COURT OF APPEAL FOR ONTARIO

CITATION: Sharma v. Sharma, 2016 ONCA 329

DATE: 20160503

DOCKET: C59404

Laskin, Pepall and Brown JJ.A.

BETWEEN

Jyotsna Sharma

Applicant (Respondent)

and

Tarun Sharma

Respondent (Appellant)

Geoffrey Wells and Ryan Kniznik, for the appellant

S. Giannandrea, for the respondent

Richard Startek, for Pawan Sharma

Heard and released orally: April 26, 2016

On appeal from the judgment of Justice Randolph Mazza of
    the Superior Court of Justice, dated August 22, 2014.

ENDORSEMENT

[1]

At the beginning of the appeal we added the appellants brother Pawan
    Sharma as a party to the appeal. He has an interest in the appeal and his claim
    was adversely affected by the judgment at trial. Our intervention order,
    however, was on the following terms: (1) Pawan Sharma must accept the trial
    record; (2) the appeal would not be adjourned; and (3) his counsel would have
    20 minutes for oral argument.

[2]

On the appeal itself Mr. Sharma makes three main submissions:

(1)

The trial judge erred by
    failing to find that Mr. Sharma had a debt to his brother of $265,000 arising
    from their joint real estate investments;

(2)

The order for spousal
    support should be set aside and the issue should be sent back for trial because
    the trial judge erred in determining Mr. Sharmas income; and

(3)

The trial judge erred in
    making vesting orders in favour of Mrs. Sharma for two of the three properties
    in issue in these proceedings  the two Kitchener condominiums. Mr. Sharma also
    emphasizes that the matrimonial home should not be vested in Mrs. Sharma, but
    should be sold, as otherwise he is prejudiced because he will be deprived of
    any increase in the homes value.

[3]

Pawan Sharma submits that because the trial judge erred in his entire
    approach to the ownership of the properties and the calculation of an
    equalization payment, the only just result is to order a new trial.

[4]

Dealing first with Mr. Pawan Sharmas submission, we do not think a new
    trial is either necessary or desirable. In the light of the trial judges
    findings of fact and Mr. and Mrs. Sharmas agreement on the values of the
    properties, we are in a position to correct any errors made by the trial judge.

(1)

Alleged debt to Pawan Sharma

[5]

As Mr. Wells candidly acknowledged in oral argument, this is a difficult
    appeal for Mr. Sharma because the trial judge rejected his principal claim that
    he owed his brother a $265,000 debt arising out of their real estate
    investments as not plausible. The trial judges finding was amply supported
    in the record. The debt was alleged to have arisen largely in connection with a
    $20,000 advance by Pawan Sharma to help his brother and sister-in-law purchase
    their first home at 19 Jacqueline Boulevard. The brothers alleged before the
    trial judge that Pawan Sharmas $20,000 was for a half-interest in the home,
    that the $20,000 was never repaid and that Pawans half-interest escalated in
    value because of the increases in values of the parties later real estate
    purchases.

[6]

However, the trust agreement and later transfer signed by Pawan Sharma
    evidenced that he had no beneficial interest in the Jacqueline property.
    Moreover, the trial judge reasonably inferred that his $20,000 was repaid when Pawan
    Sharma signed a transfer of the Jacqueline property and put a $23,000 down
    payment on his own home.

[7]

Additionally, Pawan Sharma claimed that he had made ongoing cash
    contributions to the upkeep of the properties. There was no contemporaneous
    documentation that supported this claim. The only support for the claim was his
    and his brothers evidence, which was rejected by the trial judge. Thus, Mr.
    Sharmas first submission must fail.

[8]

Once we disregard the alleged debt owed to Pawan Sharma, the parties
    agree on the equalization payment Mr. Sharma owes to Mrs. Sharma  it is
    $217,058.

(2)

Spousal Support

[9]

The trial judge imputed yearly income to Mr. Sharma of $197,000 and
    based on that amount ordered lump sum spousal support of $106,018. Mr. Sharma
    submits that the trial judge erred in the determination of his income for the
    purpose of spousal support. We disagree.

[10]

Mr. Sharmas application for a line of credit at TD Bank stated his
    annual income was $137,000. The trial judges bump up to $197,000 was justified
    in the light of Mr. Sharmas more than comfortable lifestyle, which included
    ownership of three cars and rather expensive vacations. And even if the bump up
    was not entirely justified, the trial judges support order, if anything, was
    low. Thus, we decline to give effect to Mr. Sharmas submission on spousal
    support.

(3)

Vesting orders

[11]

On the numbers the parties have agreed to, or have been ordered to pay
    by the trial judge, Mr. Sharma owes Mrs. Sharma $375,864 broken down as
    follows:

·

Equalization payment - $217,058

·

Spousal support - $106,018

·

Trial costs - $55,000

·

Less lump sum child support - $2,212

[12]

In his October order, as security for the payment of this amount, the
    trial judge vested the two Kitchener condominiums in Mrs. Sharma. In our view,
    he was entitled to make that vesting order under s. 100 of the
Courts of
    Justice Act
, and s. 9(1) of the
Family Law Act
.

[13]

On Mrs. Sharmas net family property summary statement, version one, the
    two Kitchener condominiums are valued at $240,000 ($135,000 for one and
    $105,000 for the other). Deducting this amount from the amount owed by Mr.
    Sharma leaves a balance of $135,864. Also on the net family property summary
    statement, version one, Mr. Sharmas half interest in the matrimonial home is
    $133,843 taking account of the line of credit against the property, but not any
    disposition costs, real or notional. Thus, Mr. Sharmas equity in the three
    properties closely approximates the amount he owes to Mrs. Sharma.

[14]

In his judgment after the trial, the trial judge vested the matrimonial
    home in Mrs. Sharma as security for the money owing to her. But in his later
    October order, the trial judge vacated this vesting order. We think he was
    right to do so.

[15]

Mr. Sharma and the parties daughter are currently living in the home.
    Mr. Sharma has asked not to vacate the home for 90 days from todays date. That
    is a reasonable request. Within 90 days, the home should be listed and then sold,
    largely in accordance with paragraph 108(d) of Mrs. Sharmas factum. The
    conditions of sale are as follows:

(a)

Mrs. Sharma shall have control of the listing and sale process;

(b)

Mrs. Sharma shall list the home for sale within 90 days after Mr. Sharma
    and his daughter have vacated the home;

(c)

Mrs. Sharma, through her counsel, shall inform Mr. Sharma of the listing
    agreement and the closing of the sale;

(d)

Mr. Sharma shall be responsible for any increase in the line of credit
    from todays date to the date of sale;

(e)

Mr. Sharmas net proceeds of sale shall be used to pay the balance owing
    to Mrs. Sharma under this order.

[16]

We were advised by her counsel that Mrs. Sharma intends to sell the two
    Kitchener condominiums. If, after calculating the net proceeds of sale of all
    three properties, the total amount is less than the amount owing to Mrs. Sharma,
    Mr. Sharma shall remain liable for the deficiency. Conversely, if the net
    proceeds of sale of the three properties exceed the amount owing to Mrs.
    Sharma, she shall pay the excess to Mr. Sharma. To give effect to this
    provision, Mrs. Sharma, through her counsel shall advise Mr. Sharma of the
    listing agreements and closings of the sales on the two Kitchener properties,
    as well as on the matrimonial home.

[17]

And finally, if any issue arises pending the sale, or in connection with
    the completion of the sale of any of the three properties, the parties may
    return to the trial judge for directions.

[18]

In the light of these reasons, the appeal is dismissed. The respondent
    is entitled to her costs of the appeal, fixed in the amount of $35,000,
    inclusive of disbursements and applicable taxes.

John
    Laskin J.A.

S.E.
    Pepall J.A.

David
    Brown J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Summit Glen Waterloo/2000 Developments Inc. (Re),

2016 ONCA 405

DATE: 20160530

DOCKET: C58356

Cronk, Pepall and Lauwers JJ.A.

In the
    Matter of the Bankruptcy of Summit Glen Waterloo/2000 Developments Inc., of the
    City of Toronto, in the Province of Ontario

Patrick Shea and Brent Arnold, for the
    appellant/respondent by way of cross-appeal, A. Farber & Partners Inc., as
    Trustee in Bankruptcy of Annopol Holdings Ltd. and Summit Glen Group of
    Companies Inc.

Maurice J. Neirinck and Michael McQuade, for the
    respondents Morris Goldfinger and 1830994 Ontario Ltd. and for the appellant by
    way of cross-appeal, 1830994 Ontario Ltd.

Heard: October 14 and 15, 2015

On appeal from the judgment of Justice David M. Brown of
    the Superior Court of Justice, dated February 3, 2014, with reasons reported at
    2014 ONSC 756, 9 C.B.R. (6th) 86.

Pepall J.A.:

Introduction

[1]

This is the third of three companion appeals, the other appeals bearing file
    numbers C57879 and C57898. This courts decisions in the three appeals are
    being released contemporaneously. The background to the three appeals is
    described in detail in this courts reasons in C57879.

[2]

On December 1, 2008, Summit Glen Waterloo/2000 Developments Inc. (SG
    Waterloo) was placed under receivership and on June 28, 2010, it was adjudged
    bankrupt.  A. Farber & Partners Inc. (Farber), in its capacity as Trustee
    in bankruptcy of both Annopol Holdings Ltd. (Annopol) and Summit Glen Group
    of Companies Inc. (SG Group), asserted claims against SG Waterloo, as did Montor
    Business Corporation (Montor), Dr. Morris Goldfinger, and 1830994 Ontario
    Ltd. (183), a company controlled by Goldfinger. These claims were to be heard
    by the Registrar in Bankruptcy but the trial judge decided that they should be
    heard in a hybrid trial, together with the subject matter of Court File Nos.
    C57898 and C57879.  Farber now appeals from the trial judges disallowance of
    certain claims it advanced in SG Waterloos bankruptcy. 183 cross-appeals from
    the trial judges disallowance of its claim in SG Waterloos bankruptcy.

[3]

For the reasons that follow, I would allow Farbers appeal in part and
    would dismiss 183s cross-appeal.

A.

Annopols Claim in SG Waterloos Bankruptcy

(i)

Background

[4]

The first part of this appeal concerns the trial judges partial
    disallowance of certain claims advanced by Farber in its capacity as Annopols Trustee
    in bankruptcy in the SG Waterloo bankruptcy.

[5]

Annopol had lent money to SG Waterloo and filed a proof of claim in SG
    Waterloos bankruptcy proceedings. Accordingly, the trial judge had to
    determine what amount SG Waterloo owed to Annopol as of June 28, 2010, the date
    of SG Waterloos bankruptcy.

[6]

Annopol originally filed its proof of claim for $519,600, which had been
    paid in small instalments from June 2000 to December 2008, rather than in a
    lump sum. Farber was later able to retrieve documents that conclusively
    established that the amount advanced was actually $557,600. It also filed a
    report to that effect. $100,000 of this amount was secured and the remaining $457,600
    was unsecured.

[7]

The trial judge described Annopol as having filed a proof of claim for
    an unsecured amount of $420,000 and a secured amount of $100,000, for a total
    of $520,000. Accordingly, he allowed the unsecured claim in the amount of
    $420,000, rather than $457,600. He also awarded interest calculated at 5% per
    annum from December 4, 2008, which was the date of the final recorded advance
    from Annopol to SG Waterloo.

(ii)

Farbers Submissions on Appeal

[8]

Farber opposes the trial judges decision on two grounds. First, it submits
    that the trial judge erred in awarding Annopol $420,000 instead of $457,600. Farber
    argues that there is no explanation as to why Annopols claim for $457,600 was
    not allowed given the trial judges finding that it had loaned $457,600 to SG
    Waterloo.

[9]

Second, Farber submits that the trial judge erred in ordering interest on
    the entire sum from December 4, 2008  the date of Annopols last proven
    advance. It submits that interest should run from the dates of the individual
    advances. Farber acknowledges that the trial judges decision was
    discretionary, but argues that he had to exercise his discretion with regard to
    the evidence and proper considerations. On this point, Farber asserts that the
    trial judge gave no explanation for his selection of December 4, 2008 as the
    interest commencement date and the only available evidence on the issue of
    interest did not support his decision.

(iii)

Analysis

[10]

The record clearly supports Farbers position that the correct quantum
    of the unsecured debt is $457,600. Moreover, Goldfinger does not seriously
    object to the fact that the $420,000 finding was in error.

[11]

I would therefore allow this portion of Farbers appeal, in its capacity
    as Annopols Trustee in bankruptcy, and vary the February 3, 2014 judgment to
    allow Annopols unsecured claim against SG Waterloo at $457,600.

[12]

Turning to the ground of appeal relating to the calculation of interest
    on the unsecured claim, the evidence on interest payable was limited.  Unlike
    the secured claim, there was no documentary evidence governing the calculation
    of interest with respect to the unsecured claim.  That said, Annopol did make
    multiple advances between 2000 and 2008 to SG Waterloo.

[13]

Interest compensates for the use or retention by one person of a sum of
    money belonging to another which accrues day by day: see
Garland v.
    Consumers Gas Co.
, [1998] 3 S.C.R. 112, at para. 27.  It follows that in
    the absence of evidence to the contrary, interest should accrue from the date
    of each individual advance, not from the date of the last advance.

[14]

I would therefore also allow Farbers appeal with respect to interest
    and vary the February 3, 2014 judgment so that interest is calculated by the
    parties from the date of each advance by Annopol to SG Waterloo.

B.      SG Groups Claims in SG Waterloos Bankruptcy

(i)       Background

[15]

The second part of Farbers appeal is made in its capacity as Trustee in
    bankruptcy of SG Group in the SG Waterloo bankruptcy.  Farber appeals the trial
    judges partial disallowance of certain claims advanced by Farber and his
    interest award.

[16]

SG Waterloo owned development property located at 105 University Avenue
    in Waterloo, Ontario. Farber claimed that SG Group had made payments to a
    number of third parties on behalf of SG Waterloo and that therefore SG Waterloo
    was unjustly enriched to SG Groups detriment.

[17]

First, Farber asserted that SG Group had paid $346,029.13 to Joe Somfay
    Architects on behalf of SG Waterloo and filed a proof of claim including that
    amount. In support of that portion of its claim, Farber simply filed a summary
    of invoices, credit notes and payments that had been prepared by Somfay. In his
    reasons dated October 28, 2013, the trial judge concluded that Farber had filed
    insufficient particulars of these alleged payments. He accordingly provided
    Farber with an opportunity to file additional evidence of payment.

[18]

In his reasons dated February 3, 2014, having received and reviewed Farbers
    additional evidence, the trial judge allowed $236,249 of SG Groups claim, but
    disallowed the remaining $109,780.13 due to inadequate evidence.

[19]

He also rejected the interpretation, urged upon him by Farber, of an
    August 7, 2002 letter from Somfay, allegedly reflecting a payment of $108,531. He
    concluded that the letter did not reflect confirmation of receipt of the amount
    of $108,531. Rather, it represented an offer of a discount in that amount. In
    addition, the trial judge reasoned that if Somfay had received payment of
    $108,531 prior to the August 7, 2002 letter, it was difficult to understand why
    invoices from 2000 would continue to be outstanding at that time. The trial
    judge also observed that Farber had been given more time to file additional
    evidence and that it could have filed an affidavit from Somfay but failed to do
    so.

[20]

Second, Farber asserted that SG Group paid operating expenses of
    $104,855 for SG Waterloos 105 University Avenue property and, as a result, SG
    Waterloo was unjustly enriched to the detriment of SG Group.

[21]

Before the trial judge, Farber successfully established that SG Group
    had paid some of SG Waterloos operating costs. However, while it produced
    invoices totalling $104,855 rendered for work done at 105 University Avenue, it
    could not locate any evidence establishing that these amounts had been paid. Farber
    urged the trial judge to draw an inference that these additional amounts had
    been paid, but the trial judge declined to do so. He was not satisfied with the
    sufficiency of the evidence and explained that SG Waterloo went into bankruptcy
    in part because of its inability to pay all its obligations. In rejecting the
    claim, he acknowledged that Farber found the Summit Glen companies books and
    records in a state of disarray and noted that Farber was not responsible for
    the absence of the required evidence. However he rejected Farbers additional
    claim of $104,855.

[22]

Third, Farber claimed interest on the total amount of $625,368.88, which
    is the sum that the trial judge ordered in SG Groups favour.

[23]

The trial judge held that, because Farbers claim on behalf of SG Group
    sounded in unjust enrichment and was not based on a loan agreement, s. 3 of the
Interest Act
, R.S.C. 1985, c.
    I-15,
did not apply. He therefore awarded interest on the sum of
    $625,368.88 in accordance with the prejudgment interest provisions of the
Courts
    of Justice Act
, R.S.O. 1990, c. C.43
.

[24]

He ordered the interest to be payable from June 28, 2010  the date of SG
    Waterloos bankruptcy. The trial judge reasoned that interest should be
    calculated from the date of bankruptcy, which was the date upon which the
    deprivation underpinning the cause of action for unjust enrichment occurred.

(ii)      Farbers
Submissions on Appeal

[25]

Farber submits that the trial judge erred in law in requiring that it
    establish with certainty that SG Group paid the sum of $109,780.13 to Somfay
    and $104,855 to SG Waterloos other suppliers. It submits that this was too
    high a threshold. It argues that the trial judge ignored concessions made by
    Goldfinger, failed to properly consider the lack of documentary evidence
    available to Farber, including records outside of Farbers control, and failed
    to give proper weight to the evidence. In particular, it submits that the trial
    judge erred by misinterpreting the August 2002 letter from Somfay and by
    concluding that invoices from 2000 continued to be outstanding in 2002.

[26]

Farber also argues that the trial judge erred in calculating interest on
    the basis of the
Courts of Justice Act
, rather than the
Interest
    Act
. However, Farber concedes that the trial judge erred in concluding
    that interest ran from the date of SG Waterloos bankruptcy. Indeed, Farber did
    not seek such interest.  Although it initially submitted that interest should
    be awarded from December 1, 2008 (the date SG Waterloos receiver was appointed)
    to June 28, 2010 (the date of SG Waterloos bankruptcy), in oral argument, Farber
    did not press this point.

(iii)     Analysis

[27]

I do not accept Farbers submissions relating to the Somfay and operating
    cost claims. First, the trial judge did not apply a standard of certainty. Starting
    at para. 35 of his October 28, 2013 reasons, he reviewed the law applicable to
    proof of claims.

[28]

The trial judge cited
South Beach Homes Ltd. (Re)
, 2010 SKQB 182, 357 Sask.R. 82
 the same
    decision Farber relies on as establishing the test to admit a claim. At para.
    46 of
South Beach
, the court expressly noted that certainty is not the
    test. Then, in the trial judges February 3, 2014 reasons, he applied the test
    he had already articulated in his earlier reasons.

[29]

The trial judge applied the correct test, but he was not persuaded that
    it was met either with respect to the sum of $109,780.13 or the sum of
    $104,855. He expressly considered Goldfingers position, the state of the
    documentary record and, in the case of the Somfay payments, the terms of the
    August 2002 letter. His findings of fact, which supported his conclusion, are
    both within the province of a trial judge and, based on the record, reasonable.

[30]

I see no error in the trial judges denial of these two claims advanced
    by SG Group. Accordingly, I would also dismiss this part of Farbers appeal.

[31]

As for Farbers submission that the trial judge erred in concluding that
    the
Interest Act
was inapplicable, I see no basis on which to disturb
    the trial judges conclusion. Farber had advanced a claim for unjust enrichment
    and, in any event, the trial judge rejected its contention that the amount paid
    by SG Group for SG Waterloos benefit constituted a contingent loan. The trial
    judges determination that interest was properly payable under the provisions
    of the
Courts of Justice Act
rather than the
Interest Act
was
    reasonable. I would dismiss this part of the appeal.

[32]

Lastly, I agree with Farbers concession that interest does not run
    after the date of bankruptcy.  As I have already said, Farber did not press the
    argument that interest ran from the date of the receivership.

[33]

In the circumstances, I would therefore allow the appeal in part so as
    to allow interest up to December 1, 2008, the date of SG Waterloos
    receivership.

C.      Cross-Appeal: 183s
    Claim in SG Waterloos Bankruptcy

[34]

In the companion appeal (C57898), I concluded that the release signed in
    2009 was designed to result in finality and to release any future claim
    Goldfinger, and by extension 183, had against SG Waterloo. Accordingly, I further
    concluded that 183 had given up any claim to the proceeds from the sale of 105
    University Avenue. That includes both the principal claim, dealt with in the
    companion appeal, as well as the expenses associated with the principal claim,
    the subject of this cross-appeal.

[35]

Accordingly, I would dismiss the cross-appeal.

Disposition

[36]

In summary, I would:

(1)

allow
    Farbers appeal in its capacity as Trustee in bankruptcy of Annopol and amend paragraph
    1 of the February 3, 2014 judgment to replace the sum of $420,000 with the sum
    of $457,600 with interest calculated from the date of each individual advance;

(2)

dismiss
    Farbers appeal in its capacity as Trustee in bankruptcy of SG Group with
    respect to the $109,780.13 Somfay expense claim and the $104,855 operating
    expense claim;

(3)

allow
    Farbers appeal in its capacity as Trustee in bankruptcy of SG Group and amend
    paragraph 2 of the February 3, 2014 judgment to replace the words from June
    28, 2010 with the words to the date of December 1, 2008; and

(4)

dismiss
    the cross-appeal of 183.

[37]

As agreed by the parties, I would order Farber to pay Goldfinger $3,000
    in respect of the costs of the appeal, and 183 to pay Farber $5,000 in costs
    concerning the cross-appeal, both inclusive of disbursements and applicable
    taxes.

Released:

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

EAC                                                            I
    agree E.A. Cronk J.A.

I
    agree P. Lauwers J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Tran v. Chung, 2016 ONCA 378

DATE: 20160519

DOCKET: C60661

Simmons, LaForme and Huscroft JJ.A.

BETWEEN

Nip Y Tran

Plaintiff (Appellant)

and

Phu Man Chung,

Majekodunmi Adega,
    also known as Majek Adega,

Tu Hong Luong,
    Tradeworld Realty Inc.,

Bank of Montreal
, and Cynthia Dacosta, also known as

Cynthia DaCosta, also
    known as Cynthia Da Costa,

and
    Kerryon Nugent

Defendants (
Respondent
)

James H. Chow, for the appellant

Allyson Fox, for the respondent

Heard: December 9, 2015

On appeal from the order of Justice Mary E. Vallee of the
    Superior Court of Justice, dated May 25, 2015
,
with reasons
    reported at 2015 ONSC 3315.

H.S. LaForme
    J.A.:

A.

INTRODUCTION

[1]

The appellant, Nip Y Tran, claims she was fraudulently induced to
    provide a bank draft payable to the Bank of Montreal (BMO) by a group of
    alleged fraudsters. Unbeknownst to her, the alleged fraudsters gave the bank
    draft to a third party whom the appellant did not know. The third party then
    took the bank draft to BMO. Following the third partys instructions, BMO
    accepted the bank draft and deposited it to her line of credit. The third party
    then instructed BMO to provide her with funds equal to the amount of the bank
    draft and gave those funds to one of the alleged fraudsters.

[2]

Did BMO commit the tort of conversion? The motion judge said no and
    dismissed the appellants claim on a motion for summary judgment. For the
    reasons that follow, I disagree and would allow the appeal and grant judgment
    to the appellant.

B.

BACKGROUND

[3]

Ms. Tran owned a house, which had a $225,750 mortgage registered against
    it in favour of BMO. In 2009, the mortgage went into default.

[4]

Ms. Tran was concerned about the bank repossessing her house and
    confided in one of the defendants, Phu Man Chung, who was a tenant at the
    property. Mr. Chung told Ms. Tran that he could sell the house for her quickly.
    Ms. Tran trusted him and left the matter in his hands.

[5]

Mr. Chung was friends with the defendant, Tu Hong Luong, who was a real
    estate agent with the defendant, Tradeworld Realty Inc. Mr. Luong listed the
    property for sale although there was no listing agreement signed by Ms. Tran.
    Mr. Chung advised Mr. Luong that he owned the property.

[6]

Mr. Chungs brother-in-law, Hui Ming Zhou, offered $420,000 to purchase
    the property. Ms. Tran signed an agreement of purchase and sale, prepared
    by Mr. Luong.

[7]

The defendant, Majek Adega, was Ms. Trans real estate lawyer. After the
    transaction closed on March 9, 2010, Ms. Tran was accompanied by Mr. Chung to
    Mr. Adega's office where Mr. Adega provided her with a bank draft payable to
    her in the sum of $148,788.32  the equity she had after the mortgage was
    discharged.

[8]

On the same day, Ms. Tran was escorted to a branch of the Royal Bank of
    Canada (RBC) where a bank account under her name had previously been opened
    under the instructions of, and with the assistance of, Mr. Chung.

[9]

At the RBC branch, Mr. Adega, Mr. Chung and Kerryon Nugent  a real
    estate agent who had acted for Mr. Zhou  were there to ensure that Ms. Trans
    bank draft in the sum of $148,788.32 was deposited into her bank account. She
    was then instructed by them to sign purchase orders for four RBC bank drafts
    payable as follows: $90,190 to BMO, $4,193.50 to Ms. Nugent, $40,000 to Mr. Chung,
    and $11,000 to Vicky Le.

[10]

Ms. Tran, who cannot read English and who completed only limited
    education in Vietnam, claims that she acted as instructed because she believed
    the drafts were necessary to complete the transaction for the sale of her
    property and to discharge her mortgage with BMO. However, BMO accepts that, on
    the date the bank draft was issued, Ms. Tran did not owe any money to BMO as
    her mortgage had already been discharged. Ms. Tran gave the $90,190 bank draft
    payable to BMO to Ms. Nugent who, in turn, gave the bank draft to Cynthia
    DaCosta, another defendant. Ms. Tran did not know Ms. DaCosta and did not know
    that the bank draft was given to her. Ms. DaCosta admits that she had no right
    to any money from Ms. Tran, and that Ms. Tran never gave her the draft and has
    never known her.

[11]

On March 10, 2010, Ms. DaCosta, accompanied by Ms. Nugent, visited a BMO
    branch. BMO, following Ms. DaCosta's instructions, deposited the $90,190 bank
    draft payable to BMO into Ms. DaCostas line of credit account with BMO. This
    bank draft had Ms. Trans name and address written on the front of it as the
    purchaser of the draft. Ms. DaCosta then immediately withdrew the exact sum of
    the bank draft in two transactions: (i) a bank draft made payable to
    "Majek Adega" in the sum of $79,190; and (ii) cash in the sum of
    $11,000. She then gave both the cash and bank draft to Ms. Nugent, who in turn
    gave them to Mr. Adega.

[12]

Ms. Tran says the defendants told her that she would receive more than
    $100,000 from the sale in the days following the issuance of the draft. She has
    received nothing to date.

[13]

Ms. Tran commenced an action against the individual defendants for fraud
    and various other breaches. She also included BMO as a defendant, claiming that
    BMO was liable for conversion because it collected the $90,190 and made those
    funds available to Ms. DaCosta, who was not a person entitled to receive them.
    In the alternative, Ms. Tran claimed that BMO was unjustly enriched.

[14]

Ms. Tran subsequently brought a motion for summary judgment against BMO
    for $90,190, and BMO brought a competing motion for summary judgment for an
    order dismissing the action against it. The motion judge granted BMOs motion
    for summary judgment and dismissed Ms. Trans claim against BMO.

C.

The Motion Judges Decision

[15]

The motion judge relied on the test for conversion of a cheque as set
    out in
373409 Alberta Ltd. (Receiver of) v. Bank of Montreal
, 2002 SCC
    81, [2002] 4 S.C.R. 312 (
373409 Alberta Ltd.
), at para. 10: a bank
    will be liable for conversion where it makes payment on a cheque to someone
    other than the rightful holder and that payment is not authorized by the
    rightful holder. The tort is one of strict liability.

[16]

Ms. Trans theory of liability was described by the motion judge: BMO
    converted her $90,190 RBC bank draft, which was payable to BMO, on the
    direction of Ms. DaCosta, who was not authorized by Ms. Tran to possess the
    draft. Accordingly, Ms. Tran asserts that BMO committed the tort of conversion
    and is liable for the $90,190.

[17]

The motion judge concluded that there were three questions to be
    answered to decide whether BMO was liable for conversion: (1)
who was the rightful holder of the bank draft; (2)
was
    the payment made to someone other than the rightful holder of the draft; and
    (3) was the payment not authorized by the rightful holder? The motion judge
    held that BMO was not liable for conversion of the bank draft.

[18]

I will say more about the motion judges reasons for her decision in my
    discussion below.

D.

SUBMISSIONS

[19]

The sole issue raised by the parties on appeal is whether the motion
    judge erred in finding that BMO is not liable for conversion. Nevertheless,
    there are several other issues that arise out of my conclusion on conversion,
    which I comment on briefly near the end of these reasons.

[20]

According to Ms. Tran, this is a classic case of conversion. She says
    that a bank converts an instrument by dealing with it under the direction of
    someone without authorization and making the proceeds available to someone
    other than the person rightfully entitled to possession. She alleges that, in
    this case, BMO converted the bank draft when it collected the proceeds of the
    bank draft and made them available to Ms. DaCosta and Mr. Adega, who had no
    entitlement to those funds.

[21]

BMO, on the other hand, submits that:

1. Ms. Tran cannot bring an action in conversion on the bank
    draft because she was not the drawer, payee, or endorsee of the bank draft.

2. BMO cannot convert funds payable to BMO. The funds were
    guaranteed funds from RBC.

3. BMO did not wrongfully interfere with the draft since Ms.
    Tran had authorized the draft be made payable to BMO.

4. Ms. Tran cannot make out a claim for conversion because she
    was not in actual possession of the draft, nor was she entitled to immediate
    possession of it.

5. Ms. Tran voluntarily parted with the bank draft when she
    gave it to Mr. Adega, Ms. Nugent and Ms. Chung, which conveyed to them the
    right to use the bank draft. That right was subject to Ms. Tran revoking her
    consent, which she did not do.

6. In the alternative, BMO has a defence as a holder in due
    course under the
Bills of Exchange Act
, R.S.C. 1985, c. B-4.

[22]

I will deal with these issues after first reviewing the law on
    conversion.

E.

ANALYSIS

(1)

The Tort of Conversion

[23]

The tort of conversion involves a wrongful interference with the goods
    of another, such as taking, using or destroying these goods in a manner
    inconsistent with the owners right of possession:
Boma Manufacturing Ltd.
    v. Canadian Imperial Bank of Commerce
, [1996] 3 S.C.R. 727, at para. 31.
    The tort is of one of strict liability and so it is no defence that the
    wrongful act was committed without intent:
Boma
, at para. 31. Even if
    the claimant is negligent with respect to its chattel, the wrongdoer will not
    be able to contest liability on the basis of the claimants contributory
    negligence:
Boma
, at paras. 31-35. In other words, the tort of
    conversion is not concerned with the moral concept of fault:
Westboro
    Flooring & Décor Inc. v. Bank of Nova Scotia
(2004), 71 O.R. (3d) 723
    (C.A.), at para. 14.

[24]

In
Boma
,

at para. 36, Iacobucci J. referred to the
    seminal discussion of the conversion of cheques from Crawford and
    Falconbridges treatise,
Banking and Bills of Exchange
, 8th ed.
    (Toronto: Canada Law Book Inc., 1986):

Conversion is the remedy of the lawful possessor of chattels to
    have their value paid to him by a wrongful dispossessor. It is normally applied
    to goods and there might appear to be some difficulty in holding that a bank
    that had paid part of what it owes to a customer to some other person not
    entitled to receive it is guilty of a conversion of the customers chattel. But
    any such apparent difficulty has been surmounted by treating the conversion as
    being of the instrument itself, that is, of the piece of paper in respect of
    which the payment is made. Similarly, a bank that collects a sum of money under
    an instrument for a person not entitled to it is treated as having converted
    the instrument.
It has been repeatedly held that a bank
    converts an instrument by dealing with it under the direction of one not
    authorized, either by collecting it or
,
semble
(although this
    has not yet actually been decided)
by paying it and in
    either case, making the proceeds available to someone other than the person
    rightfully entitled to possession
. [Emphasis added.]

[25]

Borrowing from this passage, Iacobucci J. affirmed, at para. 83, that
    [a] bank converts an instrument, including a cheque, by dealing with it under
    the direction of one not authorized, by collecting it and making the proceeds
    available to someone other than the person rightfully entitled to possession.

[26]

The Supreme Court subsequently affirmed the test from
Boma
in
373409
    Alberta Ltd.
, in the context of a
    cheque.

At para. 10, Major J. noted that two factors must
    be present for a bank to be liable for conversion of a cheque:

[A] lending institutions liability in conversion is predicated
    upon finding both that payment upon the cheque was made to someone other than
    the rightful holder of the cheque,
and
that such
    payment was not authorized by the rightful holder. If either of these criteria
    is not satisfied, there is no tort. [Emphasis in original.]

[27]

Major J. noted, at para. 9, that dealing with anothers chattel in a
    manner authorized by the rightful owner is consistent with the owners right of
    possession and therefore does not qualify as wrongful interference.

(2)

Application of Legal Principles

(a)

Can Ms. Tran bring an action in conversion if she is not the drawer,
    payee or endorsee of the bank draft?

[28]

BMO accepts that it is possible to sue in conversion on a bank draft.
    However, it relies on a comment in
Boma
to argue that Ms. Tran is
    unable to bring such an action because she is not the drawer, payee or endorsee
    of the bank draft. At para. 37 of
Boma
, Iacobucci J. stated that
    [t]he drawer, the payee or the endorsee can bring an action for conversion of
    a cheque.

[29]

This argument is predicated on differences between a cheque and bank
    draft.

(i)

Cheques vs. Bank Drafts

[30]

A cheque is used to instruct a bank to pay funds from the payors
    account. In the case of a cheque, the following terminology is used:

·

The drawer is the payor, who directs, through the cheque, that
    funds be drawn from his or her account.

·

The drawee is the bank upon which the drawer writes the cheque
    (e.g., the drawers bank).

·

The payee of a cheque is the person to whom the draft is made
    payable.

·

An endorsee is a person to whom the cheque is negotiated by the
    original payee (or a previous endorsee). For instance, if a cheque is made payable
    to X, X may endorse it to Y. Y is now the endorsee and the person who is
    entitled to demand payment on the instrument.

[31]

Similar to cheques, bank drafts are often used to effect payment from
    one party to another. However, bank drafts fall within a category of
    instruments referred to as remittance instruments, which also includes
    certified cheques and money orders.

[32]

Unlike a cheque, a bank draft has a purchaser, who buys the instrument
    from an issuing bank. The purchaser instructs the issuing bank to fill out the
    draft with a payee and the amount he or she wishes to pay. The payee may be the
    purchaser or a third party. The bank then collects the payment amount from the
    purchaser (e.g., as a direct debit from the purchasers bank account). The
    purchased funds are placed in the issuing banks reserve account until the
    payee negotiates the draft. After negotiation by the payee, the issuing bank
    will transfer the funds to the payees account: M.H. Ogilvie,
Bank and
    Customer Law in Canada
, 2d ed. (Toronto: Irwin Law Inc., 2013), at pp.
    426-428.

[33]

Since the issuing bank holds the money in its own reserve account and
    then transfers it to the payees bank, the issuing bank is considered both the
    drawer and the drawee of the bank draft (unlike in the cheque context,
    where the drawer is the customer who asks, through the cheque, that money be
    transferred from its account to the payee). As with cheques, the payee is the
    person to whom the instrument is payable. While the purchaser may be named in
    the bank draft (e.g., on the face of the draft), it is not a party to the
    instrument.

[34]

One reason for using a bank draft to make a payment instead of a cheque
    is that a bank draft is said to be guaranteed funds. Because the bank holds
    the payment amount in its own account, there is no risk of the draft
    bouncing, as compared to a regular cheque where the drawer/payor could
    theoretically give a cheque to the payee and withdraw all of the funds in its
    bank account before the cheque clears or cancel the cheque.

(ii)

Conversion of a Bank Draft

[35]

There is very little case law dealing with conversion of bank drafts.
    However, what little there is supports the view that a claim for conversion is
    available where it involves a bank draft.

[36]

In
Bank of Montreal v. Bloomer
, [1965] S.C.R. 696, the
    purchaser of a bank draft sued the bank for conversion. The Supreme Court
    overturned the lower courts finding that BMO was liable for converting a bank
    draft on the basis that conversion was not established. It did not suggest that
    a purchaser of a bank draft could not establish conversion in a proper case. Nor
    did it suggest that the principles that apply to converting a bank draft are
    different than the principles that apply, for example, to converting a cheque.

[37]

More recently in
Raza Kayani LLP v. Toronto-Dominion Bank
, 2013
    ONSC 7967, 9 C.C.L.T. (4th) 154, the trial judge held that the defendant bank
    was liable for converting both a certified cheque and a bank draft. She did not
    specifically address whether the conversion analysis should be different in
    relation to the bank draft. Instead, at paras. 58 and 60, she appears to have
    equated the drawer of a cheque with the purchaser of a draft and assumed that
    the same principles apply in respect of both instruments:

Zwicker and Kayani were the drawers who
    authorized the writing of the cheque or draft on their Accounts
. The
    Bank was the drawee, which was directed to pay a sum of money on an instrument,
in this case a cheque or a draft
.

In the conversion of cheques or bank
    drafts
negotiated at a collecting bank and deposited to the credit of
    the collecting bank's customer, who was not entitled to the proceeds of the
    cheque or draft, the collecting bank is
prima facie
liable to the maker of the cheque or draft
. [Emphasis
    added.]

[38]

This court reversed the trial judges decision on appeal on the basis
    that the bank had a valid defence available to it under
the
Bills of Exchange Act
:
Raza

Kayani LLP v.
    Toronto-Dominion Bank
, 2014 ONCA 862
,
378 D.L.R. (4th) 729.
This court did not
    indicate any problems with the trial judges conclusion that the bank was
prima
    facie
liable for conversion, indicating that a bank draft may be the
    subject of a conversion action.

(iii)

Ms. Tran can bring a claim for conversion

[39]

As noted, BMO argues that Ms. Tran cannot bring an action in conversion
    as the purchaser of a bank draft.

[40]

I reject BMOs argument, which relies on para. 37 of
Boma
.
    While para. 37 says that a drawer, payee or endorsee can sue for conversion, the
    court in that case was expressly dealing with conversion of a cheque. The
    Supreme Court did not hold that only those three parties could maintain a claim
    in conversion for any kind of instrument.

[41]

In conclusion, I reject BMOs argument that Ms. Tran cannot bring a
    conversion action because she is not the drawer, payee or endorsee of the bank
    draft. As I will explain, in the circumstances of this case, Ms. Tran has met
    the test for conversion.

(b)

Did BMO convert funds payable to BMO in the circumstances of this
    case?

[42]

BMO submits that, even if a purchaser of a draft can bring an action in
    conversion, the tort cannot be made out on the facts of this case.

[43]

Its primary argument is that the bank cannot convert a draft payable to
    itself and presented to it by its own customer. Relying on
Boma
and
373409
    Alberta

Ltd.
, it says there can be no conversion if the
    instrument is delivered to its intended payee and that BMO was the intended
    payee in this case. It also relies on the fact that a bank draft is guaranteed
    funds to assert that the proceeds belonged to BMO. I reject these arguments.

[44]

Returning to the test from para. 83 of
Boma
, the question is
    whether BMO converted the bank draft by dealing with it under the direction of
    one not authorized, by collecting it and making the proceeds available to
    someone other than the person rightfully entitled to possession. Thus, the
    motion judge was required to consider (1) whether BMO dealt with the bank draft
    under the direction of one not authorized, and (2) whether the proceeds were
    made available to someone other than the person rightfully entitled to
    possession.

[45]

In grappling with those questions, the motion judge asked herself the
    following three questions: (1) who was the rightful holder of the bank draft?
    (2) was the payment made to someone other than the rightful holder of the
    draft? and (3) was the payment not authorized by the rightful holder? (para.
    22).

[46]

The heart of her analysis, found at paras. 20-21 and 25-27, is as follows:

The authorities relied upon by the parties with respect to
    conversion deal with cheques payable to one person but deposited into the
    account of another person without the authority of the drawer of the
    cheque. The situation here is quite different. Firstly, it involves a bank
    draft not a cheque. The draft was payable to BMO.  The plaintiff was not
    an endorsee. The draft was deposited into a BMO customers line of credit
    account. The line of credit was a debt secured against the customers property.
    Accordingly, the customer was indebted to the bank.

In
373409 Alberta Limited
, the court stated that, a lending institutions liability in
    conversion is predicated upon finding both that the payment upon the cheque was
    made to someone other than the rightful holder of the cheque,
and
that such payment was not authorized by the rightful holder. If
    either of these criteria is not satisfied, there is no tort. (see para. 10)

In this matter, the plaintiff states that she gave the drafts
    to the defendants Adega, Chung and Nugent. Accordingly, they were the
    rightful holders; however, the draft was not payable to them.  Nugent then
    gave the draft to DaCosta. According to the plaintiff, Nugent did not did use
    the cheque for the purpose she intended.

Even though the plaintiff did not know the reason for it, by
    virtue of the fact that she requested and obtained a draft payable to BMO, she
    intended that the $90,190 be payable to BMO. It was deposited into a line of
    credit account in which the holder of the account was indebted to BMO. The
    deposit was a payment to the bank on account of a secured debt.

The bank was entitled to accept a draft payable [to] itself and
    to deposit it to an account in which the account holder was indebted to the
    bank. The fact that the plaintiff was fraudulently induced to obtain the
    draft may give her a cause of action against Adega, Chung and Nugent as well as
    the person who ultimately received the funds; however, the bank did not commit
    the tort of conversion.

[47]

In her analysis, she referred to
373409 Alberta

Ltd.
for the proposition that [a]n owners right of possession includes the right
    to authorize others to deal with his or her chattel in any manner specified.
    She also made reference to
Jer v. Samji
, 2014 BCCA 116, 60 B.C.L.R.
    (5th) 173, which Ms. Tran relied on in support of her argument that she was the
    rightful holder of the draft because her mortgage with BMO was already paid
    out.

[48]

In my view, the motion judges analysis overlooks several important
    points.

[49]

First, while Ms. Tran authorized Mr. Adega, Mr. Chung, and Ms. Nugent to
    give the bank draft to BMO, it is fair to infer from the affidavit evidence
    that they were not authorized to do whatever they wanted with it. Rather, they
    were authorized to deliver the bank draft on Ms. Trans behalf.

[50]

Second, I fail to see how Ms. DaCosta became rightfully entitled to
    possess the bank draft. Ms. Tran had never heard of Ms. DaCosta and so it
    cannot be said that Ms. Tran authorized her to deal with the draft. Nor did Ms.
    Tran authorize Mr. Adega, Mr. Chung and Ms. Nugent to give the draft to anyone
    other than BMO.

[51]

Third, as the collecting bank, BMO acted on the instructions of Ms. DaCosta
    to deposit the proceeds of the bank draft into her account to reduce her
    indebtedness to BMO. Without Ms. DaCostas instructions, there was no reason to
    deposit the proceeds of the draft into her account, as she was neither the
    payee nor an endorsee. In acting on her instructions, BMO acted on the
    instructions of one not authorized to deal with the proceeds.

[52]

Fourth, in the circumstances, it is reasonable to infer that Ms. Tran
    never intended to either gift money to BMO or to pay off Ms. DaCostas line of
    credit.

[53]

BMO, however, points to the fact that it was entitled to the bank draft
    as payee of the draft and that, as payee, it was entitled to the guaranteed
    funds from RBC.

[54]

BMO provided no authority in support of the bald proposition that a bank
    cannot convert a bank draft made payable to itself where presented by its own
    customer to pay down an existing third-party debt.

[55]

BMO also submits that a plaintiff must prove that she was either in
    actual possession or entitled to immediate possession of the chattel in order to
    sue for conversion. It notes that, once Ms. Tran handed over the draft to the
    alleged fraudsters, she no longer had actual possession. Nor, in BMOs
    submission, was she entitled to immediate possession of the proceeds, as she
    had authorized that the bank draft be payable to BMO.

[56]

It is clear, in my view, that in relation to Mr. Adega, Ms. Nugent and
    Mr. Chung, Ms. Tran was entitled to demand immediate possession of the bank
    draft. They were not the payees or endorsees of the draft and it was clear that
    the draft was meant to be delivered to BMO. Effectively, they were merely
    messengers acting on Ms. Trans behalf.

[57]

Ms. Tran was also entitled to immediate possession as against Ms.
    DaCosta as, on the evidence before this court, Ms. Da Costa had no legal
    entitlement to the bank draft. To paraphrase the words of the House of Lords in
Midland Bank v. Reckitt
(1932)
,
    [1933] A.C. 1, at p. 14, had Ms. Tran found Ms. DaCosta at the counter of the
    bank waiting to deposit the RBC bank draft to her own account, Ms. Tran could
    have, if she knew the facts, demanded Ms. DaCosta deliver the bank draft to
    her.

[58]

In my view, Ms. Tran also had a right to demand immediate possession of
    the proceeds from BMO in the circumstances of this case. In
Boma
, the
    Supreme Court indicated that, where an instrument is payable to someone without
    any legal entitlement to the proceeds of the cheque, the payee will not have a
    right of possession as against the owner of the proceeds. At para. 38 of
Boma
,
    the court noted that the payees of the cheques in question had no right of
    possession to the cheques, as they were not created in respect of legitimate
    debts owed to them by the appellants.

[59]

Here, BMO recognizes that Ms. Tran owed it nothing at the relevant time.
    Furthermore, BMO treated the funds represented by the bank draft as being the
    property of Ms. DaCosta and not as BMOs property. BMO took instructions from
    Ms. DaCosta on how and where to pay the funds, even though she was not the
    payee of the bank draft. On her instructions, they credited the proceeds to her
    account and then permitted her to withdraw the same amount in the form of a new
    bank draft, payable to Adega, and cash.

[60]

As  I have already noted, wrongful interference in the conversion
    context does not involve any moral wrongdoing. Because Ms. Tran was entitled to
    immediate possession of the draft from BMO, the wrongful interference consisted
    of paying the proceeds to Ms. DaCosta without proper authorization.

[61]

BMO submits that it is irrelevant whether Ms. Tran intended Ms. DaCosta
    to have possession of the proceeds. It refers to
iTrade Finance Inc. v.
    Bank of Montreal
, 2011 SCC 26, [2011] 2 S.C.R. 360, at para. 49, for the
    proposition that when an innocent party consensually advances funds to another
    under an agreement, it voluntarily parts with those funds, and that divestiture
    conveys the right to use them. Until the transferor discovers the fraud and
    voids the transaction, the fraudster retains beneficial title. Relying on
iTrade
,
    BMO argues that Ms. Tran conveyed the right to use the bank draft when she
    transferred it to Mr. Adega, Mr. Chung and Ms. Nugent.

[62]

iTrade
does not assist BMO in this case. In the
    passages cited by BMO in support of its position, Deschamps J. was discussing
    principles that apply when a transfer occurs under a
contract
obtained through fraud. Those passages stand for the unremarkable proposition
    that a contract obtained through a fraudulent misrepresentation is voidable and
    that, until it is voided, it remains an effective contract.

[63]

Here, there was no contract between Ms. Tran on the one hand
    and Mr. Adega, Mr. Chung and Ms. Nugent

on the other. She gave them
    the bank draft based on their representation that they would give it to BMO to
    pay off a debt she thought she owed. Ms. Tran did not receive any consideration
    and did not enter into any legal agreement.
iTrade
has no application
    in this case.

(c)

Can BMO rely on a defence under the
Bills of Exchange Act
?

[64]

BMO raised an alternative argument for the first time in oral argument
    before this court. Counsel submitted that, if BMOs actions amounted to
    conversion, it is a holder in due course and as such can rely on s. 55 of the
Bills of Exchange Act
to absolve itself of liability.

[65]

While certain provisions in the
Bills of Exchange Act
may
    afford a defence to an action in conversion, since BMO did not plead a
    statutory defence or raise any such defence before the motion judge, I would
    not consider this ground of appeal. BMO was required to put its best foot
    forward on the summary judgment motion; however, it failed to raise this
    argument. Further, and in any event, BMO did not fully argue this issue on
    appeal and did not provide sufficient information in the record to allow this
    court to assess the merits of any defence it may have under the
Bills of Exchange
    Act
.

(d)

Conclusion

[66]

On the record in this case, Ms. Trans motion for summary judgment
    should have been granted and BMOs motion to dismiss her claim for conversion
    of the bank draft should have been dismissed.

F.

DISPOSITION

[67]

I would set aside the motion judges order and replace it with an order
    allowing Ms. Trans motion for summary judgment for conversion and denying
    BMOs motion to dismiss her claim.

[68]

Ms. Tran is awarded her costs of the appeal as well as those in the
    court below. Ms. Tran will have fourteen days from the release of these reasons
    to provide brief written submissions on costs. BMO will provide its brief
    written submissions within fourteen days thereafter.

Released: GH MAY 19 2016

H.S. LaForme J.A.

I agree. J. Simmons
    J.A.

I agree. Grant
    Huscroft J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Wright v. Holmstrom, 2016 ONCA 360

DATE: 20160512

DOCKET: C60391

Strathy C.J.O., MacFarland and Brown JJ.A.

BETWEEN

Alexander James Wright

Applicant (Appellant)

and

Candice Anne Holmstrom

Respondent (Respondent in Appeal)

Jeanie DeMarco, for the appellant

Susan Adam Metzler, for the respondent

Heard: May 10, 2016

On appeal from the judgment of Justice Victoria Rose
    Chiappetta of the Superior Court of Justice, dated March 24, 2015.

ENDORSEMENT

[1]

This appeal is entirely fact-based. The appellant identifies no error of
    law. Instead, he asks this court to re-assess and re-weigh the evidence at
    trial concerning his interest, if any, in the Neville Park Boulevard house.

[2]

The appellants claim to a half interest was undocumented. As the trial
    judge noted, the resolution of his claim required her to make findings of fact
    based on conflicting evidence. This, in turn, called for the assessment of the
    credibility of the parties in the context of all the evidence, documentary and
    testimonial.

[3]

Having heard and seen the evidence of the witnesses, particularly the
    parties themselves, and having considered the extensive, but far from
    definitive, documentary record, the trial judge rejected the appellants
    evidence in support of his claim to an interest in the home. She found his
    evidence incredible, contrived and illogical. She recognized that there were
    inaccuracies and inconsistencies in the respondents evidence, but ultimately
    accepted her explanations and her evidence that the appellants payment of
    $130,000 to her was a gift.

[4]

The appellant submits we should come to come to different conclusions. In
    his factum and counsels submissions he points to bits and pieces of evidence
    which he says supported his position and were ignored, misunderstood or
    misapprehended by the trial judge. We do not accept these submissions. The trial
    judge considered and evaluated all the evidence, weighed the evidence on both
    sides, and found the respondents evidence credible and the appellants
    evidence incredible. She performed her task and, absent palpable and overriding
    error, her decision is entitled to deference.

[5]

The appellant identifies two principal errors which he says were
    overriding, in the sense that they affected the outcome. First, he says that
    the respondents lawyers file is strong evidence in support of his version of
    the facts and against the respondents. We disagree. The file establishes, at
    best, that at one time the respondent may have contemplated that the appellant
    would acquire an interest in her house. But the respondents evidence, which
    the trial judge accepted, was that the appellant gave the money to her as a
    gift. This finding was clearly open to the trial judge and it is not
    inconsistent with the evidence in the lawyers file.

[6]

The second alleged error was that the trial judge should not have
    rejected the appellants evidence on the origin of the Declaration of Shared
    Ownership and should not have found that he created the document only for the
    purpose of the lawsuit, in an unsuccessful attempt to corroborate a story that
    was not believable. The trial judge articulated a number of reasons why she rejected
    the appellants evidence on this issue. We see no error in her reasoning.

[7]

We do not find it necessary to review any of the other alleged errors
    identified by the appellant. None of them, individually or collectively, come
    close to being dispositive. The trial judge gave ample reasons for rejecting
    the appellants evidence and for accepting the respondents, not the least of
    which was the implausibility of the appellants explanation of why his alleged
    interest in the home was undocumented.

[8]

For the same reasons, we find that the appellant has identified no error
    in the trial judges conclusions on the breach of trust claim. Those
    conclusions, set out at paras. 86-91 of her reasons, were open to her.

[9]

Nor would we interfere with the order that the appellant pay $3,000 for
    the damage he caused to the Neville property. That claim was plainly before the
    trial judge and was supported by the evidence, including the appellants own
    written acknowledgment.

[10]

We also see no basis on which to interfere with the trial judges exercise
    of her discretion to award no costs. She observed that success was divided on
    the several issues before her, each party had made unfounded allegations
    against the other and each had engaged in misconduct in the course of the
    proceedings. She considered the relevant factors and her decision is entitled
    to deference.

[11]

The appeal is therefore dismissed.

[12]

The appellant stated that she did not intend to pursue the cross-appeal
    if the appeal was dismissed. Accordingly, the cross appeal is dismissed as
    abandoned.

[13]

The respondent is entitled to her costs of the appeal, fixed in the
    amount of $17,776.93, inclusive of disbursements and all applicable taxes. We
    see no reason to make any reduction to account for the dismissal of the
    cross-appeal.

G.R. Strathy C.J.O.

J. MacFarland J.A.

D.M. Brown J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: 798839 Ontario Limited v. Platt, 2016 ONCA 488

DATE
:
20160620

DOCKET: C58414

Strathy C.J.O., Blair and Lauwers JJ.A.

BETWEEN

798839 Ontario Limited
and
Jacobus
    Hanemaayer

Plaintiffs (
Appellants
)

and

Robert Platt
, James
    Bay Kaolin Corporation, James Bay Company Mineral Resources Inc., Black Gregor
    Explorations Ltd., Carlson Mines Limited, Source Resource Corp., Andre Boudreau
    and All-Terrain Track Sales & Services

Defendants (
Respondent
)

AND BETWEEN:

Robert Platt, Source
    Resource Corp., James Bay Kaolin Corporation and James Bay Company Mineral
    Resources Inc.

Plaintiffs

-
    and -

Community Expansion
    Inc., Great Lakes Nickel Limited, 153078 Canada Inc., 798839 Ontario Limited,
Great
    Lakes Kaolin Inc.
, Mineral Research Canada Inc., 894456 Ontario Limited,
    810031 Ontario Inc., 667188 Ontario Inc., 667190 Ontario Inc., 650326 Ontario Inc.,
    907248 Ontario Limited, Jacobus Hanemaayer, Jeffrey Hanemaayer, Earl Orth, Eric
    Kraushaar And Erin McGoey

Defendants (
Appellant
)

Paul J. Pape and Joanna L. Nairn, for the appellants

Robert Isles and R. Donald Rollo, for the respondent

Heard: May 12, 2016

On appeal from the judgment of Justice Michael A. Penny
    of the Superior Court of Justice, dated January 31, 2014, with reasons reported
    at 2013 ONSC 6879.

R. A. Blair J.A.:

[1]

This appeal involves the contractual interpretation of an agreement
    relating to the development of certain mining claims located in the James Bay
    lowlands of Northern Ontario.

[2]

The appellants, Jacobus Hanemaayer and 798839 Ontario Ltd., assert that
    the agreement was in effect an agreement of purchase and sale whereby full ownership
    of the Claims was transferred to them outright, in return for their undertaking
     but at their complete discretion  to do certain work in developing the
    Claims.

[3]

The respondent, Robert Platt says the agreement (which is called an Option
    Agreement, refers to the parties as Optionor and Optionee, provides that
    the Optionee
will earn
a 100% interest in the mining claims by
    fulfilling certain conditions, and that the agreement is intended to operate as
    an actual
earn in of interest
 in the claims), is an option
    agreement. Because the appellants did not comply with the conditions
    underpinning the option, he therefore remains entitled to the Claims.

[4]

Penny J. agreed with Mr. Platt.

[5]

For the reasons that follow, I agree with Penny J.

Factual Background

[6]

This appeal is the culmination of a long-standing litigious war of
    attrition between Mr. Hanemaayer and Mr. Platt. The conflict began more than a
    quarter of a century ago and stems from a deal made between the two men and
    their respective corporations in 1988. The relationship fell apart in 1989, spawning
    at least three legal proceedings. This action was commenced in 1990. The trial
    extended over a period of 6 months in 2013.

The
    Genesis of the Project

[7]

In 1988, Mr. Platt was a mining promoter in Timmins. He owned the rights
    to a number of mining claims in Northern Ontario. While this lawsuit concerned
    several of these claims, the appeal is confined to the issue of ownership of what
    are known as the Kipling Claims, located in Kipling Township about 60 miles
    north of Kapuskasing.

[8]

The Kipling Claims were thought to contain valuable deposits of the
    mineral kaolin  a naturally white clay substance that is used as a filler in
    the pulp and paper, plastic, paint and rubber industries, as a coating for
    paper, and in the manufacture of ceramic products. The exploration and
    development of these claims is referred to in the proceedings as the Kaolin
    Project.

[9]

Mr. Platt had exhausted his own funding, however, and he needed
    financing or investors or both to continue his exploration and development
    activities in respect of the Kaolin Project and his other claims.

[10]

Mr. Hanamaayer was an investor and had, or had access to, financing.

[11]

Although he was not familiar with the mining industry at the time, Mr.
    Hanemaayer became interested in the project when he learned of the commercial
    potential of the kaolin ore body from Mr. Platt and coupled that information
    with what he learned elsewhere about the tax advantages then available for
    investments in the Canadian mining exploration field. He represented other
    investors who were also interested in the prospects of obtaining mining
    exploration tax write-offs. As the trial judge found, at para. 20, Hanemaayer
    proposed to take a very significant role in, and to arrange for the investment
    of very significant funds to finance, the initial exploration phase of the
    Kaolin Project.

[12]

Mr. Hanemaayer incorporated 798839 Ontario Limited (798 Ontario) to act
    as the flow-through Canadian resource corporation for purposes of developing
    the Claims. This meant 798 Ontario would issue what are known as flow-through
    shares to the Hanemaayer investors  principally Heinz Kraushaar (deceased by
    the time of trial) and Kraushaars two corporations  to raise the needed funding.
    Flow-through shares were the mechanism by which investors in mining
    exploration companies at the time were able to obtain tax write-offs against
    their other income by flowing the exploration costs incurred by the Canadian
    resource corporation directly through that corporation to the investors own
    tax returns to be set off against that other income.

The
    Agreements

[13]

Two agreements relevant to the appeal were entered into in order to
    effect the further exploration and development of the Kipling Claims and to
    accomplish the sought-after tax advantages. The first was the Option
    Agreement, dated November 1, 1988, between Mr. Platt and 798 Ontario. The
    second was a Management Agreement, entered into between Mr. Platts company,
    James Bay Kaolin Corporation (James Bay), and 798 Ontario on the same date,
    whereby it was agreed that James Bay would carry out the necessary exploration
    development of the Claims  at an amount mutually agreed upon  in order to
    prove or disprove the existence and extent of the kaolin ore body and then to
    facilitate a final feasibility study for a full production operation.

[14]

Although Mr. Platt provided what was apparently a common form of mining
    exploration agreement to Mr. Hanemaayer to work from, Mr. Hanemaayer was at all
    times represented by Eric Kraushaar  a lawyer and advisor, and the son of the
    investor Heinz Kraushaar. Mr. Platt was not represented.

[15]

James Bay subcontracted the work under the Management
    Agreement, or some of it, to the defendants Andr
é
Boudreau and his corporation All-Terrain Track Sales & Services. The trial
    judge dismissed the action as against them.
[1]

[16]

By the time the relationship between the Hanemaayer and Platt interests
    broke down in 1989, the investors had advanced $10.8 million to the exploration
    and development of the Kipling Claims through 798 Ontario. $1.2 million was
    ultimately returned to Mr. Hanemaayer and used for other purposes.

The
    Trial

[17]

There were many issues in play at trial.  The appellants argued that:

(i)

the Option Agreement transferred
    title and ownership to them completely and they therefore owned the Kipling Claims;
    and the agreement placed Mr. Platt in the position of trustee and the monies
    had been advanced to him in trust;

(ii)

Mr. Platt had misused the funds,
    or at least failed to account for them adequately, and the investors were
    entitled to several millions of dollars in credits as a result;

(iii)

the misuse of, or failure to
    account adequately for, the funds was the cause of the breakdown in the
    relationship; and,

(iv)

they were entitled to damages
    for the loss of certain tax benefits because Mr. Platt was obliged to ensure
    the monies were used in a fashion that would guarantee their entitlement to
    claim the deductions provided by the tax program.

[18]

By the time of the trial in 2013, both Mr. Hanemaayer and Mr. Platt were
    incapacitated by age and health concerns. Mr. Platt was incapable of testifying
    (his examination for discovery was accepted as his evidence at trial) and Mr.
    Hanemaayer testified via a number of limited and carefully monitored video
    conference appearances from his home. Although credibility was a difficult
    issue given these factors, the trial judge ultimately found Mr. Hanemaayers
    evidence was not reliable and made no adverse findings against Mr. Platt.

[19]

As noted, the trial issues referred to above also related to mining
    claims other than the Kipling Claims. In addition, the trial judge was faced
    with counterclaims by Mr. Platt and by Mr. Boudreau and his corporation for
    damages they alleged they had sustained.

[20]

With the exception of a claim by Mr. Boudreaus company for a loss
    sustained on the sale of a piece of heavy equipment that had been purchased for
    the project, the counterclaims were dismissed. The appellants action was
    dismissed in its entirety. More particularly, for the purposes of the appeal, the
    trial judge held, at para. 307, that Mr. Hanemaayer and 798 Ontario had no
    interest in the Kipling Claims and that,

Title to the Kipling Claims rests
    entirely with Platt and his assigns. As a result, ownership and title to the
    mining claims in Kipling township which are the subject of the Option Agreement
    dated November 1, 1988 between Platt and [798] Ontario shall revert and be
    restored to Platt.

Analysis

[21]

Although the appellants address items (i) through (iv) outlined in para.
    17 above in their factum, they nonetheless raise only one issue on appeal:

Did the trial judge err in
    interpreting the Option Agreement to include an automatic reversion of the Kipling
    Claims to Platt in the event that development of the project was not fully
    funded?

[22]

I see no basis for concluding that the trial judge erred in this respect.
    Indeed, I am in substantial agreement with his interpretation of the Option
    Agreement and his reasoning on this point set out at paras. 295-307.

[23]

The trial judge properly held that in interpreting a commercial contract
    the court must give effect to the intention of the parties as derived from the
    words they have used, in the context of the contract as a harmonious whole and
    the factual matrix in which it was entered into. He relied on the following
    passage from this Courts decision in
Salah v. Timothys Coffees of the
    World Inc.
, 2010 ONCA 673, 268 O.A.C. 279, at para. 16:

When interpreting a contract, the
    court aims to determine the intentions of the parties in accordance with the
    language used in the written document and presumes that the parties have
    intended what they have said. The court construes the contract as a whole, in a
    manner that gives meaning to all of its terms, and avoids an interpretation
    that would render one or more of its terms ineffective. In interpreting the
    contract, the court must have regard to the objective evidence of the factual
    matrix or context of the underlying negotiation of the contract, but not the
    subjective evidence of the intention of the parties. The court should interpret
    the contract so as to accord with sound commercial principles and good business
    sense, and avoid commercial absurdity. If the court finds that the contract is
    ambiguous, it may then resort to extrinsic evidence to clear up the ambiguity.
    Where a transaction involves the execution of several documents that form parts
    of a larger composition whole  like a complex commercial transaction  and
    each agreement is entered into on the faith of the others being executed, then
    assistance in the interpretation of one agreement may be drawn from the related
    agreements.

See also
Bell Canada v. The Plan Group
, 2009
    ONCA 548, 96 O.R. (3d) 81, at paras. 37-38, and
De Beers Canada Inc. v.
    Ootahpan Company Limited
, 2014 ONCA 723, [2014] O.J. No. 4904, at para. 3.

[24]

The Supreme Court of Canada has recently held that [c]ontractual
    interpretation involves issues of mixed fact and law as it is an exercise in
    which the principles of contractual interpretation are applied to the words of
    the written contract, considered in light of the factual matrix, and therefore
    that the trial judges interpretation is entitled to deference on appeal: see
Sattva
    Capital Corp. v. Creston Moly Corp.
, 2014 SCC 53, [2014] 2 S.C.R. 633, at
    para. 50. The appellants acknowledge this, but rely on the Courts recognition
    that if it is possible to identify an extricable error of law, a judges error
    on such an issue does not attract deference:
Sattva
, at para. 53. Citing
    this Courts decision in
First Elgin Mills Developments Inc. v. Romandale
    Farms Limited
, 2015 ONCA 54, 381 D.L.R. (4th) 114, at para. 9, they argue
    that an extricable error of law occurs where the judge misapprehended the
    evidence, reached an interpretation of the agreement that was commercially
    unreasonable, and improperly implied a term in the agreement when the legal
    standard for doing so was not met. They submit that the trial judges
    interpretation is caught within these categories.

The
    Trial Judge Did Not Fail To Give Effect To The Plain Wording Of The Agreement
    Or Misapprehend The Evidence In Respect Of It

[25]

First, the appellants contend that the trial judge failed to give effect
    to what they say is the clear language of s. 3 of the Option Agreement. Section
    3 provides that on closing
[2]
,
    the Optionor [Platt] shall transfer unto the Optionee [798 Ontario] 100% of its
    right, title and interest in and to the said Claims  to and for its sole and
    only use forever The appellants submit that this error was fed by a misapprehension
    of the evidence. What they characterize as the trial judges misapprehension of
    the evidence is his finding that the transfer of title provided for in s. 3 was
    simply to facilitate the flow through of the development and exploration costs
    to the investors under the tax program by giving 798 Ontario the legal title to
    the Claims without transferring the beneficial interest in them to the
    corporation.

[26]

I reject this submission.

[27]

There was evidence from Mr. Platt upon which the trial judge could find,
    as he did, that 798 Ontario held legal title [f]or tax and other reasons to
    protect its investment and that like a mortgagor, beneficial title remained
    with Platt (para. 303). Counsel for the appellants conceded that there was
    evidence the investors had to have title in order to enjoy the benefits of
    the tax program. What the appellants characterize as a misapprehension of the
    evidence, therefore, is more accurately characterized as a disagreement with a
    factual finding made by the trial judge. The finding was supported by the
    record and puts the language of s. 3 in its proper perspective in relation to
    the other terms of the Option Agreement.

[28]

The wording of the Option Agreement makes it clear: (i) that the
    Optionee (798 Ontario) would only
earn a 100% interest
in the said
    mining claims by fulfilling its obligations, over a period not exceeding five
    years, to finance and carry out the required exploration, development and
    testing work (emphasis added: s. 2); (ii) that upon 798 Ontario satisfying the
    aforesaid obligations, [Platt] will retain a 5% net profit royalty interest in
    the said mining claims (s. 2); and (iii) that the Agreement was intended to
    be and shall
operate as an actual earn in of interest
in the Claims (emphasis
    added: s. 8). These provisions are reinforced by the recitals to the Option
    Agreement as well:

WHEREAS
the Optionor [Platt] is the beneficial owner
,
    free and clear of liens and encumbrances, of certain mining claims situated in
    the Province of Ontario;

AND WHEREAS the parties hereto have
    agreed that the
Optionee [798 Ontario] shall earn a certain interest in the
    mining claims of the Optionor [Platt] by financing and carrying out certain
    exploration development and testing work
on the said Claims as hereinafter
    set out. [Emphasis added.]

[29]

In my view, the trial judges interpretation is consistent with, and
    gives effect to, the language of the contract as a whole, having regard to the
    circumstances surrounding its negotiation and the purposes for which it was
    entered into  the twofold purposes of developing the Kaolin Project and
    providing the flow-through tax benefits to the investors.

The Factual
    Matrix and Commercial Sense

[30]

The appellants acknowledge the trial judges interpretation of the Option
    Agreement was rooted in his view of the surrounding circumstances, but their
    second submission is that he ignored at least two critical parts of the factual
    matrix.

[31]

The appellants say the trial judge failed to give effect to the fact
    that, at the time the Option Agreement was signed, Mr. Platt was in dire
    financial straits and in desperate need of an investor who could develop the claims.
    Accordingly, while the mining claims had significant potential value they were
    all but worthless to Mr. Platt without an investor willing to fund the
    development. It followed from this that Mr. Platt did not have the leverage to
    extract the type of unbalanced protection of his interests that emerged from
    the Option Agreement, the argument goes.

[32]

From there, the appellants move to the additional aspect of the factual
    matrix they contend the trial judge ignored. They argue the trial judges
    interpretation provides no protection for the up to $20 million that 798
    Ontario may have had to put up (for all of the projects) because, on the trial
    judges interpretation, they lose everything, and would be left with nothing to
    show for their investment, if the projects were not fully funded, while Mr.
    Platt would retain the Kipling Claims plus all the benefits of the investment
    in such circumstances.  They submit that this makes no commercial sense and
    does not reflect their superior bargaining power at the time the Option Agreement
    was made. In short, since Mr. Platt did not have the bargaining power to
    negotiate such an unbalanced outcome, the Option Agreement must not provide for
    such an outcome, and the contrary interpretation put forward by the appellants
    is the reasonable interpretation.

[33]

I see no merit in this argument.

[34]

The trial judge was aware of, and took into account, the fact that Mr.
    Platt was in need of funds to advance the project. There is nothing in the
    record to support either the contention that the parties were in unequal
    bargaining positions or, if they were, that this inequality somehow led to
    what, on the appellants interpretation would have been an equally unbalanced interpretation
    of the contract  one where Mr. Platt would give up all interest in his claims,
    and any control over and security for their exploration and development, in
    exchange for a potential 5% royalty (from a new company with no assets) at the
    end of the day. That is the logical end point of the appellants position that
    the Option Agreement was in effect an agreement of purchase and sale pursuant
    to which they acquired the full legal title and beneficial interest in the Kipling
    Claims at once, whether they carried out their exploration, development and
    testing obligations or not, or advanced any funds or not.

[35]

The reality is that option agreements are by nature instruments that can
    be viewed as providing for unbalanced outcomes from the perspective of either
    the optionor or the optionee. The optionor benefits from the price if the
    option is exercised (whether the price is in the form of a money payment or,
    as in this case, other consideration in the form of work performed), but runs
    the risk of being stuck with that price even if the value of the property or
    right that is optioned turns out to be considerably more that the optionor
    bargained for. The optionee buys the ability to obtain the property or the
    right optioned at the agreed price upon performing its obligations, but has
    the complete discretion or freedom whether to perform the obligations or not;
    however, if the optionor chooses not to do so, it loses the price paid for the
    option.

[36]

Either outcome can appear one-sided. However, the fact that one or
    another may occur does not indicate either that the negotiating table was
    tilted in favour of one party or another, or that the parties did not intend to
    enter into an option agreement.

[37]

Moreover, it is in the nature of an option agreement that the optionee
    typically loses the option price if it decides not to pursue the option by
    paying the price (in this case, by performing all the exploration, testing and
    feasibility study obligations). As Angela Swan and Jakub Adamski note in
Canadian
    Contract Law
, 3rd Ed. (Markham, ON: LexisNexis Canada, Inc., 2012), at p.
    276:

Option contracts are lopsided in
    the sense that, apart from the obligation to pay for the option, the optionee
    has complete freedom to exercise the option or not  and, of course, this is
    exactly what the optionee bought.  Generally speaking, options will be strictly
    construed and the optionee, in particular, required to exercise the option
    exactly in accordance with its terms. The reason for this attitude is that, by
    giving the option, the optionor is taking the risk that it will be held to the
    terms of the deal, particularly the price, that it offered. It should be able
    to rely on the optionee having to comply precisely with the terms of the
    option, particularly the deadline for acceptance.

[38]

This is the answer to the appellants assertion that it makes no
    commercial sense to interpret the Option Agreement in a fashion that requires
    them to advance $10.2 million towards the Kaolin Project without obtaining any
    interest in the Claim. The exploration development, testing and feasibility
    study work they agreed to do was simply the price they agreed to pay for the
    right to earn their 100% interest in the Kipling Claims and to move forward
    with the Kaolin Project in conjunction with Mr. Platt who would thereafter
    retain the right to a 5% royalty payment from the profits of the venture.

[39]

Mr. Platt also retained the right, after 798 Ontario had obtained its
    100% interest, to buy back a minimum 50% interest in the Claims if the
    appellants did not proceed further to bring the mine into production. The trial
    judge rightly concluded that the buy-back provisions found at ss. 5 and 6 of
    the Option Agreement did not come into play in the circumstances. Nor were they
    inconsistent with the trial judges interpretation of the Option Agreement. One
    might ask why Mr. Platt was being given the right to buy back a 50% interest
    (or more) in the Kipling Claims if the title and interest in the Claims had not
    been transferred as the appellants say was effected by s. 3. But the answer is
    that the buy-back provision only kicks in after the appellants have fulfilled
    the conditions necessary for earning their 100% interest; it is designed to
    ensure that once they had done so they continued to the production phase and
    that, if they did not, Mr. Platt was entitled to re-acquire an interest and do
    so himself.

The
    Implication of Terms

[40]

Thirdly, the appellants argue that the trial judge erred by improperly
    implying a term into the Option Agreement, namely that the rights in the Kipling
    Claims would revert to Mr. Platt if 798 Ontario did not fulfill the
    conditions precedent to its obtaining its 100% interest. Again, I disagree.

[41]

There was no need to imply a term that the beneficial interest in the
    Claim would revert to Mr. Platt, and the trial judge did not do so. The
    beneficial interest had never been transferred to 798 Ontario. What reverted
    back to Mr. Platt was the legal title, which had been transferred for the tax
    reasons outlined above.  This is what the trial judge found to be the case, at
    para. 303:

For tax and other reasons to
    protect its investment, [798] Ontario held legal title to the Kipling claims
    but, like a mortgagor, beneficial title remained with Platt.  Unless Hanemaayer
    financed the Project to the requisite state, legal title to the Kipling Claims
    would revert to Platt.

[42]

This is entirely consistent with the trial judges overall interpretation
    of the Option Agreement. In a fashion with which I agree, he summarized that
    interpretation, at paras. 298 and 301-302:

These expenditures,
[3]
and particularly the second of these expenditures, [were] specifically agreed
    to be discretionary to [798] Ontario. This does not mean, however that if, in
    its discretion, [798] Ontario chose not to finance the test facility, bulk
    sampling and material testing, it still earned its ownership interest of the
    Kipling Claims. To the contrary, the only interpretation of the Option
    Agreement that makes any sense is that while [798] Ontario could not be
    compelled to finance the test facility, bulk sampling and material testing (or
    be sued for failing to do so), if it did not finance these additional steps,
    the ownership of the Kipling Claims was not earned and reverted back to Platt.

In my view, Hanemaayers interpretation of the Option Agreement
    would defeat its entire purpose. According to Hanemaayer, the Option Agreement
    was not an option at all; it represented an outright sale of the Kipling Claims
    against the promise of future consideration.

That is not how I view the Option
    Agreement. The Option Agreement must be read in the context of the other
    Agreements made by the parties at the time.  Read as a whole and in the context
    of the surrounding circumstances, it is clear that the Option Agreement was
    critical to the protection of Platts principal interest in and contribution to
    this deal  his ownership of the Kipling Claims. In order to acquire the
    Kipling Claims, [798] Ontario had first to finance the two steps necessary to
    conduct a feasibility study to determine whether the Kaolin Project represented
    a commercially viable mining operation. [798] Ontario could not be compelled to
    do so but, if it did not, it would not earn its right to the Kipling Claims.

[43]

While the parties could have been more careful and included a specific
    term to this effect, it followed naturally from the failure of 798 Ontario to
    fulfill its obligation and earn its interest in the Claim. I observe again that
    Mr. Hanemaayer had legal advice and that Mr. Platt did not.

[44]

The trial judge summarized his findings and conclusions at paras.
    305-306:

I find, as a fact, that while [798] Ontario financed a drilling
    exploration program to prove or disprove the existence and extent of the kaolin
    ore body on the Kipling Claims, it did not finance pilot plant, bulk sampling,
    other material testing and other undertakings to the extent necessary to establish
    a final feasibility study for a full production mining facility.

Hanemaayer and [798] Ontarios
    failure to fulfill the second requirement to earn an interest in the Kipling
    Claims was not the result of Platts conduct. Rather, the Kaolin Project was
    not taken to the bulk sample/test facility/commercial feasibility stage
    because, by December 1989, Hanemaayer had sized up Platt as somewhat naïve and
    a bit of a dreamer. He took Platts vision of developing the Kaolin Project and
    used it to obtain an enormous tax benefit for the flow-through shareholder
    investors. He then concluded that he could easily squeeze Platt out of the
    Project and, with his superior financial resources, take over the entire
    Project for himself. Hanemaayer chose to cease all funding to Platt. The price
    of Hanemaayer doing so was to forfeit his interest in the Kipling Claims.

[45]

These findings and conclusions are fully supported by the record.

Disposition

[46]

For the foregoing reasons, the judgment below is affirmed and the appeal
    is dismissed.

[47]

In accordance with the agreement of counsel, the respondent is entitled
    to costs of the appeal fixed in the amount of $20,000 inclusive of all
    disbursements and applicable taxes.

Released: June 20, 2016

R.A. Blair J.A.

I agree G.R. Strathy
    C.J.O.

I agree P. Lauwers
    J.A.

[1]
The appellants originally appealed against this decision as well. However, the
appeal was dismissed as against Boudreau and All-Terrain by order
    of Rouleau J.A., dated February 18, 2015, for the failure of the appellants to
    comply with an order for security for costs granted in favour of Boudreau and
    All-Terrain by Simmons J.A. on December 17, 2014.

[2]

The closing apparently occurred on November 7, 1988.

[3]
The exploration, testing and feasibility study expenditures which constitute
    the condition set out in s. 2 of the Option Agreement.


COURT OF APPEAL FOR ONTARIO

CITATION: 1468025 Ontario Limited v. 998614 Ontario Inc.,
    2016 ONCA 504

DATE: 20160624

DOCKET: C61479

Rouleau, van Rensburg and Benotto JJ.A.

BETWEEN

1468025 Ontario Limited

Plaintiff (Respondent)

and

998614 Ontario Inc. and Gabriel Menei

Defendants (Appellants)

T. Michael Harris, for the appellants

Daniel Matson, for the respondent

Heard: June 21, 2016

On appeal from the judgment of Justice John S. Fregeau of
    the Superior Court of Justice, dated November 20, 2015, with reasons reported
    at 2015 ONSC 7216, 62 R.P.R. (5th) 130.

ENDORSEMENT

[1]

At the conclusion of the hearing, we dismissed the appeal with reasons
    to follow. These are those reasons.

Background

[2]

The appellants appeal the trial judges award of $184,211.58 and a
    declaration of an equitable mortgage on the properties subject to the
    litigation.

[3]

The claim was for repayment of various sums owed by the appellants,
    Gabriel Menei (Gabriel) and his corporation 998614 Ontario Inc. (998), to
    the respondent corporation, whose president and operating mind was Gabriels
    son, Dario Menei (Dario).

[4]

In 2001, 998 was experiencing serious financial difficulties. From 2001
    to 2007, the respondent corporation advanced funds to the appellants to cover Gabriels
    personal expenses and 998s operating expenses.

[5]

In 2002, the parties entered into an agreement respecting these advances.
    That agreement was to be secured by mortgages on the appellants properties. However,
    those mortgages were never registered on title.

[6]

At trial, the appellants maintained that the advances could not be
    proven as the documentation purporting to support them was inadequate. An
    adverse inference ought to be drawn, they submitted, from the failure to
    present corroborating evidence. Further, the appellants argued that because of
    discrepancies within the documents and between the documents and Darios
    testimony, Darios evidence should be rejected as being not credible.

[7]

The appellants also advanced a
non est factum
defence (it is
    not my deed), arguing that the 2002 agreement was void because Gabriel, who
    signed it, had only a grade one education and did not understand what he was
    signing.

[8]

Finally, the appellants argued that they ought not to be jointly and
    severally liable.

[9]

In his decision, the trial judge refused to draw an adverse inference
    from the limited documentation available in support of the various advances. Finding
    Dario generally credible, he accepted his explanation for the state of the
    record. The trial judge went on to allow most of the claims, but disallowed
    those without sufficient corroborating evidence.

[10]

The
    trial judge also rejected Gabriels
non est factum
defence, finding
    that Gabriel was not as unsophisticated as he alleged: he had been in business
    for many years, had entered into all manner of agreements during those years,
    and, in the trial judges estimation, understood what he was signing in 2002.

[11]

Finally,
    given the nature of the relationship and of the reasons for the various
    advances, the trial judge found that the appellants were jointly and severally
    liable. In any event, the 2002 agreement provided that all of the advances, whether
    to Gabriel or 998, were secured by the mortgages. As a result, recourse against
    the security was available for the entire debt.

[12]

The
    appellants now appeal on substantially the same grounds as were argued at
    trial. They simply frame these grounds as errors by the trial judge in his
    application of the law. They also argue that one aspect of the judgment, an
    award of $7,787.50 for damages to a piece of equipment, which equipment was
    returned to the respondent after the claim was issued, ought not to have been
    made as the claim was not properly pleaded.

[13]

In
    oral submissions, the appellants, relying on the Supreme Court of Canadas decision
    in
Lévesque v. Comeau
, [1970] S.C.R. 1010, placed particular emphasis
    on the trial judges failure to draw the requested adverse inference.

Analysis

[14]

We
    see no merit in the appeal. For the most part, the appellants simply disagree
    with the trial judges findings of fact. These findings were made after a
    careful review of the documentation filed at trial and an assessment of Darios
    and Gabriels credibility. The trial judge is in the best position to make such
    findings, and is entitled to deference. We see no reason to interfere. Other
    than arguing that some facts were not taken into account or were given
    inadequate weight, the appellants cannot point to any error or misapprehension
    of fact in the trial judges reasons supporting those findings.

[15]

We
    reject the submission that the trial judge erred in failing to draw an adverse
    inference from the respondents failure to produce documentation supporting
    some of its claims and from its failure to call as witnesses at trial the
    accountants who prepared some summaries of the claims advanced. The trial judge
    considered the issue and, based on Darios evidence and the extensive
    documentation filed, determined that no adverse inference should be drawn. Significantly,
    the trial judges reasons demonstrate that he carefully weighed the evidence.
    He disallowed those claims that lacked documentary support, allowing only those
    claims that were established by the evidence.

[16]

The
Lévesque
decision does not assist the appellants. It does not stand
    for the proposition that a trial judge must draw an adverse inference in
    circumstances such as were presented in this case, which included the trial
    judges finding that Dario had not intentionally withheld any relevant
    documents from the appellants. The trial judge fully explained why no adverse
    inference should be drawn. We see no basis to interfere.

[17]

As
    to the trial judges conclusions on the issues of joint and several liability
    and the appellants
non est factum
defence, we also see no basis to
    interfere. The trial judge correctly identified the governing legal principles
    and his conclusions are well supported on the record.

[18]

Finally,
    we see no error in the trial judges award of $7,787.50 for damage done to
    equipment. The return of the equipment was a subject of the claim. Although it
    was returned after the claim was issued, the appellants remained liable for the
    damage done to it prior to its return.

Disposition

[19]

For
    these reasons, we dismissed the appeal.

[20]

As
    agreed by the parties, the respondent, being the successful party on the appeal,
    is awarded indemnity costs, fixed in the amount of $7,500, inclusive of
    disbursements and applicable taxes.

Paul Rouleau J.A.

K. van Rensburg J.A.

M.L. Benotto J.A.