the application of the
    law of vicarious liability to the facts of this case. On a correct application
    of the law of vicarious liability, there is no genuine issue for trial in this
    case.

[11]

The
    law of vicarious liability was articulated by the Supreme Court of Canada in
K.L.B.
    v. British Columbia,
2003 SCC 51, [2003] 2 S.C.R. 403.  At para. 18, the
    court explained that liability is imposed on the theory that the person may
    properly be held responsible where the risks inherent in his or her enterprise
    materialize and cause harm, provided that the liability is both fair and
    useful. The court held, at para. 19, that to succeed in a claim for vicarious
    liability, a plaintiff must establish that:

1)

The relationship
    between the tortfeasor and the person against whom liability is sought is
    sufficiently close to make a claim for vicarious liability appropriate; and

2)

The tort is
    sufficiently connected to the tortfeasors assigned tasks that the tort can be
    regarded as a materialization of the risks created by the enterprise.

[12]

An
    important factual consideration includes the degree of control exercised by the
    person or organization sought to be held liable and the tortfeasor:
K.L.B.
,
    at para. 22. In
K.L.B.
, the court considered whether the relationship
    between the province of British Columbia and foster parents was sufficiently
    close to impose vicarious liability on the province for the negligent actions
    of the foster parents. The court found that the day-to-day control of the
    affairs of foster children made the foster parents sufficiently independent
    from the province so there was no basis for vicarious liability. This
    conclusion was arrived at even though governments provided instruction,
    training, periodic monitoring and funding.

[13]

By
    contrast, where the control is at the day-to-day level, as it was in
Blackwater
    v. Plint
, 2005 SCC 58, [2005] S.C.R. 3, vicarious liability will be imposed.
    There, the United Church of Canada was found vicariously liable for its employees
    who abused children in a residential school. The Church was involved in all
    aspects of the operation and management and religious education of the
    students.

[14]

We
    agree with the approach taken by the dissenting judge to determine the nature
    of the relationship between the AMPS and the governments. She examined the
    terms of the Agreement and concluded that it did not create a relationship that
    is sufficiently proximate between Ontario, Quebec and the police officers to
    justify the imposition of vicarious liability. Ontario and Quebec were too
    remote from the tortfeasors to be acting on their behalf. The tort cannot
    reasonably be regarded as a materialization of risks inherent in the enterprises
    of Ontario and Quebec. The terms of the Agreement make this clear. In
    particular, the Agreement provides that:

·

the AMPS is autonomous and independent;

·

the provinces are not in a partnership with the AMPS;

·

the Akwesasne Mohawk Police Officers and their Chief are employed
    by the Council;

·

the AMPS Chief is responsible for the operation and administration
    of the police service;

·

the Chief of police shall be free of any interference;

·

the governments are not required to provide training to the AMPO;
    and

·

the Liaison Committee has only consulting and recommendation
    duties, but no power or control over the AMPS.

[15]

Since
    the terms of the Agreement do not create a relationship that is sufficiently
    close or controlling to justify the imposition of vicarious liability, there is
    no genuine issue requiring a trial. We therefore allow the appeal on this ground.

Amendment of Pleading

[16]

Many
    years before the Agreement was signed, an audit was conducted with respect to
    the police procedures and practices of the AMPS. The resulting report of 1991
    identified a number of problems with management procedures and officer training.
    The reports recommendations included that the police be placed under tutelage
    to develop and implement appropriate management policies and procedures.

[17]

The
    respondents sought to amend their claim to allege that the audit called for
    corrective intervention to ensure police standards were met, and that the
    failure on the part of the governments to do so constituted direct negligence,
    which caused or contributed to the deaths of the Kassians. The proposed claim was
    framed as follows:

The Plaintiffs state that the institutional Defendants through
    their services and agents were negligent by failing to implement the regular
    audits that were recommended in the 1991 audit report, which negligence caused
    or contribute to the deaths of Edward and Eileen Kassian as the deficiencies
    that were noted in the 1991 audit were evident and reflected in the conduct of
    the Akwesasnse police officers on the 14th of November 2008.

[18]

The
    motions judge and the majority of the Divisional Court held that a trial was
    necessary to resolve this issue. (This was the test used by the motions judge. The
    Divisional Court noted that she had conflated the test for summary judgment
    with that for striking a pleading, but held that she nonetheless was correct to
    conclude that a trial was necessary.)

[19]

We
    agree with the analysis of the dissenting judge. After considering the
    applicable jurisprudence (
Cooper v. Hobart
,

2001 SCC 79,
    [2001] 3 S.C.R. 537), she concluded that the governments were too far removed
    from the day-to-day conduct of the officers of the AMPS to owe a private law duty
    of care to particular individuals. The harm to the respondents was not
    reasonably foreseeable and the relationship between the governments and the
    AMPS was not sufficiently close to impose a duty of care.

[20]

The
    audit was conducted in 1991, years before the Agreement was signed. Although
    the audit identified problems with the AMPS, no mention was made of high speed
    chase protocols. The governments were not required to conduct audits, train,
    hire or supervise the officers. The audit did not impose a duty on third
    parties. In particular, there was no duty imposed to persons driving through
    the land seventeen years later.

[21]

Although
    the defendant governments are under a general duty to ensure adequate and effective
    police services in Akwesasne, and have some broad general powers in furtherance
    thereof, we agree with the dissenting judge that these broad powers and duties
    to the public at large do not give rise to private law duties of care to
    particular individuals.

[22]

We
    also agree with the dissenting judge that claims alleging negligence against
    public authorities should be examined at the pleading stage to determine
    whether there is any possibility a duty of care can be found to exist. Since no
    duty of care is owed in the present case, the claim cannot succeed.

[23]

Likewise,
    as it is apparent from the Agreement that there is no factual basis for the
    allegation that the police cruisers are beneficially owned by Ontario, Quebec
    and Canada, this bald allegation should not have been allowed.

[24]

The
    appeals of Ontario and Quebec are allowed and the action against them is dismissed.

[25]

Canadas
    appeal from the Divisional courts dismissal of its appeal from the motion to
    amend is also allowed.  Canadas request to deny the impugned amendments to
    paragraphs 23, 24 and 33.1 to 33.8 of the Statement of Claim is granted.

[26]

In
    accordance with the parties resolution of costs, the appellants are entitled
    to costs of the appeal fixed at $25,000 and to costs of the Divisional Court
    appeal fixed at $20,000. All costs are inclusive of disbursements and HST.

Alexandra Hoy A.C.J.O.

Robert J. Sharpe J.A.

M.L. Benotto J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Landmark Vehicle Leasing Corporation v. Mister
    Twister Inc., 2015 ONCA 545

DATE: 20150722

DOCKET: C58753

Doherty, Pepall and Huscroft JJ.A.

BETWEEN

Landmark Vehicle Leasing Corporation

Plaintiff (Respondent)

and

Mister
    Twister Inc., Amadeus Blazys a.k.a. Amadeus Amo Blazys

a.k.a.
    Amadeus A. Blazys and Luisa M. Blazys a.k.a. Luisa Blazys

Defendants (Appellants)

Charles Wagman, for the appellants

David Winer, for the respondent

Heard: June 30, 2015

On appeal from the judgment of Justice C.J. Brown of the
    Superior Court of Justice, dated March 26, 2014.

By the Court:

I

[1]

The appellants, Amadeus Blazys and Luisa Blazys, are husband and wife. Mister
    Twister Inc. is Mr. Blazys company. The respondent, Landmark Vehicle Leasing
    Corp. (Landmark), alleged that one or more of the appellants leased three
    vehicles from Ross Wemp Leasing Inc. (Ross Wemp Leasing) and that Ross Wemp
    Leasing subsequently assigned the leases to Landmark. Landmark successfully
    sued for arrears owing under each of the leases. The appellants appeal from that
    judgment.

[2]

The appellants raise many grounds of appeal. However, in oral argument,
    the appellants focused on the submission that because the appellants did not
    receive written notice of the lease assignments, Landmark should have named
    Ross Wemp Leasing as a party in the action. According to the appellants,
    Landmarks failure to name Ross Wemp Leasing as a party should have led to a dismissal
    of Landmarks action.

[3]

The other grounds of appeal involve alleged errors by the trial judge in
    assessing credibility, and allegations of procedural failings and pleading inadequacies
    that the appellants contend prejudiced their ability to present their case at
    trial.

[4]

For the reasons that follow, we would dismiss the appeal.

II

[5]

The leases related to three vehicles, a
1999 Mercedes-Benz, a Dodge Ram truck, and a GMC
    truck. The Mercedes-Benz vehicle was eventually returned and sold by Landmark to
    a wholesaler for $9,000.  This was very close to the stipulated depreciated
    residual value agreed to in the lease.  Landmark claimed the difference between
    the amount owing on the lease and the amount recovered on the sale. Landmark
    alleged, and the trial judge found, that the appellants did not return either
    the Dodge Ram or the GMC. Landmark successfully claimed for the full amounts
    owing under those leases.

[6]

Mr. and Mrs.
    Blazys testified. Mrs. Blazys acknowledged that she drove the Mercedes-Benz for
    years, but testified that she knew nothing about the lease and was not a party
    to the lease. She said the signature on the lease was not hers.

[7]

Mr. Blazys
    acknowledged entering into the three leases, but testified that he had returned
    all three vehicles. He also alleged that Landmark sold the Mercedes-Benz at a
    price well below a commercially reasonable price.

[8]

Faced with
    irreconcilable versions of the important events, the trial judge had to assess
    credibility. The trial judge did not believe Mr. and Mrs. Blazys. She made the
    following findings of fact:

·

Both Mr. and
    Mrs. Blazys leased the Mercedes-Benz;

·

Mr. Blazys leased the Dodge Ram and the GMC;

·

Mister Twister Inc. was on the GMC lease;

·

The Mercedes-Benz was returned to Landmark and sold for $9,000, a
    reasonable wholesale price;

·

Neither the Dodge Ram nor the GMC was returned;

·

An employee at Ross Wemp Leasing spoke to Mr. Blazys in November
    2007, the month after the assignment to Landmark, and advised him of the
    changes, the merger and the new Landmark address;

·

Mr. Blazys returned the Mercedes-Benz to Landmarks location on
    January 10, 2008;

·

Landmark had correctly calculated the amounts owing under the
    leases;

·

Various documents were sent to all the lessee customers of Ross
    Wemp Leasing advising them of the asset purchase by Landmark and of the consequential
    changes in vehicle ownership and insurance. There was no specific evidence that
    these documents were sent to or received by the appellants; and

·

Mr. Blazys received notice of the lease assignments.

III

THE FAILURE TO GIVE WRITTEN NOTICE OF THE ASSIGNMENT

[9]

The
Conveyancing and Law of Property Act
, R.S.O. 1990, c. C.34,
    applies to the lease assignments. Section 53(1) reads in part:

Any absolute assignment made on or after the 31st day of
    December, 1897, by writing under the hand of the assignor,  of any debt or
    other legal chose in action
of which express notice in writing has been
    given to the debtor
is effectual in law, subject to all equities that
    would have been entitled to priority over the right of the assignee if this
    section had not been enacted, to pass and transfer the legal right to such debt
    or chose in action from the date of such notice, and all legal and other
    remedies for the same, and the power to give a good discharge for the same
    without the concurrence of the assignor. [Emphasis added.]

[10]

Section
    53(1) requires express notice in writing to the debtor.  Although there is
    some ambiguity in her reasons, it would appear that the trial judge found that Mr.
    Blazys had express notice of the assignment, but not notice in writing. Ross
    Wemp Leasing therefore did not assign the leases to Landmark in law: see
80
    Mornelle Properties Inc. v. Malla Properties Ltd.
, 2010 ONCA 850, 327
    D.L.R. (4th) 361, at para. 22. Ross Wemp Leasing did, however, assign the
    leases to Landmark in equity. An equitable assignment does not require any
    notice, let alone written notice:
Bercovitz Estate v. Avigdor
, [1961]
    O.J. No. 20 (C.A.), at paras. 16, 25.

[11]

The
    appellants, relying on
DiGuilo v. Boland
, [1958] O.R. 384 (C.A.),
    affd, [1961] S.C.C.A. vii, argue that as the appellants did not have written
    notice of the assignment, Landmark could not sue on its own. Instead, Landmark
    had to join Ross Wemp Leasing in the action. The appellants argue that the
    failure to join Ross Wemp Leasing requires that the judgment below be set
    aside.

[12]

DiGuilo
does in fact require that the assignor of a chose in action be joined in the
    assignees claim against the debtor when the debtor has not received written
    notice of the assignment. The holding in
DiGuilo
tracks rule 5.03(3)
    of the
Rules of Civil Procedure
,
    R.R.O. 1990, Reg. 194
:

In a proceeding by the assignee of a debt or other chose in
    action, the assignor shall be joined as a party unless,

(a) the assignment is absolute and
    not by way of charge only; and

(b)
notice in writing has been
    given to the person liable in respect of the debt
or chose in action that
    it has been assigned to the assignee. [Emphasis added.]

[13]

Yet
    the assignees failure to join the assignor does not affect the validity of the
    assignment or necessarily vitiate a judgment obtained by the assignee against
    the debtor. Rule 5.03(6) reads:

The court may by order relieve against the requirement of
    joinder under this rule.

[14]

The
    joinder requirement is intended to guard the debtor against a possible second
    action by the assignor and to permit the debtor to pursue any remedies it may
    have against the assignor without initiating another action:
DiGuilo
,
    at p. 395. Where the assignees failure to join the assignor does not prejudice
    the debtor, the court may grant the relief in rule 5.03(6): see
Gentra
    Canada Investments Inc. v. Lipson
, 2011 ONCA 331, 106 O.R. (3d) 261, at
    paras. 59-65, leave to appeal refused, [2011] S.C.C.A. No. 327.

[15]

In
    this case, the trial judge found that Mr. Blazys, and effectively all of the
    appellants, gained actual notice of the lease assignments very shortly after
    the assignments were made and well before Landmark sued. Armed with actual,
    albeit not written, notice of the assignment, the appellants could fully
    protect themselves against any prejudice from Landmarks failure to join Ross
    Wemp Leasing. Had the appellants seen any advantage in joining Ross Wemp
    Leasing, either to defend against Landmarks claim or to advance a claim
    against Ross Wemp Leasing, the appellants could have moved for joinder under rule
    5.03(4). The appellants failure to bring a motion to add Ross Wemp Leasing
    speaks loudly to the absence of any prejudice caused by Landmarks failure to
    join the assignor.

[16]

Ross
    Wemp Leasing perhaps should have been a party to the proceeding. Landmarks
    failure to join Ross Wemp Leasing, however, did not prejudice the appellants
    and should have had no impact on the trial judgment. If requested, this court
    will make a
nunc pro tunc
order relieving Landmark from the requirement
    of joining Ross Wemp Leasing in the action.

IV

the other grounds of appeal

(i)

The alleged violations of the collateral fact rule

[17]

Landmarks
    counsel asked Mr. Blazys if he had lied under oath at a prior proceeding. He said
    no. Counsel, over objection from Mr. Blazys counsel, proceeded to
    cross-examine Mr. Blazys on documents relating to that prior proceeding. Counsel
    suggested to Mr. Blazys that these documents demonstrated that he had lied
    under oath in the prior proceeding.

[18]

On
    appeal, the appellants argue that the question put to Mr. Blazys on a prior lie
    under oath went only to his credibility. Therefore, the appellants say, the
    collateral fact rule precluded further cross-examination of Mr. Blazys on any
    alleged lie after he denied lying under oath.

[19]

A
    party triggers the collateral fact rule when, after closing its own case, it
    seeks to call rebuttal evidence to contradict a witness testimony on a
    collateral matter: see
R. v. Krause
, [1986] 2 S.C.R. 466, at pp.
    474-75. Cross-examination on a collateral matter does not trigger the rule.

[20]

Counsel
    is entitled to challenge a witness credibility in cross-examination. The scope
    of that cross-examination is limited by the requirements of relevance and other
    rules applicable to cross-examination. For example, the cross-examination
    cannot be abusive or overly repetitive. The collateral fact rule has nothing to
    do with the scope of the cross-examination. Similarly, documents may be put to
    a witness during cross-examination for the purposes of impeachment. The
    admissibility of those documents is subject to various evidentiary rules, such
    as relevance, but the collateral fact rule is not one of them: see S.C. Hill,
    D.M. Tanovich & L.P. Strezos,
McWilliams Canadian Criminal Evidence
,
    loose-leaf, 5th ed. (Toronto: Thomson Reuters, 2015), at c. 6. The cross-examination
    of Mr. Blazys in respect of his alleged prior lies under oath did not offend
    the collateral fact rule.

[21]

The
    appellants argue that the collateral fact rule also foreclosed
    cross-examination of Mr. Blazys to demonstrate that he had previously given conflicting
    evidence on the identity of Mister Twister Inc.s directors. That argument
    reveals the same misunderstanding of the collateral fact rule. Furthermore, the
    cross-examination on the conflict played a potentially important role in establishing
    Mr. Blazys credibility. The trial judge did not err in finding that Mr.
    Blazys inability to explain the conflict undermined his credibility.

(ii)

The alleged errors undermining the credibility findings

[22]

Counsel
    submits that the trial judge took into account a negative credibility
    assessment of Mr. Blazys made by another tribunal in a prior proceeding. The
    appellant correctly submits that a credibility assessment by another tribunal
    in an unrelated matter based on entirely different evidence does not speak to
    Mr. Blazys credibility in this case. The trial judges reasons do not suggest
    that she considered the prior tribunals finding in assessing Mr. Blazys
    credibility. The trial judge gave many reasons for disbelieving Mr. Blazys. The
    prior tribunals credibility assessment was not one of them.

[23]

Counsel
    submits that the trial judge erred in failing to draw negative inferences from
    Landmarks failure to call certain witnesses and failure to produce certain
    documents, and that she further erred in the manner in which she assessed
    conflicting evidence. These arguments invite the court to retry the case. We
    cannot and do not do that.

(iii)

The
    procedural irregularities

[24]

The appellants next submit that Landmarks late delivery of many
    relevant documents, its failure to fulfill at least one undertaking, and the
    various factual errors in its Statement of Claim combined to produce a chaotic
    and unfair trial.

[25]

There
    is no merit to this submission. A review of the trial record reveals no chaos. The
    appellants show no prejudice from any of the alleged irregularities. For
    example, the appellants complain about Landmarks failure to complete an
    undertaking to produce the Black Book, a book apparently containing vehicle
    valuations. In fact, Landmark did respond to the undertaking, indicating that
    it could not locate its copy of the Black Book. Moreover, the book is
    published and available to the public. The appellants could have obtained a Black
    Book of their own had they seen any value in doing so.

(iv)

The finding that the Mercedes-Benz was sold at a commercially reasonable
    price

[26]

The
    appellants also challenge the trial judges finding that there was no evidence
    Landmark sold the Mercedes-Benz at less than a commercially reasonable price.
    The only evidence suggesting the $9,000 sale price was less than a commercially
    reasonable price came from Mr. Blazys. He testified that he had placed an
    advertisement for the Mercedes-Benz in a magazine and received an offer of
    $15,000. According to Mr. Blazys, he referred the purchaser to Landmark and was
    later told by the purchaser that Landmark had refused to sell the vehicle for
    $15,000. Mr. Blazys could not recall the name of this third party or offer any
    information that might assist in identifying the third party. Nor could he
    offer any evidence to support his assertion that he had placed an advertisement
    for the Mercedes-Benz in a magazine. Not surprisingly, the trial judge found
    this part of Mr. Blazys evidence incapable of belief.

[27]

Setting
    aside Mr. Blazys rejected evidence, there was no evidence that $9,000 was not
    a commercially reasonable price for the Mercedes-Benz. Landmark also points out
    that under the terms of the lease, it was entitled to sell the vehicle at a wholesale
    price. Landmark was not obligated to sell the vehicle at a retail price.

V

conclusion

[28]

The
    appeal is dismissed. Costs of the appeal to Landmark in the amount of $10,000,
    inclusive of disbursements and all applicable taxes.

RELEASED: DD  JUL 22 2015

Doherty J.A.

Sarah Pepall J.A.

Grant Huscroft J.A.