COURT OF APPEAL FOR ONTARIO

CITATION: BDO Canada Limited v. Gottardo, 2017 ONCA 206

DATE: 20170308

DOCKET: C62810

Juriansz, Watt and Brown JJ.A.

BETWEEN

BDO Canada Limited, in its Capacity as
    Court-Appointed Receiver of B. Gottardo Construction Ltd. and B. Gottardo Site
    Servicing Limited

Applicant (Respondent)

and

Bruno Gottardo
,
David Gottardo
,
Kleinridge
    Investments Inc.
, 615146 Ontario Limited, 2191673 Ontario Limited,
    Falconridge Corporation, 2303663 Ontario Ltd., and 2346193 Ontario Limited

Respondents (
Appellants
)

Colby Linthwaite, for the appellants

Maya Poliak, for the respondent BDO Canada Limited

No one appearing for the respondent, 2346193 Ontario
    Limited

Heard: March 1, 2017

On appeal from the judgment of Justice Frank J. C.
    Newbould of the Superior Court of Justice, dated October 7, 2016.

APPEAL BOOK ENDORSEMENT

[1]

This appeal has been abandoned. Costs of the appeal by the Gottardo's
    and Kleinridge fixed in the amount of $4250.00 all inclusive.


COURT OF APPEAL FOR ONTARIO

CITATION: Bimman v. Neiman, 2017 ONCA 264

DATE: 20170331

DOCKET: C61412

Juriansz, Brown and Miller JJ.A.

BETWEEN

Alexander Bimman and 2182474 Ontario Inc.

Plaintiffs (Appellants/

Respondents by way of cross Appeal)

and

Arkadi Neiman, Corayana Enterprises Limited,
    1050828 Ontario Ltd., Canadian Investment & Consulting Central Corporation,
    Larwest Canada (Caribbean) Inc., 2182158 Ontario Ltd., 1765350 Ontario Inc.,
    1771636 Ontario Ltd., Edward Poberezkin, Victor Itkine, Roman Shmulik, Alex Glozman
    and Corayana Services Ltd.

Defendants (Respondents/

Appellants by way of cross-appeal)

Igor Ellyn, Q.C. and Evelyn S. Perez-Youssoufian, for
    the appellants/respondent by way of cross-appeal

David A. Shiller and J. Thomas Curry, for the respondents/appellants
    by way of cross-appeal

Heard: February 27-28, 2017

On appeal from the judgment of Justice Arthur M. Gans of
    the Superior Court of Justice, dated April 16, 2015, with reasons reported at
    2015 ONSC 2313.

Brown J.A.:

I.

OVERVIEW

[1]

The
    appellants, Alexander Bimman and 2182474 Ontario Inc. (218), were minority
    investors in the respondent, Corayana Enterprises Limited (CEL), which owned
    several multi-unit residential complexes in Thompson, Manitoba. CEL acquired
    the properties and renovated them, for subsequent sale or lease.

[2]

Bimmans
    company, 218, initially held 20% of CELs issued shares. In early 2010, CEL
    required further funds to renovate its properties. Unable to secure third party
    financing, CELs shareholders made two cash calls  on January 11 and February
    11, 2010. Bimman declined to participate in either cash call; all other
    shareholders participated.

[3]

Relying
    on a provision in their November 3, 2009 Shareholders Agreement (the SHA), the
    majority of CELs shareholders approved the issuance of additional shares to shareholders
    who had participated in the cash calls, thereby diluting Bimmans ownership
    interest in CEL.

[4]

As
    a result of that and other conduct, Bimman commenced an action, in which he
    ultimately sought relief under the oppression remedy provisions of s. 248 of
    the Ontario

Business Corporations Act
, R.S.O. 1990, c.
    B.16. By the time of the trial, the parties had agreed that a parting of the
    ways was required. The main issues for trial therefore became: (i) had the respondents
    engaged in oppressive conduct; and (ii) if they had, how many CEL shares did
    the appellants own and what was their value as of December 31, 2013, the
    agreed-upon valuation date for a buy-out?

[5]

The
    trial judge found, in effect, that the respondents had engaged in conduct that was
    unfairly prejudicial to the appellants interests by issuing too many shares on
    the January and February 2010 cash calls. That finding is not in issue on this
    appeal.

[6]

In
    his Judgment, the trial judge granted declarations (i) specifying the number of
    shares CEL ought to have issued on the two cash calls and (ii) the resulting
    ownership interest of the appellants in CEL, which he fixed at 11.08%. The
    trial judge then valued the appellants shares in CEL as of December 31, 2013
    at $858,468.31, and he ordered the respondents to purchase those shares for
    that amount, plus pre-judgment interest.

[7]

Both
    parties take issue with the trial judges determination of the appellants
    shareholding in CEL and the value of those shares.
[1]

[8]

Both
    raise additional issues.

[9]

The
    appellant, Bimman, submits the trial judge erred in only awarding him damages
    of $112,068 for a deferred management fee; he contends the trial judge should
    have granted him judgment for $250,000. As well, the appellants argue the trial
    judge erred in awarding them only partial indemnity costs of $780,312.50; they
    submit they are entitled to substantial indemnity costs of $1,324,419.70.

[10]

On
    his part, the respondent, Victor Itkine, submits the trial judge erred in
    awarding punitive damages of $25,000 against him.

[11]

For
    the reasons set out below, I would dismiss the appeal. I would grant the
    appellants leave to appeal the trial judges award of costs, but I would
    dismiss their costs appeal.

[12]

I
    would allow the cross-appeal, in part. I would set aside the award of punitive
    damages against Itkine. I would increase the number of shares that ought to
    have been issued for the February 11, 2010 share call from 5,743 to 6,071,
    thereby, reducing the value of the appellants shares in CEL as at December 31,
    2013 from $858,468.31 to $842,971.52.

II.

THE INTERPRETATION OF S. 6.01 OF THE SHA

[13]

The
    parties respective challenges to the trial judges findings about 218s
    shareholdings in CEL following the two cash calls and their value as of
    December 31, 2013 engage two key issues: (i) the interpretation of s. 6.01 of
    the SHA; and (ii) the inclusion of certain amounts by the trial judge in his
    valuation of CELs shares. In this section, I will consider the first issue.

A.

The issue stated

[14]

The
    parties entered into a November 3, 2009 shareholders agreement. Article 3
    dealt with share ownership. Section 3.01 contained a table setting out each
    shareholders contribution loan, which together totaled $1 million. As well,
    the table recorded the percentage ownership of each shareholder, its share
    quantity, and its share capital. In the case of 218, the table showed it had a
    20% ownership interest in CEL, reflected in 2,000 issued shares, with a share
    capital of $20.

[15]

In
    late 2009 and early 2010, CEL required more funds to renovate the buildings it
    had acquired. A search for external, third-party financing proved unsuccessful.

[16]

Article
    6 of the SHA dealt with financing. Section 6.01 provided as follows:

ARTICLE 6  FINANCING

6.01 When funds are required to meet financial obligations of
    the Corporation or continue business operations, shareholders shall have the
    option to obtain external loans or financing, provided that the terms of such
    financing are satisfactory to simple majority of the shareholders.

If such funds cannot be obtained from external loans or
    financing,

(a) Each shareholder shall have the option to advance
    its proportionate share of the funds required and any such advance shall be
    without interest.

(b) If one or more than one of the shareholders do not agree
    or fail to make the advance after a reasonable period of time, given the then
    existing circumstances, shareholders who contributed the necessary funds shall
    have the option to receive new shares. Issuance of such new shares by Corayana
    shall be contingent on the agreement of simple majority of the
    shareholders. The number of the new shares to be received by contributors
    would be based on their contributions and the then current values of the shares
    before and after the contributions.

[17]

At
    a January 11, 2010 shareholders meeting, the majority approved a cash call
    requiring the infusion of $250,000, of which Bimman, through 218, would be
    required to provide $50,000. He refused.

[18]

At
    a February 11, 2010 shareholders meeting, the majority approved a further cash
    call of $1.35 million. Again, Bimman refused to participate.

[19]

As
    a result of Bimmans refusal, the remaining shareholders invoked section
    6.01(b) of the SHA and issued an additional 4,000 and 21,600 shares to those
    shareholders who met the cash calls. The trial judge held CEL issued too many
    additional shares in respect of the cash calls. He reduced the number of shares
    CEL should have issued on each cash call to 2,307 and 5,743 respectively.

[20]

At
    trial, the appellants relied heavily on the argument that Bimmans interest in
    CEL should not be diluted at all because the issuance of shares in response to
    the two cash calls engaged the criminal interest rate provisions in s. 347 of
    the
Criminal
    Code
, R.S.C. 1985, c. C-46 and should be set aside. The trial
    judge rejected that argument. The appellants do not pursue it on appeal.

[21]

Instead,
    they advance an argument that played a secondary role at trial: s. 6.01(b) only
    entitled participating shareholders to an issuance of shares based upon their
pro rata
contribution to the amount of funds the non-participating shareholder had
    refused to contribute, not upon the overall amount of their contributions. The
    appellants contended the words necessary funds in s. 6.01(b) referred only to
    the amount the non-participating shareholder had refused to contribute. The
    trial judge did not address this argument in his trial reasons, implicitly
    rejecting it.

[22]

However,
    following the release of the trial reasons, the appellants brought a motion,
    which the trial judge described in para. 1 of his resulting endorsement (2015
    ONSC 3076):

The plaintiffs bring a motion to amend the Reasons for Judgment
    (the Reasons) that I released on April 16, 2015:
Bimman v. Neiman
,
2015 ONSC 2313
. Putting the issues simply, they ask
    that I formally adjudicate on an interpretation of the words the necessary
    funds found in Article 6.01(b) of the Shareholders Agreement, set out
    verbatim at paragraphs 66 and 137 of the Reasons.

[23]

The
    trial judge concluded it would not be appropriate for him to adjudicate on the
    appellants request. At para. 6 he stated:

However, I make the following observations in this Addendum to
    my Reasons for Judgment:

a. A reading of my Reasons indicates that while I did not
    deal with the argument sought to be revisited in this motion head on, which I
    am not in any event obliged to do in the discharge of my duties as a jurist, I
    implicitly rejected the interpretation asserted again in this motion. I was
    very much alive to the issue when it was argued and as I wrote the judgment.

b. The argument now advanced by the plaintiffs was not rooted
    in any facts to which my attention was directed during the evidence portion of
    the trial, nor during argument. In effect, it was a gloss put on the words of
    the November Shareholders Agreement by plaintiffs counsel. It was, as I
    observed during argument, a 4 a.m. inspiration, which all good counsel have
    in the heat of battle. It was not plaintiffs counsels primary or strongest
    argument.

c. Put otherwise, the argument advanced by plaintiffs
    counsel was not within the reasonable contemplation of the parties at the time
    the Shareholders Agreements were being negotiated. Indeed, while the words
    necessary funds were used in an earlier draft of the August Agreement, when
    Article 6.01(b) was debated by Itkine and Bimman in various email exchanges, its
    use in the earlier iteration of the agreement actually undercuts the
    plaintiffs suggested interpretation in my view.

d. Finally, this proposed interpretation is not referenced
    in the pleadings, which although not those of trial counsel, still must be considered
    in defining the issues for trial and judgment. In that respect, a review of
    paragraph 6 of the Plaintiffs Reply and Defence to Counterclaim is most
    instructive.

[24]

The
    appellants renew their argument about the interpretation of necessary funds in
    s. 6.01(b) of the SHA on this appeal.

B.

Analysis

[25]

The
    SHA was a one-off contract negotiated amongst CELs shareholders. In those
    circumstances, the deferential standard of appellate review applies to the
    trial judges interpretation of s. 6.01 of the SHA:
Sattva Capital Corp. v.
    Creston Molly Corp.
, 2014 SCC 53, [2014] 2 S.C.R. 633, at paras.
    52-53;
Ledcor
    Construction Ltd. v. Northbridge Indemnity Insurance Co.
,
    2016 SCC 37, 404 D.L.R. (4th) 258, at para. 24.

[26]

I
    see no palpable and overriding error in the trial judges interpretation of s.
    6.01. His interpretation of the phrase necessary funds as meaning the total
    contributions made by the participating shareholders in response to a cash call
    is a reasonable one, in light of the language of the section as a whole and the
    purpose of s. 6.01 within the overall scheme of the SHA  i.e. to generate
    operating funds for CEL when outside financing proved unavailable.

[27]

I
    do not accept the appellants contention that the interpretation results in a
    commercial absurdity. On the contrary, s. 6.01(b) would operate to incent a
    shareholder in a closely-held, thinly capitalized, nascent corporation to
    participate in the continued financing of the companys operations when outside
    financing proved unavailable. The risk of significant ownership dilution by not
    participating in cash calls would encourage further shareholder contributions.

[28]

Finally,
    while the minutes of the January 11 and February 11, 2010 shareholders meetings
    record Bimmans refusal to participate, they do not record any objection by him
    to the issuance of shares calculated using the interpretation of s. 6.01 adopted
    by the trial judge.

[29]

Accordingly,
    I would not give effect to this ground of appeal by the appellants.

III.

THE CALCULATION OF THE NUMBER OF ADDITIONAL SHARES AND THE VALUE
    OF 218S SHARES

[30]

Both
    sides advance grounds of appeal based on errors they submit the trial judge
    made in calculating the proper number of additional shares that should have
    been issued on the cash calls, as well as the value of 218s shares as of
    December 31, 2013. I propose to deal first with the grounds advanced by the appellants,
    followed by those put forward by the respondents.

A.

The appellants grounds of appeal

The trial judge erred in awarding
    shares for the respondents net $1 million contributions

[31]

The
    appellants submit the trial judge erred in awarding the respondents additional
    shares for the net $1 million they contributed to CEL in response to the first
    and second cash calls. They submit his errors lay in interpreting the words
    necessary funds in s. 6.01(b) of the SHA as all the loan money advanced by
    the defendants and in calculating the number of new shares using their value
    at the time of the shareholder contributions, instead of the date of issuance
    of the shares.

[32]

This
    submission simply is a variant of the appellants ground of appeal concerning the
    interpretation of s. 6.01(b), a submission which I have not accepted for the
    reasons set out earlier. For the same reasons, this submission also must fail.

The trial judge should have
    calculated the value of CEL shares as of March 31, 2010, not as of the dates of
    the cash calls

[33]

The
    appellants submit the trial judge erred when he calculated the proper number of
    new shares using values of CEL as at the dates of the cash calls  January 11
    and February 11, 2010. They contend the calculation properly required using the
    value of CEL as at March 31, 2010, the date the additional shares were issued.

[34]

The
    trial judge explained why he rejected March 31, 2010 as the proper valuation
    date at paras. 160-161 of his reasons:

Mr. Ellyn did not lump all the events of the month of March as
    I have, but argued that because the shares in respect of each of the two cash
    calls were not subscribed for and issued until March 31, the dilution was not
    complete until that date. Hence, he argued that Bimmans interest remained at
    20% for valuation purposes as a result of a finding of oppression.

While this argument had some appeal, in my view it would only
    succeed if I found that the cash calls were either not necessary or a ruse at
    the relevant time, and that none of the money had been contributed along the
    way. I am satisfied the evidence belies those conclusions. Therefore, I hold
    that Bimmans interest in CEL as at March 31, 2010, should be reduced to
    11.08%. I now must embark upon a calculation of its value as at December 31,
    2013, which is the date of reckoning the parties are agreed is my starting
    point.

[35]

The
    trial judges finding that the other shareholders made their contributions
    before March 31, 2010 is not in dispute. The trial judges selection of the
    contribution dates as the dates for valuation faithfully tracks the language of
    s. 6.01(b) of the SHA, which provides that the number of new shares would be
    based on both (i) the contributions of the participating shareholders and (ii)
    the then current values of the [CEL] shares before and after the
    contributions. Accordingly, I see no error in his conclusion on this issue.

The evidentiary effect of the
    Minutes of the February 11, 2010 shareholders meeting

[36]

Finally,
    the appellants submit the trial judge erred by failing to give effect to what
    they characterize as an admission by the respondents that the appellants
    shareholding in CEL was not diluted as a result of the January 11, 2010
    shareholders meeting. In support of this submission, they point to the minutes
    of the February 11, 2010 meeting that record Bimmans required contribution was
    $270,000, which would reflect a continuing 20% shareholding by 218.

[37]

The
    respondents argue the entry in the February 11 minutes was nothing more than a
    clerical error. When the rest of the evidence is considered in its entirety, it
    was clear the other shareholders were taking the position 218s shareholding
    had been diluted by reason of its failure to participate in the January 11 cash
    call.

[38]

I
    accept the respondents submission. What the appellants style as an admission
    is nothing more than a recording error. I give no effect to this ground of
    appeal.

B.

The respondents cross-appeal

The "add back debt" issue

[39]

In
    Appendix 1 to his reasons, the trial judge showed how he calculated the number
    of shares CEL should have issued on the first and second cash calls, as well as
    what Bimmans resulting diluted ownership interest should have been.

[40]

His
    calculations for the shares issued on the February 11, 2010 cash call started
    with an en-bloc adjusted book value for CEL of $1.823 million. In using that
    number, the trial judge accepted the en-bloc fair market value of CEL as at
    February 11, 2010 derived by the appellants expert business valuator, Bruce
    Roher, on Schedule 1B to his supplementary report dated November 18, 2014. The
    supplementary report resulted from the trial judges request, part-way through
    Rohers examination-in-chief, that the parties business valuators engage in a
    form of hot-tubbing on the share valuation calculations. Although they could
    not agree on a joint submission to the trial judge, Roher provided a supplementary
    report.

[41]

Rohers
    Schedule 1B showed that in calculating CELs February 11, 2010 en-bloc value he
    included a $250,000 amount for add back debt. The respondents expert, Paul Mandel
    of Collins Barrow, would not have included that number. The trial judge made a general
    finding that he preferred Rohers evidence over that of Mandel.

[42]

There
    is no dispute the $250,000 for add back debt referred to the amount of the
    contributions made by shareholders on the January 11, 2010 cash call.

[43]

The
    respondents advance two reasons why the trial judge erred in accepting Rohers
    inclusion of the $250,000 in his February 11 en-bloc valuation of CEL.

[44]

First,
    they submit the trial judge committed a calculation error by including the
    $250,000 when, in his reasons, he had found the net contributions made on the
    January 11 cash call only totaled $150,000.

[45]

I
    accept this submission. It was an oversight by the trial judge not to have
    adjusted the February 11 en-bloc book value amount on his Appendix 1 to reflect
    that finding. Appendix 1 should have showed the value as $1,723,000.

[46]

Second,
    the respondents submit the trial judge erred in including any amount, even the
    $150,000, as add back debt in calculating CELs February 11, 2010 en-bloc
    value. They contend the error resulted from the trial judges failure to accept
    an admission Roher made during his cross-examination. Roher was asked whether
    his inclusion of $250,000 in add back debt was based on the assumption the
    $250,000 was used to purchase shares and there is not debt. He agreed. Roher
    was then asked if the $250,000 was debt, would the amount come out of his
    calculation. He agreed it would. On re-examination, Roher was asked whether it
    would be appropriate to add back the $250,000 if the shareholders had paid for
    their shares in January. He answered it would.

[47]

I
    am not persuaded the trial judge made any reversible error on this point. In
    his reasons, the trial judge characterized the issuance of shares pursuant to s.
    6.01(b) as a result of loans, or contributions, made by participating
    shareholders as a hybrid debt-equity transaction. As a result of that
    finding, the probative value of the admission by Roher on which the
    respondents rely to establish an error by the trial judge becomes far from
    clear. Roher did not opine on whether the add back debt amount should form
    part of the valuation calculation in the event the transaction was regarded as
    a hybrid debt-equity one.

[48]

The
    respondents rely on no other evidence to support this ground of appeal. Both
    parties advise they do not want this case remitted back to the trial court;
    they want this court to deal finally with all issues. That being the case, this
    court is left in the position that it has no expert evidence before it
    concerning the treatment of the $250,000 in light of the trial judges
    characterization of the transaction as a hybrid debt-equity one. In those
    circumstances, the respondents have not discharged their burden of demonstrating
    the trial judge made a material error.

[49]

I
    therefore would not give effect to the argument that the trial judge erred in
    including any amount as add back debt in calculating CELs February 11, 2010
    en-bloc value. However, I would allow this ground of appeal to the extent that
    trial judges reasons should have used the amount of $1,723,000 for the
    February 11, 2010 CEL en-bloc adjusted book value, instead of $1,823,000.

The valuation of Buildings Nos. 1
    and 2

[50]

In
    calculating CELs en-bloc adjusted book value as of January 11 and February 11,
    2010, the trial judge used values determined by Roher, which estimated the
    market values of CELs real estate properties on both dates. In Schedule 1D to
    his November 18, 2014 supplementary report, Roher valued Building No. 1 at $1.9
    million on both dates and Building No. 2 at $900,000 on January 11 and $1.9
    million on February 11, 2010. By contrast, Mandel valued each building as of
    February 11, 2010, before adjustments, at $1.733 million, based on a December
    24, 2009 valuation by Red River Appraisal.

[51]

The
    respondents submit the trial judge erred in relying on Rohers January and
    February values for Building No. 1, and the February value for Building No. 2, because
    they were the product of using impermissible hindsight. Instead, they argue the
    trial judge should have relied on the values in the December 24, 2009 Red River
    Appraisal.

[52]

Valuation
    is more art, than an exact science; mathematical certainty is not demanded,
    because it is not possible:
Debora v. Debora

(2006),
83 O.R. (3d) 81 (C.A.)
, at
    para. 51. A valuation exercise must look at the situation as of the valuation
    date. Hindsight information generally is not relevant to the valuation exercise,
    except for the purpose of measuring the accuracy of projections or testing the assumptions
    used by valuators:
New Quebec Raglan Mines Limited v. Uffe Blok-Andersen
,
    [1991] O.J. No. 3472 (C.J.), at para. 2;
Hall v. Atto
,
    [2004] O.J. No. 463 (S.C.), at para.23, affd 2005 CarswellOnt 7087 (Div Ct.).

[53]

I
    am not persuaded the trial judge erred in relying on the contested valuation
    numbers for Buildings Nos. 1 and 2 used by Roher in his Schedule 1D. Roher
    explained how he arrived at his $1.9 million valuation for each building in a
    lengthy Footnote No. 1 to Schedule 1D. It is true that the first part of the
    footnote referred to events that occurred after the valuation date:

Fuller Landau based the market value on the subsequent sale
    price of Buildings 1 and 2 of $1,950,000 less estimated construction costs of
    $50,000. As the purchaser and vendor were negotiating from the fall of 2009,
    Fuller Landau assumed that the subsequent purchase price is the most reasonable
    estimate of the market value at each date.

[54]

However,
    Roher went on to address the value Red River arrived at in December 2009. His
    footnote continued:

The Red River Appraisal of December 2009 of Buildings 1 and 2
    used an average of the Income Approach and the Direct Comparison Approach. Only
    one comparable was used in the Direct Comparison Approach (68 Fox Bay) and that
    comparable was discounted by 15% due to size difference between 68 Fox Bay and
    the Buildings 1 and 2. The same comparable (68 Fox Bay) was used in Red Rivers
    2013 appraisal in the Direct Comparison Approach, however, the selling price
    was not discounted as it had been in Red Rivers 2009 Appraisal. Had Red River
    not discounted the comparable in its 2009 appraisal, the 2009 appraised value
    would have been $1,882,000 which approximates the estimated market value used
    by Fuller Landau.

[55]

At
    trial, the respondents did not take issue with the admission of Rohers
    supplementary report. Nor did they cross-examine Roher on his valuation of
    Buildings Nos. 1 and 2.

[56]

When
    read in the light of his critique of the Red River 2009 appraisal, Rohers
    reference in Footnote No. 1 on Schedule 1D to a post-valuation date event takes
    on the character of a testing of the Red River valuation, not a stand-alone
    hindsight valuation. In those circumstances, I conclude it was open to the
    trial judge to consider and accept the en-bloc adjusted book values of CEL
    using the real estate values set out by Roher on Schedule 1D.

[57]

I
    would not give effect to this ground of cross-appeal.

The value of Corayana Services
    Limited (CSL)

[58]

Establishing
    the en-bloc fair market value of CEL as of February 11, 2010 required
    determining the fair value at that date of a related company, CSL, which had
    been incorporated in December 2009. CSL began generating income in late
    February 2010.

[59]

Roher
    estimated the fair market value of CSL as of February 11, 2010 at $150,000 and used
    that value to calculate the en-bloc value of CEL. The trial judge, in turn, accepted
    that value. The respondents submit the trial judge erred in so doing.

[60]

I
    am not persuaded by their submission. Several pieces of evidence were adduced
    before the trial judge on this issue. Mandel, the respondents business
    valuator, estimated CSLs value at the time at $30,000 using a normalized
    income approach based on expected pre-tax earnings. Roher testified CSLs value
    was higher than that. As part of his in-trial supplementary report, he
    estimated CSLs value at $150,000. He also wrote that Mr. Mandel and I
    discussed the value of CSL. We agreed that the value was in the range of
    $100,000 to $200,000 in 2010 and 2013. Finally, in re-examination Roher
    advised the trial judge that one factor he took into account in valuing CSL was
    its recent securing of a contract with Vale.

[61]

The
    trial judge preferred the evidence of Roher to that of Mandel in all respects.
    Given that finding, and in light of the evidence before the trial judge about CSLs
    value as of February 11, 2010, I cannot say the trial judge committed
    reversible error in accepting and using Rohers estimated value of $150,000.
    Accordingly, I would not give effect to this ground of cross-appeal.

C.

Summary

[62]

By
    way of summary, I would dismiss the appeal on the share issuance issues. I
    would allow the cross-appeal only to the extent of holding that Appendix 1 to
    the trial judges reasons should have used the amount of $1,723,000 for the
    February 11, 2010 CEL en-bloc adjusted book value, instead of $1,823,000.

[63]

Let
    me describe how that affects the calculations shown on Appendix 1 to the trial
    judges reasons.

[64]

Using
    the amount of $1,723,000 changes the February 11, 2010 share value to $140 per
    share [$1,723,000/12,307], thereby increasing the number of shares that ought
    to have been issued from 5,743 to 6,071 [$850,000/$140 per share]. Accordingly,
    in para. 1(b) of the Judgment, 6,071 shares should be substituted for the trial
    judges finding of 5,743 shares that ought to have been issued as of February
    11, 2010. And in para. 2(b) of the Judgment, 15,529 shares should be
    substituted for the trial judges finding of 15,857 shares that were invalid
    and thereby cancelled.

[65]

That
    reduces Bimmans ownership at that date from the 11.08% found by the trial
    judge to 10.88% [2,000 shares / (12,307 + 6,071 = 18,378) shares], requiring
    para. 3 of the Judgment to be varied accordingly.

[66]

Using
    the trial judges finding that CELs value at December 31, 2013 was $7,747,900,
    Bimmans 10.88% shareholding was worth $842,971.52. Consequently, I would vary
    para. 4 of the Judgment to reduce the value of the appellants shares in CEL
    from $858,468.31 to $842,971.52.

IV.

DEFERRED MANAGEMENT FEE

[67]

Section
    6.02(c) of the SHA provides for the payment to CELs directors of a deferred
    management fee  flat $500,000.00 for the entire period of the projects
    existence. There is no dispute that the two directors at the relevant times
    were Bimman and Neiman.

[68]

The
    trial judge awarded Bimman $112,068 as his share of the Deferred Management Fee
    (DMF). Bimman contends the trial judge erred by not awarding him 50% of the
    DMF, or $250,000. Bimman submits the trial judges award was arbitrary because
    it was not based on the terms of the SHA or the evidence.

[69]

I
    would not accept this submission. First, the trial judge found, at para. 223,
    that Bimmans final entitlement to a portion of the DMF was very much a matter
    left for future negotiation. The appellants have not demonstrated the trial
    judge committed a palpable and overriding error in so interpreting s. 6.02(c)
    of the SHA.

[70]

Second,
    the trial judge provided a detailed explanation of how he calculated Bimmans
    entitlement to the DMF. He stated, at paras. 220-224:

Conversely, I am not persuaded that Bimmans activities prior
    to October 2009 warrant compensation to the levels he proposes. From my
    understanding of the project, namely a conversion of very modest apartments to
    prime rental property in Thompson, the day-to-day activities associated with
    the renovations were really left to Neiman and the team he assembled to
    complete. I am satisfied that much of the heavy lifting in respect of the
    renovation work and the subsequent marketing and rental of the units, if not as
    entire buildings, was done after Bimman was forced out of the day-to-day
    management of the Property.

Furthermore, while Bimman may have introduced UCN [University College
    of the North] to the Property, and may have been instrumental in retaining
    appraisers to assist in the marketing of the two buildings, the deal that was
    struck was concluded under Neimans watch, with little or no Bimman
    involvement.

I have not lost sight of the fact that Bimman was forced out of
    the management group as a result of exaggerated, if not unfounded, allegations
    of impropriety bordering on embezzlement. I have concluded that while Bimmans
    resignation was perhaps ill-advised, the defendants, with Itkine at the helm,
    made his life positively miserable during this period of time. He had no
    alternative but to resign, if only to secure his entitlement to a healthy
    portion of the DMF, a negotiation which never took place, notwithstanding earlier
    promises from Itkine to the contrary.

Bimman did not, however, have a reasonable expectation to one
    half of the amount reserved for the DMF, or $250,000, after his resignation and
    based on the status of the development to that date. Indeed, it does not appear
    that he ever asserted such a claim, as it is not evidenced in any of the
    meeting minutes either prior to or following the date of his resignation and
    into early 2010. His final entitlement to a portion of the DMF was very much a
    matter left for future negotiation.

That said, I am satisfied that but for the timing of his forced
    resignation from CEL, he would have been permitted to stay and participate in
    the management of the project and undoubtedly would have been entitled to an
    increased share of the DMF, a share greater than that to which the defendants
    suggest hes entitled. In that respect, I find that he is entitled to share in
    the DMF up to the end of March 2010, the moment in time that I have held that
    the oppression took place. This adds an additional five months to the
    calculation. Using the straight mathematical formula that both parties are
    agreed to, this calculation yields a DMF entitlement of $112,068.

[71]

Those
    findings were open to the trial judge to make on the record before him. I see
    no basis for appellate intervention.

V.

COSTS APPEAL

[72]

As
    mentioned, the trial judge awarded the appellants their costs of the action
    fixed at $780,312.50 on a partial indemnity scale.

[73]

The
    appellants submit they should have received a higher award. They contend the
    trial judge erred by (i) not awarding costs on a substantial indemnity scale,
    (ii) not awarding costs for pre-trial motions argued before Newbould J., (iii)
    reducing the amounts of experts fees recoverable as disbursements, and (iv)
    awarding $5,000 in costs to the respondents for a post-trial motion.

[74]

I
    would not accept any of those submissions.

A.

The appropriate scale of costs

[75]

Although
    the appellants acknowledge the choice of the appropriate scale of costs lies
    within the discretion of a trial judge, they argue the trial judge committed
    two errors of principle in refusing to award them substantial indemnity costs.

[76]

First,
    they submit that since the respondents made allegations of fraud against them,
    substantial indemnity costs should follow. Bimman and his corporation, Bimman
    Real Estate Services Inc., had contracted with a local paint store owner, Lucy
    Lambert, to involve some of the CEL work crew in painting projects in Thompson
    (the Lambert Contracts). In October 2009, Bimman was accused of having
    misappropriated CELs funds and taken the Lambert Contracts to the detriment of
    that company, complaints that were repeated by the CEL board in the months that
    followed.

[77]

While
    an unsubstantiated pleading of fraud can expose a party to substantial
    indemnity costs, and while the respondents made such an allegation in respect
    of the Lambert Contracts, the trial judge explained, at para. 8 of his costs
    endorsement (2015 ONSC 4144), why, in the end, that pleading did not attract
    costs on a higher scale:

Lead counsel for the Defendants, from the drop of the puck at
    trial, downplayed the importance of the Lambert Contracts and their impact on
    the decision-making process surrounding the raising of funds necessary to
    finance CEL in the formative days, a process counsel allowed was critical to
    the ultimate success of CEL. This approach, whether undertaken by plan or
    happenstance, meant that
the allegations of fraud formed
    more a part of the Plaintiffs overall mantra than the Defendants defence or
    counterclaim, the latter of which I suggested in the Trial Judgment had all but
    disappeared or was unsupported by any damage evidence.
[Emphasis added]

[78]

Second,
    the appellants submit the trial judge acted inconsistently in awarding punitive
    damages against Neiman and Itkine, but not awarding substantial indemnity costs
    against the respondents. I do not agree. An award of punitive damages does not
    automatically translate into an award of substantial indemnity costs. An award
    of costs acts to provide fair and reasonable indemnity for legal expenses
    incurred when assessed in light of all of the factors enumerated in rule
    57.01(1) of the
Rules of Civil Procedure
, which include not only the
    nature of the allegations asserted in a proceeding, but also how a party
    conducts a proceeding. The trial judges cost endorsement disclosed he took all
    relevant factors into account. At para. 39, the trial judge explained how he
    balanced them:

On balance, I am satisfied, having regard to the matters
    described above, that a payment of costs to the Plaintiffs on a partial
    indemnity basis only is appropriate in all the circumstances. I decline to
    award costs of any aspect of this case on a substantial indemnity basis since I
    am not persuaded that there was clear evidence throughout of reprehensible,
    scandalous or outrageous conduct to warrant an award of elevated costs, even
    though, I dare say, that the allegations of Bimmans alleged misdeeds loomed
    large throughout the stages of the proceedings ramping up to trial. In any
    event, I am of the view that the award of punitive damages sounded a note of
    condemnation to the lead Defendants for their sometimes inappropriate
    behaviour.

[79]

I
    see no error in principle in how the trial judge exercised his discretion in awarding
    costs on a partial indemnity scale.

B.

Costs of the motions before Newbould J.

[80]

Newbould
    J. dismissed competing pre-trial motions brought by the parties in respect of
    property sales proceeds paid into court. Newbould J. left the costs of both
    motions to the trial judge, who concluded, at para. 27 of the costs endorsement,
    neither side came away as a clear winner at days end. As a result, the trial
    judge decided there will be no order as to costs of the motion and
    cross-motion.

[81]

The
    appellants submit the trial judge erred in failing to appreciate that by
    reserving costs to the trial judge, Newbould J. was indicating that the result
    of the trial should influence the disposition of costs of these motions. I
    disagree. Newbould J. left the costs of the motion to the trial judge; he did
    not order costs in the cause of the action. The trial judge explained why no
    costs order should be made in respect of the motions. He made no error in
    principle in so exercising his discretion. I give no effect to this ground of
    appeal.

C.

Recoverable experts' fees

[82]

In
    determining the appellants recoverable disbursements, the trial judge reduced
    claimed business valuator fees by 25% to $169,137, plus HST. He also reduced
    the claimed real estate appraisers fees from about $58,000 to $35,000, plus
    HST. The appellants submit the trial judge erred in so doing.

[83]

I
    see no error. A party is free to pay a retained expert whatever amount of fees
    it sees fit. However, courts do not act as a rubber stamp automatically
    approving claimed experts fees. Part II, Item 26 of Tariff A under the
Rules of Civil Procedure
only permits a party to recover a reasonable amount for experts reports. In
    the present case, the trial judge subjected the appellants claimed
    disbursements for experts reports to the required reasonableness analysis. He
    concluded the claimed amounts were excessive when compared with the fees
    charged for similar work by the respondents experts and after taking into
    account the usefulness of the work for the issues that remained live at
    trial. In sum, he properly discharged his duty to vigilantly review the
    reasonableness of claimed experts expenses. I would give no effect to this ground
    of appeal.

D.

The $5,000 cost award for a motion

[84]

The
    trial judge released his reasons on April 16, 2015. The appellants then brought
    a remediation motion in writing asking the trial judge to adjudicate on their
    necessary funds SHA interpretation argument described above at paras. 21 to 23.
    By reasons released on May 19, 2015, the trial judge dismissed the motion with
    costs. In his July 2, 2015 costs endorsement, the trial judge awarded the
    respondents costs of the remediation motion in the amount of $5,000.

[85]

The
    appellants spent some time at the hearing arguing the trial judge erred in so
    doing because he failed to provide them with an opportunity to make submissions
    on the appropriate amount of costs to be awarded.

[86]

I
    see no merit in this submission. On May 9, 2015, the appellants submitted a
    bill of costs in which they sought partial indemnity fees of $3,257.63 for
    their remediation motion. In light of that ask by the appellants, an ultimate
    award of $5,000 all in to the respondents for the motion was fair and
    reasonable. The trial judge committed no error in awarding that amount.

E.

Summary

[87]

I
    would grant the appellants leave to appeal the trial judges award of costs,
    but I would dismiss their costs appeal in its entirety.

VI.

PUNITIVE DAMAGES

[88]

The
    trial judge found the activities of Neiman and Itkine amounted to a marked
    departure from ordinary standards of decent behavior  and awarded punitive
    damages of $25,000 jointly against them for such appalling behaviour.

[89]

Neiman
    does not appeal that award. Itkine does, submitting it was unfair for the trial
    judge to make such an award when the appellants had not sought punitive damages
    against him in their pleadings.

[90]

It
    is common ground the appellants did not include a claim for punitive damages
    against Itkine in their pleadings and only sought such damages when they made
    their closing submissions at trial.

[91]

Whether
    a defendant has been taken by surprise by a defective pleading must be decided
    in the circumstances of the particular case:
Whiten v. Pilot Insurance Co.
, 2002
    SCC 18, [2002] 1 S.C.R. 595, at para. 88. The question is whether the defendant
    had adequate notice of his possible jeopardy for personal liability and an
    adequate opportunity to respond to the claim:
Alfano v. Piersanti
,
    2012 ONCA 297, 291 O.A.C. 62, at para. 163.

[92]

In
    the circumstances of the present case, such notice was not given until the
    evidence had closed. That was not fair to Itkine. A party should know before a
    trial starts the extent of his or her jeopardy. Itkine did not. Accordingly,
    the trial judge erred in awarding punitive damages against Itkine. I would set
    aside that part of his Judgment.

VII.

DISPOSITION

[93]

For
    the reasons set out above, I would dismiss the appeal, including the appeal of
    costs.

[94]

I
    would allow the cross-appeal in two respects only.

[95]

First,
    I would set aside the award of punitive damages against Itkine in para. 9 of
    the Judgment.

[96]

Second,
    I would vary paras. 1(b), 2(b), 3 and 4 of the Judgment in the manner described
    in paras. 63 to 66 above.

[97]

Para.
    5 of the Judgment specifies the amount the respondents are to pay 218 for its
    shares in CEL, which includes pre-judgment interest. Before us, the parties did
    not make submissions about how to recalculate pre-judgment interest. However,
    the amount in para. 5 of the Judgment needs to be revised. Accordingly, as part
    of their submissions on costs, the parties shall include an agreed-upon
    recalculation of the amount to be substituted in para. 5.

[98]

I
    would encourage the parties to agree on the costs of the appeal. If they
    cannot, any party seeking costs may file brief written submissions of up to 3
    pages in length, together with a Bill of Costs, no later than Thursday, April 14,
    2017. Any party against whom costs are sought may file brief responding
    submissions no later than Monday, April 24, 2017.

Released: March 31, 2017 ("RGJ")

"David Brown J.A."

"I agree. R.G. Juriansz J.A."

"I agree. B.W. Miller J.A."

[1]
The appellants abandoned their argument that the issuance of the shares
    pursuant to the resolutions made at the January 11 and February 11, 2010
    shareholder meetings was invalid for want of proper notice.


COURT OF APPEAL FOR ONTARIO

CITATION: Boaden Catering Limited v. Real Food For Real Kids Inc., 2017 ONCA 248

DATE: 20170327

DOCKET: C62410

MacFarland, van Rensburg and Huscroft
    JJ.A.

BETWEEN

Boaden Catering Limited

Plaintiff (Appellant)

and

Real Food For Real Kids Inc. and David Starbuck
    Farnell

Defendants (Respondents)

and

Real Food For Real Kids Inc.

Plaintiff
    by Counterclaim (Respondent)

and

Boaden Catering Limited

Defendant by Counterclaim (Appellant)

Adam Jarvis, for the appellant

John Simpson, for the respondents

Heard: February 15, 2017

On appeal from the order of
    Justice John R. Sproat of the Superior Court of Justice, dated June 30, 2016,
    with reasons reported at 2016 ONSC 4098, and from the costs order, dated August
    16, 2016.

ENDORSEMENT

[1]

This is an appeal from a summary judgment
    dismissing the appellants action and an order dismissing the appellants motion
    to strike certain paragraphs of the respondents statement of defence. The
    appellant also seeks leave to appeal the costs award.

A.

HISTORY OF THE PROCEEDINGS

[2]

The proceedings arise out of a dispute over
    website domain names. The appellant Boaden Catering Limited (Boaden) and the respondent
    Real Food For Real Kids Inc. (RFRK) are competitors in the market for healthy
    childrens catering in the Greater Toronto Area. In July 2014 and December 2014,
    Boaden registered a .com domain name (realfoodforrealkidss.com) and three .ca
    domain names (realfoodforkids.ca, rfrk.ca and realfoodlunchclub.ca), which were
    identical or similar to names that RFRK claimed to have used in its business continuously
    since 2005. In December 2014, Boaden registered RFRK and RFRK.CA as business
    names under Ontarios
Business Names Act
,
    R.S.O. 1990, c. B.17
.
Boaden also embedded RFRK,
    Real Food for Real Kids and other similar keywords as meta-tags on its
    website at organickidscatering.ca, which ensured that persons searching the
    internet using such keywords would be directed to Boadens website.

[3]

In March 2015, RFRK submitted a complaint under
    the Internet Corporation for Assigned Names and Numbers (ICANN) Uniform Domain
    Name Dispute Resolution Policy (UDRP) concerning Boadens registration of the
    domain name realfoodforrealkidss.com. On May 5, 2015, an arbitrator found
    that Boaden had no legitimate interest in this domain name, which it had
    registered in bad faith.

[4]

On May 7, 2015, RFRK submitted a complaint under
    the Canadian Internet Registration Authority (CIRA) Domain Name Dispute
    Resolution Policy concerning Boadens registration of the three .ca domain
    names. On July 8, 2015, the CIRA arbitrator found that Boaden had no legitimate
    interest in the disputed .ca domain names, and that the domain names had been
    registered in bad faith. The arbitrator ordered that the registration of the .ca
    domain names be transferred from Boaden to RFRK.

[5]

On June 2, 2015, Boaden commenced an action in
    the Superior Court against RFRK and its principal David Farnell for a variety
    of relief, including a declaration that Boaden is the lawful owner of the disputed
    domain names, and damages for passing off, defamation and theft of trade
    secrets. In accordance with CIRA policy, the order to transfer the registration
    of the .ca domain names to RFRK is suspended while court proceedings are
    pending.

[6]

RFRK and Farnell defended the action and RFRK counterclaimed
    for injunctive and declaratory relief as well as compensatory and punitive
    damages for Boadens conduct in registering and using the domain names, and for
    other conduct in relation to Boadens business.

[7]

On January 4, 2016, RFRK served a motion for
    summary dismissal of Boadens action. The motion was originally returnable at
    the same time as an interlocutory injunction motion brought by Boaden, which had
    been adjourned on July 17, 2015 to the week of February 29, 2016. In the
    interim, Boaden had served a motion to strike certain paragraphs of the
    statement of defence, also returnable on February 29, 2016.

[8]

During the week of February 29, 2016, Boadens
    counsel was ill. As a result, on March 1, 2016, the parties appeared before
    Sproat J. and all three motions were adjourned to the week of April 11, 2016. Sproat
    J. made it clear that Boadens pleadings motion would not be heard and
    determined in advance of the summary judgment motion.

B.

DECISION OF THE MOTIONS JUDGE

[9]

Accordingly three motions were before the court on
    April 13, 2016: the motion for summary dismissal of the action, the motion to
    strike paragraphs of the statement of defence, and the motion for an
    interlocutory injunction (which Boaden advised it was no longer pursuing).
    Boaden sought an adjournment of the summary judgment motion for the purpose of
    cross-examining RFRKs deponents. The motions judge refused to adjourn the
    motion. As the motions judge explained in his written reasons, having regard to
    the history of the proceedings, Boaden was in breach of the obligation under
    rule 39.02(3) of the
Rules of Civil Procedure,
R.R.O. 1990, Reg. 194
to
    exercise its right to cross-examine with reasonable diligence.

[10]

After hearing argument and reserving his
    decision, the motions judge decided to hear
viva voce
evidence on the summary judgment motion from Louie Tassone, Boadens
    principal, in accordance with his powers under rule 20.04(2.1). The motions
    judge subsequently provided written reasons dismissing Boadens action and the
    pleadings motion.

[11]

The motions judges reasons are comprehensive, clear
    and detailed, and need not be set out in any detail here. It is sufficient to note
    that the motions judge considered the evidence respecting each cause of action
    alleged and dismissed Boadens action, concluding that there was no genuine
    issue requiring a trial. The motions judge found that Boaden registered the
    domain name rfrk.ca in bad faith with a view to denying RFRK the ability to use
    the name. He concluded that Boaden brought the litigation to intimidate a
    smaller business competitor and adopted a number of dubious tactics to gain
    advantage. Boaden had acted in bad faith, attempting to appropriate RFRKs
    goodwill and to exploit the value of its trademarks for illegitimate financial
    gain, and engaged in conduct that was unethical and deceptive.

[12]

As for the pleadings motion, the motions judge
    rejected Boadens assertion that certain paragraphs of the statement of defence
    alleging bad faith acts by Boaden, should have been pleaded as part of the
    counterclaim rather than the defence. He concluded that bad faith conduct was
    relevant to the defence of a number of Boadens claims in the action, in
    particular, to the claims for an interlocutory injunction, the declaration that
    it owned the contested domain names (as registering a name in bad faith is
    clearly relevant to the validity of the registration) and to the claim for
    damages. He dismissed the pleadings motion.

[13]

The motions judge awarded costs in favour of the
    respondents in the sum of $98,959.82. He concluded that there was reprehensible
    conduct by Boaden, which justified a costs award on a higher scale than partial
    indemnity, and that the amount sought by the respondents was both reasonable
    and proportionate.

C.

ISSUES AND ANALYSIS

[14]

The appellant raises several grounds of appeal.

(1)

Denial of an Adjournment

[15]

The first ground, which was the appellants main
    argument on appeal, is that Boaden was denied procedural fairness when the
    motions judge wrongly refused to adjourn the summary judgment motion.

[16]

Boaden says an adjournment was warranted for the
    following reasons: first, Boaden needed time to cross-examine the deponents of RFRKs
    affidavits; second, its pleadings motion ought to have been heard and
    determined in advance of the summary judgment motion; third, the summary
    judgment motion ought to have been adjourned to be heard together with RFRKs intended
    motion for summary judgment on the counterclaim; and fourth, Boaden needed time
    to respond to new evidence and an amended factum RFRK delivered only days
    before the scheduled motion date.

[17]

We reject this ground of appeal. There is
    limited scope for appellate intervention with respect to the denial of an
    adjournment. The decision to grant or refuse an adjournment is discretionary
    and will only be interfered with if the judge has failed to take account of
    relevant factors and has exercised his or her discretion unreasonably, such
    that the decision is contrary to the interests of justice:
Khimji v.
    Dhanani
(2004), 69 O.R. (3d) 790 (C.A.), at para. 14. There
    is no reason in this case to interfere with the exercise of discretion by the
    motions judge in refusing to adjourn the summary judgment motion.

[18]

First, consistent with the pattern of delay by
    Boaden in the litigation, Boaden did not act reasonably to cross-examine RFRKs
    deponents. As early as July 2015 RFRK indicated its intention to move for
    summary judgment and proposed that the parties agree to a schedule for the
    litigation, without co-operation from Boaden. As the motions judge noted,
    Boaden took no steps to cross-examine RFRKs deponents between January 6, 2016,
    when RFRK served its motion record for summary judgment, and March 1, 2016,
    when the motion was adjourned because of the illness of Boadens counsel. Even
    after the adjournment, Boadens first and only request to cross-examine RFRKs
    deponents was on March 30 (before Boaden had delivered any responding material).
    RFRKs counsel responded that the deponents were not available on the date
    Boaden had proposed, April 5, but were available on April 8. Boaden refused the
    offer to examine on April 8, saying it was too close to the motion date. The motions
    judge was justified in concluding that Boaden did not exercise its right to
    cross-examine with reasonable diligence and that an adjournment for
    cross-examination was not warranted.

[19]

Second, the fact the appellants brought a motion
    to strike paragraphs of the statement of defence did not warrant an adjournment
    of the summary judgment motion. At the March 1 attendance, Sproat J. made it
    clear that the pleadings motion would not be heard first and that he was
    prepared to hear the summary judgment motion on the matters return. There was
    no reason for Boaden to expect an adjournment of the summary judgment motion on
    the same basis that had already been canvassed and for reasons that had been
    rejected by the court.

[20]

Third, Boadens assertion that the motion for
    summary dismissal of its claim ought to have been adjourned so it could be
    heard with RFRKs motion for summary judgment on the counterclaim has no merit.
    Although there was some indication that RFRK would bring such a motion in the
    future, there was no such motion pending and no direction from the court that the
    two motions would need to proceed together. In any event, as Boaden had not yet
    delivered a defence to the counterclaim, any motion for judgment on the
    counterclaim would have been premature: rr. 20.01, and 20.09. As such, RFRKs
    intention to move for summary judgment on the counterclaim was irrelevant to
    any request for an adjournment of the motion for summary dismissal of Boadens
    action.

[21]

Finally, we reject the argument that an adjournment
    was warranted because RFRK had put forward new evidence and served an amended
    factum. The alleged new evidence consisted of print-outs from the Canadian
    Intellectual Property Offices public database showing that RFRKs applications
    to register two trademarks had matured to registration. Boaden was aware of the
    applications, pleading the February 25, 2015 trademark registration application
    and its intention to contest same at paras. 22 and 23 of its amended statement
    of claim. In any event, the motions judge determined the action based on common
    law principles, and not based on RFRKs registered trademarks. As for the late
    delivery of an amended factum, this was necessitated by the need to incorporate
    evidence from Boadens affidavits (served only days before the motion) and
    cross-examination, and would not justify an adjournment.

[22]

Accordingly, there is no error in the motions
    judges exercise of discretion in refusing an adjournment, and we do not give
    effect to this ground of appeal.

(2)

Dismissal of Motion to Strike

[23]

Boadens next argument is that the motions judge
    should have granted its motion to strike certain paragraphs of RFRKs statement
    of defence. The assertion is that certain allegations of bad faith conduct were
    not relevant to the respondents defence, and should only have been pleaded in
    the counterclaim. From this Boaden says that, in dismissing the action, the
    motions judge ought not to have taken into consideration matters it says were
    irrelevant to the defence of the claim (as opposed to its counterclaim), such
    as Boadens registration of RFRK as a business name, the use of meta-tags and
    the procedural history of the parties dealings.

[24]

We do not give effect to this argument. There
    was no error in the refusal of the motion to strike paragraphs of the
    respondents defence. The motions judge was entitled to find that the impugned
    paragraphs were relevant to the appellants alleged bad faith, which in turn
    was clearly relevant to the validity of its domain name registrations. The
    motions judge was entitled to consider all of the evidence of Boadens use of
    the disputed marks and Boadens course of conduct in deciding, among other
    things, whether Boaden was entitled to a declaration that it owned the
    contested domain names.

(3)

Denial of Procedural Fairness

[25]

Boaden also asserted in oral argument that the
    denial of its adjournment request had a snowballing effect and that it was
    denied procedural fairness. Although this part of Boadens argument was
    difficult to follow, Boaden seems to say that it was prevented from responding
    properly to the motion for summary judgment and that the motions judge relied
    on the previous arbitration decisions in which Boaden had not participated to grant
    summary judgment dismissing Boadens action.

[26]

There is no merit to this argument. First,
    Boaden was not prevented from responding properly to the motion. Although only delivered
    on the eve of the summary judgment motion, Boadens materials seeking to
    substantiate the claims asserted in the action were before the court, as were the
    materials previously filed in respect of the interlocutory injunction motion.

[27]

Whether or not Boaden had an excuse for not
    participating in the CIRA arbitration proceedings, the motions judge did not
    base his findings on the results of those proceedings, but simply referred to
    them at paras. 24 and 25 of his reasons. Instead, the motions judge noted, at
    para. 27, that Boaden obviously had the opportunity to file evidence in this
    court action to establish the basis for its claim to [the] domain names and he
    went on to determine the issues based on the evidence that was presented to the
    court, including the additional oral evidence of Tassone. The motions judge
    concluded that, on the evidence, the respondent had used three marks, including
    RFRK, and that the respondent operated an internet website at rfrk.com
    featuring such marks. The motions judge did not err in concluding, after giving
    Boadens principal the opportunity to provide
viva voce
evidence, that Boadens registration of the domain names was in bad
    faith with a view to denying RFRK the ability to use the names.

(4)

Failure to Apply the Right Test

[28]

The only alleged error of law pressed in oral argument was that
    the motions judge erred in failing to expressly apply the test in
Black
    v. Molson Canada
(2002), 60 O.R. (3d) 457 (S.C.), which Boaden
    characterizes as the proper
authority relating to domain name
    registrations. Boaden refers to the test, as cited in
Black,
as
    requiring a complainant to establish (i) that the domain name is identical to a
    trademark or service mark in which the complainant has rights; (ii) the
    respondent has no rights or legitimate interests in respect of the domain name;
    and (iii) the domain name has been registered or is being used in bad faith.
    Boaden says that the motions judge did not consider whether the domain names it
    registered were identical with a mark in which RFRK had rights, and did not
    consider evidence demonstrating that Boaden had rights and legitimate interests
    in respect of the domain name.

[29]

Again, there is no merit to this submission. In
Black
, the
    court referred to the criteria for directing the transfer of a .com domain
    name, as articulated in the ICANN policies at the time, which required that a
    domain name be identical to the complainants mark. The current criteria are substantially
    the same under both the ICANN policies and the CIRA Dispute Resolution Policy
    governing disputes over .ca domain names, except that it is sufficient if the disputed
    domain name is confusingly similar to a mark in which the complainant had and
    continues to have rights. The motions judge applied the same test in his
    reasons: see, in particular, para. 37. And, contrary to Boadens assertion, the
    motions judge considered all of the relevant evidence put forward by Boaden
    seeking to explain why it had rights and legitimate interests in respect of the
    domain name. The evidence was proffered by Tassone, who claimed that Boaden had
    registered the domain names as part of a public education initiative it started
    in 2014 called Real Food Real Knowledge, and that it never occurred to him
    that this bore a resemblance to the name of his completion. The motions judge
    explained why he soundly rejected that evidence at paras. 29 to 38 of his
    reasons. We find no merit to this ground of appeal.

(5)

Costs

[30]

Finally, Boaden seeks leave to appeal the costs
    award of $98,959.82. Boaden says that the motions judge erred in failing to
    consider its offer to settle, and in awarding costs in respect of the summary
    judgment motion that included RFRKs costs in its counterclaim.

[31]

There is no merit to this argument. The offer to
    settle would have required RFRK to consent to a dismissal of its counterclaim
    in exchange for a dismissal of the action on a without costs basis, and would
    have no bearing on the respondents costs entitlement for their success on all
    three motions that were before the court. The respondents bill of costs
    properly noted that it did not claim any costs for attendances that were
    exclusively in relation to the counterclaim. The claim and counterclaim arose out
    of the same dispute between the parties. The motions judge was satisfied that
    the attendances set out in the bill of costs were reasonable, and, noting that
    Boaden had not filed its own accounts, he concluded the amount claimed was
    proportionate. There is no basis to interfere with the motions judges
    determination of costs in this matter.

D.

DISPOSITION

[32]

The appeal is therefore dismissed in its entirety. The
    respondents shall have their costs of the appeal fixed at $7,500, inclusive of
    HST and disbursements.

J. MacFarland J.A.

K. van Rensburg J.A.

Grant Huscroft J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Castronovo v. Sunnybrook & Women's College
    Health Sciences Centre, 2017 ONCA 212

DATE: 20170313

DOCKET: C62791

Hoy A.C.J.O., Gillese and Brown JJ.A.

BETWEEN

Calogero Castronovo, Liverata Castronovo and
    Pasquale Castronovo

Plaintiffs (Respondents)

and

Sunnybrook & Womens College Health Sciences
    Centre, Ms. L. Chow, Jane Doe and/or John Doe,
Venus
    Chiodo a.k.a. Venus Cariati o/a Mutual Aid Legal Services and Mikhail Krylov
    a.k.a. Michael Krylov

Defendants (
Appellants
)

William G. Scott, for the appellants

Brian Pickard and Earl Murtha, for the respondents

Heard:  March 7, 2017

On appeal from the order of Justice F.L. Myers of the Superior
    Court of Justice, dated October 6, 2016.

ENDORSEMENT

[1]

In a June 9, 2016 order, Archibald J. directed
    that, if advised, the appellants were to serve and file a motion to amend their
    defence to advance a limitation period defence by June 17, 2016. He maintained
    the October 17, 2016 trial date, pending amendments.  All counsel signed the
    order.

[2]

The appellants served their notice of motion,
    seeking leave to amend their statement of defence to plead a limitations
    defence, on August 17, 2016.  Myers J. heard their motion on October 6, 2016.
    The appellants asserted that the respondents should have discovered their claim
    against them in 2007 and the claim was accordingly statute-barred.

[3]

Myers J. dismissed their motion. The crux of his
    reasoning was that the appellants had failed to show why it was in the
    interests of justice to grant the requested extension of time under r. 3.02 of
    the
Rules of Civil Procedure
.  He held that Archibald J.s order was a consent order and found
    the appellants had not explained why they waited seven years from being added
    as parties or two months after the deadline prescribed in the consent order to
    file and serve their motion.  He noted that Archibald J.s order specifically
    contemplated counsels need for instructions.  Moreover, it was common ground
    that the trial date would be lost if leave to amend were granted.  Delay
    matters, he wrote.  And if the appellants advanced a limitations defence, the
    respondents counsel would be a key witness and the respondents would need to
    find new counsel in a 13-year old case.  He concluded there is no amount of
    money that can compensate the [respondents] if they are sent back to the
    drawing board needing to find new counsel at this late date.

[4]

The appellants concede Myers J. articulated the correct
    test (whether it was in the interests of justice) to be applied in determining
    whether an extension of time should be granted under r. 3.02, and that an order
    under r. 3.02 is discretionary. But they argue Myers J. erred (i) in concluding
    Archibald J.s order was a consent order; (ii) in concluding the appellants had
    not adequately explained the delay; and (iii) by considering prejudice other
    than prejudice arising from their two-month delay in complying with Archibald
    J.s order.

[5]

We reject these arguments.  In our view, Myers
    J. did not err in concluding that the appellants had failed to show that it was
    in the interests of justice to grant the requested extension.  The
    uncontradicted evidence before Myers J. was that all counsel had agreed to the
    timeline ordered by Archibald J.  The fact that the parties had consented to
    the order, the very late stage in this long-outstanding litigation at which the
    appellants raised the possibility of amending their defence, and the impact on
    the litigation  what Myers J. characterized as prejudice  if the appellant
    brought the motion to amend, all required that the appellants provide a
    compelling explanation for their non-compliance with the consent order.  Myers
    J.s conclusion that the appellants had failed to satisfactorily explain their
    non-compliance is supported by the record.  There is no basis to interfere with
    the order of Myers J. dismissing the appellants motion.

[6]

The appeal is dismissed.

Alexandra
    Hoy A.C.J.O.

Eileen E. Gillese
    J.A.

D.M. Brown J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Chapman v. GPM Investment Management, 2017 ONCA 227

DATE: 20170321

DOCKET: C61512

van Rensburg, Hourigan and Miller JJ.A.

BETWEEN

Brent Chapman

Plaintiff (Appellant)

and

GPM Investment Management and Integrated Asset
    Management Corp.

Defendants (Respondents)

Paul J. Pape and Jerome R. Morse, for the appellant

Christopher J. Cosgriffe and Ryan Watkins, for the
    respondents

Heard: October 25, 2016

On appeal from the judgment of Justice Drew S. Gunsolus
    of the Superior Court of Justice, dated November 27, 2015, with reasons
    reported at 2015 ONSC 6591.

B.W. Miller J.A.:

Overview

[1]

The sole issue on this appeal is whether an employers refusal to pay a
    bonus merely breached the appellants employment contract, which the employer no
    longer contests, or whether it also constituted constructive dismissal. For the
    reasons that follow, in my view the trial judge made no error in finding, on
    the facts before him, it did not. I would dismiss the appeal.

Background

[2]

GPM is in the business of providing real estate management services. The
    appellant was employed by GPM for nine years, as its chief executive officer and
    president, and was also a director of IAM, which holds an ownership interest in
    GPM.

[3]

Over the course of his employment, the appellant entered into three
    successive memoranda of understanding, setting out the terms of employment. The
    most recent of these, dated November 17, 2008, was for a term of three years
    and was in force at the time the appellants employment ended on October 26,
    2011.

[4]

This memorandum of understanding provided that the appellant was
    entitled, in addition to his base salary and various benefits and stock
    options, to an annual bonus that was to be calculated as follows:

Annual pro rata bonus available shall
    be 10% of pretax profit of GPMA and Darton less interest income and
    depreciation. Profit shall not include present level, if crystalized, of
    performance fees to GPMA on GPM/Endow (8) of $0.60MM.

[5]

On October 19, 2011, the appellant met with Steven Johnson, the Chief
    Financial Officer of the respondent IAM, to discuss the quantum of his 2011 bonus.
    The appellant was surprised to learn that GPM planned to exclude from the
    calculation of its pretax income (which was used to calculate the appellants bonus)
    profit from the sale of lands that it had purchased several years earlier as an
    investment (the Ellerslie lands). The exclusion of profits from the sale of
    the Ellerslie lands reduced the appellants bonus by $329,687.

[6]

Johnson and the appellant met again on October 24, 2011, and Johnson confirmed
    this decision. He left open the possibility, however, that GPM might reconsider
    if the other investors in the Ellerslie lands would be willing to contribute.
    The appellant did not follow up on this suggestion, on the basis that the other
    investors had no legal obligation to contribute to his bonus.

[7]

On October 26, 2011, the appellant left his employment, after taking the
    position that GPMs refusal to include the profit from the sale of the
    Ellerslie lands in the calculation of his bonus constituted constructive
    dismissal. GPM took the position that he had voluntarily resigned.

[8]

The appellant sued for damages for breach of his employment contract and
    for constructive dismissal. The respondents defended the action, asserting that
    no bonus was payable on the Ellerslie lands and that the appellant had not been
    constructively dismissed.

[9]

Although the trial judge found that GPM had breached the appellants
    contract by not including the profit from the Ellerslie lands transaction in
    the calculation of the appellants bonus, he did not find that the appellant
    had been constructively dismissed. The trial judge found that the breach did not
    alter an essential term of the appellants contract. He characterized the
    dispute between the parties as more a matter of disagreement over the
    interpretation of the application of Mr. Chapmans bonus scheme. This was not,
    therefore, a unilateral change in the bonus structure by the employer, but a
    disagreement over the interpretation of the contract, and a disagreement
    regarding the calculation of a bonus is not necessarily constructive
    dismissal.

[10]

The
    trial judge concluded that (a)ny reasonable person would conclude that the
    essential terms of the employment contract had not been changed, but in fact
    remained intact.

Issues

[11]

The
    appellant raises two issues on this appeal:

1.      Did
    the trial judge misapply the test for constructive dismissal? and

2.     If so,
    should the damages for constructive dismissal be assessed on the basis of a
    four year average of  pre-dismissal remuneration?

[12]

As
    I would find that the trial judge did not err in his application of the law of
    constructive dismissal, it will not be necessary to address the second issue.

Analysis

A.

Principles

Constructive dismissal

[13]

As
    the trial judge noted, there are two routes that a plaintiff can follow to
    establish constructive dismissal, as set out in
Potter v. New Brunswick Legal
    Aid Services Commission
, 2015 SCC 10, [2015] 1 S.C.R. 500
.

[14]

The
    first branch is apt where an employer has, by a single unilateral act, breached
    an essential term of the contract of employment. The second branch allows for
    constructive dismissal to be made out where there has been a series of acts
    that, taken together, show that the employer no longer intended to be bound by
    the contract. On both branches, it is the employers perceived intention no
    longer to be bound by the contract that gives rise to the constructive
    dismissal:
Potter
, at para. 43.

[15]

The
    first branch  for a single unilateral act  has two steps: (1) the employers conduct
    must be found to constitute a breach of the employment contract, and (2) the conduct
    must be found to substantially alter an essential term of the contract:
Potter
, at para.
34.

[16]

In
    contrast, the focus of enquiry on the second branch is not on a single act of the
    employer, but on the cumulative effect of past acts by the employer that
    establish that the employer no longer intends to be bound by the contract:
Potter
, at para.
33.

[17]

The
    perspective shifts during the analysis. In ascertaining whether an employers
    conduct has amounted to a breach of contract (the first step of the first
    branch), the test is objective:
Potter
, at para.
62. Thereafter, on both the second step of the
    first branch and on the second branch, the perspective shifts to that of a
    reasonable person
in the same circumstances as the employee
The
    question is whether, given the totality of the circumstances, a reasonable
    person in the employees situation would have concluded that the employers
    conduct evinced an intention to no longer be bound by [the contract] (emphasis
    in original):
Potter
, at para. 63. In these parts of the analysis, the
    trial judge must conduct the enquiry from the perspective of the reasonable
    employee. This perspective excludes, for example, reliance on information that
    the employee did not know about or could not be expected to have foreseen.
Potter,
at paras.

62 and 66. Furthermore, the employee is not required to
    establish that the employer actually intended to no longer be bound by the
    contract, but only that a reasonable person in the employees situation would
    have concluded that this was the employers intention:
Potter
, at
    para. 63.

B.

THE Principles Applied

[18]

The
    appellant runs arguments under each branch of
Potter
. First, he argues
    that the trial judge muddled the two branches of
Potter
and imported
    elements of the second branch into the first. Additionally, he says that the
    trial judge relied impermissibly on the employers perspective rather than the
    employees.

[19]

With
    respect to the second branch, the appellant argues that the trial judge erred
    in not considering the second branch of the
Potter
test at all, and
    ought to have found constructive dismissal based on GPMs course of conduct.

[20]

Each
    of these arguments is explored below.

The first branch  a single
    breach

[21]

The
    appellants argument is that the trial judge wrongly used a criterion exclusive
    to the second branch (whether a reasonable person in the employees position
    would conclude that the employer no longer considered itself to be bound by the
    contract) to resolve the question on the first branch of whether the breach was
    a substantial alteration of an essential term of the contract. He argues that
    the trial judge then committed a further error by answering this question from
    the employers perspective, using evidence of the employers intentions that
    could not have been known by the appellant.

[22]

The
    trial judge, however, did not conflate the two branches of
Potter
and the
    appellant is simply mistaken. In reading the trial judges reasons, it must be
    borne in mind that both the first and second branches of
Potter
are in
    service of the same ultimate enquiry: the determination of whether the employer
    has, by its conduct, evinced an intention not to be bound by the contract:
Potter
, at para.
63. The question of whether there
    has been a substantial alteration of an essential term of the contract is not
    an end in itself, but a step towards answering this ultimate question. The
    trial judge had this ultimate question in mind, and did not conflate the two
    branches of the
Potter
test.

[23]

As
    I explain below, the trial judge did not err in concluding that the breach of
    contract did not constitute a substantial alteration to an essential term of
    the contract, nor did it evince an intention not to be bound by the contract.

The breach: denial of bonus
    from sale of the Ellerslie lands

[24]

Of
    critical importance to this appeal is the trial judges analysis of the breach
    of contract, and whether that breach constituted a substantial alteration to
    the contract.

[25]

GPM
    is in the business of providing real estate management services. As noted by
    the trial judge, its income, for the most part, is generated through operating
    fees. As part of his remuneration, the appellant was entitled to a bonus
    calculated on GPMs profits. There were two exceptional asset sales, outside of
    GPMs ordinary operations, that generated substantial capital gains for GPM.
    One of these was the disposition of a property management company, Darton Property
    Advisors & Managers Inc. Income generated by Darton was included in the
    calculation of the appellants annual bonus. The trial judge found that when
    Darton was sold, the appellant was paid a discretionary bonus. Although the
    appellant disputes the nature of the Darton bonus, the trial judge found that
    IAM, in its statements to its shareholders, characterized the bonus as
    discretionary.

[26]

The
    second asset sale was the Ellerslie lands. The trial judge found that this
    investment was unusual, in that it was acquired prior to the commencement of
    the appellants employment with GPM, and was the only real estate investment
    held by GPM during the entirety of the appellants tenure. The trial judge
    accepted GPMs evidence as to why this was the case: subsequent to purchasing
    the Ellerslie lands, GPM concluded that the acquisition of real estate investments
    put it in a conflict of interest with its investors. GPM made no further real
    estate investments. It did engage in other real estate transactions, but these were
    different in kind. The trial judge found that in these transactions, GPM earned
    a fee by securing agreements to purchase and then assigning its rights to third
    parties. On these deals, GPM had no intention and no ability to complete the
    purchases, let alone hold them as investments.

[27]

Although
    the non-investment policy was not communicated to the appellant, and the
    appellant did not agree that the acquisition of the Ellerslie lands constituted
    a conflict of interest, the fact remains that during the entire course of the
    appellants employment, GPM did not acquire a single real estate investment. Thus
    the appellant had no expectation of further bonuses from capital gains in the
    future.

[28]

The
    trial judge found that the appellants employment contract with GPM required
    that he be paid a bonus based on all of GPMs income, including capital gains
    on real estate investments such as the sale of the Ellerslie lands, and not
    just operating income. GPM was therefore found to have breached its contract
    with the appellant. Did the trial judge nevertheless err by concluding that
    this breach was not a substantial alteration of an essential term of the
    contract?

A substantial alteration of an
    essential term

[29]

The
    appellant argues that the trial judge erred in not finding that GPM had converted
    the appellants overall bonus scheme from a non-discretionary bonus to a
    discretionary bonus, and that this constituted a substantial alteration of an
    essential term of the contract.

[30]

The
    trial judge rejected this argument, and found that there had been no alteration
    to any term: the appellants duties and his compensation, including the bonus
    calculation, remained unchanged. The dispute between the appellant and GPM
    amounted to a dispute over the interpretation of the application of one
    transaction to Mr. Chapmans bonus scheme and nothing more.

[31]

The
    appellant argues that the trial judge erred in this conclusion because he
    considered the breach from the employers perspective rather than that of a
    reasonable employee: the trial judge made note of Johnsons evidence that GPM
    thought it would be business as usual going forward, and that GPM intended all
    along to continue to be bound by the terms of the memorandum of understanding.
    The appellant argues that as these intentions were not communicated to him, they
    were unknowable by him, and a reasonable employee in his position, confronted
    with a denial of $329,000 in bonus income would have concluded that GPM had no
    intention to continue to be bound by the contract.

[32]

The
    trial judge, however, made no such error. Although he noted Johnsons evidence
    that GPM intended to continue to be bound by the contract, this was secondary
    in the trial judges reasoning. What was primary was the appellants statements
    in cross-examination that he believed that none of the terms of his employment
    had changed. As the trial judge summarized the appellants evidence, at paras.
    69-70:

During cross-examination, Mr. Chapman admitted the following:

i.

No one told him that his duties as president/CEO of GPM had or would
    change;

ii.

No one said that his duties as a director of IAM had or would change;

iii.

No one told him that his base salary had or would change;

iv.

No one told him that the way in which his bonuses would be calculated in
    the future would or had been changed.

Mr. Chapman further acknowledged that he expected that his
    bonuses would be paid as they had been in the past. To quote Mr. Chapman, when
    asked whether he expected his bonuses would continue, he said, Oh, yes; most
    certainly.

[33]

Although
    the appellant distanced himself from this statement on re-examination, the
    trial judge was entitled to prefer the evidence elicited on cross-examination.

[34]

Furthermore,
    the trial judge considered all of the relevant surrounding circumstances in
    concluding that there were no other factors that could lead a reasonable person
    in the appellants position to conclude that GPMs breach indicated an
    intention not to be bound by the memorandum of understanding.

[35]

Against
    this, the appellant argues that the trial judge erred in not finding that he had
    been placed in the untenable position of having to either forego the $329,000 in
    bonus income and keep his job, or sue to recover the $329,000 and lose his job.

[36]

The
    trial judge, however, found on the evidence that the appellant had options
    other than suing GPM on the one hand and foregoing the bonus on the other,
    including proposing arbitration and/or following up on Johnsons suggestion
    that GPM might reconsider paying something towards a bonus if the other investors
    in the Ellerslie lands agreed.

[37]

In
    my view, it was open to the trial judge to find that there were, on the facts
    of this case, dispute resolution alternatives that the appellant, a
    commercially sophisticated party, could have been expected to explore, and that
    a reasonable person in the appellants position would not have considered
    himself to have been constructively dismissed when the bonus on the sale of the
    Ellerslie lands was refused.

[38]

In
    summary, the trial judge made no error in characterizing the dispute as solely about
    whether a particular transaction  one that he accepted could not be repeated
    during the remainder of the contractual term  fit within the unaltered bonus
    structure. The trial judges rejection of the appellants argument that the
    respondents had converted the appellants bonus structure from
    non-discretionary to discretionary, and his finding that the disagreement over
    what constituted income for the calculation of the appellants bonus was not an
    alteration to the contract, let alone a substantial alteration, were supported
    by the evidence.  Finally, the conclusion that the failure to pay the bonus in
    question did not constitute constructive dismissal, notwithstanding that
    non-payment was in breach of the appellants employment contract, was
    reasonably open to the trial judge after a proper analysis and application of
    the first branch of the
Potter
test.

The second branch  a course of
    conduct

[39]

A
    further argument on appeal is that the trial judge failed to address the second
    branch of
Potter
, specifically the argument that the respondents
    unequivocally told the appellant that they would not be bound by the contract,
    and that this was a continuing course of conduct that evidenced an intention
    not to be bound by the contract in the future.

[40]

The
    respondents objected that this theory of liability was neither pleaded nor
    advanced at trial, and so it is unsurprising that it does not feature more
    prominently in the trial judges reasons.

[41]

In
    any event, the argument fails on the facts, as found by the trial judge, that
    no evidence was presented upon which one could conclude that GPM did not
    intend to be bound by the terms of the 2008 employment Memorandum of
    Understanding. None of the evidence that the appellant marshalled in support
    of the argument that the respondents resented the appellants level of
    remuneration and intended to curtail it when his contract was next up for
    renegotiation, is relevant to the question of whether a reasonable employee in
    the circumstances of the appellant would believe that the respondents did not
    intend to be bound to the existing agreement. And against this is, again, the appellants
    own evidence that he believed at the relevant time that despite GPM refusing to
    pay a portion of his bonus, nothing had changed going forward. In such circumstances,
    constructive dismissal is not made out on the second branch either.

Disposition

[42]

I
    would dismiss the appeal. I would award the respondents costs in the amount of
    $17,000 inclusive of disbursements and HST.

Released: BWM MAR 21 2017

B.W. Miller J.A.

I agree. K. van
    Rensburg J.A.

I agree. C.W.
    Hourigan J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Construction Distribution & Supply Co. Inc. v.
    King Packaged Materials Company, 2017 ONCA 200

DATE: 20170307

DOCKET:  C62450

Hoy A.C.J.O., Gillese and Brown JJ.A.

BETWEEN

Construction Distribution & Supply Co. Inc.

Plaintiff (Appellant)

and

King Packaged Materials Company

Defendant (Respondent)

Alan B. Dryer, for the appellant

Ted Frankel, for the respondent

Heard:  March 6, 2017

On appeal from the judgment entered by Justice M.D.
    Faieta of the Superior Court of Justice, dated June 17, 2016.

APPEAL BOOK ENDORSEMENT

[1]

Counsel attended to advise the matter has
    settled.  On consent, the appeal and application for leave to appeal costs are
    dismissed and costs are awarded to the respondent in the amount of $25,000, all
    inclusive.