COURT OF APPEAL FOR ONTARIO

CITATION: Density Group
    Limited v. HK Hotels LLC, 2014 ONCA 605

DATE: 20140822

DOCKET: C55944

Feldman, MacFarland and Epstein JJ.A.

BETWEEN

Density Group Limited

Plaintiff

(Appellant)

and

HK Hotels LLC and
Henry
    Kallan

Defendants

(
Respondent
)

Martin Teplitsky, Q.C., for the appellant

Martin J. Henderson, for the respondent

Heard: February 12, 2014

On appeal from the judgment of Justice Janet Wilson of the
    Superior Court of Justice, dated July 20, 2012, with reasons reported at 2012
    ONSC 3294, 5 B.L.R. (5
th
) 131.

MacFarland J.A.:

[1]

This appeal arises from a business dispute between the parties who were
    working together to pursue the development of a hotel project. After a falling
    out, HK Hotels, LLC (HKH) terminated its relationship with the appellant, Density
    Group Ltd. (Density), and Density brought an action against HKH and the respondent,
    Henry Kallan, the companys president and owner.

[2]

Mr. Kallan, in turn, brought a motion for summary judgment to have the
    action against him dismissed. The motion was successful: the breach of
    fiduciary duty and the inducing breach of trust, breach of fiduciary duty and
    breach of contract claims were all dismissed.

[3]

The motion judge was guided in her decision by
Combined Air
    Mechanical Services Inc. v. Flesch
, 2011 ONCA 764, 108 O.R. (3d) 1. Since
    her 2012 decision, of course, the law has changed with the release of the
    Supreme Court of Canadas decision in
Hryniak v. Mauldin
, 2014 SCC 7,
    366 D.L.R. (4
th
) 641, which greatly expands the use of the summary
    judgment process for the resolution of civil disputes.

[4]

For the reasons that follow, I would dismiss Densitys appeal. In my
    view, the summary judgment process was available to the motion judge and was
    appropriately used by her on the record before her.

A.

THE FACTS

[5]

HKH, a New York corporation, operates a number of boutique hotels in
    New York City.  As noted above, Mr. Kallan is the companys owner and
    president.  He is also a director of the company. He is regarded as an
    innovative and successful hotelier.

[6]

Sean Majerovic is the principal and only director of Density, an
    Ontario corporation. He is the son of Peter Majer. Mr. Majer and Mr. Kallan had
    known one another for some time before the events giving rise to this action
    and had been involved in a business venture together.

[7]

In late 2006, the Board of Directors of Exhibition Place (the Board)
    issued a Request for Expressions of Interest, seeking proposals for the development
    of a hotel at Exhibition Place in Toronto.

[8]

Mr. Majer and Mr. Kallan discussed the matter and it was decided that
    HKH would respond to the Boards request and submit an expression of interest.
    It was also decided that Density would work with HKH.

[9]

Density and HKH entered into a letter of understanding (LOU), dated
    April 30, 2007. The LOU defines the nature of the relationship between the two
    corporations with respect to the hotel project. It describes the parties as
    Co-Venturers and states that the Co-Venturers are proceeding with the intent
    that each shall have a 50% ownership interest in the Project.

[10]

The
    LOU provides that, unless otherwise agreed, costs and expenses associated with
    the pre-development and city approval phases of the project are to be shared on
    a 50/50 basis. The LOU also contemplates that, within three months of the
    execution of the LOU, the parties will enter into more formal contracts to
    define their respective roles.

[11]

While
    Density and HKH extended the deadline for entering into the specified
    agreements to February 15, 2008, they never did enter into any of the
    agreements contemplated by the LOU.

[12]

They
    did, however, enter into an agency agreement, dated May 11, 2007 (the Agency
    Agreement). It appoints Density as HKHs agent with the authority to bind HKH
    in relation to matters specified in the LOU.  In the Agency Agreement, HKH
    acknowledges that the agreement does not create the relationship of partner or
    fiduciary between the Agent and [HKH].

[13]

In
    practice, Density conducted much of the day-to-day business for the project,
    while HKH lent its name and experience in the hotel business to the venture.

[14]

As
    agreed, an expression of interest was submitted to the Board in the early part
    of 2007 in HKHs name alone.

[15]

By
    letter dated October 16, 2007, the Board confirmed to HKH that its proposal had
    been selected as the preferred proposal. In her reasons, the motion judge
    refers to the letter as the First Letter of Intent.
[1]

[16]

The
    First Letter of Intent, which makes no mention of Density, sets out the
    framework for negotiating a formal letter of intent.  It specifies that the
    parties to the letter of intent will be the Board and HKH. It provides that a
    Canadian company wholly-owned by HKH may also be a party to the formal letter
    of intent but any other parties must be approved by the Board:

[T]he introduction of any new parties whether at the stage of
    signing the LOI, or as co-venturer in the development and operation of the
    hotel, or as tenant to the ground lease, or at any other time, shall constitute
    an assignment and be subject to the approval of the Board.

[17]

The
    Board and HKH entered into a formal letter of intent in July 2008 (the Second
    LOI). The Second LOI, dated July 9, 2008, was prepared by a lawyer retained by
    Density and signed by Mr. Majerovic on behalf of HKH. It confirms the parties
    intention to negotiate a land lease and ancillary agreements necessary to bring
    the hotel project to fruition.

[18]

Although
    the Second LOI is addressed only to HKH, Densitys name appears in paras. 4 and
    26 of the document. Paragraph 4 deals with the granting of a lease and
    specifies that the Board and the City will grant a ground lease to a
    corporation (the Tenant) owned by HKH and Density Group Limited. Paragraph
    26, which deals with assignment and subletting, provides that HKH shall not
    assign its rights under this LOI other than to a Canadian company owned by HKH
    and Density Group Limited without the consent of the Board.

[19]

Following
    the execution of the Second LOI, the relationship between the parties began to
    fray. The motion judge summarized the parties explanations as to why their
    relationship deteriorated:

[44]    It is the position of Density that the relationship
    between Density and [HKH] soured when an unrelated restaurant project in New
    York City fell apart in the fall of 2008. Density alleges that Kallan
    improperly ended the Hotel Project as a consequence of the failure of the
    restaurant project.  It is this conduct that Density argues constitutes bad
    faith and improper dealings on the part of Kallan, underpinning in part their
    assertion of personal liability owed by Kallan.

[45]    [HKH] asserts that the relationship ended abruptly when
    the comptroller for [HKH], Tom Mangan, requested on January 15, 2009 the
    back-up documentation and bank documentation for the project expenses incurred
    by [HKH] to complete the year-end financial statements, and learned for the first
    time that Density had been paying itself unauthorized project management fees.

[20]

The
    unrelated restaurant project involved Mr. Kallan and Mr. Majer. Density was not
    involved. As a result of a dispute between the two men over the project, Mr.
    Majer ultimately withdrew from the restaurant venture in the fall of 2008.

[21]

The
    two men disagree about the degree of animosity that resulted from Mr. Majers
    withdrawal. Mr. Majer describes the situation as acrimonious and says that
    litigation lawyers were retained to deal with the dispute. Mr. Kallan says
    counsel was only retained to formalize Mr. Majers withdrawal from the project.
    Ultimately, Mr. Majers money was returned to him and Mr. Kallan continued with
    the restaurant project.

[22]

In
    mid-January 2009, Mr. Kallan asked his comptroller, Tom Mangan, to review the
    expenses of the Toronto hotel project. As a result of that exercise, Mr.
    Kallan learned that Density had been paying itself project management fees. Until
    then, Mr. Kallan had understood that HKH and Density were each contributing one
    half of the expenses incurred for the project in accordance with the LOU.

[23]

None
    of the documentation submitted to HKH to this point in time, disclosed that
    Density was paying itself fees. The budgets produced were generic in nature:
    they referenced project management fees but did not reveal the identity of
    Density as the payee. It was not until the expense review began in January 2009
    that Mr. Mangan requested back-up documentation, including copies of bank
    records. The documentation revealed that the budget claim item for project
    management fees represented monies going to Density.

[24]

Upon
    discovering Densitys payment of project management fees to itself, HKH took
    action.

[25]

By
    letter dated March 4, 2009 signed by Mr. Kallan, HKH informed Density that
    their relationship was at an end since Density had paid itself as much as
    $199,000 in project management fees without authority or approval to do so.
    Moreover, its financial contribution to the project was minimal.

[26]

In
    the meantime, Mr. Kallan spoke to the CEO of the Board, Ms. Dianne Young, and
    advised her that HKH wished to continue the hotel project without any further
    involvement from Density.

[27]

Eventually,
    in the fall of 2009, a third letter of intent was concluded between HKH and the
    Board in terms identical to the Second LOI except that the references to
    Density were deleted.

[28]

Density
    commenced its action against HKH and Mr. Kallan in April 2009. It made breach
    of contract, breach of trust and breach of fiduciary duty claims against HKH.
    As noted above, it made breach of fiduciary duty and inducing breach of trust,
    breach of fiduciary duty and breach of contract claims against Mr. Kallan.

[29]

Underlying
    the fiduciary and trust claims was Densitys assertion that the Second LOI was
    a trust asset and that HKH held the asset in trust for the joint venture (i.e.
    for Density and HKH). Density alleged that removing its name from the Second
    LOI amounted to misappropriation of a trust asset.

[30]

It
    claimed that HKHs breach of trust and fiduciary duty was inspired, induced
    and caused by Kallan for his own benefit and not for [HKHs] benefit.

[31]

Density
    also alleged that Mr. Kallan excluded Density from the hotel project through
    his improper actions, thus breaching the joint venture agreement between
    Density and HKH. Density contended that, in doing so, he was not acting in
    HKHs best interests.

B.

MOTION JUDGES DECISION

[32]

The
    motion judge articulated the question before her at para. 5 of her reasons: was
    there was a genuine issue requiring a trial as to whether Mr. Kallan was
    personally liable to Density on the facts of the case?

[33]

She
    began her analysis by making a number of important factual findings, setting
    out a number of assumptions and noting what was not to be decided on the
    summary judgment motion.

[34]

First,
    she noted that it was not for her to decide definitively at this juncture what
    the nature of the relationship was between Density and [HKH] and the
    obligations, if any, that may flow from the relationship between the two
    corporations: para. 29. Counsel agreed that was an issue for trial.

[35]

Second,
    she assumed, for the purposes of the motion, that the LOU and the Agency
    Agreement continued to apply and [were] relevant in defining the relationships
    between the parties: para. 34.

[36]

Third,
    she found as a fact that [the] assertion by Density of a link between the
    Hotel Project and a failed restaurant project was clearly disproved in the
    evidence before [her]: para. 48. She did not accept that Mr. Kallans actions
    with respect to the Hotel Project were a retaliation or reaction to the
    aborted restaurant transactions in New York: para. 46.

[37]

Fourth,
    the motion judge found, at para. 66, that payment of the project management
    fees to Density was never discussed or agreed upon and that the precipitating event
    causing a breakdown in the relationship between Density and [HKH] was the
    discovery that Sean Majerovic had improperly caused payment to Density of
    unauthorized project management fees of some $199,000.00: para. 67.

[38]

Fifth,
    she concluded that when Mr. Kallan met with Board CEO Dianne Young in February
    2009 and asked for Densitys name to be deleted from the Second LOI, he was
    acting on behalf of HKH and in its best interests in accordance with his
    obligations as a director of HKH: para. 115.

[39]

The
    motion judge then turned to the first claim against Mr. Kallan  that he
    personally owed a fiduciary duty to Density. She concluded that there was no
    genuine issue requiring a trial:

[118]  There are no disputed facts that require a closer review
    and involve findings of credibility that should be considered in a trial. The
    facts that Density purports to rely on were either proven to be totally
    unreliable (the allegations of the restaurant deal colouring the actions of
    Kallan) or were not supported by any evidence (the allegation of peculiar
    vulnerability of Density).

[119]  Applying the [
Frame v. Smith, infra
] and [
Alberta
    v. Elder Advocates of Alberta Society, infra
] analysis as well as the full
    appreciation test, I conclude that there is no genuine issue for trial
    regarding whether Kallan individually
prima facie
owed a fiduciary
    duty to Density based upon the various arguments raised by Density.  There is
    no such duty [on] the facts of this case.

[40]

Next,
    she considered whether there was a genuine issue for trial that the Second LOI
    could be characterized as a trust asset owned by Density and HKH.

[41]

The
    motion judge set out Densitys position: as Density and [HKH] were arguably in
    a fiduciary relationship in a co-venture relationship, any agreement entered
    into on behalf of the parties including the Second LOI, becomes a trust asset.
    That trust in turn imposes fiduciary duties upon directors of the co-venturer
    corporations and personal liability upon directors if an agreement is dealt
    with contrary to the interests of one of the co-venturer corporations: para.
    138.

[42]

The
    motion judge was alive to the fact that the nature of the relationship between
    HKH and Density was not before her. However, as mentioned above, she made an
    assumption for the purposes of the motion that the terms of the LOU bound
    Density and [HKH] together as co-venturers or joint venturers and that it [was]
    arguable that a fiduciary duty existed between Density and [HKH]: para. 134.

[43]

Nonetheless,
    she concluded that being a party to a joint venture with fiduciary duties owed
    between joint venturers  does not mean that any agreement is a trust asset,
    unless the requirements of what constitutes a trust have been met: para. 140.

[44]

The
    motion judge then reviewed the law of trusts, the agreements between Density
    and HKH, and the surrounding circumstances to assess whether the Second LOI was
    impressed by a trust. She concluded a trial was not necessary to determine that
    issue: para. 170. There was no evidence that the Second LOI was a trust asset.
    And if the Second LOI was not a trust asset, summary judgment should be
    granted: para. 171.

[45]

In
    the event she was wrong that there was no triable issue as to whether the
    Second LOI was a trust asset, she considered Densitys argument that there was
    a triable issue as to whether Mr. Kallan was personally liable for inducing
    breach of contract and breach of fiduciary duty based on his conduct.

[46]

The
    motion judge concluded there was no genuine issue as to whether Mr. Kallan was
    personally liable to Density for inducing breach of contract or breach of
    fiduciary duty: para. 192. She found that there was no independent tortious or
    unlawful conduct by Mr. Kallan and he was entitled to rely on the principle in
Said
    v. Butt
, [1920] 3 K.B. 497: para. 191. She noted that for an officer or
    director to rely on that principle the director must be acting
bona fide
in the best interests of the corporation and cannot have individually engaged
    in tortious or unlawful conduct that would lead to the director having a
    separate legal identity from the corporation: para. 186.

[47]

In
    summary, the motion judge concluded that the issues of Mr. Kallans personal
    liability could and should be decided on the motion and that a trial was not
    required.

C.

ISSUES ON APPEAL

[48]

Density
    challenges the motion judges decision on the basis that she made a number of
    factual errors that tainted her analysis.

[49]

Density
    submits that the motion judge also erred in failing to make an important
    factual finding  whether Density has an interest in the Second LOI as a
    co-owner.

[50]

Density
    further contends that the motion judge erred in describing and applying the
Said
    v. Butt
defence.

[51]

Finally,
    Density submits that resolving the claims against Mr. Kallan on a motion for
    summary judgment was not appropriate in this case, particularly since the case
    against HKH will go to trial in any event.

[52]

I
    will address each of these points. First, however, it is helpful to review the
    principles to be applied in reviewing a decision on a summary judgment motion.

D.

ANALYSIS

(1)

SUMMARY JUDGMENT UNDER
HRYNIAK

[53]

As
    noted above, the Supreme Courts decision in
Hryniak
greatly expands
    the use of the summary judgment process for the resolution of civil disputes.

[54]

The
    decision makes it clear that the new fact-finding powers available to judges
    under Rules 20.04 (2.1) and (2.2) are discretionary and presumptively
    available: para. 45.

[55]

The
    Court directs that deference is owed to motion judges on summary judgment motions:

[81] In my view, absent an error of law, the exercise of powers
    under the new summary judgment rule attracts deference.  When the motion judge
    exercises her new fact-finding powers under Rule 20.04(2.1) and determines
    whether there is a genuine issue requiring a trial, this 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 [citation omitted].

[82] Similarly, the question of whether it is in the interest
    of justice for the motion judge to exercise the new fact-finding powers
    provided by Rule 20.04(2.1) depends on the relative evidence available at the
    summary judgment motion and at trial, the nature, size, complexity and cost of
    the dispute and other contextual factors.  Such a decision is also a question
    of mixed fact and law which attracts deference.

[83] Provided that it is not against the interest of justice,
    a motion judges decision to exercise the new powers is discretionary. Thus,
    unless the motion judge misdirected herself, or came to a decision that is so
    clearly wrong that it resulted in an injustice, her decision should not be
    disturbed.

[56]

The
    Supreme Court recognizes at para. 60 of its decision that it may not be in the
    interest of justice to grant summary judgment in favour of a single defendant
    if the matter must still go to trial:

[I]f some of the claims against some of the parties will
    proceed to trial in any event, it may not be in the interest of justice to use
    the new fact-finding powers to grant summary judgment against a single
    defendant.

[57]

On
    the other hand, summary judgment may be appropriate even if some claims must
    still proceed to trial, as was the case in
Hryniak
itself. The Court
    recognizes that the resolution of an important claim against a key party could
    significantly advance access to justice: para. 60.

[58]

The
    Court also notes that [p]rompt judicial resolution of legal disputes allows
    individuals to get on with their lives: para. 25.

[59]

Here,
    Density argues that it was not in the interest of justice to determine Mr.
    Kallans personal liability on the motion because, regardless of the outcome of
    the motion, a trial is still necessary to determine virtually the same issues
    between Density and HKH.

[60]

While
    that is true, it is not the only consideration. The motion judges decision
    resolved Mr. Kallans personal liability. The record discloses that he is an
    active, experienced businessman involved in the hotel industry. I am sure that
    to him, having his personal liability determined at this stage is preferable to
    waiting perhaps years for a trial to resolve an action that was commenced more
    than five years ago. The threat of a lawsuit continuing to hang over his head,
    where damages claimed against him are well in excess of $10,000,000.00, may
    well have an impact on his ability to carry on his business affairs.

[61]

Accordingly,
    it is clear that absent an error of law, deference is owed to the motion
    judges determination to proceed by way of summary judgment and her findings
    made on the record before her.

(2)

FACTUAL ERRORS

[62]

Density
    alleges that the motion judge made a number of factual errors. In particular,
    Density takes issue with the following findings:

1.

Mr. Majer, Mr.
    Majerovic and Density did not respond to Mr. Kallans March 4
th
letter, which terminated the relationship between Density and HKH.

2.

Densitys bank
    statements were never voluntarily produced.

3.

The audit
    conducted by Tom Mangan was routine.

4.

Mr. Kallan was
    unaware of Densitys inclusion in the Second LOI until his meeting with Ms.  Young
    in February 2009.

5.

The payment of
    project management fees to Density was unauthorized.

6.

Density did not
    plead dishonest conduct by Mr. Kallan.

7.

Mr. Kallan acted
    in the best interests of HKH in terminating its relationship with Density and
    removing Densitys name from the Second LOI.

[63]

The
    question is whether she did err and, if so, whether any of the errors are
    material.

[64]

In
    oral argument, counsel for Density submitted that five findings were necessary
    to support Mr. Kallans personal liability. Noticeably, this list of findings
    and the list of alleged factual errors above do not directly correspond to one
    another.

[65]

According
    to Density, the first finding necessary to ground its case is a finding that
    there was a joint venture between Density and HKH. As noted above, the motion
    judge made this assumption for the purposes of the motion.

[66]

The
    second necessary finding is that the LOU provided for the co-ownership of
    assets. As previously mentioned, the motion judge assumed for the purposes of
    the motion that the LOU continued to apply.

[67]

The
    third finding necessary to support its claims against Mr. Kallan is a finding
    that there was a fiduciary relationship between Density and HKH. Again, the
    motion judge assumed for the purposes of the motion that there was a fiduciary
    relationship between the two corporations.

[68]

The
    fourth finding necessary to support its theory of the case, says Density, is a
    finding that the Second LOI was a trust asset of the joint venture. As
    mentioned above, the motion judge concluded that was not the case.

[69]

The
    fifth necessary finding, according to Density, is a finding that the removal of
    Densitys name from the Second LOI was a misappropriation of a trust asset.
    Given that the motion judge found that the Second LOI was not a trust asset, it
    followed that removal of Densitys name from the letter of intent did not
    amount to a misappropriation of a trust asset.

[70]

As
    discussed below, I agree that the motion judge made factual errors but, in my
    view, none of the errors, either individually or together, are material.

(a)

Failure to Respond to the March 4
th
Letter

[71]

The
    motion judge noted that Mr. Majer, Mr. Majerovic and Density did not respond to
    the March 4, 2009 letter from HKH terminating its relationship with Density:
    para. 86.

[72]

In
    fact, the record discloses that Mr. Majerovic did respond to Mr. Kallans
    letter in two emails, one dated March 9, 2009 and the other dated March 13,
    2009.

[73]

Counsel
    for Density submits that the motion judges error on this point, as well as
    other factual errors, tainted her view of Mr. Majerovics and Mr. Majers
    credibility. Density does not submit that the error undermined any particular
    legal conclusion.

[74]

Counsel
    for Mr. Kallan conceded in oral argument that the motion judge erred in finding
    that there was no response to the March 4
th
letter but contends that
    the contents of the two emails from Mr. Majerovic do not assist Densitys position.

[75]

In
    his emails, Mr. Majerovic says that Mr. Kallan was aware of the fees and that
    [n]o attempts were made to conceal fees. In particular, Mr. Majerovic points
    to the fact that the fees were documented in the budgets provided to, and
    approved by, Mr. Kallan. He also says that the LOU attributed a project
    development fee in favour of Density.

[76]

The
    motion judge clearly rejected these explanations:

[62] First, in an email dated March 2, 2009 Sean Majerovic
    provides the explanation that development/ project management fees were as per
    project budgets provided in advance to [HKH].

[63] I find based upon the record before me that although
    clearly projected budgets provided to [HKH] included an entry for project
    management fees, there was never any indication to whom project management fees
    were being paid. Kallan confirmed that he understood all expenses, including
    project management fees, were payable to third parties. No document ever
    confirms that the project management fees were being paid to Density, until the
    Expenses as of January 2009 document was produced at the request of [HKHs]
    comptroller.

...

[65]  Finally, in Sean Majerovics affidavit sworn
    September 26, 2011 he stated that he needed the money to live on, and was not
    going to do this work for free. Whatever Sean Majerovics needs may have been,
    there is no indication anywhere of any agreement in writing, or any disclosure
    to [HKH] until February 2009 that Sean was to be paid for alleged services
    rendered.

[77]

In
    light of these findings, it is difficult to see how the motion judges decision
    would have been different had she considered the emails and their contents.
    Thus, I find that her error is not material.

(b)

Densitys bank statements were never voluntarily produced

[78]

The
    funds for the hotel project flowed through a bank account opened and controlled
    by Density. At para. 69 of her reasons, the motion judge noted that Densitys
    bank statements for the account were never voluntarily produced.

[79]

She
    also commented on Densitys failure to disclose bank documentation until
    ordered to do so:

[167]  [HKH] had no access to the bank documentation, and in
    fact was denied access in spite of requests for bank documentation from the
    comptroller to prepare the year-end financial statements of [HKH].
The bank
    documentation was only disclosed after this litigation commenced pursuant to an
    order of this court.
As outlined in the facts, [HKH] alleges
    improprieties by Density with respect to the bank funds both before and after
    the dispute between the parties. [Emphasis added.]

[80]

The
    motion judge noted that the bank statements revealed regular payments to
    Density in the amount of $5,000 both before and after the March 4
th
termination letter: paras. 71 and 74.

[81]

Mr.
    Majerovic provided evidence about the bank statements. In his affidavit, he
    states that he provided bank statements to Mr. Mangan, HKHs comptroller, in
    February 2009. Appended to his affidavit is his March 2, 2009 email to Mr.
    Mangan. The email simply says attached after Mr. Mangans statement that I
    dont understand why we never received any copies of bank statements, after so
    many requests; they are the most important thing I need.

[82]

Mr.
    Mangan responded to Mr. Majerovics assertion that the bank statements were
    provided by email on March 2, 2009.  In his affidavit he states:

I agree that the email dated March 2, 2009 was exchanged with
    me. Nevertheless, and as I have already explained above, although Density
    finally did provide some supporting documentation in response to my requests,
    [HKH] did not receive a complete copy of bank statements from Density.

[83]

And,
    earlier in his affidavit, he states:

It is my recollection that I encountered some difficulty in
    obtaining the documents that I was looking for from Density. Eventually, I did
    receive some supporting invoices and bank statements, which I reviewed.  I do
    recall that although I received these materials, [HKH] continued to await full
    production of bank statements that were never provided.

[84]

In
    his cross-examination on his affidavit, Mr. Mangan was asked how long it took
    Mr. Majer to get [him] all the documents, from the time [he] asked for them for
    the audit until the time [he] got them?  He answered that he got about half
    of what [he] needed by March, mid-March, roughly.

[85]

There
    was also evidence before the motion judge relating to a motion in this
    litigation heard by Master Sproat on March 26, 2010. The Master ordered Density
    1) to produce bank statements for the period July 8, 2009 to the date of
    motion, and 2) to provide authorization permitting the defendants to request
    bank documentation and information relating to the account directly from the
    bank.

[86]

In
    assessing costs, Master Sproat noted that, while the motion was on consent,
    the relief was agreed to only over the course of the hearing.  She

concluded the defendants were entitled to
    costs having been put to the task of obtaining production.

[87]

Density
    submits that, prior to the termination of its relationship with HKH, it
    voluntarily produced its bank statements to Mr. Kallan and notes that Master
    Sproats order provides for the production of bank statements post-termination
    of the joint venture.

[88]

Paragraph
    12 of Mr. Kallans factum states:

12. Density continued to conceal evidence about the full extent
    of its misappropriation of project monies provided by HKH. The bank statements
    for the Toronto project account, which was controlled by Density, were never
    voluntarily produced to HKH. On March 26, 2010, after a motion was brought in
    this action, Master Sproat made an order requiring Density to produce an
    authorization to HKH to obtain the Density bank statements for the hotel
    project.

[89]

While
    on the evidence before her the motion judge may have gone too far in saying
    that bank statements for the hotel project were
never
voluntarily
    produced, there is evidence that:

·

Density was slow to produce the bank records when they were
    requested in January 2009;

·

Density did not produce all its bank records prior to the March
    4th termination letter;

·

Master Sproat ordered that the post-termination bank records be
    produced;

·

Master Sproat ordered Density to provide an authorization to the
    defendants to permit them to obtain bank statements and information relating to
    the account; and,

·

while the motion before Master Sproat was on consent, the relief
    was only agreed to over the course of the hearing.

[90]

In
    light of this evidence, I am not persuaded that the motion judges comment that
    the bank statements were never voluntarily produced, is material.

(c)

The audit was routine

[91]

Density
    takes issue with the motion judges comment that the 2009 audit conducted by
    Mr. Mangan was routine:

[53] The documentary trail could not be clearer. The accountant
    for [HKH] made
routine inquiries
concerning the production of back up
    documentation for the expenses for the Hotel Project. On January 15, 2009, he
    began making such requests in order to prepare the year end statements for
    [HKH].  [Emphasis added.]

[92]

Evidence
    was provided about the nature of the audit.

[93]

In
    his affidavit, Mr. Kallan refers to Mr. Mangans request for records as part
    of his annual reconciliation and auditing process for [HKHs] 2008 fiscal
    year.

[94]

Under
    cross-examination, Mr. Mangan said that the 2009 audit was done at Mr. Kallans
    request.  Mr. Mangan was asked whether Mr. Kallan explained why he wanted the
    bank statements and other documentation.  Mr. Mangan replied: No, I mean, I
    just assumed it was regular business procedure.

[95]

In
    his affidavit, Mr. Mangan comments on the fact that no audit was conducted for
    the year ending 2007:

First, [HKH] had a different comptroller at the beginning of
    2008 . Second, it is my recollection that [HKH] had far fewer expenses
    incurred to date at the beginning of 2008, as opposed to the beginning of
    2009.  There was a greater need as of early 2009 to reconcile the expenses on this
    project.

[96]

Mr.
    Mangan also denies, that he told Mr. Majer that there was no year-end audit
    being performed and that Mr. Kallan was simply looking for an excuse to end the
    parties business dealings.

[97]

Density
    submits that it is significant that Mr. Kallan ordered the audit on the heels
    of the dispute between him and Mr. Majer over their New York restaurant
    venture. Counsel for Density also says the motion judge overlooked evidence
    that no audit was done in the prior year and evidence about what else was going
    on at the time of the audit  for instance, Mr. Kallan was failing to attend
    meetings with, or make payments to, Density.

[98]

Underlying
    these submissions is the suggestion that the audit was motivated by Mr.
    Kallans desire to retaliate against Mr. Majer for his withdrawal from their
    New York restaurant venture.

[99]

The
    motion judge rejected that suggestion based on the evidence before her:

[47]   Majer relies in his affidavit on hearsay
    evidence from three individuals to confirm this link between the failed
    restaurant venture in New York and the Hotel Project. Counsel for [HKH]
    contacted these three individuals, and they conclusively denied under oath the
    contents and assertions contained in Majers affidavit dated September 26, 2011
    linking the restaurant failure to any dealings in this matter.

[48]   I find as a fact that this assertion by
    Density of a link between the Hotel Project and a failed restaurant project was
    clearly disproved in the evidence before me, in affidavits and
    cross-examinations, when counsel for [HKH] contacted the individuals and
    obtained sworn evidence from them.

[49]  The credibility of Peter Majer was
    significantly undermined with respect to this issue.

[100]

In my view, it
    was open to the motion judge to make the finding that there was no link between
    the restaurant project and the hotel project.

[101]

In particular, I
    note the hearsay evidence referred to by the motion judge in para. 47 of her
    reasons. In Mr. Majers affidavit, he swore that three individuals had
    independently told him that Mr. Kallan was ending Densitys involvement in the
    hotel project because he was angry about Mr. Majers withdrawal from the
    restaurant venture. However, each of the three individuals provided sworn
    statements denying they had made such a statement.

[102]

In conclusion, I
    reject Densitys submission that the motion judge erred in characterizing the
    audit as routine.  As outlined, there was evidence to support the conclusions
    that  the audit was done in the normal course and that Mr. Kallan did not act
    out of revenge for Mr. Majers withdrawal from the New York restaurant venture.

(d)

Mr. Kallan was unaware of Densitys inclusion in the Second LOI

[103]

Density takes
    issue with the motion judges comments about Mr. Kallans discovery of
    references to Density in the Second LOI:

[79]    At the meeting with the [Board] on February 26, 2009,
    Kallan became aware that Density was specified in the Second Letter of Intent
    in paragraphs 4 and 26 as co-owner of the tenant corporation.  Kallans
    comptroller had not been provided with a copy of the Second Letter of Intent
    dated July 9, 2008, although he had asked for a copy from Sean Majerovic.

[81]    When Kallan became aware that Density was referred to
    in the Second Letter of Intent with the [Board], he sought to remove the name of
    Density from paragraphs 4 and 26 of that document.

...

[164]  It appears that Kallan saw the Second LOI at the meeting
    with the [Board] on February 26, 2009 for the first time, and that his
    comptroller did not have a copy of this document. The Second LOI may have been
    sent to Kallan by email.

[104]

Mr. Majer
    provided evidence that Mr. Kallan had received a draft copy of the Second LOI
    prior to his meeting with Ms.  Young at the end of February 2009. In his
    affidavit, Mr. Majer swears that Mr. Kallan was provided with a draft of the
    Second LOI by email dated March 2, 2008, in which  Density is referenced. He
    says Mr. Kallan also received a copy of the signed document.

[105]

Mr. Kallan
    acknowledges in his reply affidavit that he may have received the drafts in
    question but, if he did, there was nothing to alert him to the fact Density had
    been inserted into the lengthy agreement.

[106]

Mr. Kallans
    evidence on his cross-examination in relation to his knowledge about Densitys
    specific inclusion in the Second LOI is relatively straightforward.  He was
    asked:

224.                      Q.      Mr.
    Kallan, could you answer my question? What drafts or copies of the LOI did you
    receive prior to February 2009?

Mr. Martin:   Can
    you answer that question here today?

The
    Deponent:       Prior to February, I dont remember specifically what drafts I
    received.

By Mr.
    Teplitsky:

225.                      Q.      But
    did you receive some?

A.      I
    really remember only this                                     letter.

226.                      Q.      So
    you do not recall ever                                        receiving any
    letter of intent, any                                     letter of intent
    agreement?

A.      Not
    specifically.

227.                      Q.      What
    do you mean not                                          specifically? You
    dont have a                                         specific memory?

A. I
    dont have a specific memory                                     receiving a
    draft of an LOI.

Mr. Martin:   Apart
    from the one he has made reference to.

By Mr.
    Teplitsky:

228.                      Q.      So
    you are not denying that                                    you received them?

Mr.
    Martin:   No.

[107]

There follows a
    discussion between counsel and the witness which is generally unhelpful.  The
    questioning continued:

231.                      Q.      Are you
    denying that you received --

A.      I am
    not denying anything. Im saying that its possible that the drafts arrived,
    but I did not pay attention maybe to the fact that I relied completely on Sean
    to represent me as my agent with the city, and I had complete confidence in him
    to deliver the LOI, according to this draft signed by Dianne Young and Sean,
    which was an outline of the relationship for the future.
[2]

[108]

In its factum,
    Density describes Mr. Kallans position as evolving: Mr. Kallan never said he
    was unaware that Density was included in the Second LOI until discovery in
    October 2012 and, ultimately, Mr. Kallan abandoned this position as it was
    exposed as a contrivance on cross-examination. Density suggests that Mr.
    Kallan obviously felt he had to make the LOI assertion to justify his ex-post
    facto claim that Density was only [HKHs] agent.

[109]

Density faults
    the motion judge for not attempting to reconcile her finding that Mr. Kallan
    may have received a copy of the Second LOI with her finding that he only saw
    the document for the first time at the February 26, 2009 meeting with Ms.
    Young.

[110]

As to the
    significance of the error, Densitys factum states:

It is not clear from Justice Wilsons Reasons, what bearing, if
    any, her finding that Henry was unaware of the inclusion had on her decision to
    grant the motion.

[111]

In response to
    these submissions, Mr. Kallans factum suggests that he received the draft
    copies of the Second LOI but did not look at them closely:

While drafts of the second LOI were emailed to Kallan in March
    of 2008, they were sent as attachments, and nothing in the covering emails
    alerted Kallan to the change adding the reference to Density as a shareholder
    in the proposed tenant corporation.  [References omitted.] Kallans evidence
    was that he did not deny, but had no recollection of receiving the emails. They
    contain no indication on their face of the reference to Density as a
    shareholder.

[112]

Counsel for Mr.
    Kallan submits that the motion judge did not make a definitive finding as to
    when Mr. Kallan first became aware of the references to Density in the Second
    LOI.  In any event, her finding is not dispositive of any issue affecting the
    parties rights, and, in particular, any cause of action against Mr. Kallan
    personally.

[113]

In my view, the
    motion judges comments about Mr. Kallans discovery of the inclusion of
    Density in the Second LOI ought to be read in light of her comments at paras.
    112 and 163 of her reasons:

[112]   Kallan was at all times behind the scenes, and as I
    read the lengthy file, not paying close attention to matters, relying entirely
    on Density and Sean Majerovic.

[163]  Density was in charge of all negotiations with the City,
    and the Second LOI was prepared on Densitys instructions.

[114]

In other words, the
    motion judge seemed to accept that Mr. Kallan was not paying close attention to
    matters as they unfolded. Thus, in para. 164 she said that it appear[ed] that
    he first saw the Second LOI on February 26, 2009, although she acknowledged
    that the document may have been sent to him by email.

[115]

I agree that
    this does not amount to a definitive finding. However, it was unnecessary to
    make a definitive finding as I fail to see the relevance of  when Mr. Kallan
    first discovered Densitys inclusion in the Second LOI to the question before
    the motion judge; namely, Mr. Kallans personal liability. I note that Density
    itself questions what bearing, if any, her finding that Henry was unaware of
    the inclusion had on her decision to grant the motion.

(e)

No agreement to pay management fees

[116]

Whether the
    payment of project management fees to Density was authorized was a significant
    issue before the motion judge.

[117]

She concluded
    that the fees were not authorized:

[66]    I am satisfied based on the record before me that there
    was never any discussion or agreement that Density would be paid management
    fees. The diverse and conflicting explanations given by Sean and Peter are to
    be given little or no weight as they are clearly contradicted by the
    documentary trail. There is no genuine issue requiring a trial about these
    findings.

[118]

Both Mr. Majer
    and Mr. Majerovic provided justifications for the payment of the fees.

[119]

In his affidavit
    sworn September 26, 2011, Mr. Majerovic discusses the management fee issue as
    follows:

7.       Density
    disclosed in the Project budgets it sent to Henry that a management fee was
    being charged. It was also discussed with Henry at the outset.

8.       Project
    manager was one of the roles that Density was going to perform which it did.
    The work done by Density pre and post bid was extensive  it was a full time
    job. I wasnt going to do the work for free.

[120]

Mr. Majerovic
    was not cross-examined on these statements.

[121]

In Mr. Majers
    examination for discovery, he described the fees paid to Mr. Majerovic as
    activated based on advances.

[122]

In contrast, Mr.
    Kallan denies that Densitys payment of project management fees to itself was
    authorized. Under cross-examination, he stated that he probably read the
    budgets provided to him but there was never a reference to  Density
    collecting management fees.  He did not ask any questions because the budgets
    could have been referring to all the consultants and because there was no need
    since he trusted Mr. Majer and Mr. Majerovic.

[123]

Density submits
    that there are a number of problems with the motion judges finding that the
    fees were not authorized. First, the finding was unnecessary and, given that
    there was conflicting evidence on this point, it was inappropriate to resolve
    the issue on a motion for summary judgment. Moreover, the motion judge failed
    to mention Mr. Majerovics statement that the fees were discussed and agreed to
    at the outset, or the fact that he was not cross-examined on his sworn
    statement.

[124]

In oral
    argument, Densitys counsel also took great issue with the motion judges
    various comments that the documentary trail was clear and that Densitys
    evidence was inconsistent with it. According to counsel, inferences favourable
    to Mr. Majer and Mr. Majerovic can be drawn from the paper trail but the motion
    judge ignored those inferences.

[125]

In response,
    counsel for Mr. Kallan submits that while Mr. Majerovics evidence is that the
    fees were disclosed to Mr. Kallan, Mr. Majerovic never says that Mr. Kallan
agreed
that Density could charge management fees during the
    pre-construction phase of the project.  None of the management fee invoices had
    Densitys name on them.  Even after the March 4
th
termination
    letter, Density continued to pay itself fees out of the joint ventures bank
    account.

[126]

I do not accept
    that it was unnecessary to decide whether the fees were authorized or that it
    was inappropriate to decide the issue given the conflicting evidence.

[127]

The project
    management fee issue was of utmost relevance. Two theories were presented to
    the motion judge: 1) Mr. Kallan acted to achieve personal revenge without
    regard to the interests of the corporation; or 2) he acted in accordance with
    his duties as an officer of HKH to protect the corporations interest by ending
    all dealings with Density after the unauthorized fees were discovered.

[128]

The question of
    good faith was clearly in play because the
Said v. Butt
defence is
    limited to actions done in good faith within the scope of an individuals
    authority.

[129]

Rule 20.4 (2.1)
    permits a motion judge to weigh evidence, evaluate the credibility of a
    deponent and draw reasonable inferences from the evidence in determining
    whether there is a genuine issue requiring a trial, unless it is in the
    interest of justice for such powers to be exercised only at a trial.  Courts
    are reminded that absent an error of law, the exercise of powers under the new
    summary judgment rule attracts deference:
Hryniak
, at para. 81.

[130]

The motion judge
    considered the explanations provided by Mr. Majer and Mr. Majerovic for the
    payment of the fees. She also had the budget sheets before her, which described
    the reported outlay as management fees without any reference to Densitys
    name. Only when Mr. Mangan asked for back-up documentation in early 2009 was it
    revealed that Density was paying itself these monies.

[131]

In my view, this
    evidence coupled with the LOU between Density and HKH, which provides that the
    costs and expenses associated with the pre-development and city approval phases
    of the project were to be shared 50/50, renders the motion judges finding a safe
    one.

(f)

Density failed to plead dishonest conduct by Mr. Kallan

[132]

In the course of
    her reasons, the motion judge commented, at para. 107, that Density does not
    allege in its pleading any allegation of fraud, deceit or dishonesty in
    Kallans conduct.

[133]

In fact,
    Densitys
Amended
Statement of Claim includes a
    number of allegations of dishonesty on the part of Mr. Kallan.  For example:

14.1   At the time [HKH] informed Density
    that [HKH] was taking the position that it could proceed unilaterally with the
    development, Density was unaware that Kallan had misrepresented to the Board
    the nature of Densitys role in the development.  Kallan lied to the Board by
    advising it that Density was merely an agent of HK as opposed to informing the
    Board as to the truth which was that Density was in fact [HKHs] joint venture
    partner in the development. As a consequence of Kallans misrepresentation to
    the Board, the Board agreed to revise the LOI to remove Densitys name from the
    LOI.  Density did not become aware of Kallans misrepresentation and its
    exclusion from the LOI until August of 2009. In making the misrepresentation to
    the Board, Kallan was not acting in [HKHs] best interests nor in good faith.

Kallans Inducement
    of [HKHs] Breach of Trust and

Fiduciary Duty and
    His Own Breach of Fiduciary Duty

16.1   Density states [HKHs] breach of
    trust and fiduciary duty was inspired, induced and caused by Kallan for his own
    benefit and not for [HKHs] benefit. Density further states that Kallans
    inducement of [HKH] to commit these unlawful acts was dishonest and constitutes
    [tortious] conduct independent of [HKHs] own [tortious] conduct for which he
    is personally liable. Density states that in committing this [tortious]
    conduct, Kallan breached  his fiduciary duty of good faith and loyalty to
    Density and as such, is liable to it for breach of fiduciary duty.
[Underlining in original.]

[134]

While not a
    model pleading, there are pleas of lying, dishonesty and misrepresentation in
    the
Amended
Statement of Claim, although they
    appear to have been added as an afterthought just before the motion for summary
    judgment was heard.  Nevertheless, the pleas are there.

[135]

Density submits
    that the motion judges error may have contributed to her finding that Mr.
    Kallans conduct was not dishonest.

[136]

I note that
    para. 107 of the motion judges reasons is found under the heading Is there a
prima
    facie
fiduciary duty owed by Kallan to Density?  It is in the context of
    her analysis of that question that she made the puzzling comment that Density
    had not pleaded fraud, deceit or dishonesty against Mr. Kallan personally.

[137]

It is unclear
    how her comment is relevant to her analysis of the question whether Mr. Kallan
    owed Density a fiduciary duty.  It is also difficult to understand why she made
    the comment she did, given the express pleading of dishonesty in the
Amended
Statement of Claim. It may be that the motion
    judge was only referring to para. 12 of the
Amended
Statement of Claim, since that is the paragraph that deals with Kallans
    Personal Fiduciary Obligations and that is the subject of her para. 107.
    Paragraph 12 of the
Amended
Statement of Claim
    does not specifically allege dishonest conduct but rather makes a general
    allegation of breach of fiduciary duty.

[138]

Notwithstanding the
    possibly erroneous comment about Densitys pleading, it is clear the motion
    judge was alive to the allegation that Mr. Kallan had acted dishonestly.

[139]

For instance,
    just two paragraphs after the impugned comment, the motion judge referenced
    Densitys allegation that Mr. Kallan had breached duties owed to Density by
    meeting with representatives of the Board to have Densitys name removed from
    the Second LOI.

[140]

She also referred,
    at para. 83, to the allegation that Mr. Kallan misappropriated a trust asset:

[83]    It is the actions resulting in the removal of Density
    from the Third Letter of Intent, that Density alleges is a
misappropriation
    of a trust asset
by Kallan in breach of his fiduciary duties to Density
    giving rise to potential personal liability. [Emphasis added.]

[141]

And, at para.
    191, the motion judge commented:

[191]  There are no facts before me of fraud or dishonesty by
    [HKH] in seeking to have Densitys name removed from the Second LOI in the
    circumstances of this case.  Kallan was taking steps on behalf of, and in the
    interests of, [HKH] in an attempt to salvage a potential opportunity for the
    company.  The actions by the [HKH] cannot be held to be fraudulent or
    dishonest. There was no independent [tortious] or unlawful conduct by Kallan
    and he is entitled to rely on the
Said v. Butt
principle.

[142]

Given her
    awareness of these allegations of dishonesty against Mr. Kallan, I am not
    convinced her comment at para. 107 contributed to her finding that Mr. Kallans
    conduct was not dishonest.

(g)

Kallan acted in HKHs best interests

[143]

In a number of
    places in her reasons, the motion judge found that Mr. Kallan acted in HKHs
    best interests in cutting its ties with Density and in seeking to have the
    references to Density in the Second LOI removed.

[144]

For instance, in
    answering the question, is there a
prima facie
duty of care owed by
    Kallan to Density?, the motion judge made the following finding:

[115]  I find that when Kallan went to Toronto to meet with the
    [Board] and sought to delete Densitys name from the Second Letter of Intent,
he
    was acting on behalf of [HKH] in its best interests in accordance with his
    obligations as a director to that corporation. Clearly, continuing the
    relationship with Density in the circumstances was not in [HKHs] interest.
[Emphasis added.]

[145]

In discussing whether
    there was proof that the HKHs actions were fraudulent or dishonest, the
    motion judge stated:

[190]  It was clear when Kallan discovered that Sean Majerovic
    had been paying unauthorized project management fees to Density, that this was
    the end of any co-venture relationship. In response, Kallan promptly, on behalf
    of [HKH], attended a meeting with the Board to ascertain whether the Board
    would continue with the Hotel Project without the involvement of Density.
Kallan
    took these steps to preserve [HKHs] interests and reputation. In the highly
    competitive commercial world, Kallans conduct was prudent and could not on any
    view of the facts be characterized as unlawful or wrong.
Any understanding
    or convention which may have existed between the parties was brought to an
    abrupt end when the financial disclosure was finally made by Density.

[191]  There are no facts before me of fraud or dishonesty by
    [HKH] in seeking to have Densitys name removed from the Second LOI in the
    circumstances of this case.  Kallan was taking steps on behalf of, and in the
    interests of, [HKH] in an attempt to salvage a potential opportunity for the
    company. The actions by [HKH] cannot be held to be fraudulent or dishonest.
    There was no independent [tortious] or unlawful conduct by Kallan and he is
    entitled to rely upon the
Said v. Butt
principle.

[146]

Density submits
    that the motion judge erred in concluding that Mr. Kallan was acting in HKHs
    best interests in excluding Density from the Second LOI.  She ought, instead,
    to have found that his conduct in lying to the Board so as to misappropriate
    the Second LOI, was dishonest.  As a matter of law, an officer who acts
    dishonestly cannot be said to be acting in good faith or in the best interests
    of the officers company.

[147]

Counsel for Mr.
    Kallan characterizes the situation differently. He says that HKH acted through
    Mr. Kallan to terminate any and all contractual relationships between it and
    Density once the company confirmed that Density had taken improper fees. That
    included terminating the Agency Agreement and any joint venture, whether lapsed
    or still existing. Whether termination of the agreements results in any
    liability being imposed on HKH is a matter that will be dealt with at trial.

[148]

Among other
    evidence that supports this view of things is Mr. Kallans March 4
th
termination letter. In it, he explains his reasons for cutting ties between the
    two companies:

... [I]t is clear that you have been paying Density project
    management fees of at least $154,000.00 (and possibly as much as $199,000)
    despite having no authority or approval to do so.  Considering that the other
    invoiced amounts on your list total approximately $234,000, the outrageousness
    of your charging such project management fees while not fully paying third
    party vendors should be readily apparent.  Aside from those improper project
    management fees, Densitys financial contribution to the potential project is
    minimal.  In short, it is clear that I have contributed almost all of the
    requested funds for this potential project (aside from the project management
    fees improperly paid to Density) and that you have not properly accounted for
    the expenditure of my contributions. In light of the foregoing and your general
    failure to act in good faith and in a forthright and trustworthy manner, I have
    no further interest in having you as a partner of HK Hotels, LLC (HK) or
    participant in any manner whatsoever in this potential project.

[149]

Mr. Kallan also
    points out in his letter that the LOU had expired, and he rescinds and
    terminates the Agency Agreement.

[150]

Density offers a
    different explanation for Mr. Kallans actions. However, the difficulty for
    Density is that the motion judge rejected its theory of the case against Mr.
    Kallan.

[151]

She found that
    the fees Density paid to itself were not authorized and that the reason for the
    rupture between HKH and Density was the discovery that Density paid itself the
    unauthorized fees. She also explicitly rejected the notion that Mr. Kallan had
    excluded Density from the hotel project, out of spite. As previously discussed,
    it was open to the motion judge to make these findings

[152]

Another
    significant finding supporting her conclusion that Mr. Kallan acted in good
    faith, is the motion judges finding that there was no misappropriation of a
    trust asset since there was no trust asset to misappropriate. In my view, that
    finding was also available to her.

[153]

There is no reason
    to interfere with the motion judges finding that there was no evidence to
    support Densitys submission that the Second LOI is impressed with a trust.
    Without evidence of intention to create a trust, either express or implied,
    there is no trust. As explained in
Maralta Oil Co. Ltd. v. Industrial
    Incomes Ltd.
, (1964) 46 D.L.R. (2d) 511, at p. 514 (Alta. Supreme Court - Appellate
    Division), affd [1968] S.C.R. 822, it is necessary that the intention to
    create a trust can be clearly inferred from the language used or the
    surrounding circumstances.

[154]

There is nothing
    in the language of the LOU or the Agency Agreement that would suggest any intention
    to create a trust.  Similarly, none of the versions of the LOI suggest in their
    language that they are trust assets belonging to the joint venture. Nor do
    the surrounding circumstances suggest an intention to create a trust.

[155]

In conclusion,
    there is no reason to interfere with the motion judges findings that 1) Mr.
    Kallan did not act out of revenge, 2) the fees Density paid to itself were
    unauthorized, 3) Mr. Kallans reason for terminating the relationship between
    HKH and Density was to protect HKHs interests after the unauthorized fees were
    discovered, 4) the Second LOI was not a trust asset, and 5) in going to the
    Board and seeking to have the references to Density removed from the agreement
    between the Board and HKH, there was no dishonesty or misappropriation of a
    trust asset. These findings all support the motion judges more general
    conclusion that Mr. Kallan acted in good faith and in HKHs best interests in
    ending the arrangement  with Density.

(h)

Failure to make finding re: Densitys interest in the Second LOI

[156]

Finally, I turn
    to a different type of error. Density submits that the motion judge erred in
    failing to make an important finding - whether Density had an interest in the
    Second LOI as a co-owner.

[157]

Mr. Kallan
    rejects Densitys submission, saying the motion judge properly dealt with the
    issues as presented to her.

[158]

I am not
    convinced that the motion judge misunderstood Densitys position. Having
    reviewed Densitys factum on the summary judgment motion, it is clear that
    Density characterized its interest in the Second LOI as a trust asset. For
    instance, in its factum Density states:

32. As referenced above, Density submits that it had an
    interest in the LOI and that [HKH] was holding that interest in trust given its
    control over the LOI. As for when an express trust may arise, the Courts have
    held that:

·

In the absence of a formal trust documentation, the Court must
    consider the circumstances and evidence as to what the parties intended, what
    was actually agreed to and how the parties conducted themselves to determine if
    the requisite clear intention to create a trust is present;

·

It is clear that no technical language is required to create a
    trust....;

·

A trust can be construed from conduct alone. The intention to
    create a trust can be inferred from the language used, along with the
    surrounding circumstances;

·

An implied trust can refer to an express trust where the
    language creating the trust was not clear... but in the end the court
    interpreted it as imposing a trust obligation;

·

An implied trust is merely a species of express trust  Since
    Equity looks at the intent rather than at the form, no special form of words is
    necessary for the creation of a valid trust; and,

·

The exceptions to privity of contract, being agency, trust,
    assignment or statute, may be explicitly embodied in the contract, or simply
    implied in it. [Citations omitted.]

[159]

I reference this
    paragraph at length, as it illustrates that the motion judge understood and
    responded to the arguments put to her.
It was argued that Density had an interest in the Second LOI and the nature of
    that interest was a trust asset
.
As discussed above, the motion judge
    addressed the question whether the Second LOI was a trust asset at length, and
    concluded it was not.

[160]

Thus, in my
    view, there is no merit to this ground of appeal.

(i)

Conclusion re: factual errors

[161]

In my view, none
    of the factual errors made by the motion judge are material. It cannot be said
    that, either individually or collectively, they might reasonably have affected
    the result.  I would not give effect to this ground of appeal.

(3)

OTHER ERRORS

[162]

I now turn to
    the other issues raised by Density on this appeal, beginning with a brief
    review of three important cases.

[163]

In this courts
    decision in
ScotiaMcLeod Inc. v. Peoples Jewellers Ltd.
(1995), 26
    O.R. (3d) 481, leave to appeal refused, [1996] S.C.C.A. No. 40, Finlayson J.A.
    discussed situations in which directors may be held personally liable for
    actions ostensibly carried out in the corporate name.  I think it is helpful to
    review the principles set out at pp. 490-91:

The decided cases in which employees and officers of companies
    have been found personally liable for actions ostensibly carried out under a
    corporate name are fact- specific. In the absence of findings of fraud, deceit,
    dishonesty or want of authority on the part of employees or officers, they are
    also rare. Those cases in which the corporate veil has been pierced usually
    involve transactions where the use of the corporate structure was a sham from
    the outset or was an afterthought to a deal which had gone sour.  There is also
    a considerable body of case-law wherein injured parties to actions for breach
    of contract have attempted to extend liability to the principals of the company
    by pleading that the that the principals were privy to the tort of inducing
    breach of contract between the company and the plaintiff: see
Ontario Store
    Fixtures Inc. v. Mmmuffins Inc.
(1989), 70 O.R. (2d) 42 (H.C.J.), and the
    cases referred to therein. Additionally there have been attempts by injured parties
    to attach liability to the principals of failed businesses through insolvency
    litigation. In every case, however, the facts giving rise to personal liability
    were specifically pleaded. Absent allegations which fit within the categories
    described above, officers or employees of limited companies are protected from
    personal liability unless it can be shown that their actions are themselves
    tortious or exhibit a separate identity or interest from that of the company so
    as to make the act or conduct complained of their own.

[164]

In
ADGA
    Systems International Ltd v. Valcom Ltd.
(1999), 43 O.R. (3d) 101, leave
    to appeal refused, [1999] S.C.C.A. 124, Carthy J.A. had occasion to review the
    law in relation to when an officer or director may be held personally liable
    even though purportedly acting bona fide in the best interests of the
    corporation.  At p. 107 he stated:

The consistent line of authority in Canada holds simply that,
    in all events, officers, directors and employees of corporations are
    responsible for their tortious conduct even though that conduct was directed in
    a
bona fide
manner to the best interests of the company, always
    subject to the
Said v. Butt
exception.

[165]

The so-called
Said
    v. Butt exception
 is a longstanding rule dating back to a 1920 decision
    by the Court of Kings Bench. As that decision comes into play into this case,
    it is worth briefly reviewing it.

[166]

The facts of the
    case are as follows. Mr. Said wanted to be present at the opening night of a
    play but knew that if he ordered a ticket in his own name his request would be
    refused because had made certain serious and unfounded charges against some
    members of the theatres staff. He therefore obtained a ticket through a friend
    but when he showed up at the theatre with the ticket, he was spotted by the
    theatres managing director, Sir Alfred Butt, and was denied admission. Mr.
    Said sued Sir Butt on the basis that he wrongfully and maliciously procured the
    company to break a contract made by the company in selling him a ticket to the
    performance.

[167]

McCardie J.
    concluded that there was no contract upon which Mr. Said could have sued the
    theatre. Nonetheless, the trial judge went on to consider whether if the
    plaintiff had established that there was a valid contract between the theatre
    and himself, the claim against Mr. Butt personally could have succeeded.

[168]

The trial judge
    concluded, at p. 506, that:

if a servant acting bona fide within the scope of his
    authority procures or causes the breach of a contract between his employer and
    a third person, he does not thereby become liable to an action of tort at the
    suit of the person whose contract has thereby been broken.

[169]

He also
    clarified that nothing in his decision should be taken as being inconsistent
    with the rule that a director or a servant who actually takes part in or
    actually authorizes such torts as assault, trespass to property, nuisance, or
    the like may be liable in damages as a joint participant in such a tortious
    wrong: p. 506.

[170]

I will now
    consider whether the motion judge erred in dismissing the four claims against
    Mr. Kallan.

(a)     Breach of Fiduciary Duty

[171]

In her analysis
    of the fiduciary duty claim against Mr. Kallan, the motion judge referred to a
    number of leading Supreme Court of Canada decisions on fiduciary duties:
Hodgkinson
    v. Simms
, [1994] 3 S.C.R. 377, which cites the Courts earlier decision in
Frame v. Smith
, [1987] 2 S.C.R. 99, and
Alberta v. Elder Advocates
    of Alberta Society
, 2011 SCC 24, 2 S.C.R. 261.

[172]

In particular,
    she highlighted the principle from
Hodgkinson v. Simms
that to
    establish a fiduciary duty outside the established fiduciary categories what
    is required is evidence of a mutual understanding that one party has
    relinquished its own self-interest and agreed to act solely on behalf of the
    other party: pp. 409-10.

[173]

She also referred
    to the requirements set out in
Elder Advocates
for establishing a
    fiduciary relationship outside a recognized category. First, there must be
    evidence that the alleged fiduciary undertook to act in the best interests of
    the beneficiary. Second, it must be shown that the alleged fiduciary has a
    discretionary power over a defined person or class of persons.  Third, there
    must be evidence that the alleged fiduciarys power may affect the legal or
    substantial practical interests of the beneficiary:
Elder Advocates
,
    paras. 30 to 34.

[174]

The motion judge
    concluded that there was no evidence of a mutual understanding that Mr. Kallan
    had relinquished his own self-interest and agreed to act in Densitys best
    interests:

[114] As the allegation of fiduciary duty by Density is outside
    the recognized categories where such a duty exists, what is required is
    evidence of a mutual understanding that one party has relinquished its own
    self-interest and agreed to act solely on behalf of the other party.
There
    is no evidence presented by Density that could possibly support such a finding
    in this case.
[Emphasis added.]

[175]

Before reviewing
    the evidence before the motion judge, it is important to examine the claims as
    pleaded by Density.

[176]

Densitys
Amended
Statement of Claim articulates the fiduciary
    duty claim against Mr. Kallan as follows:

Kallans
    Personal Fiduciary Obligations

12.     Density states that it also reposed its complete trust
    and confidence in Kallan and was vulnerable to the exercise of his discretion
    and power.
Densitys trust and confidence in Kallan was a
    result of the Majerovic familys long standing friendship dating back to at
    least the 1908s [sic] and business relationship with Kallan, which began in or
    around 2007 with a restaurant business venture in New York City, but for which,
    and to Kallans knowledge, Density would not have entered into the joint venture.
    Kallan was a trusted adviser to Density.  It was also Kallans reputation (in
    addition to the [HKH] name), and personal assets that  Density and the Board
    were relying on in order for the development to be feasible.  Density was
    vulnerable to the exercise of his discretion and power which Kallan, in breach
    of his fiduciary duty, ultimately used against Density as set out herein.
Density therefore states that, at all material times, Kallan owed it a
    fiduciary duty. [Emphasis in original.]

[177]

I note that
    Density does not specifically plead that there was a mutual understanding that
    Mr. Kallan had relinquished his self-interest and agreed to act in the best
    interests of Density. Instead, the pleading focuses on reasons Density
    allegedly placed its trust and confidence in Mr. Kallan.

[178]

In assessing
    whether there was a mutual understanding that Mr. Kallan had relinquished his
    self-interest and agreed to act in the best interests of Density, the motion
    judge took into account that, as a director of HKH, Mr. Kallan owed a fiduciary
    duty to that corporation.

[179]

Another
    important factor the motion judge noted was Densitys role in the hotel
    project. She found that it was clear that Density acted as HKHs agent in the
    discussions and negotiations with the Board.

[180]

The motion judge
    also referenced para. 4 of the Agency Agreement:

[26] Of particular note, and very relevant to the question of
    whether Kallan owes fiduciary duties to Density is paragraph 4 of the Agency
    Agreement which confirms that
[HKH] acknowledges that
    this agreement does not create the relationship of partner or fiduciary between
    the Agent [Density] and [HKH].
[Underlining in original.]

[181]

Other factors
    she considered on the question of vulnerability were HKHs reputation and the
    prior business dealings between the parties:

[116]  The stellar reputation of [HKH] for the management of
    quality hotels in New York City was the reason that [HKH] was chosen for the
    Hotel Project. Reliance by the City and the Board upon [HKHs] established
    reputation in granting the LOI does not create a peculiar vulnerability on the
    part of Density or a fiduciary duty owed by Kallan personally. As well, any
    prior business dealings between the parties do not create vulnerability or a
    fiduciary obligation.

[182]

I note that the
    reference to prior business dealings is a reference to the New York City
    restaurant venture that Mr. Majer says lead to acrimonious dealings between the
    parties. On the one hand, the venture is said to be the reason for the dispute
    between Density and HKH and, on the other, it is said to be one of the reasons
    Density reposed its trust in Mr. Kallan.

[183]

The motion judge
    concluded that the allegations in the pleading, of vulnerability and reliance
    by Density, are not born out in the primary role that Density played with the
    City and Board in all negotiations: para. 117. In other words, HKH relied on
    Density as its agent, rather than the other way around.

[184]

Ultimately, the
    motion judge found that there is no genuine issue for trial regarding whether
    Kallan individually
prima facie
owed a fiduciary duty to Density based
    upon the various arguments raised by Density: para. 119.

[185]

On this record, I
    see no reason to interfere with that conclusion. I agree with the motion judge
    that the evidence does not point to the existence of a mutual understanding
    that Mr. Kallan undertook to act in the best interests of Density.

(b)     Inducing Breach of Contract

[186]

The first of the
    three tort claims against Mr. Kallan is the claim for inducing breach of
    contract. This claim is set out at para. 15 of Densitys
Amended
Statement of Claim. It states that Mr. Kallan did not act in good faith
    in causing the alleged breach:

Kallans
    Inducement of [HKHs] Breach of Contract

15.     Shortly thereafter, [HKH] notified Density that it was
    going to continue with development without its involvement. [HKHs] purported
    reason for excluding Density was that Density had allegedly breached its
    obligations under the Joint Venture Agreement. Density in fact did not breach
    any of its obligations under the Joint Venture Agreement. [HKHs] true reason
    for excluding Density was that it believed that it could manage the development
    without Density and did not want to continue to pay Densitys agreed upon
    management fees and share the future profits generated from the development. As
    well, Kallan was angry at the Majerovic family because of an unrelated business
    dispute. He decided to exclude Density from the joint venture to obtain
    revenge.
Kallan intended to cause [HKH] to breach the
    Joint Venture Agreement and did cause the breach which breach damaged Density.
    There was no justification for his conduct. He was not acting in the best
    interests of [HKH] despite the fact that Mr. Kallan did not want [HKH] to
    continue to pay Densitys fees and have Density to share in the profits, within
    the scope of his authority as an officer and Director of [HKH], nor in good
    faith.
[Underlining in original.]

[187]

Thus, it is
    claimed that the reason Mr. Kallan caused the alleged breach of contract was so
    HKH would no longer have to pay fees to, or share profits with, Density. It is
    also alleged he was seeking personal revenge.

[188]

In assessing the
    inducing breach of contract claim, the key question is whether the
Said v.
    Butt
defence is available to Mr. Kallan on the facts of this case. As
    outlined above, the
Said v. Butt
principle affords a defence to an officer,
    director or employee who causes his or her company to breach an agreement,
    provided the individual acts
bona fide
within his or her authority. It
    is not available as a defence to an individual who engages in dishonest conduct
    in inducing breach of contact.

[189]

The motion judge
    concluded the defence was available to Mr. Kallan: [t]here was no independent
    [tortious] or unlawful conduct by Kallan and he [was] entitled to rely upon the
Said v. Butt
principle: para. 191.

[190]

Density
    disagrees. In its submission, the principle in
Said v. Butt
is not
    available to Mr. Kallan as a defence to the claim of inducing breach of
    contract because he acted dishonestly and not in the best interests of HKH. It
    is alleged that Mr. Kallan misappropriated the Second LOI, which the
Amended
Statement of Claim describes as a trust asset
    owned by Density and HKH. In particular, Density points to the fact Mr. Kallan
    met with Board CEO Dianne Young without advising Density, allegedly made
    misrepresentations to her about Densitys role in the hotel project and asked
    that Densitys name be removed from the Second LOI.

[191]

As discussed
    above, the motion judge made the necessary finding that Mr. Kallan acted
    honestly and in good faith in taking steps to protect HKHs interests after
    discovering that Density had paid itself unauthorized fees. I would not
    interfere with this finding.

[192]

That finding
    disposes of Densitys submission that Mr. Kallan was not entitled to rely on
Said
    v. Butt
as a defence to the inducing breach of contract claim because he
    acted dishonestly and not in HKHs best interests.

(c)     Inducing Breach of Trust
    and Breach of Fiduciary Duty

[193]

Density takes
    issue with the motion judges analysis of the inducing breach of trust and
    breach of fiduciary duty claims.

[194]

Density suggests
    that the motion judge erred in not squarely dealing with the inducing breach of
    fiduciary duty claim by conflating that claim with the inducing breach of trust
    claim as a result of her incorrect understanding that Densitys claim for
    breach of fiduciary duty depended on a finding of a breach of trust.

[195]

Density submits
    that had the motion judge turned her mind to the fiduciary duty issue, she
    would have found that HKHs actions were inconsistent with its fiduciary
    obligations. In particular, it points to Mr. Kallans meeting with Ms. Young
    and his request to the Board that Densitys name be deleted from the Second LOI.

[196]

In my view, the
    motion judge understood the nature of the claims before her. Given Densitys
    pleadings and submissions, it is understandable why she dealt with the two tort
    claims together.

[197]

The
Amended
Statement of Claim sets out the inducing breach
    of trust and inducing fiduciary duty claims together. These claims must be read
    in light of another part of the claim that sets out the breach of trust and
    fiduciary duty claims against HKH:

[HKHs]
    Breach of Trust and Fiduciary Duty

16. Density states that at all
    material times, [HKH] held the LOI and the HK Hotel name in trust for the
    joint venture (the Trust Assets).  Density further states that in breach of
    its duties as trustee and in breach of its contractual obligations (the Joint
    Venture Agreement), [HKH] has misappropriated the Trust Assets for its own
    use.  Density also states that the misappropriation was a breach of the
    fiduciary
duty
that it
and Kallan
owed to
    Density.

Kallans
    Inducement of [HKHs] Breach of Trust and

Fiduciary
    Duty and His Own Breach of Fiduciary Duty

16.1   Density states [HKHs] breach of
    trust and fiduciary duty was inspired, induced and caused by Kallan for his own
    benefit and not [HKHs] benefit.  Density further states that Kallans
    inducement of [HKH] to commit these unlawful acts was dishonest and constitutes
    [tortious] conduct independent of [HKHs] own [tortious] conduct for which he
    is personally liable. Density states that in committing this [tortious]
    conduct, Kallan breached his fiduciary duty of good faith and loyalty to
    Density and as such, is liable to it for breach of fiduciary duty.

[198]

After setting
    out its claims against Mr. Kallan, Density pleads its claims for relief as
    follows:

Relief Sought

17.     In furtherance of its claim for breach of trust and breach
    of fiduciary duty, Density seeks a declaration confirming that [HKH] holds the
    Trust Assets in trust for the joint venture members under an express, implied
    or constructive trust.

18.     In the alternative to Densitys claim for a declaration
    that the Trust Assets are held in trust by [HKH] (and its claim for an
    equitable accounting), Density claims damages from [HKH] for breach of trust
    and breach of contract, damages
from Kallan personally
    for inducing [HKHs] breach of contract, breach of trust and breach of
    fiduciary duty,
and from both Defendants for breach of fiduciary duty.
    [Underlining in original.]

[199]

Thus, as pleaded
    by Density, the breach of trust and breach of fiduciary duty claims are closely
    intertwined. In particular, misappropriation of Trust Assets underpins both
    claims.

[200]

In her reasons,
    the motion judge summarized Densitys submissions:

[138]      The argument is as follows: as
    Density and [HKH] were arguably in a fiduciary relationship in a co-venture
    relationship, any agreement entered into on behalf of the parties including the
    Second LOI, becomes a trust asset. This trust in turn imposes fiduciary duties
    upon directors of the co-venturer corporations and personal liability upon
    directors if an agreement is dealt with contrary to the interests of one of the
    co-venturer corporations.

[139]      Density argues that Kallan
    induced a breach of contract, or a breach of fiduciary duty owed by [HKH] to
    Density, when he negotiated with the [Board] to remove Density from the Letter
    of Intent, and therefore is personally liable for these actions.

[201]

Her summary
    reflects the submissions made to her. For instance, Densitys factum on the
    summary judgment motion states that [t]he premise of Densitys claim against
    Mr. Kallan is that [HKH] was holding Densitys interest in the [Second] LOI
    (the Joint Venture asset) in trust for Density. This position is elaborated
    on throughout Densitys factum. Later in the factum, Density states that [i]f
    there was a fiduciary duty and/or express trust, the exclusion of Density from
    the [Second] LOI (the trust asset) constitutes a breach.

[202]

Densitys factum
    before this court also groups the claims for inducing breach of trust and
    breach of fiduciary duty together. For example:

49.  As a trustee, [HKH] owed a duty of good faith to Density.
    Density submits that [HKH] breached that duty and the trust when it excluded
    Density from the LOI.  Henry is personally liable for assisting in [HKHs]
    breach of fiduciary and trust duties if the following elements exist: (a) a fiduciary
    or trust duty owed by [HKH] (b) [HKHs] dishonest breach of that duty (c) Henry
    must have had actual knowledge of both [HKHs] fiduciary relationship or trust
    and its dishonest conduct, and (d) Henry must have assisted in [HKHs]
    dishonest conduct. [References omitted.]

[203]

Given the manner
    in which the case was pleaded and argued, the motion judge approached the
    inducing breach of trust and breach of fiduciary duty claims by considering
    whether there was a genuine issue for trial that the Second LOI could be
    characterized as a trust asset owned by Density and HKH.

[204]

The motion judge
    concluded that the Second LOI was not a trust asset. As discussed, there is no
    reason to interfere with that conclusion. And, I agree with the motion judge
    that if the Second LOI is not a trust asset, the claim for inducing breach of
    trust must necessarily fail.

[205]

The motion
    judges finding that the Second LOI is not a trust asset also disposes of the
    inducing breach of fiduciary duty claim as it was articulated by Density. To
    quote Densitys
Amended
Statement of Claim, HKH is
    alleged to have misappropriated Trust Assets for its own use, which
    misappropriation was a breach of the fiduciary duty it owed to Density. HKHs
    breach of trust and fiduciary duty was said to be inspired, induced and
    caused by Mr. Kallan.

[206]

While that
    disposes of the three tort claims against Mr. Kallan, for the sake of
    completeness I will address Densitys submission that the motion judge
    misunderstood the application of the principle in
Said v. Butt
.

[207]

In the event she
    was wrong in concluding that there was no triable issue as to whether the
    Second LOI was a trust asset, the motion judge went on to consider whether
    there is a triable issue that Kallan may be found personally liable for
    inducing [HKH] to breach its fiduciary duty or its contract based upon his
    conduct: para. 172. She concluded that there was no independent [tortious] or
    unlawful conduct by Kallan and he is entitled to rely upon the
Said v. Butt
principle: para. 191.

[208]

On my reading of
    the motion judges reasons, she appears to have understood that the
Said v.
    Butt
defence applied to both the inducing breach of contract and the
    inducing breach of fiduciary duty claims.

[209]

As I read the case
    law provided by counsel,
Said v. Butt
is not available as a defence to
    an inducing breach of fiduciary duty claim.  However, given the motion judges
    findings, any error in her interpretation of the case law is immaterial.

(d)     Conclusion

[210]

I conclude that
    Density has not pointed to any error in the motion judges reasons that
    provides a basis for overturning her decision.

E.

MOTION TO INTRODUCE FRESH EVIDENCE

[211]

Density seeks to
    introduce fresh evidence on this appeal. The evidence consists of statements by
    Ms. Young from a related proceeding.

[212]

Density submits
    that certain evidence given by Ms. Young when cross-examined on an affidavit
    she filed in a related proceeding contradicts evidence given by her when she
    was cross-examined on her affidavit filed in this proceeding. In particular,
    Density says that when cross-examined in this proceeding, Ms. Young stated that
    she did not discuss the Second LOI with Mr. Kallan. However, Density says that
    when she was cross-examined in the related proceeding, she stated that Mr.
    Kallan knew about Densitys inclusion in the Second LOI and that she had
    discussed it with him prior to the inclusion.

[213]

Density submits
    that Ms. Youngs evidence bears directly on an important issue in that Mr.
    Kallan asserts that Density was not a co-owner of the LOI and that assertion
    rests in part on his allegation that he was unaware of Densitys inclusion in
    the Second LOI. Density also reiterates its submission, dealt with above, that
    the motion judge erred in finding that Mr. Kallan only became aware of
    Densitys inclusion in the Second LOI after the March 4
th
termination letter.

[214]

In response,
    counsel for Mr. Kallan submits that the fresh evidence is not admissible on the
    basis that it does not bear upon a potentially decisive issue, it does not bear
    the meaning ascribed to it by Density, it cannot reasonably be expected to have
    affected the result and it will not likely be conclusive of an issue in the
    appeal.

[215]

In my view,
    Density has not satisfied the test to admit fresh evidence. While the evidence in
    question was not available at the time the summary judgment motion was argued,
    the interpretation Density puts on Ms. Youngs evidence is misplaced and would,
    in no event, effect the result.

[216]

Density has
    filed a five-page excerpt from an examination of Ms. Young in an application by
    the City of Toronto and Princes Gates Hotel Limited Partnership against Density
    related to the validity of a notice Density registered on title of the
    Exhibition Place property.

[217]

Looking at the
    evidence in its proper context, there is, in my view, no contradiction between
    Ms. Youngs 2012 examination and her 2013 examination on the related
    proceeding.

[218]

Density relies
    on Ms. Youngs answers to two questions in the 2013 examination in which she
    refers to what Mr. Kallan wanted or asked for:

80  Q. So are you saying that when you wrote the LOI when it
    was created, you didnt write it, that Density was going to be an owner of the
    lease, you are saying that wasnt your understanding that they were going to be
    an owner, even though it says it there? That is what I am just trying to get my
    head around.

A.  All Im saying is that at that point of writing the lease,
    it could be Density. It could have been somebody else.
I
    mean, right now what Henry was saying is he wanted to have Density stated in
    here
but, you know, we all thought that at some point in the future when
    we were looking at the lease, when we were down to the lease and detailed terms
    on assignments and partners, or joint venturers, or anything, we would
    certainly be getting from HKH some further details of what that meant.

83  Q. You mean Density was kind of pre-approved?

A.  In that sense, yes.
Henry was asking
    for it and we decided to agree with him
, although the language was put
    in, as you know, with respect to  we wanted to add some terms with respect to
    Henrys [continued operation of it] [Emphasis added.]

[219]

In making these
    statements, Ms. Young was not speaking of Mr. Kallans actual knowledge or
    of any specific conversation she had with him.  Instead she was speaking of her
    own belief about what Mr. Kallan must have desired because she believed that
    Density, as his agent, was doing what Mr. Kallan must have wanted done when
    Density amended the Second LOI.

[220]

That Ms. Young
    only dealt with Sean Majerovic throughout the period when the Second LOI was
    being negotiated is clear. In her affidavit sworn June 5, 2013 in the related
    proceeding she states:

19.     Throughout this process of reviewing various drafts to
    the LOI, I am not aware of the Board having any communications directly with
    Kallan as to his thoughts about the wording of the LOI. All negotiations were
    conducted through Majerovic as the local agent of [HKH].

[221]

In my view, the
    evidence simply does not support the assertion that there is a contradiction in
    Ms. Youngs evidence as to her discussions about the Second LOI with Mr.
    Kallan.

[222]

Even if there were
    a contradiction, it would be nothing more than a prior inconsistent statement
    for the motion judge to make of it what she would.  Ms. Youngs evidence
    on the point is, in any event, quite irrelevant to the issue of Mr. Kallans
    personal liability.

[223]

As I have
    already discussed, the motion judge did not make a definitive finding as to
    when Mr. Kallan first discovered Densitys inclusion in the Second LOI. She did
    not need to do so. The issue before the motion judge was Mr. Kallans personal
    liability and when he might have seen the Second LOI for the first time is not
    definitive of that issue.

[224]

For these
    reasons I would dismiss the motion to admit the fresh evidence.

F.

ORDER

[225]

The appeal is
    dismissed. Costs payable to the respondent are fixed in the amount of $25,000
    (including HST and disbursements)  the figure to which counsel agreed.

Released: August 22, 2014 (J.M.)

Jean
    MacFarland J.A.

I
    agree K. Feldman J.A.

I
    agree Gloria Epstein J.A.

[1]
The term First Letter of Intent is a misnomer, since the letter merely
    provides for the negotiation of a letter of intent. However, nothing, in my
    view, turns on the misnomer.

[2]
Mr. Kallan was referring to the First LOI, which contained no references to
    Density.