COURT OF APPEAL FOR ONTARIO

CITATION:
St.
    Mary's Cement Inc. (Canada) v. Clarington (Municipality),

2012 ONCA 884

DATE: 20121217

DOCKET: C53545

Winkler C.J.O., Pepall J.A. and Smith J. (
ad
    hoc
)

BETWEEN

St. Marys Cement Inc. (Canada)

Applicant (Appellant)

and

Municipality of Clarington

Respondent (Respondent)

Harry C. G. Underwood and Brendan Brammall, for the
    appellant

Ian Godfrey and Jon Smithen, for the respondent

Heard: November 20, 2012

On appeal from the judgment of Justice David G. Stinson
    of the Superior Court of Justice, dated March 11, 2011, with reasons reported
    at 2011 ONSC 1533, 81 M.P.L.R. (4th) 275.

Winkler C.J.O.:

A. Overview

[1]

This is an appeal by St. Marys Cement Inc. (Canada) (SMC) from a
    decision on an application for the interpretation of a municipal zoning by-law.
    SMC is proposing to substitute alternative fuel for part of the conventional fossil
    fuel currently used in its cement manufacturing process. The proposed fuel is
    recovered from post-recycling and post-composting materials. The appellant took
    the position that the by-law permits it to continue the manufacturing process
    with the new fuel. The respondent, the Municipality of Clarington
    (Clarington), disagreed.

[2]

The application judge interpreted the by-law in favour of Clarington and
    held that the use of the alternative fuel would be an impermissible change in
    land use.

[3]

The determinative issue in this case is whether SMCs proposed use of
    alternative fuel constitutes a new land use that is not permitted at the site
    in question. I conclude that it does not constitute a new land use. For the
    reasons that follow, I would allow the appeal.

B. Background

[4]

SMC operates a cement manufacturing plant on the north shore of Lake
    Ontario in the Municipality of Clarington, within the Regional Municipality of
    Durham. Claringtons By-Law 84-63 permits the use of the site for a cement
    manufacturing plant as well as any accessory uses that are customarily
    incidental and subordinate to, and exclusively devoted to, the main use.

[5]

SMC is proposing to substitute fuel consisting of post-composting and
    post-recycling materials for some of the conventional fossil fuel that it
    currently uses.

[6]

Clarington opposes SMCs proposal on the basis that it would give rise
    to a new land use; namely, the use of the site as a waste disposal area,
    which is not permitted under the by-law. Clarington therefore maintains that an
    amendment to the by-law is required for SMC to use the new materials. Further,
    Clarington takes the position that the alternative fuels are not customarily
    used in the cement industry in Ontario and therefore do not fall within the
    scope of the accessory use provision of the by-law.

[7]

SMC contends that its proposal does not give rise to a new land use.  In
    the alternative, it argues that use of the alternative fuels is a permissible
    accessory use authorized under the by-law.

[8]

Claringtons objection gave rise to the instant application. The
    application judge issued an order declaring that SMCs proposed use was neither
    a permissible use nor an acceptable accessory use under the by-law.

C. The Zoning By-Law

[9]

The SMC plant comprises approximately 321 hectares and is zoned as an Extractive
    Industrial (M3) Zone.

[10]

Section
    25.1 of the by-law lists the Permitted Uses of land within an M3 zone. Any
    use that is not permitted is prohibited. A cement manufacturing plant is not
    listed as one of the permitted uses in s. 25.1. However the plant is subject to
    a specific site exception in s. 25.4.1, which reads:

Notwithstanding Section
    25.1, those lands zoned M3-1 on the Schedules to this By-law may, in addition
    to the other uses permitted, be used for a cement manufacturing plant and a
    maximum of two (2) residential dwelling units for a manager, caretaker,
    watchmen, or other similar persons employed on the same lot and their families.

[11]

Section
    3.1(a) of the by-law permits Accessory Buildings, Structures and Uses:

Where this By-law
    provides that a lot may be used or a building or structure may be erected or
    used for a purpose, that purpose shall include any accessory building or
    structure or accessory use...

An accessory use is defined
    in s. 2 of the by-law to mean:

[A] use established
    during or after the establishment of the main use which is customarily
    incidental and subordinate to, and exclusively devoted to, the main use of the
    lot, and located on the same lot as such main use.

Use is also defined in s. 2 of the by-law to mean:

[T]he purpose or function
    for which a lot or building or structure, or any combination thereof, is
    designed, arranged, occupied or maintained and when used as a verb, USE shall
    have a corresponding meaning.

D. SMCs Proposal

[12]

SMC
    currently uses petroleum coke (petcoke), a by-product of crude oil refining,
    as fuel for its cement manufacturing process. Most of the petcoke is
    transported to the site by lake freighter, and the rest arrives by truck.  SMC
    has proposed to conduct a time-limited demonstration project in which three
    alternative fuels would be substituted for up to 30 percent of the petcoke
    currently used. According to the proposal, the fuels would be transported
    exclusively by truck and delivered on a just-in-time basis shortly before
    their use. Three alternative fuel types are proposed: post-composting residual
    plastic film from a composting plant, post-recycling paper bio-solids, and
    post-recycling residual materials from a recycled paper plant. It is hoped that
    this project will reduce the plants dependency on non-renewable fossil fuels
    and cut costs. SMC has applied for the necessary approvals to the Ministry of the
    Environment under s. 27 of the
Environmental Protection Act
, R.S.O. 1990,
    c. E. 19 (the
EPA
). These approvals are pending the outcome of this
    appeal.

[13]

Similar
    alternative fuels have been used by other cement manufacturers in plants in
    other jurisdictions including Quebec and British Columbia, as well as the
    United States and Europe.

[14]

SMC
    operates another cement plant in the Town of St. Marys in south-western
    Ontario. That site has proposed to use one of the same fuels proposed for use
    at the Clarington plant, pending approval by the Ministry of the Environment.
    The Town of St. Marys has a similar by-law but, unlike Clarington, the Town took
    the position that the use of alternative fuel does not constitute a change in
    use, that fuel storage and handling is an accessory use, and that no additional
    planning permission is required.

[15]

Should
    the Clarington pilot project demonstrate that the alternative fuels can be used
    without any significant change in emissions or environmental impact, SMC plans
    to seek regulatory approval for long-term use.

[16]

SMC
    filed expert evidence on the application to the effect that the project will
    not create adverse neighbourhood effects. While the substitution of fuels would
    result in some increased truck traffic, the system of alternative fuel delivery
    is enclosed and, by design, the process would not create additional litter,
    odour or dust nuisances. Instead, the use of post-recycled and post-compost
    materials is proposed to have environmental benefits and its substitution for
    petcoke is expected to reduce the plants greenhouse gas and sulphur emissions.

E. Decision Below

[17]

The
    application judge referred to the correct legal principles in interpreting the
    Clarington by-law. The modern principles of statutory interpretation apply
    equally to the interpretation of a municipal by-law and a statute:
Montréal
    (City) v. 2952-1366 Québec Inc
., 2005 SCC 62, [2005] 3 S.C.R. 141, at para.
    10. Thus, the interpretation of a by-law involves consideration of the text of
    the by-law, the intent of municipal council, and the purpose and scheme of the
    by-law as a whole:
Neighbourhoods of Windfields Limited Partnerships v.
    Death
(2008), 48 M.P.L.R. (4th) 183 (Ont. S.C.), at para. 33, affd 2009
    ONCA 277, leave to appeal to S.C.C. refused [2009] S.C.C.A. No. 253.

[18]

The
    application judge decided that the proposed fuel substitution would bring the
    subject lands outside the expressly permitted use of the land as a cement
    manufacturing plant. At para. 30 of his reasons, he concluded:

While I agree that SMCs use of the site for the manufacturing
    of cement will continue to be a permitted use under the Demonstration Project
    in my view, through the introduction of a fuel that falls within the
EPA
definition of waste, SMC is introducing a new and additional use on the site,
    because it will be disposing of industrial waste. As such, SMC will be
    operating a waste disposal area on the site.

[19]

The
    application judge also rejected the argument that use of the proposed alternative
    fuel was an accessory use to the main use of the site as a cement manufacturing
    plant, holding, at para. 33, that [t]he evidence does not support the
    conclusion that the proposed use is common or customary within the Municipality
    of Durham or Province of Ontario.

F. Analysis

(i)

The error in the decision below

[20]

In
    my view, the application judge erred in concluding that the use of waste as
    fuel brought the plant within the definition of waste disposal area, and that
    it therefore constituted a new and additional use. In reaching this decision he
    did not apply the express language used in s. 2 of the by-law to define waste
    disposal area.

[21]

I
    agree with the application judge that the proposed fuel falls within the broad
    definition of waste under the
EPA
. Section 2 of the
General Waste
    Management
Regulation, R.R.O. 1990, Reg. 347, sets out an expansive list of
    materials designated as wastes under the
EPA
, including post-recycling
    and post-composting materials regulated by
Recycling and Composting of Municipal
    Waste
Regulation, O. Reg. 101/94. Waste is not defined by the by-law; the
    Official Plans of Clarington and Durham define the term by reference to the EPA
    definition.  Since by-laws are the means by which official plans are
    implemented, the terms of the official plans aid in the contextual
    interpretation of the by-law:
Aon Inc. v. Peterborough (City)
(1999), 1
    M.P.L.R. (3d) 225, at para. 18.

[22]

The
    parties agree that use of the subject lands as a waste disposal area is not
    permitted. The term waste disposal area is defined by s. 2 of the by-law as a
    place where garbage, refuse or domestic or industrial waste is dumped,
    destroyed, or stored in suitable containers. Under the by-law, a waste
    disposal area is neither a generally permitted use nor a use listed under the
    site specific exemption for the subject lands.

[23]

Under
    the proposal, however, SMC would not be dumping, destroying or storing waste. As
    a result, there is no waste disposal area within the meaning of the by-law.
    Accordingly, the sole use continues to be the use expressly permitted by s.
    25.4.1 of the by-law  that is, the operation of a cement manufacturing
    plant.

(ii)

Waste
    disposal area

[24]

The
    application judge concluded that because SMC would be operating a waste
    disposal area on the site it would be introducing a new use to the site. This
    conclusion is based on his finding that the proposed activity falls within the
    definition of waste disposal area. In reaching this conclusion he failed to
    consider, and therefore analyze, the wording of the definition as it appears in
    the by-law. In adopting this approach to the construction of the by-law he fell
    into error.

[25]

The
    site must be used for dumping, destroying or storing waste to fall within
    the definition of a waste disposal area. Clarington contends waste is
    destroyed when it is burned as fuel in a cement kiln.

[26]

SMCs
    use of the alternative fuel would not be considered destruction of waste,
    just as the use of petcoke fuel would not be characterized as the destruction of
    petcoke. In both cases, fuel is being used productively as part of the
    permitted use  the manufacturing of cement.

[27]

Reading
    the definition of waste disposal area in the context of the by-law as a whole,
    and in the context of the official plans, the purpose of the definition is
    clear: the Municipality seeks to regulate land that is used for the purpose of
    removing, containing or managing unwanted materials. Conversely, SMC is
    proposing to use the materials as a resource for an existing and approved
    manufacturing process. The fact that the fuel materials are being diverted from
    the waste stream is not, on the facts of this case, determinative of the land
    use. In this context it is worth noting that petcoke is a by-product of
    petroleum production, and by definition, would itself be a waste product if it
    did not have a productive use. The use of one fuel as opposed to another does
    not alter the fact that the SMC plant is in essence a cement plant and not a
    waste disposal area.

(iii)

Is the proposed use of the land a prohibited additional use?

[28]

Clarington
    submits that even if the proposal does not fall within the definition of waste
    disposal area, the proposed substitution of fuels is a use that is still
    prohibited because the by-law does not permit any kind of waste processing at
    the SMC site. The by-laws should be interpreted in the context of the Official
    Plans for Durham and Clarington. Clarington argues that the provisions in the
    Official Plans show an intention to regulate the land use aspects of waste
    handling. Neither the M3 Zone, nor the M3-1 Exception Zone, explicitly lists
    any kind of waste processing as a permitted use. By contrast, another provision
    in the by-law explicitly allows for a waste transfer station and material
    recovery and recycling facility for solid non-hazardous waste. Therefore, by
    implication, it is Claringtons position that any kind of waste processing activity
    is a new use that would require explicit permission.

[29]

Clarington
    cites the decision of this court in
1121472 Ontario Inc. v. Toronto (City)
(1998), 39 O.R. (3d) 535 (C.A), at para. 15 as authority for the proposition
    that land may have more than one use, and if one of the uses is prohibited, that
    use is not saved because the primary use is permitted. Applying this reasoning
    to the instant circumstance, Clarington asserts that the proposed use of
    alternative fuel constitutes a second use of the subject lands, namely the
    handing of waste, which is not permitted.

[30]

I
    cannot accede to this submission that the use of the alternative fuel by SMC constitutes
    a second use. All the above arguments by Clarington are contingent on a finding
    that the SMC proposal would introduce an additional use of the land. In my view,
    there is no additional use in the present circumstances. This is a complete
    answer to the line of argument advanced by Clarington.

[31]

The
    proposition that partial substitution of alternative fuels constitutes a change
    in use requiring new planning permission was considered and rejected by the
    Court of Appeal of England and Wales in
R. (ex parte Lowther) v. Durham
    County Council

and Lafarge Redland Aggregates Limited
, [2001] EWCA Civ 781
. Although
Lowther
was decided under a different regulatory framework, the interpretive issue in
    that case is analogous to the present circumstance.

[32]

In
Lowther
, the Lafarge company ran an operation in which kilns were used
    to produce dolomite. Petcoke served as the primary fuel. Lafarge proposed to substitute
    a fuel derived from waste solvents for some of the petcoke used and received
    approval from the Environment Agency. The issue was whether use of the alternative
    fuel constituted a material change in use of any buildings or other land
    requiring separate planning permission. The court in
Lowther
noted that
    waste disposal could constitute a separate and distinct use of land.

[33]

In
Lowther
, the court held that the use of alternative fuel was not a
    material change in land use. At para. 45, Phillips M.R. stated:

I have been unable to identify any principle of planning law
    that decrees that, simply because waste is matter which has to be disposed of,
    a person who makes constructive use of the waste for the purpose of some
    activity other than disposal of the waste, but who incidentally disposes of the
    waste at the same time, must be deemed to be making two uses of the land,
    namely waste disposal and the ulterior activity.

[34]

Moreover,
    at para. 54, the Master of the Rolls relied on the principle that, when one is
    dealing with waste, the object of the operation is of particular importance
    when analysing the nature of the activity for planning purposes. At para. 72, Phillips
    M.R. agreed that there was no waste disposal use in Lafarges burning of the
    alternate fuel. He concluded that the burning of fuel is a process of energy
    recovery that is so entirely part of the manufacture of cement for lime that
    it would be wrong to characterise it as a separate use.

[35]

I
    find the reasoning in
Lowther
to be compelling and apposite to the
    instant case. The burning of fuel is inherent in the production of cement, and
    the use of alternative fuel does not amount to a separate use of the land.

[36]

There
    may be instances where land truly has two uses, one of which would render the
    entire enterprise prohibited. Examples of this could include methane recapture
    from a landfill site or energy generation from a garbage incinerator. These
    situations could fall within the restricted definition of waste disposal
    area.  Phillips M.R. averted to this possibility at para. 58 of
Lowther
:

In some circumstances an operation may involve a nice balance
    between the objective of waste disposal and the ultimate objective of the
    operation. In those circumstances it may be correct to hold that the land is
    being subjected to two uses, waste disposal and the ultimate objective.

[37]

Whether
    any particular activity constitutes a second use for planning purposes will
    depend on the facts of the case and specific language of the by-law at issue.

G. Conclusion and Disposition

[38]

My
    conclusion that the by-law does not bar SMCs alternative fuel use is in no way
    an invitation to unregulated waste disposal in the municipality. The by-law is
    still effective against any activity captured by the definition of waste
    disposal area, as it is against any other activity where land is being used
    for an additional use that is not permitted.

[39]

It
    is worth repeating that the present case is a land use case and not an
    environmental matter. Even though the by-law does not restrict the substitution
    of fuels in this case, SMC is still subject to the broad regulatory oversight
    of the Ministry of the Environment. At para. 10 of his reasons, the application
    judge emphasized that the focus of this case is on land use, not environmental
    regulation. Use of the proposed fuels still requires s. 27 approval from the
    Ministry under the
EPA
, which is pending in this case.

[40]

Moreover,
    it is also important to emphasize that this case is about the interpretation of
    a specific by-law. It does not involve an issue as to the powers of the
    municipality.

[41]

Given
    my conclusion that the proposed use of alternative fuel falls within the permitted
    use under the by-law, it is unnecessary to address the second issue of
    accessory use.

[42]

For
    the reasons above, I would allow the appeal, set aside the judgment below and
    the application judges order as to costs.

[43]

An
    order shall issue declaring that use of the proposed alternative fuels at the
    SMC plant in the Municipality of Clarington does not constitute a new land use
    and is permissible for the purposes of Zoning By-Law 84-63.

[44]

SMC
    is entitled to its costs on the application and the appeal. The costs of the
    appeal are fixed at the agreed amount of $25,000, inclusive of disbursements
    and taxes.

Released: WKW   December 17, 2012
W.K. Winkler CJO

I agree S.E. Pepall
    J.A.

I agree Patrick
    Smith J.
(ad hoc)


COURT OF APPEAL FOR ONTARIO

CITATION: Seredy v.
RBC Royal Bank of Canada
, 2012 ONCA 883

DATE: 20121213

DOCKET: C54725

Juriansz, LaForme and Ducharme
[*]
JJ.A.

BETWEEN

George Seredy

Appellant

and

RBC Royal Bank of Canada, Greg Peden as
    servant/agent of Royal Bank of Canada, Aklima Rojan as servant/agent of Royal
    Bank of Canada

Respondents

George Seredy, in person

Greg Bowden, for the respondents

Heard and released orally: April 20, 2012

On appeal from the judgment of Justice Silja S. Seppi of
    the Superior Court of Justice, dated January 18, 2011.

SUPPLEMENTARY ENDORSEMENT

[1]

The courts decision in this case was released on June 5, 2012. The
    court decided that the trial judge erred by granting the respondents motion to
    withdraw the case from the jury. She had characterized the motion as a motion
    for non-suit and had dismissed the appellants action for slander.  In
    determining the motion the trial judge accepted the appellants version of the
    utterances and the appeal was decided on that basis. This court decided that
    the words in the appellants version were reasonably capable of carrying a
    defamatory meaning.

[2]

In its reasons released June 5, 2012 the court allowed the appeal but
    did not state explicitly that there would be a new trial.

[3]

Had the trial judge allowed the case to proceed, it would have been the
    task of the jury to decide if the words alleged by the appellant were uttered
    in fact, and if the words found to be uttered were in fact defamatory.  Given
    the trial judges ruling the jury was dismissed. A new trial in front of a new
    jury is necessary. We would have thought this was implicit in our reasons, but
    to remove any doubt, we order a new trial as a consequence of the successful
    appeal.

R.G.
    Juriansz J.A.

H.S.
    LaForme J.A.

[*]
Ducharme
    J.A. did not participate in the Supplementary Endorsement.


COURT OF APPEAL FOR ONTARIO

CITATION:
Straus
    Estate v. Decaire, 2012 ONCA 918

DATE: 20121224

DOCKET: C53471

Goudge, Simmons and Gillese JJ.A.

BETWEEN

Estate of Joseph Straus by its Executor, Angela
    Straus and Angela Straus

Plaintiffs (Respondents)

and

Roy Decaire, RCB Investors Choice Inc., IPC
    Investment Corporation,
FundEX Investments Inc.
,
    Pacific International Securities Inc., Orion Securities Inc., Spectrum Meditech
    Inc., IRG Services Ltd., Cyclone Investments Inc., Northgate Holdings Inc.,
    Millenium Medical Supply Inc., Millenium Medical Supply Corp., Kelly Fielder,
    Richard Savage and Nicola More

Defendants (
Appellant
)

Ross F. Earnshaw, for the appellant FundEX Investments
    Inc.

Gary L. Petker, for the respondents

Heard: September 19, 2012

On appeal from the judgment of Justice David S. Crane of
    the Superior Court of Justice, dated February 18, 2011, with reasons reported
    at 2011 ONSC 1157.

Gillese
    J.A.:

OVERVIEW

[1]

Joseph Straus (now deceased) and his wife, Angela Straus, (together the
    Strauses or the plaintiffs) lived with their six young children in Waterloo,
    Ontario.  Joe was a millwright with a grade 12 education.  Angela was a
    homemaker with some part-time employment as a bookkeeper.  At the relevant
    time, their youngest child was four years old.  The children are approximately
    two years apart in age.

[2]

Roy Decaire (Decaire) was Joes brother-in-law.  He was also Joe and
    Angelas financial advisor.

[3]

Decaire was registered with the Ontario Securities Commission (OSC) as
    a salesperson.  By virtue of his registered status, at the relevant time for
    this appeal, he was allowed to sell mutual funds and other financial products,
    but only for so long as he was employed by FundEx Investments Inc. (FundEX).
    Decaire had been previously employed by Associated Financial Planners Inc. (AFP/IPC)
[1]
on a similar condition.  Both FundEX and AFP/IPC were registered mutual fund
    dealers (dealers), regulated by the
Securities Act
, R.S.O. 1990, c.
    S.5.

[4]

Decaire became associated with Kelly Fielder (Fielder), a stock
    promoter who was pursuing investment in needle incineration technology
    (Needle-Ease).  Decaire was not legally permitted to promote or sell this
    investment.  In promoting it, Decaire was acting off the books.

[5]

Decaire convinced Joe and Angela to invest in start-up companies
    associated with Needle-Ease.  The investment turned out to be worthless and
    they lost all that they had invested in it.

[6]

The Strauses brought a lawsuit in which they sought to recover their
    losses from not only Decaire but also the financial firms with which he was
    affiliated during the relevant times.

[7]

They were successful.

[8]

In a judgment dated February 18, 2011 (the Judgment), the trial judge ordered
    that Decaire pay damages for the full amount of their investment of $277,471,
    plus interest and costs; that AFP/IPC pay damages of $154,471,
[2]
the amount they invested while Decaire was its representative; and, that FundEX
    pay damages of $100,000, the amount they invested while Decaire was its
    representative.

[9]

In addition, the trial judge awarded the Strauses costs payable by Decaire,
    AFP/IPC and FundEX, jointly and severally, with indemnity rights against one
    another in approximate proportion to the principal amounts awarded against
    each.

[10]

FundEX
    appeals.  It contends that the trial judge erred in finding it liable for Decaires
    actions during the period that he worked for it.

[11]

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

BACKGROUND IN BRIEF

Decaire

[12]

Decaire
    played a central role in this matter.  His employment history is a critical
    component of the saga.  Thus, I begin there.

[13]

Decaire
    was both a licensed life insurance agent and a licensed mutual fund sales
    representative.  He was associated with Royal Sun Alliance, a life insurance
    company, at all material times.

[14]

In
    1997, Decaire was hired and fired by Regal Capital Planners.
[3]

[15]

That
    same year, he went to work with Financial Concepts, where he lasted one month.

[16]

From
    January 1998 to May 1999, Decaire worked at AFP/IPC.

[17]

In
    May 1999, Decaire left AFP/IPC and joined FundEX.

[18]

In
    the contract between Decaire and FundEX, Decaire agreed to operate as an
    independent contractor, not an employee, and that he would not hold himself out
    as a FundEX employee.  He further agreed that he would comply with all industry
    standards relating to trading in financial products offered by FundEX, and all compliance
    and supervisory procedures.

[19]

In
    order to sell mutual funds and other such financial products, Decaire had to be
    licensed by the OSC.  Each of his employers, including FundEX, had to sponsor
    his application and his registration was conditional on him remaining employed
    by his sponsoring employer.

[20]

Decaire
    remained with FundEX until 2002.  On leaving, Decaire transferred his book of
    business to Gordon Stoll.  Mr. Stoll completed the first and only Straus
    investment application on record at FundEX, albeit only for Joe Straus.  This
    application showed that Joes investment objectives were tax savings,
    retirement planning and growth.  His risk tolerance was rated at medium.

Decaires Relationship
    with Millenium

[21]

In
    1998, Decaire became associated with Fielder.  At all material times, Fielder
    was an insider of, and a fund raiser for, the defendants Millenium Medical
    Supply Inc., Millenium Medical Supply Corp., and Spectrum Meditech Inc.  These
    companies are insolvent; no claim was advanced against them at trial.  Fielder
    was also the principal and guiding mind of the defendant corporations Spectrum
    Meditech Inc., IRG Services Ltd., Cyclone Investments Inc. and Northgate
    Holdings Inc. Neither Fielder nor these corporations defended the action at
    trial.  For ease of reference, I will refer to all of these companies as
    Millenium.

[22]

From
    1998 onward, Decaire was a vigorous proponent of investment in Millenium.  The
    trial judge found that his commitment to Millenium and Needle-Ease was beyond
    reason and objectivity and that it continued well after their insolvency.

[23]

Decaire
    introduced, promoted and assisted the sale of Millenium shares to his mutual
    fund clients.  He was rewarded for his efforts by Millenium, a fact hidden from
    the plaintiffs and his other clients.  For example, he signed a contract with
    Millenium under the terms of which he was to receive 1.5 million shares plus
    $5,000 (USD) per month for promoting Millenium.  At other points during this
    sad saga, he was gifted 107,500 shares

for his participation in the development and design of the Canadian
    marketing effort

and later received a further gift of 550,000
    shares in Spectrum Meditech Inc.

The Strauses Invest in
    Millenium

[24]

Decaire
    was Joe and Angelas sole source of investment advice and information.  Angela
    did not know the difference between segregated funds, mutual funds or stocks.
    She did not know the difference between a stockbroker and those who could only
    sell mutual funds. Even at trial she was still unsure of what a segregated fund
    is.  It was only during the course of the lawsuit that she had learned that it
    was an insurance product.

[25]

In
    1998, the Strauses bought four Royal Sun Alliance segregated funds, a life
    insurance product, for $80,000.

[26]

After
    Decaire got involved with Fielder, he advised Joe and Angela to invest in
    Millenium to the full extent of their financial resources.  As previously
    noted, he never disclosed to them that he was reaping financial gains for his
    promotional efforts in respect of Millenium.  He did not give Joe and Angela
    any documentation or disclose the risks associated with the investment.  He led
    the Strauses to believe that they would not lose their money  that the
    investment was as safe and secure as if it had been invested in a Canada
    Savings Bond or GIC.

[27]

While
    Decaire was at AFP/IPC and on his advice, the Strauses invested approximately
    $170,000 in Millenium.

[28]

When
    Decaire joined FundEX, he transferred the Straus investments to it.

[29]

While
    at FundEX, Decaire maintained unfounded faith in the business viability of
    Needle-Ease
[4]
and continued to vigorously promote Millenium, even though by that time he knew
    it was worthless.  He made no secret of his involvement with Millenium and
    Needle-Ease.  He kept its promotional material on his desk in his FundEX
    office.  He talked with anyone and everyone about Needle-Ease as an
    investment.

[30]

In
    August 1998, on Decaire's advice, Joe and Angela liquidated their Royal Sun
    Alliance
segregated funds and used
the
    proceeds of approximately $95,000, supplemented by other personal funds, to
    make a further investment of $100,000 in Millenium.

[31]

FundEX
    called no witnesses at trial.

Expert Evidence at
    Trial

[32]

Sergio
    Cechetto was the only expert at trial qualified to testify on matters relating
    to mutual fund dealers including mutual fund industry practice, compliance practices
    and the compliance duties of dealers during the relevant time period.

[33]

Mr.
    Cechetto testified that the Mutual Fund Dealers Association (MFDA) was formed
    in June 1998 but it was not until 2000-2001 that it was fully established as a
    self-regulatory organization.  However, by 1999, all dealers were aware that
    the MFDA was in place or about to be in place and become effective. He said that
    every dealer had to come up with a compliance plan consistent with the minimum
    standards contained in the regulations.

[34]

The
    trial judge accepted Mr. Cechettos evidence that as part of compliance,
    dealers are obliged to oversee the activities of their sales representatives so
    that clients are not put into products that are inappropriate for them.  He
    also accepted Mr. Cechettos testimony that dealers have a duty to have in
    place a robust compliance plan and they also have a duty to their clients to
    ensure compliance with codes of conduct, which provide protection to investors
    from unfair, improper or fraudulent practices.

THE TRIAL JUDGMENT

[35]

The
    trial judge found that Joe and Angela were simple people in financial and
    business matters  unsophisticated investors with a moderate tolerance for
    risk.  They had a very minimal knowledge and understanding of investments in
    securities regulated under the
Securities Act
. Their purchase of Millennium
    shares was their first corporate share transaction, a transaction that the
    trial judge found was suitable only for sophisticated investors with a high
    risk tolerance.  He found the purchase to be clearly unsuitable for the
    Strauses.

[36]

In
    respect of Decaire, the trial judge found that he acted unlawfully in his off the
    books activity with Millenium and that he violated the fundamental obligation
    of honest dealing in his promotion and misrepresentation of Millenium to FundEX
    mutual fund customers.  Further and significantly, the trial judge found that
    in so doing, Decaire acted in an open and readily discoverable manner.

[37]

The
    trial judge concluded that FundEX had failed in its duty to protect the
    plaintiffs from Decaires off the books activity.  He found that FundEX,
    through its corporate policy and practices, placed Decaire into the community
    so as to obtain the plaintiffs trust and confidence as their financial advisor,
    all without proper supervision or governance of his activities and while
    knowing that there was a reasonable risk that Decaire would abuse that
    confidence by putting clients into inappropriate products.

[38]

And,
    the trial judge found at para. 25 of his reasons,

Decaire at the direction of [AFP/IPC] and subsequently FundEX,
    jointly and severally for their respective profit, adopted a model for the sale
    of mutual funds by creating a fiction that their sales representatives were
    financial advisors.

[39]

The
    business model AFP/IPC and FundEX employed was to have Decaire solicit his
    family members, relatives and friends, all on the basis that he was an
    officially registered financial advisor employed by a large mutual fund company
    to perform these services.  The mandate and instruction of the two defendants
    was for Decaire to obtain his clients confidence and trust both for immediate
    purchases and for the development of long term loyalty to the defendant
    dealer.

[40]

In
    holding FundEX liable in negligence, the trial judge made these further findings:

1.  Decaire
    came to FundEX with bad judgment and little knowledge, ability or training to
    be a financial planner or advisor.  He was a persuasive salesperson qualified
    to sell mutual funds, provided he was given instruction and supervision;

2.  FundEX
    failed to inquire into Decaires activities at AFP/IPC and his potential for
    continuing those activities while at FundEX;

3.  FundEX
    failed to train Decaire for the purpose of committing him to the compliance
    requirements of the mutual fund industry;

4.  FundEXs
    governance officer failed to make even a superficial inquiry into Decaires
    activities and any reasonable inquiry would have revealed Decaires off the books
    activity;

5.  FundEX failed
    to monitor and supervise Decaires daily activities after he began working for
    it.  In so doing, it failed to meet its legal responsibilities under the
Securities
    Act
;

6.  FundEX failed
    to examine Decaires books;

7.  In light
    of Decaires employment history in the financial industry, FundEX failed to
    make reasonable inquiries that would have disclosed Decaires off the books activity;

8.  FundEx
    failed in its obligation to the plaintiffs to ensure that it met its compliance
    requirements of oversight and that codes of conduct were followed.

[41]

The
    trial judge also found FundEX liable on the basis that it was vicariously
    liable for Decaires activities during that period.

THE ISSUES

[42]

FundEX
    submits that the trial judge erred in finding that it:

(1)  owed a duty of care to
    the plaintiffs; and

(2)  was vicariously liable
    for Decaires activities.

[43]

FundEx
    also sought to appeal the cost order below. However, at the oral hearing of the
    appeal, counsel for FundEx indicated this ground would be pursued only if the
    appeal were successful.  As I would dismiss the appeal, it is unnecessary to
    deal with this issue.

ANALYSIS

Did FundEX owe the
    plaintiffs a duty of care?

[44]

FundEXs
    submission on this ground rests on the different regulatory regimes for life
    insurance agents and mutual fund sales representatives. FundEX complains that
    the trial judge imposed liability on it based upon a duty to supervise the
    liquidation of life insurance products. It points to the fact that the Royal
    Sun Alliance segregated funds were liquidated by Decaire, through Royal Sun
    Alliance, under the authority of his life insurance designation.  FundEX contends
    that as a mutual fund dealer it cannot be held responsible for Decaires
    actions as a life insurance agent in the sale and liquidation of life insurance
    products.

[45]

This
    submission, in my view, completely misses the point.  The trial judge held
    FundEX liable in negligence based not on a duty to supervise the liquidation of
    life insurance products, as FundEX contends, but based on the breach of its
    duty to supervise Decaire in his role as a mutual fund sales agent.  The source
    of the plaintiffs funds (i.e. their life insurance investments) for the
    additional $100,000 investment in Millenium during the time that Decaire
    worked for FundEX is not legally significant in the circumstances of this case.
    What is significant is that the investment was made at Decaires urging, while
    he was a licenced mutual fund agent working for FundEX, a registered mutual
    fund dealer.  The trial judge held FundEX liable in negligence because, after
    enabling Decaire to hold himself out as a registered financial advisor working
    with a registered mutual fund dealer, it failed to adequately (or at all) train,
    monitor or supervise Decaire while he worked for it, contrary to its regulatory
    and industry obligations.

[46]

FundEX
    made a related argument based on
Doiron v. Devon Capital Corp
., 2002
    ABQB 664, 319 A.R. 387.  In
Doiron
, Forsyth J. of the Alberta Queens
    Bench found Manufacturers Life Insurance Company, functioning as Manulife, was
    not liable for off the books activity by one of its agents.  At para. 21, the
    court stated that Manulife had a duty to supervise the agent but that duty only
    extended to his Manulife-related activities.  Therefore, while Manulife had a
    duty to ensure that the life insurance policies and annuities that the agent
    solicited were appropriate for the particular client, that duty did not extend
    to the agents collateral investment projects.

[47]

The
    trial judges findings of fact in the present case make it clear that
Doiron
is a very different case.  Decaire did not promote Millenium completely
    independently of FundEX.  On the contrary, he did so openly and vigorously
    while at his FundEX office and to anyone who would listen, including FundEX
    colleagues.  Indeed, when Decaire left FundEX in 2002, he transferred his book
    of business to Gordon Stoll, a mutual fund salesperson at FundEX whom he had
    convinced to invest in Needle-Ease.

[48]

The
    trial judge held FundEX liable in negligence based on extensive findings of
    fact.  On the record, those findings were fully available to him.  I see no
    basis for appellate intervention.

[49]

Accordingly,
    I would dismiss this ground of appeal.

Is FundEX vicariously liable for Decaires
    activities?

[50]

FundEx
    makes two submissions in arguing that the trial judge improperly found it
    vicariously liable for Decaires off the books activity.

[51]

The
    first submission is based on
671122 Ontario Ltd. v. Sagaz Industries Canada
    Inc
., [2001] 2 S.C.R. 983.  At para. 33 of
Sagaz
, the Supreme Court
    of Canada states that the relationship of an employer and independent
    contractor typically does not give rise to a claim for vicarious liability.
    FundEX says that the relationship it had with Decaire was that of employer and
    independent contractor, not employee.  Therefore, the trial judge erred in
    fixing it with vicarious liability for the plaintiffs losses arising from the
    August 1999 Investment.

[52]

FundEXs
    second submission is that the trial judge erred by expanding the doctrine of
    vicarious liability to encompass the principal and agent relationship by fixing
    it with liability, as principal, for damages arising from Decaires acts which
    were prohibited by law, performed contrary to FundEX policies and which the
    plaintiffs knew to be completely unrelated to FundEX.

[53]

The
    trial judge was fully alive to the distinction between an employee and an
    independent contractor and the implications of such a determination when
    determining whether vicarious liability was to be imposed.  He thoroughly
    canvassed the relevant legal principles, paying particular attention to the
Sagaz
decision.

[54]

Despite
    the terms of the written contract between Decaire and FundEX, in which Decaire
    agreed he was an independent contractor, the trial judge concluded that Decaire
    was an employee.  He reached this conclusion after a close examination of the
    total relationship between FundEX and Decaire, with particular attention to the
    factors set out in
Sagaz
and informed by the policy considerations of
    fairness and deterrence  as set out in
Bazley v. Curry
, [1999] 2 S.C.R.
    534  that justify the imposition of vicarious liability.  He found that
    Decaire was not performing as if he were a person in business on his own
    accord.  Decaire did not hire employees.  He worked from an office at FundEX,
    in which, parenthetically, he kept promotional material on Needle-Ease.  He was
    not free to choose his method of marketing.  Rather, he followed FundEXs business
    model, one which the trial judge found created a risk that Decaire would place FundEX
    clients in inappropriate products.  His mutual fund agent licence was obtained under
    the auspices of FundEX and his registration with the OSC was conditional on him
    remaining employed by FundEX.  He could not market or promote financial
    products without this registration.  And, the trial judge understood Mr.
    Cechettos evidence as an expert on the structure of the mutual funds industry to
    be that Decaire was more akin to an employee of FundEX.
[5]

[55]

I
    see no basis for appellate intervention with the trial judges determination of
    the character of the employment relationship.  Having found that an
    employer-employee relationship existed, there was no error in holding FundEX
    vicariously liable for Decaires wrongdoing.

[56]

Accordingly,
    it becomes unnecessary to determine whether the trial judge correctly held that
    FundEX, as principal, was vicariously liable for Decaires wrongful acts.

DISPOSITION

[57]

Accordingly,
    I would dismiss the appeal with costs to the respondent fixed at $15,000.00,
    all inclusive.

Released: December 24, 2012 (E.E.G.)

E.E. Gillese
    J.A.

I agree S.T. Goudge J.A.

I agree Janet Simmons J.A.

[1]
Investment Planning Counsel of Canada Limited was the successor to AFP and AFP
    Wealth Management Limited.  In the style of cause, it was named as the
    defendant IPC Investment Corporation.

[2]
In the reasons for decision, AFP/IPC was held liable in damages of $177,471.
    However, the Judgment shows liability in the amount of $154,471.

[3]
There is some confusion in the record over the precise dates of his employment
    with Regal Capital Planners.  It may be that he worked for it from sometime in
    1996 to sometime in 1997.

[4]
As described by the trial judge at para. 94 of his reasons.

[5]
Mr. Cechetto testified that it was an independent contractor relationship for
    the purposes of the tax treatment of expenses but it was a principal/agent
    relationship in terms of the employee having to comply with the employers way
    of doing business and meeting the legislative requirements.


COURT OF APPEAL FOR ONTARIO

CITATION:
Townshend v. Townshend, 2012
    ONCA 868

DATE: 20121211

DOCKET: C53680

Simmons, Cronk and Rouleau JJ.A.

BETWEEN

John Charles Townshend

Applicant (Appellant)

and

Barbara Elizabeth Townshend

Respondent (Respondent in appeal)

Robert N. Kostyniuk, Q.C., for the appellant

Robert B. Lawson, for the respondent

Heard: November 15, 2012

On appeal from the order of Justice Emile R. Kruzick of
    the Superior Court of Justice, dated December 2, 2010.

Simmons
    J.A.:

[1]

The issues on appeal arise out of a family law proceeding.
The parties were married on June 17, 1972 and separated on May 26,
    2005.
The contested issues at trial related to the division and
    calculation of their net family properties.

[2]

The trial judge rejected the wifes claim for an unequal division of the
    net family properties. He went on to address various disputed items relating to
    the calculation of each partys net family property. After dealing with the
    disputed items, the trial judge calculated the equalization payment using those
    findings together with the undisputed figures relating to the net family
    property calculations. He ordered the wife to pay the husband an equalization
    payment of $31,368.07.

[3]

On appeal, the husband submits that the trial judge
    erred in his findings concerning the disputed items in the net family property
    calculations. In the event he is successful on appeal, he seeks leave to appeal
    the costs award of $35,000 made in favour of the wife.

[4]

For the reasons that follow, I would allow the appeal.

A.

Equalization issues

[5]

I will deal with each disputed item relating to the net
    family property calculations and leave it to counsel to make the required
    adjustment to the equalization payment that was ordered. I note at the outset
    that during oral argument the wife asked that, in the event this court
    concluded that the trial judge erred in his findings, rather than ordering a new
    trial, this court make the necessary findings.

(1)

Property Brought into the Marriage  the Husbands Claim for an $8,500
    credit relating to a one-acre parcel of land

[6]

At trial, the husband claimed an $8,500
    deduction for the value of a one-acre parcel of land, which he claimed he owned
    on the date of marriage. The one-acre parcel formed part of a 25-acre parcel of
    land registered in the husbands parents names. Both the husband and his
    sister testified that, at the time the land was acquired, they used their own
    earnings to purchase one-acre shares in the parcel of land.

[7]

The husbands father died in 1971. Both the
    husband and his mother claimed that: the 25-acre parcel was sold in 1971; the
    transaction did not close until 1973; following the closing, the husband alone
    received $8,500 from the proceeds of sale. The husband acknowledged that these
    monies were eventually invested in the matrimonial home.

[8]

The wife disputed the husband's claim that the
    property was sold in 1971. According to her, the parties received a cheque
    payable to both of them representing the sale proceeds of the one-acre parcel
    in 1973  moreover, that cheque was subsequently deposited into a joint
    account.

[9]

The trial judge rejected the husbands claim for
    a deduction because the evidence concerning the payment of the proceeds was
    contradictory and because the husband had no documentary evidence to support
    his assertion that the sale proceeds were paid to him alone. In my view, he
    erred in doing so.

[10]

Although the evidence concerning payment of the
    proceeds of sale for the husbands one-acre share was contradictory, on the
    appeal hearing, the wifes counsel acknowledged that there was no dispute at
    trial that the husband alone had an equitable interest in the one-acre parcel
    on the date of marriage. This acknowledgement is consistent with the evidence
    given by the husband and his sister concerning the acquisition of the property.

[11]

Section 4(1) of the
Family Law Act
, R.S.O.1990, c. F.3, defines net family property as the value of
    all property (except excluded property) owned by a spouse on the valuation date
    (net of debts and liabilities) less the net value of property, other than a
    matrimonial home, owned by a spouse on the date of marriage.
[1]

[12]

Accordingly, unlike the case with excluded
    property, the fact that property owned by a spouse on the date of marriage may
    have been distributed or invested jointly following the date of marriage is
    irrelevant. The claiming spouse is entitled to a deduction for the net value of
    property other than a matrimonial home owned on the date of marriage.

[13]

On appeal, the wife argued that the husbands
    claim for a deduction should fail in any event because the husband did not
    submit evidence at trial of the value of the land as of the date of the
    marriage.

[14]

I would reject this argument. Even assuming the
    trial judge rejected the evidence that the sale of the 25-acre parcel was
    negotiated in 1971, denying the husbands claim entirely because he failed to
    obtain a valuation date appraisal would be unreasonable. The value of the lands
    at issue is relatively nominal. There was undisputed evidence of their value close
    to the date of marriage.

[15]

Had the wife advanced a reasonable basis for a discount
    of the value of the one-acre parcel as of the date of marriage, I would have
    considered it. However, disallowing the deduction entirely because the husband
    failed to obtain a valuation date appraisal would mean increasing the cost of
    resolving family law disputes unnecessarily.

[16]

In all the circumstances, I would allow the
    $8500 deduction claimed by the husband.

(2)

Inter-vivos
gift received during
    marriage  The Husband's Claim for a $25,000 exclusion

[17]

At trial, the husband claimed an exclusion for a
    $25,000
inter-vivos
gift, which he said he
    received from his mother in June 2001. He claimed that the wife deposited these
    funds into a joint bank account contrary to his instructions.

[18]

The trial judge accepted that the funds were
    paid to the husband alone. However, he found that the gift lost its
    exclusionary character when the funds were deposited, initially, into a TD Bank
    joint account in July 2001 and, subsequently, into a Scotia McLeod joint
    account in September 2004. Accordingly, the trial judge denied the husbands
    claim for a deduction for the amount of this gift.

[19]

I take it as implicit in the trial judge's
    reasons that he rejected the husband's evidence that the wife deposited the
    funds into a joint account contrary to the husband's instructions. On the
    appeal hearing, the husband acknowledged that there had been some activity in these
    accounts, creating an available inference that the husband was aware of the
    nature of the accounts. In the circumstances, I see no basis on which to
    interfere with the trial judge's implicit finding.

[20]

Nonetheless, in my view, the trial judge erred
    in failing to grant the husband an exclusion for one-half of the amount of the
    gift.

[21]

On the appeal hearing, the wife relied on
Belgiorgio
    v. Belgiorgio
(2001), 10 RFL (5th) 239 (Ont. S.C.), affd 23 R.F.L. (5th)
    74 (Ont. C.A.), as support for the proposition that a gift loses its
    exclusionary character completely when deposited into a joint account.

[22]

In
Belgiorgio
, the husband sought to exclude inherited
    money that he claimed had initially been kept segregated in GICs, but later was
    deposited into a joint account and used to purchase specific items. The trial
    judge appears to have accepted the wifes evidence that the inherited funds
    were deposited directly into the joint account and used, along with other
    funds, as part of leading an executive lifestyle following the inheritance.
    In the circumstances, the trial judge concluded that the husband could not meet
    his onus to trace the inherited money into the property he sought to exclude.
    This alone was enough to deny the husband the exclusion. Nonetheless, at para.
    33 of his reasons, the trial judge went on to state that the inheritance lost
    its exclusionary nature when deposited into the joint bank account.

[23]

The trial decision in
Belgiorgio
was upheld on appeal.
    However, in upholding the result, this court referred only to the trial judges
    finding that the husbands evidence was unreliable and did not refer to the
    trial judges conclusion about the effect of depositing funds into a joint account.

[24]

This courts decision in

Colletta v. Colletta
, [1993] O.J. No. 2537,
at
    para. 1, is also of limited assistance.

[25]

In
    that case, the trial judge allowed the husband a deduction for $23,518.71,
    being the amount on deposit in a joint account at the date of separation. The
    monies had been a gift from the husbands mother. On appeal, this court
    concluded that both parties had an equal interest in the funds. As the husband
    had subsequently used the funds to purchase a house, this court held that the
    wife should receive a credit for one-half of the amount on deposit as of the
    date of separation against the equalization payment she owed to the husband.

[26]

This
    court went on, however, to allow the wife to simply reduce her equalization
    payment to the husband by the value of her half-interest in the property deposited
    into the joint account - money that the husband now owed her. However, by
    allowing this direct offset and failing to also reassess the wifes net family
    property, which was now increased by her ownership interest in the joint
    properties, the effect of the court's decision was actually to deprive the
    husband of the value of his exclusion.

[27]

Since
    the reasons in
Colletta
suggest that the intention was to correct the
    trial judge only in so far as he failed to take the presumption of joint
    ownership into account, the decision does not provide clear guidance on the
    treatment of excluded property deposited into a joint account.

[28]

Interestingly,
Colletta
, for the most part, has been
    interpreted as standing for the proposition that excluded property deposited
    into a joint account loses its exclusionary character to the extent of the
    one-half interest that is presumed to be gifted to the spouse:  see
Goodyer
    v. Goodyer
, [1999] O.J. No. 29 (Gen. Div.), at para. 76;
Cartier v.
    Cartier
, [2007] O.J. No. 4732 (S.C.), at footnote 4; and Ilana I.
    Zylberman & Brian J. Burke, "Tracing Exclusions in Family Law"
    (2006) 25 Canadian Family Law Quarterly, 67.

[29]

In my view, this is, in fact, the correct approach.
That this is so
is
    best understood by recalling that, in addressing property issues under Part I
    of the
Family Law Act
, the court first
    determines issues of ownership before turning to questions involving
    calculation of the parties net family properties: for example, see
McNamee
    v. McNamee
, 2011 ONCA 533, at paras. 56-63.

[30]

While s. 14 of the
Family Law Act
creates certain presumptions with respect to the ownership of
    property, it does not address how each partys net family property is to be
    calculated. Rather, it is s. 4(2) that stipulates the exclusions from net
    family property.

[31]

In relation  to gifts, s. 4(2) states that, “[p]roperty, other than a matrimonial home, that  was acquired by gift or inheritance from a third person after the date of  marriage” is to be excluded. Similarly, “[p]roperty other than a matrimonial  home, into which [a gift] can be traced” is excluded.

[32]

Given that the legislature made clear its
    intention that gifts used to purchase a matrimonial home lose their excluded
    character, but did not do the same in relation to monies deposited into a joint
    account, I discern no legislative intent that the entire amount of the gift should
    lose its excluded character when deposited into a joint bank account. See also:
Brubacher v. Brubacher
, [1996] O.J. No. 2730
(Gen.
    Div.), at para.
34;
LeCouteur v.
    LeCouteur
(2005), 18 R.F.L. (6th) 386 (Ont. S.C.),
    at paras.
50-51;
Cartier
, at paras.
2,
33-36.

[33]

In my view, therefore, the trial judge in this
    case erred in concluding that all of the gift monies lost their excluded
    character when deposited into a joint account.

[34]

On the appeal hearing, counsel for the wife acknowledged that the
    $25,000 was included in the September 2004 deposit into the Scotia McLeod
    account. However, he argued that the husband had failed to produce documents to
    show whether the $25,000 gift could be traced into the funds that remained in
    that account as of the date of separation. Moreover, counsel noted that the
    husband had breached an undertaking to produce such documents.

[35]

I would reject this argument. In my view, assuming, without
    deciding, that monetary gifts must be traced, the wifes position reflects an
    overly formalistic approach. It was undisputed that there was approximately
    $31,000 in the Scotia McLeod account on the date of separation, approximately 9
    months after the September 2004 deposit. In these circumstances, a compelling
    inference arises that the $25,000
inter-vivos
gift could be traced into those monies. While I do not condone the failure to
    comply with undertakings, I note that the account was a joint account and that
    the wife would have had equal access to the relevant documents. In all the
    circumstances, I would allow the husband an exclusion for an
inter-vivos
gift in the amount of $12,500.

(3)

The 1967 Buick

[36]

The husband claimed that the value of a 1967
    Buick Wildcat automobile registered in his name on the date of separation
    should be excluded from his net family property, either because he acquired it
    by gift during the marriage or because he had transferred the equitable
    ownership of the vehicle to the parties son prior to the date of separation.

[37]

The car was originally owned by the husbands
    father. As of the date of trial, it was registered in the name of the parties
    son.

[38]

The husbands mother testified that, following
    her husbands death she drove the car for a few years and then gave it to her
    son, Paul, to encourage him to go back to school. The husband claimed that,
    during the marriage, Paul gave him the car for $400, being the amount Paul had
    recently paid for new tires for the car.

[39]

The husband and his son both testified and
    claimed that the husband gifted the car to his son prior to the date of
    separation.

[40]

The trial judge concluded that, technically,
    the husband did not acquire the car by way of gift; rather, he purchased it,
    albeit for nominal consideration. Further, the trial judge rejected the
    evidence that the husband gifted the car to his son prior to the date of
    separation. The trial judge accordingly included the sum of $5,750 in the husbands
    net family property, representing the value of the car on the date of
    separation.

[41]

I acknowledge that it was open to the trial
    judge to reject the evidence that the husband gifted the car to his son prior
    to the date of separation. Nonetheless, in my view, the trial judge erred in
    including the entire value of the car in the husbands net family property.

[42]

It is implicit in the trial judges reasons that
    he accepted the husbands evidence that he acquired the car from his brother by
    effectively reimbursing his brother for the cost of new tires the brother put
    on the car.

[43]

In these circumstances, in my view, it was
    unreasonable to conclude that the husband had not acquired the car by way of
    gift. To the extent that the value of the car exceeded the value of the new
    tires, this additional value was acquired by gift and should be excluded from
    the calculation of the husbands net family property. The husband paid for the
    tires and it was only their value -- $400  that should have been included in
    the husbands net family property.

[44]

Accordingly, I would reduce the amount included
    in the husband's net family property for this item by $5,350.

(4)

The GMAC Loan

[45]

The trial judge rejected the husband's claim
    that he owed $12,790 to GMAC for a car loan on the date of separation because
    the husband failed to provide documentation to prove the existence of the loan
    on the date of separation.

[46]

The husband has filed fresh evidence on appeal,
    which demonstrates that the amount owing on the loan as of the date of
    separation was $12,483.36. Moreover, contrary to the trial judges conclusion,
    the husband in fact did file evidence at the trial that supported his claim
    about the existence of this debt on the date of separation.

[47]

Prior to trial, counsel for the husband obtained
    a copy of GMACs file relating to the debt. Although GMAC had sold the
    particular indebtedness, its file revealed that the indebtedness was not paid
    off until 2006. Further, the copy of the conditional sales contract in the file
    indicated that the original amount financed was $30,696.62 and that this amount
    was repayable in 48 monthly installments of $639.92 commencing November 25,
    2002 at 0% interest.

[48]

Assuming that the husband paid the 31 monthly
    payments that fell due between November 25, 2002 and the date of separation,
    the amount outstanding as of the date of separation would have been
    approximately $10,871.84. In my view, the trial judge erred in failing to take
    this documentary evidence into account.

[49]

Although the fresh evidence indicates that a
    somewhat larger amount was owing, it is evident that the husband obtained that
    evidence only because the trial judge disallowed his claim altogether. In the
    circumstances, I would allow the husband a deduction in the amount of
    $10,871.84.

(5)

The Wife's Claim for a Deduction for a $12,000
    Debt Owing to her Parents

[50]

The trial judge allowed the wife a $12,000
    deduction for a debt owing to her parents relating to monies borrowed for
    renovations to the matrimonial home because the wife filed a promissory note as
    an exhibit at trial to support the existence of the debt. The trial judge rejected
    the husband's assertion that no monies were owing to the wife's parents because
    the husband had nothing in writing to support his claim.

[51]

However, the trial judge overlooked the fact
    that during the trial, the wife withdrew her claim based on the promissory
    note. Instead, she chose to advance this claim solely as a claim for a debt
    owing to her parents relating to renovations to the matrimonial home.

[52]

The trial judge also overlooked the fact that a
    document signed by the wifes parents was filed, without objection, as an
    exhibit at trial in which the wifes parents denied that the wife owed them any
    money.

[53]

As the trial judge erred in allowing this
    deduction on the basis of the promissory note and in failing to squarely
    address the alternative basis for the wife's claim, I see no alternative but to
    set aside the trial judges finding and to deny the wifes claim for this
    deduction. Not only did she not have any documentary evidence to support this claim,
    the documentary evidence that did exist undermined it.

(6)

The Husbands Claim relating to the Hallstand

[54]

During oral argument on the appeal, the husband
    abandoned his claim in relation to this issue.

B.

The Trial Judges costs award

[55]

Both parties claimed costs at trial. The husband
    claimed costs in the range of $53,000 to $73,000; the wife claimed costs of
    $60,000. The trial judge awarded $35,000 to the wife as partial indemnity costs
    of the trial.

[56]

Although the wife was unsuccessful in her claim
    for an unequal division of net family properties and the husband was successful
    in his claim for an equalization payment, the trial judge found that the
    husband had acted unreasonably in advancing a claim for nominal support and in
    disputing the date of separation until the eve of trial. Further, the trial
    judge noted that, albeit on the eve of trial, the wife had offered to settle
    for an amount almost double the amount awarded to the husband at trial.

[57]

Given the adjustments I would make to the net
    family property calculations, the husband's net family property will decrease
    by approximately $37,222 and the wife's net family property will increase by
    $12,000. This will result in a net increase of approximately $24,611 in the equalization
    payment owing to the husband. In the light of this fact and the other factors
    identified by the trial judge, the husband's proposal that there be no costs of
    the trial is reasonable. Like the trial judge, I think that this case should
    have been settled.

C.

Disposition

[58]

Based on the foregoing reasons, I would allow
    the appeal and set aside paragraphs 2 and 9 of the trial judge's amended order
    dated December 2, 2010. I would substitute an order for an equalization payment
    to the husband in an amount to be agreed upon by counsel, taking account of
    these reasons, for paragraph 2 of the December 2, 2010 amended order. And I
    would substitute an order that there be no order as to the costs of the trial
    for paragraph 9 of the December 2, 2010 amended order.

[59]

I would award costs of the appeal to the husband on a partial
    indemnity scale, fixed in the amount of $4500, inclusive of disbursements and
    applicable taxes.

Released: JS December 11, 2012

Janet
    Simmons J.A.

I
    agree E.A. Cronk J.A.

I
    agree Paul S. Rouleau J.A.

[1]

The definition of net family property in s. 4(1) of the
Family Law Act
reads as
    follows:

net family
    property means the value of all the property, except property described in
    subsection (2), that a spouse owned on the valuation date, after deducting,

(a) the
    spouse's debts and other liabilities, and

(b) the
    value of property, other than a matrimonial home, that the spouse owned on the
    date of the marriage, after deducting the spouse's debts and other liabilities,
    other than debts or liabilities related directly to the acquisition or
    significant improvement of the matrimonial home, calculated as of the date of marriage.


COURT OF APPEAL FOR ONTARIO

CITATION:

Trentfab
    Inc. v. Kinmond, 2012 ONCA 914

DATE: 20121228

DOCKET: C53367

LaForme and Watt JJ.A. and Lederman J. (
ad
    hoc
)

BETWEEN

Trentfab Inc. and 2202158 Ontario Inc.

Appellants

and

Brian
    Kinmond, 2198430 Ontario Inc., 1745179
    Ontario Inc. and Crawford Acquisitions Corp.

Respondents

Scott C. Hutchison, for the appellants

R. Steven Baldwin, for the respondents

Heard: December 12, 2012

On appeal from the order of Justice Herman Wilton-Siegel of
    the Superior Court of Justice, dated January 31, 2011 reported at 2011 ONSC
    773.

ENDORSEMENT

Introduction

[1]

Wilton-Siegel J.
ordered that
    there will be a trial of the issue concerning whether the activities of Brian
    Kinmond and 219 as alleged by the plaintiffs amounts to a fraudulent structure
    or scheme.  The issue to be tried was later clarified in a consent order as
    [encompassing] causes of action for both fraud and breach of fiduciary duty in
    relation to the structure or scheme as per schedule A attached .  Schedule
    A is an amended statement of claim, which focuses the issue to be tried.

[2]

In a nutshell, the focus of the trial was whether the actions of Brian
    Kinmond (Kinmond) and 2198430 Ontario Inc. (219) constituted fraud or
    breach of fiduciary duty,
by way of
    misappropriation of funds
in relation to Trentfab Inc. (Trentfab).

[3]

After seven and one-half days of trial,
Wilton-Siegel
    J. released lengthy reasons for his decision which he commenced by noting that
    I have used the term fraudulent activity to include activity constituting a
    breach of fiduciary duty, as well as activity constituting civil fraud, in each
    case involving a misappropriation of Trentfab assets.

Issues at trial

[4]

The principal claim of the plaintiffs at trial was that characteristics
    common to civil fraud were present and that an inference should be drawn that
    Kinmond and 219 engaged in fraudulent conduct.  Relying on their expert Cameron
    McCaw, they alleged that Kinmonds conduct resulted in a monetary benefit to
    219 at the plaintiff, Trentfabs expense.

[5]

Alternatively the plaintiffs claimed that Kinmond was in breach of his
    fiduciary obligations to Trentfab.  They argued that an arrangement by
    Kinmond in connection with a decommissioning project was preferential treatment
    resulting in a misappropriation of monies owing to Trentfab.

[6]

The defendants denied that there was any fraud or a breach of fiduciary
    duty.  Their position was that the relationship between the parties was
    intended to be economically neutral to Trentfab.   That is, it was conducted on
    the basis that the financial result to Trentfab was to be the same as if 219
    had not been involved.  As between 219 and Trentfab, it was never the intention
    that Trentfab would be paid on a job-specific basis.

[7]

In his reasons the trial judge conducted an extensive review of the
    evidence and found that Kinmonds actions were not fraudulent and that he had
    not benefitted at Trentfabs expense.  He held that the plaintiffs had failed
    to establish conduct on the defendants part that constitutes fraud or breach
    of fiduciary duties, by way of any misappropriation of monies.  The plaintiffs
    appeal the trial judges decision.

Issues on Appeal

[8]

On appeal the appellants submit that the trial judge erred in two
    respects: first, in finding Kinmonds conduct not fraudulent; and second, in
    finding that the involvement of 219 was financially neutral to Trentfab.  They
    essentially argue that although the trial judge set-out and applied the correct
    law; even on the findings as made by him, had he approached the evidence
    properly, both fraud and breach of fiduciary duty were proven.

[9]

At the core of the appellants arguments is the contention that the
    trial judge did not assess the evidence collectively and as a whole.  Rather,
    they say he relied on parts of the evidence in assessing a specific issue and
    other evidence in connection with another. In approaching his task in this
    fashion, the appellants submit the trial judge committed an error of law.

Analysis

[10]

The issue to be tried was specifically narrowed and defined
    by the parties with the case management guidance of
Wilton-Siegel J.
    Some of the reasons for this are that there are several other issues in
    Trentfab and 220s action which remain unresolved, including claims for breach
    of statutory duty of care under the OBCA, and interference with contractual
    relations.  In addition, Kinmond has commenced a separate wrongful dismissal
    claim against Trentfab in another jurisdiction.

[11]

It
    is with this background that the parties defined the issue to be tried and how
    it was narrowly presented and argued at trial.  Moreover, the parties submitted
    written closing submissions to the trial judge for his reference.  Thus, the
    trial judge was well aware of the issue to be decided, namely whether Kinmond
    committed fraud or breached his fiduciary duty by misappropriating funds or
    assets of Trentfab through a scheme involving 219. He was also entirely aware,
    through the written submissions of counsel, what evidence was being relied on
    in connection with each issue to be considered.

[12]

Because
    the issue to be tried was intentionally defined narrowly, and given that the
    trial proceeded the way it did through the evidence called and relied upon the
    parties, we do not accept that the trial judge wrongly approached his
    analysis.  Instead, we think his analysis was faithful to what was agreed upon
    and the issue he was asked to decide.

[13]

In
    the end, the appellants arguments essentially amount to disagreements with the
    trial judges findings of fact.  Absent establishing palpable and overriding
    errors that impact the trial judges findings, a reviewing court will not
    interfere. They have failed to do so.

[14]

In
    reaching his decision the trial judge provided extensive reasons that examined
    the law, the issues raised and he undertook a thorough assessment of all the
    evidence.  The trial judge expressly stated that he approached Kinmonds
    evidence with caution. That would include his explanation for the interposition
    of 219 between Trentfab and the equipment purchasers.  Nevertheless, the trial
    judge specifically found that:

a)

there was no evidence
    that Kinmond diverted funds owing to Trentfab from Trentfabs customers to 219
    or himself.  No money has gone missing;

b)

the allegations of
    Trentfab were based on the assumption of a job-by-job accounting.  However, the
    trial judge found that the accounting for the project was always intended and
    was in fact on a global basis with a reconciliation at the end;

c)

there was no evidence
    that 219 retained any money payable to Trentfab for longer than was necessary;

d)

neither 219 nor
    Kinmond obtained any financial gain at Trentfabs expense.  He found that 219s
    involvement was financially neutral to Trentfab;

e)

although the
    principals of Trentfab may not have known of the involvement of 219, Trentfabs
    operational employees did and the October spreadsheet which was created
    before Kinmonds termination clearly disclosed 219s involvement.

[15]

The
    result of his review was his finding that there was no evidence of fraud or
    misappropriation of funds.  He found that that Kinmonds actions were not
    dishonest and there was no benefit to Kinmond and no deprivation to the
    appellants.  These findings are amply supported by the evidence, and should not
    be interfered with on appellate review.

Conclusion

[16]

Here,
    the trial judge convincingly established through his analysis and reasons that
    there was no evidence of fraud or misappropriation of funds.  Each of his
    findings of fact was amply supported by the evidence which, as we said, the
    trial judge thoroughly analysed.  His conclusions, based on the evidence were
    all reasonable and there is no basis upon which this court should interfere.
    His findings are entitled to deference and the appeal is dismissed.

Cross-Appeal

[17]

In
    their cross appeal the respondents submit that the trial judge erred in failing
    to hold Trentfab and 220 jointly and severally liable for costs.  What they
    assert is that the trial judge was mistaken when he wrote in his costs
    endorsement that, the directed trial was agreed to by, and involved only,
    Trentfab, Kinmond and 219.  220 was a party to the notice of action for the
    purpose of asserting additional claims against the defendants that were not
    subject of the trial.

[18]

The
    trial judge in separate reasons on costs noted that the trial was a significant
    one, lasting seven-and-a-half days.  He took into account that 219 and
    Kinmonds defences were largely the same.  He fixed both Kinmonds and 219s
    costs 219 and awarded 219 its disbursements.  However, t
he trial judge only held Trentfab  currently in receivership  liable for
    costs, and not 220 being its parent shareholder company.

[19]

It
    is true that the plaintiffs in style of cause were Trentfab Inc. and 2202158
    Ontario Inc.  And, we accept that it appears that it was never the plaintiffs
    position at trial that 220 was not a party.  However, when the reasons and
    order of the trial judge are considered fully, it is clear that the shareholder
    of Trentfab, 220, was neither the subject of the trial nor the party asserting
    the claim.

[20]

The
    respondents have not demonstrated that the trial judge either committed an
    error in law or that he was clearly wrong in his costs awards. If the trial
    judge simply made a mistake, the proper approach was to bring this to the
    attention of the trial judge.  Accordingly, we grant the respondents leave to
    appeal costs, but dismiss the cross-appeal.

[21]

Regarding
    costs of the appeal, the parties have agreed on costs whatever the result and
    will file a consent order for this courts approval.

H.S. LaForme
    J.A.

David Watt J.A.

S. Lederman J. (
ad hoc
)


COURT OF APPEAL FOR ONTARIO

CITATION:
United
  States v. Yu, 2012 ONCA 876

DATE: 20121213

DOCKET: C54877

Doherty, Simmons and Hoy JJ.A.

IN THE MATTER OF an application for judicial review pursuant
    to s. 57 of the Extradition Act, S.C. 1999, c. 18

BETWEEN

The Minister of Justice and the Attorney General
    of Canada and the United States of America

Respondents

and

Kang Ming Yu

Applicant

John Norris, for the applicant

Heather J. Graham, for the respondent

Heard and released orally: December 7, 2012

On application for judicial review of the surrender order
    of the Minister of Justice, dated December 14, 2011.

ENDORSEMENT

[1]

This is an application for judicial review of the decision of the
    Minister ordering the applicant to surrender to the United States for
    prosecution on drug charges pursuant to the terms of the relevant treaty
    between Canada and the United States.  The Canadian prosecutorial authority
    exercised its discretion not to prosecute the applicant on those charges.  It did,
    however, prosecute the applicant on different substantive charges in Canada
    arising out of the same investigation.  The applicant pled guilty to those
    charges and will be surrendered for extradition once released on those charges.

[2]

The applicant argues that the Minister: (1) erred in concluding that in
    the circumstances extradition did not unjustifiably violate the applicants s.
    6(1)
Charter
rights; (2) denied the applicant procedural fairness in
    refusing to obtain and disclose the prosecutors
Cotroni
[1]
assessment; and (3) erred in concluding that extradition would not constitute
    an abuse of process and thereby violate the applicants s. 7
Charter
rights and be unjust or oppressive under s. 44(1)(a) of the
Extradition Act
(the Act).

[3]

The Ministers surrender decision under the Act is to be afforded
    substantial deference and should not be interfered with unless it is
    unreasonable.  This court must ask whether the Minister considered the relevant
    factors and whether his decision falls within range of reasonable outcomes.

[4]

We are not persuaded that the Ministers conclusion that extradition
    does not unjustifiably violate the applicants s. 6(1)
Charter
rights
    is unreasonable.  The Ministers reasons demonstrate that he considered the
    relevant factors in conducting his
Cotroni
analysis and reached a
    defensible conclusion.

[5]

In oral argument, counsel for the applicant advanced three submissions
    in support of the contention that the Ministers
Cotroni
analysis
    under s. 6(1) was flawed.

[6]

First, he argues that the Minister fell into the same error identified
    in para. 78 of
United States v.

Leonard
, 2012 ONCA 622, namely:

by positing the choice in these cases as being between
    surrender and allowing accused drug traffickers to walk free, the Minister has
    misstated and distorted the true consequences of refusing surrender

[7]

While the Ministers reasons are similar in some respects to those in
Leonard
,
    he did not make the error identified in para. 78 of
Leonard
.  The
    absence of Canadian charges with respect to the conduct was only one of the
    factors in his analysis.  He wrote:

In sum the United States significant interest in prosecuting
    this case, the location of key evidence in the United States, and the absence
    of criminal proceedings against Mr. Yu in Canada strongly militate in favour of
    surrender.  I am, therefore, satisfied that surrendering Mr. Yu to stand trial
    in the United States would not unjustifiably violate his s. 6(1)
Charter
rights.

[8]

Counsels second submission targets the Ministers observation that
    Canada does not have jurisdiction to prosecute Mr. Yu on the U.S. offence of
    conspiracy to import ketamine into the United States.  We agree with counsel
    that this observation, while technically correct, ignores the fact that it was
    open to Canada to prosecute the substance of the conduct through a charge of
    exporting.  We are satisfied, however, that this observation played no role in
    the Ministers decision to surrender.  On these facts, the United States had
    the clearly stronger interest in prosecuting the conduct, however named.

[9]

In his third submission, counsel argues that the Minister failed to
    consider that extradition to the United States would deny the applicant the
    ability to invoke the
Charter
to challenge Canadian gathered evidence
    (for example, wiretaps).  Assuming this argument might have force in the
    appropriate circumstances, there is nothing in this record to suggest that the
    Canadian gathered evidence is constitutionally suspect or that the inability to
    raise
Charter
arguments would actually disadvantage the applicant.

[10]

Nor
    are we persuaded that the Minister denied the applicant procedural fairness in
    refusing to disclose the prosecutors
Cotroni
analysis.  This court,
    in several cases, declined to order the disclosure of the prosecutors
Cotroni
analysis.  We see no reason to come to a different conclusion in this case,
    particularly as it appears that the Minister did not even look at the
    prosecutors
Cotroni
analysis.

[11]

With
    respect to the applicants final, abuse of process argument, even accepting
    that the Minister described the abuse of process doctrine too narrowly, we are
    not persuaded that an abuse of process is made out.  The test applied is
    whether surrender would shock the conscience or whether the applicant faces
    a situation that is simply unacceptable.  While the Canadian and United
    States prosecutions arose out of the same investigation, they are in respect of
    different offences, committed in different countries.  The public would, in our
    view, consider both countries as having a legitimate interest in the
    prosecution of the applicant.

[12]

This
    application is accordingly dismissed.

Doherty J.A.

Janet Simmons J.A.

Alexandra Hoy J.A.

[1]

United States of America v. Cotroni
,
    [1989] 1 S.C.R. 1469.


CITATION:
1470568
          Ontario Limited (East Side Mario's) v. Prime Restaurants of Canada
          Inc., 2011 ONCA 9

DATE:
          20110110

DOCKET: C51891

COURT OF APPEAL FOR ONTARIO

Weiler, Laskin and Goudge JJ.A.

BETWEEN

1470568 Ontario Limited carrying on business as East
          Side Marios

Respondent (Appellant)

And

Prime Restaurants of Canada Inc.

Applicant (Respondent)

Marc A. Munro, for the appellant

Domenico Magisano, for the respondent

John Russo, for the receiver

Heard: September 23, 2010

On appeal from the order of Justice Geoffrey B. Morawetz of
          the Superior Court of Justice dated March 22, 2010.

Goudge J.A.:

INTRODUCTION

[1]

The respondent is the Canadian
    franchisor of the East Side Marios restaurant brand. The appellant is the
    franchisee of an East Side Marios restaurant in Brampton Ontario.

[2]

On the respondents application,
    Justice Morawetz appointed a receiver of the appellants business on March 22,
    2010. The application judge held that it was just and convenient to do so
    because the appellant was not making the required franchise payments to the
    respondent or the required PST payments to the provincial government. He dismissed
    the appellants arguments that the respondent had forgiven its material
    cumulative debt in letters of March 23, 2009 and November 23, 2009 and that
    alleged PST default could not be considered because it was not included in the
    respondents notice of application.

[3]

The appellant repeats these
    arguments in this court. For the reasons that follow I reject them, as the
    application judge did, and I would therefore dismiss the appeal.

THE FACTS

[4]

In late 2005, the appellant took
    over an East Side Marios restaurant in Brampton as a franchisee. The
    appellants relationship with the respondent was governed by the Franchise
    Agreement and the Security Agreement between them. The Franchise Agreement
    required the appellant to remit franchise payments to the respondent made up of
    royalty and service fees of 5% of gross revenues, and advertising contributions
    of a further 3% of gross revenues.

[5]

From the beginning, the appellant
    did not comply with the payment obligations required by the Franchise
    Agreement. When negotiations to resolve this broke down, the respondent sent a
    notice of default to the appellant on January 18, 2010, setting out the amounts
    it said were owing for royalty and service fees and for advertising
    contributions. Then on February 10, 2010, it commenced this application
    pursuant to the
Bankruptcy and Insolvency
    Act
, R.S.C. 1985, c. B-3 (the BIA) to have a receiver appointed. Among
    other things, its supporting affidavit material also disclosed a claim against
    the appellant by the provincial government for PST arrears of $101,541.  On consent, an interim receiver was appointed
    on February 23, 2010, pending argument of the application itself. The report to
    the court of the interim receiver dated March 16, 2010 ascertained that the PST
    default in fact was $270,657.57.

[6]

On March 22, 2010, on the return of
    the application, the appellants position was that until the January 18, 2010
    notice of default, the respondent had not claimed either royalties and services
    fees or advertising contributions from the time the appellant assumed the
    franchise, and further, that these had been expressly forgiven by the
    respondent in the letters of March 23 and November 23, 2009.

[7]

The March 23, 2009 letter begins as
    follows:

We
    outline below a plan that will assist you to keep your restaurant operational.

Current Debt

If
    we were to calculate your debt to Prime without any amendment to your Franchise
    Agreement, you would owe the following:

Royalty and
            Service Fees *

Advertising
            Fund Contributions *

Total *

F '09 (Gross Revenue earned to
            04 Jan 09)

$82,214.70

$49,328.82

$131,543.52

F '10 (Gross Revenue earned
            from 05 Jan 09 to 03 Jan 10)

$13,161.45

$7,896.87

$21,058.32

Grand Total

$152,601.84

*  Plus GST

Although Prime is not obliged to do so, in view of
    your commitment to improve operations of your restaurant and cooperation with
    Prime, we hereby confirm that the foregoing debt of $152,601.84 is forgiven. Furthermore,
    in the interest of resolving the issues in your business, Prime is willing to
    extend concessions to you, subject to certain conditions, as described below.

[8]

The
    letter then addressed certain conditions and obligations proposed for F 10 (i.e.
    the fiscal year ending January 3, 2010), for F 11, for franchise renewal and
    for lease assignment.  It closed with a
    proposed release by the appellant from all claims against the respondent and a
    signature line for the appellant. The last paragraph of the letter reads:

We trust you can see our sincere efforts to reduce
    your current financial and emotional burdens. If you agree, please sign (below)
    and return the enclosed duplicate copy of this letter by March 31, 2009.

[9]

With
    one difference, the letter of November 23, 2009 is essentially identical,
    except that the closing sentence adds a deadline for signing and returning a
    copy of the letter, without which this proposal shall be null and void. Apart
    from this, the one difference between the two letters was the calculation of
    current debt which reads as follows:

Royalty and
            Service Fees *

Advertising
            Fund Contributions *

Total *

F '09 (Gross Revenue earned to
            04 Jan 09)

$82,214.70

$49,328.82

$131,543.52

F '10 (Gross Revenue earned
            from 05 Jan 09 to 15 Nov 09 -- $1,175,243)

$58,762.00

$35,257.00

$94,019.00

Grand Total

$225,562.52

*  Plus GST

[10]

Neither letter was ever signed and returned by the
    appellant.

THE DECISION APPEALED FROM

[11]

The
    application judge dismissed the appellants arguments. He found that the two
    letters relied on by the appellant did not constitute express forgiveness by
    the respondent. Rather, he held that they must be read in context, which made
    it clear that in both cases, the entire letter constituted an operating plan, as
    the introductory sentence says, and that since the plan was never accepted by
    the appellant, the forgiveness never came into effect. The application judge
    pointed out that if the appellants interpretation were correct, the cumulative
    debt referred to in the November 23, 2009 letter would have reflected only the
    increase from March 23, 2009, and it does not.

[12]

The
    application judge also relied on the report of the interim receiver which found
    that the provincial government had a deemed trust claim against the appellant
    of $270,657.57 for failure to pay PST. This default was a breach of the
    Security Agreement binding the appellant.

[13]

The
    application judge concluded as follows:

In
    my view the Applicant has established that the Respondent is in breach of the
    Franchise Agreement in not making the required Franchise Payments and is also
    in breach of the Security Agreement with respect to the Franchise Payments and
    the PST payments.

The
    position of the Applicant has been put at risk as a result of the failure of
    the Respondent to comply with the provisions of both the Franchise Agreement
    and the Security Agreement.

An
    appointment of a receiver is, in my view, both just and convenient in the
    circumstances.

[14]

Having
    reached this conclusion, it was not necessary for the application judge to
    determine whether the pre F 09 or post January 5, 2009 debts owed by the
    appellant for royalty and service fees and advertising contributions, or its
    performance issues raised by the respondent, would be enough to justify the
    appointment of a receiver.

ANALYSIS

[15]

In
    this court, the appellant reiterates its position that the letters of March 23
    and November 23, 2009 constitute debt forgiveness by the respondent. It also
    makes three additional arguments in this court, none of which was raised at
    first instance:

(i)

the application was advanced contrary to the
Rules of Civil Procedure,
leaving the
    application judge without jurisdiction to grant the relief sought;

(ii)

the application judge erred and went beyond
    his jurisdictional authority by considering the PST default, since this was not
    a ground of relief sought in the notice of application;

(iii)

the application judge erred in failing to find
    that the respondent had waived its rights to the outstanding debts and was
    thereby estopped from enforcing any rights to them.

I will deal with all four arguments in turn.

THE DEBT FORGIVENESS ISSUE

[16]

For
    the reasons he gave, I agree with the application judges reading of the
    letters of March 23 and November 23, 2009. Read as a whole, each letter
    contains the proposal of a plan to the appellant. The opening sentence of the
    letter says so explicitly. The last paragraph says so implicitly. Between the
    opening and the closing, the rest of the letter describes the proposal. By its terms
    it required the appellant to agree, and to sign and return a copy of the
    letter. Since that never happened, none of the proposed terms, including that
    concerning debt forgiveness, came into effect.

[17]

The
    appellants reading of these two letters is that each contains a stand alone
    forgiveness of the debt that is complete and binding on the respondent without
    the letter being signed and returned by the appellant.

[18]

I
    do not agree. As the application judge observes, if this were so, forgiveness of
    the F 09 debt of $131,543.52 was accomplished by the March 23, 2009 letter.
    That debt would not appear again as a debt to be forgiven in the November 23,
    2009 letter. Yet it does.

[19]

In
    my view this ground of appeal fails.

THE RULES OF CIVIL PROCEDURE ISSUE

[20]

The
    appellant argues that the notice of application refers to Rule 14.05(3)(g),
    which permits an application for a receiver when that relief is ancillary to
    other relief being sought. This application is not that, and as a consequence,
    says the appellant, the motion judge lacked jurisdiction.

[21]

However
    the notice is explicitly brought under the BIA. Section 243 of that Act permits
    a court to appoint a receiver on application. Rule 14.05(2) provides that a
    proceeding may be commenced by an application if a statute so authorizes. The
    BIA does so. Rule 3 of the rules under the BIA provides that the Ontario rules
    apply to the extent they do not conflict with the BIA rules and no such
    conflict is advanced here.

[22]

I
    conclude that this proceeding was properly launched and I would reject this
    ground of appeal.

THE PST DEFAULT ISSUE

[23]

The
    appellant argues that the notice of application does not raise an issue of any
    PST default by the appellant and says that it must do so in order to prevent
    surprise and unfair advantage.

[24]

However,
    the respondents affidavit supporting the application alleges just such a
    default. Moreover the interim receiver, appointed on consent, reported to the
    court on the default, as it was obliged to, and quantified it at a
    significantly higher amount than the supporting affidavit did.

[25]

These
    circumstances do not permit the appellant to properly claim prejudice or
    surprise. They also provide an ample basis for the application judge to
    conclude that the appellant owed significant PST arrears to the provincial government
    and that this constituted a breach by the appellant of the Security Agreement.

[26]

This
    ground of appeal fails.

THE WAIVER OR ESTOPPEL ISSUE

[27]

Finally, the appellant argues that waiver and estoppel
    apply to prevent the respondent from relying on any outstanding debts owed to
    it by the appellant.

[28]

Since this argument was not raised before the
    application judge, he did not make any findings of fact with this in mind.
    Nonetheless, given his reading of the letters of March 23 and November 23,
    2009, with which I agree, it is clear that neither constitutes the respondents
    unequivocal and conscious abandonment of its right to claim the debts, required
    for waiver, nor the representation that it would not do so, required for
    estoppel. Nor can I find anything else in the record that would serve this
    purpose. Finally, the appellant does not advance any resulting reliance or
    change of position that would be necessary for either concept to apply.

[29]

This argument also fails.

[30]

For these reasons, I would dismiss the appeal. In the
    circumstances I would order costs to the respondent fixed at $5,000 inclusive
    of disbursements and applicable taxes.

RELEASED:  JAN 10 2011
    (K.M.W.)

S. T. Goudge J.A.

I agree. K. M. Weiler J.A.

I agree. J. I. Laskin J.A.


CITATION: Bank of
      Montreal v. Farquharson, 2011 ONCA 52

DATE: 20110120

DOCKET: C52365

COURT OF APPEAL FOR ONTARIO

Rosenberg, Goudge and Armstrong JJ.A.

BETWEEN

Bank of Montreal

Plaintiff, Respondent

and

Errol Grandville Farquharson

Defendant, Appellant

Warren A. Lyon, for the appellant

Amanda Jackson, for the respondent

Heard: January 19, 2011

On appeal from the judgment of
          Justice J. A. Milanetti of the Superior Court of Justice dated June 8, 2010.

APPEAL BOOK ENDORSEMENT

[1]

My order required the appellant to bring a motion for an adjournment by
    January 7, 2011.  He did not do so, but now being in the process of retaining
    Mr. Lyon, seeks an adjournment.  The reasons put forward for the adjournment
    are fragile but to ensure that the appellant is treated fairly, we will grant
    an adjournment to February 23, 2011 on the following conditions:

1.
        Any further material, such as a new factum, is to be served and filed by
    January 26, 2011.

2.      The
    costs ordered by Blair J.A. and costs of todays attendance totalling $8,673.39
    are to be paid by February 1, 2011.

[2]

If the costs are not paid by February 1, 2011, the respondent may move
    without notice before a single judge to have the appeal dismissed.