COURT OF APPEAL FOR ONTARIO

CITATION: Toronto-Dominion Bank v. Konga, 2016 ONCA 976

DATE: 20161223

DOCKET: C61970

Gillese, Benotto and Roberts JJ.A.

BETWEEN

The Toronto-Dominion Bank

Plaintiff (Respondent)

and

Raymond Kuate Konga

Defendant (Appellant)

Ronald F. Caza and Alyssa Tomkins, for the appellant

Fraser MacKinnon Blair and David Elliot, for the
    respondent

Heard: November 23, 2016

On appeal from the order of Justice Patrick Smith of the
    Superior Court of Justice, dated March 10, 2016, with reasons reported at 2016
    ONSC 1628.

By the Court:

[1]

The appellant guaranteed a loan made by the respondent bank to Vertamin
    Inc. (the corporation). The respondent claimed that the corporation breached
    the terms of the loan agreement. It demanded payment of the loan from the
    corporation and from the appellant as the guarantor. The respondent moved
    successfully for summary judgment against the appellant for payment based on
    the guarantee. The appellant submits that the motion judge erred in law by
    misinterpreting the guarantee.  He further submits that the motion judge erred
    in failing to consider whether the corporation had been provided with a
    reasonable time for repayment and in finding that the obligation under the
    guarantee had crystalized. The appellant also submits that the conduct of the
    respondent entitles him to an equitable discharge from his obligations.

[2]

For the reasons that follow, we see no error in the motion judges
    interpretation of the guarantee and dismiss the appeal.

A.

Background

[3]

The appellant is a director, the Chief Executive Officer and a majority shareholder
    of the corporation. In 2012, the respondent began providing loans and credit
    facilities to the corporation. The appellant signed a personal guarantee of all
    of the corporations obligations to the respondent. In 2013, the parties signed
    a second loan agreement which superseded and incorporated the earlier
    agreement. Under this agreement, the credit limit on the corporations line of
    credit was linked to its accounts receivable up to a limit of $800,000. The
    corporation was also to maintain a tangible net worth of $1,250,000 at all
    times and to provide the respondent with certain financial information on a
    regular basis.

[4]

The loan agreement was subject to a facility letter which provided that
    the line of credit would be repayable on demand and that the respondent could
    accelerate the payment of the loan upon the occurrence of any event of default.
    Events of default were defined in the Standard Terms and Conditions to
    include the nonpayment of the outstanding principal and the breach of any term
    or condition in the 2013 loan agreement where the breach was left unremedied
    for 5 business days.

[5]

The appellant guaranteed the 2013 loan agreement.  At para. 29 of his
    reasons, the motion judge stated that the guarantee included the following
    terms:

a.

Section 1
: The Guarantor unconditionally and irrevocably
    guarantees payment of all debts and liabilities, present or future of [the
    corporation] to [the respondent].

b.

Sections 2 and 4
: The Guarantors liability under the
    Guarantee is unlimited and continuing.

c.

Section 6
: Payment shall be made by the Guarantor upon
    receipt of a written demand from [the respondent].

d.

Section 11
: [The respondent] is not required to exhaust
    its recourse against [the corporation] or under any security before being
    entitled to demand payment from the Guarantor.

[6]

In April 2014, the respondent issued a notice advising that the
    corporation was overdrawn on its line of credit and had been in breach of the tangible
    net worth requirement since January 2014. The respondent had issued an initial
    caution to the corporation in February 2014. The line of credit remained
    overdrawn into July
[1]
and the corporation continued to fail to meet its tangible net worth
    requirement. The respondent alleged that the corporation also failed to provide
    certain financial information for August and September 2014, diverted its
    receivables, and failed to deposit a loan received from the Business
    Development Bank of Canada. The respondent took the position that these acts
    constituted breaches of the loan agreement. The corporation denied that it had
    diverted its receivables as defined in the agreement.

[7]

On September 23, 2014, the respondent told the appellant that all sums
    deposited would be used to pay down the line of credit. The corporations
    account was transferred to the respondent banks Financial Restructuring Group
    on October 6. On October 14,
[2]
the respondent confirmed that all money deposited on the operating line would
    be frozen in order to pay down the account. On October 27, the respondent sent
    a written caution to the corporation. After several more letters, on November
    13, 2014, the respondent issued a formal demand for immediate repayment and a
    notice to enforce the general security agreement. At the same time, the
    respondent demanded immediate repayment of the same amount from the appellant
    as guarantor. The demand letter stated as follows:

The [respondent] hereby demands payment forthwith by the Debtor
    of all indebtedness and liability owing by the Debtor to the [respondent]. The
    [respondent] also demands such payment pursuant to the general security
    agreement and other security held by the [respondent].

the Debtor has ten (10) days from the date of this letter to
    permanently repay the indebtedness.

[8]

The corporation filed a notice of intention to make a proposal in
    bankruptcy. The respondent moved for summary judgment against the appellant
    guarantor.

[9]

Relying on his interpretation of the guarantee, the motion judge
    rejected the appellants submissions that the corporation had to be in default
    of payment under s. 6 of the loan agreement as a precondition to the demand for
    payment on the guarantee. The motion judge found that the corporation was in
    breach of the loan agreement by (i) being overdrawn on its line of credit; (ii)
    being in breach of the tangible net worth requirement; and (iii) not providing
    its accounts receivable listings.

[10]

He found that there was evidence that the corporation, despite several
    warnings, continued to be in default and that [a]ll these defaults crystalized
    [the respondent]s right to demand payment (at para. 66). The motion judge
    also rejected the appellants submission that the actions of the respondent
    interfered with his rights of subrogation to and indemnification from the corporation
    and that he was thus entitled to an equitable discharge.

B.

Analysis

[11]

In his factum, the appellant argued that the motion judge erred: (i) in failing
    to find that the respondent had not met the preconditions to making a demand on
    the guarantee; and (ii) in finding no grounds for an equitable discharge. We
    will address those submissions but first address the primary submission made by
    the appellant at the oral hearing of the appeal.

[12]

In oral argument, the appellant submitted that the November 13, 2014
    demand letter was invalid because it did not include: (i) a reference to the
    debtors entitlement to be afforded a reasonable time to pay; and (ii) a
    statement as to the precise amount of time that entailed.

[13]

We reject this submission.

[14]

The jurisprudence since
R.E. Lister Limited v. Dunlop Canada
,
    [1982] 1 S.C.R. 726, confirms that a debtor is entitled to a reasonable time to
    pay. That determination is fact-specific and dependent upon the conduct of the
    parties, before and after the demand. It would not be possible, or indeed
    workable, for the creditor to arbitrarily establish that timeframe for the
    debtor.

[15]

On the facts of this case, the corporation was afforded a reasonable
    time to pay following the issuance of the demands. The motion judge found that
    after issuing the demand letter, the respondent took no steps to enforce the
    demand for many months.

[16]

We turn now to a consideration of the appellants submissions, as contained
    in his factum and advanced at the oral hearing of the appeal.

Issue #1  Did the motion judge err in failing to find that the
    respondent had not met the preconditions to making a demand on the guarantee?

[17]

The appellant made a number of related arguments on
    this ground of appeal.  He argued that the corporation had to be given a
    reasonable time to repay before the respondent could make a demand against the
    guarantor. He also contended that a demand for payment pursuant to the
    guarantee was only available if the corporation had failed to make a payment
    and thereby committed an act of default in relation to a monetary term.

[18]

In making these arguments, the appellant relied
    on s. 6 of the guarantee which reads as follows:

The Guarantor shall make payment to the Bank under this
    Guarantee immediately upon receipt of a written demand for payment from the
    Bank. If any Obligation is not paid by the Customer when due, the Bank may
    treat all Obligations as due and payable by the Customer and may demand
    immediate payment under this Guarantee of all or some of the Obligations
    whether such other Obligations would otherwise be due and payable by the
    Customer at such time or whether or not any demands, steps, or proceedings have
    been made or taken by the Bank against the Customer or any other person
    respecting all or any of the Obligations.

[19]

The appellant attaches significance to the words not paid and due and
    payable in s. 6 and argues that a demand for payment under the guarantee could
    only be made if the corporation defaulted on a monetary term of the loan
    agreement. Breaches of the other requirements contained in the loan agreement,
    according to the appellant, do not trigger the respondents right to demand
    payment from the guarantor (as opposed to the corporation).

[20]

The short answer to this submission is a factual one:  on the findings
    of the motion judge, the corporation repeatedly failed to meet its financial
    obligations under the loan agreement and, therefore, had defaulted on its
    monetary terms. The corporation had failed to stay within its borrowing limits,
    was repeatedly in excess of its line of credit limit, and was overdrawn every
    month between January and November of 2014, except for March and April.

[21]

More fundamentally, however, this submission must fail because it amounts
    to an assertion that the motion judge erred in his interpretation of the
    guarantee. We do not agree.

[22]

The interpretation of the guarantee is a question of mixed fact and law,
    entitled to deference on appeal. The motion judges interpretation is,
    therefore, entitled to deference in accordance with
Sattva Capital Corp. v.
    Creston Moly Corp.
,
2014 SCC 53, [2014] 2 S.C.R. 633, at paras.
    46-53. We accept the respondents contention that there is no evidence on the
    record that the guarantee is a standard form contract.  Therefore, it does not
    attract a correctness standard of review. We note that this accords with the
    motion judges approach in considering the surrounding circumstances and
    factual matrix when interpreting the guarantee.

[23]

At para. 63 of his reasons, the motion judge found the language of the
    guarantee to be clear and unambiguous.  He said that ss. 1 and 2 bind the
    guarantor to pay the unlimited liability of the corporation and s. 11 did not
    require the respondent to exhaust its recourse against the corporation, or any
    other security held by the bank in respect of the corporations indebtedness,
    before being entitled to make a demand under the guarantee.

[24]

While the motion judge did not expressly advert to s. 6 in his analysis,
    it is clear that he was aware of it because he referred to its terms in the
    background section of his reasons and he acknowledged the appellants reliance
    on s. 6 when he set out the parties positions on the issue.  Further and in
    any event, in our view, the appellants proposed interpretation of s. 6 appears
    to be inconsistent with the first sentence of s. 6, which states that [t]he
    Guarantor shall make payment to the Bank under this Guarantee immediately upon
    receipt of a written demand for payment from the Bank. More significantly, it
    cannot stand in light of the motion judges interpretation of the balance of
    the guarantee. It is trite law that the provisions of the document must be read
    in a manner which gives meaning to all of its provisions.

[25]

Accordingly, we see no basis on which to interfere with the motion
    judges interpretation of the guarantee.

Issue #2  Did the motion judge err in finding that there were
    no grounds for an equitable discharge?

[26]

In the alternative, the appellant submits that the respondents conduct
    entitles him to a discharge. He acknowledges that the motion judge correctly
    set out the test in
Bank of Montreal v. Wilder
, [1986] 2 S.C.R. 551, but
    maintains that the motion judge failed to apply the test and, instead,
    addressed the issue of an alleged breach of the common law implied duty of good
    faith.

[27]

As the appellant acknowledges, the motion judge set out the correct
    legal principles on which to decide this issue. However, we do not agree that
    the motion judge failed to apply those principles. To obtain a discharge from
    the guarantee, the appellant had to establish that the respondent banks demand
    somehow caused the corporations default. It is clear on the findings of the
    motion judge that he did not accept that had occurred. On his findings, the
    bank played no role in the corporations excessive borrowings, its breach of
    the tangible net worth requirement, its refusal to submit its accounts
    receivable reports, and its continuing failures to cure its defaults despite
    the banks warnings.

[28]

These findings were open to the motion judge  indeed, they were
    virtually inescapable on the record.

[29]

It is within that context that we consider the motion judges statement that,
    at all times, the respondent acted in good faith with respect to the
    corporation and the appellant, as guarantor.

[30]

In our view, the motion judge was not going off on a tangent in making
    these findings.  On a reading of the reasons as a whole, the motion judge determined
    that the appellant was not entitled to a discharge because the appellant had
    failed to meet his onus of establishing that the actions of the respondent had
    caused the default of the debtor.  His comments about the respondent having
    acted in good faith must be understood in the context of the arguments advanced
    before him, as well as the legal principles that he articulated.

[31]

We see no basis on which to interfere with the motion judges
    determination that the appellant had failed to meet the
Wilder

requirements.

C.

Disposition

[32]

For these reasons, the appeal is dismissed, with costs
    payable to the respondent in the amount of $26,455.05 inclusive of
    disbursements and HST.

Released: December 23, 2016 (E.E.G.)

Eileen
    E. Gillese J.A.

M.L.
    Benotto J.A.

L.B.
    Roberts J.A.

[1]

Although amended accounts receivable received by the
    respondent in June 2014 cured the March and April 2014 overdrafts.

[2]
The motion judge referred to October 6, 2014. Nothing turns on this error.


COURT OF APPEAL FOR ONTARIO

CITATION: United States v. Viscomi, 2016 ONCA 980

DATE: 20161223

DOCKET: M47285 (C62967)

Gillese J.A. (In Chambers)

BETWEEN

The Attorney General of Canada (on behalf of the
    United States of America)

Respondent

and

Marco Viscomi

Applicant

Julianna Greenspan and Brad Greenshields, for the
    applicant

Nancy Dennison and Monika Rahman, for the respondent

Heard: December 20, 2016

Gillese J.A.:

[1]

Marco Viscomi (the Applicant) applies under s.
    20 of the
Extradition Act
, S.C. 1999, c. 18

(the Act) for bail pending his appeal of the order dated October 25,
    2016, committing him for extradition to the United States.  He has been in
    custody in relation to this matter since August of 2012.

[2]

The Attorney General of Canada opposes the
    application.

Background in Brief

[3]

The proceedings in this case have a long and
    complicated history.  Only the key parts of the chronology that are relevant to
    this application are set out below.

[4]

The United States alleges that the Applicant,
    through manipulation, extortion and threats of violence, coerced two sisters
    living in Virginia into performing sadistic sexual acts with each other in
    front of a webcam while the Applicant watched and captured images on his
    computer
[1]
for his pleasure.  The two sisters were aged 13 and 17 at the time of the
    alleged offences.  The webcam session took place over Skype.  The events took
    place in the middle of the night of January 5-6, 2012, and lasted about an hour
    and ten minutes.

[5]

In the United States, the Applicant will face
    child pornography and child luring charges in respect of these allegations.  If
    convicted, he faces a sentence of up to 30 years in prison.

[6]

The Applicant was arrested on domestic charges
    on March 22, 2012.  He was released on bail on March 22, 2012, on the consent
    of the Attorney General of Ontario, subject to the condition that he reside
    with his father as a named surety.

[7]

On August 9, 2012, the Applicant was arrested
    under the Act.  The Canadian charges were withdrawn.

[8]

The Applicant brought an application for bail in
    relation to the extradition proceedings.  That application was heard by Benotto
    J., as she then was, on August 16, 2012.

[9]

Evidence at the bail hearing before Benotto J.
    showed that, at the time of his arrest under the Act, the Applicant was in
    breach of his then-existing domestic bail because he was unsupervised and in
    possession of an internet-enabled iPhone.  Unbeknownst to his father (his surety),
    the Applicant had not disconnected the internet data service on his iPhone
    immediately upon his release in March 2012, as required by the terms of his
    interim release on the domestic charges.  Instead, he had let his data plan run
    out two months after his release and, even after it had run out, his iPhone
    could continue to connect to the internet through WiFi.  Neither of the
    Applicants parents was aware of these facts until the day of the bail
    hearing.  His father admitted he was not well-versed in matters involving
    technology and the internet.

[10]

By order dated August 16, 2012, Benotto J.
    dismissed the bail application because she found that there was a substantial
    likelihood that the Applicant would re-offend and the protection of the public
    required his continued detention.

[11]

Following a committal hearing, by order dated
    May 24, 2013, the Applicant was committed for extradition to the United States.

[12]

The Applicant appealed the committal order and
    brought a fresh bail application to this court.

[13]

By order dated December 5, 2014, Laskin J.A.
    dismissed the application.  He viewed the merits of the appeal to be frivolous
    but found that otherwise the Applicant met the test for release.

[14]

On June 30, 2015, a panel of this court ordered
    the Applicants discharge, finding that there was insufficient evidence for
    committal for the offence of child luring.

[15]

That same day, the United States asked Canada to
    provisionally arrest the Applicant under the Act.  In the provisional arrest
    request material, the United States advised that they had conducted a complete
    search of the Applicants computer.  As a result of the search, 80 new alleged
    victims had been located, 70 of whom were in the United States and 10 of whom
    who were located out of the United States.

[16]

That same day  June 30, 2015  the arrest
    warrant was issued and the Applicant was arrested.

[17]

A new Record of the Case (ROC) was prepared.
    It contained the same allegations as in the prior ROC but also relied on
    evidence seized from the Applicants computer in Canada.  As well, the ROC
    contained a chart of similar fact evidence showing how the Applicant had used
    the same
modus operandi

to intimidate,
    threaten and abuse the young female victims in sexually sadistic ways.

[18]

A second extradition hearing followed.  By order
    dated October 25, 2016 (the Order), the Applicant was again committed for extradition
    to the United States.

[19]

On November 23, 2016, the Applicant filed a
    notice of appeal of the Order.  Although a number of grounds of appeal are
    raised, it is significant that the Applicant does not allege that there is
    insufficient evidence to justify committal.

[20]

The Applicant was to have completed his
    submissions to the Minister, pursuant to s. 43 of the Act, by November 24,
    2016.  However, at the Applicants request, the Minister has permitted the
    Applicant until late January 2017 to make his submissions on surrender.

[21]

It is within this context that the Applicant
    brings this application for judicial interim release.  His proposed plan of
    release is to reside with his parents  his proposed sureties  at their home,
    on house arrest.  He would be fitted with an electronic monitoring device and
    be subject to an electronic monitoring system at his residence.  He would not
    possess any device capable of connecting with the internet.

The Test for Release under s. 20 of the Act

[22]

Section 20(a) of the Act provides that the test
    to be applied is that set out in s. 679 of the
Criminal Code
, R.S.C., 1985, c. C-46, with any modifications that the
    circumstances require.  Accordingly, the Applicant must show that:

a)

his appeal is not frivolous;

b)

he is not a flight risk; and

c)

his detention is not necessary in the public
    interest.

Analysis

[23]

As I would decide this application primarily on
    the third criterion, I will deal with the first and second criteria summarily.

(a)

The appeal is not frivolous

[24]

The Attorney General submits that there is no
    merit to any of the grounds of appeal raised by the Applicant and,
    consequently, the appeal is frivolous.   My assessment of the grounds of appeal
    is that they are weak, but I cannot say that they are so devoid of merit as to
    be frivolous within the meaning of the statutory provisions governing bail.  I
    will return to the matter of the merits of the appeal below.

(b)

The Applicant has failed to show that he is
    not a flight risk

[25]

The Applicant took the position that because
    there had been no material change since Laskin J.A. heard his prior bail
    hearing, this court is bound by Laskin J.A.s determination that he is not a
    flight risk.

[26]

I do not agree.

[27]

As this is a new bail hearing under s. 20 of the
    Act, arising from a new order of committal, in my view, this court is to
    consider the application on a
de novo

basis.
    It is not bound by Laskin J.A.s findings on any of the three criteria.  The
    Applicants simple reliance on Laskin J.A.s determination of this criterion is
    not only misplaced in law, it also fails on the facts.  There has been a
    material change in the circumstances since Laskin J.A. heard the Applicants
    prior bail application.  The strength of the case against the Applicant has
    increased and the magnitude of the Applicants alleged wrongdoing is
    substantially increased.

[28]

The Attorney General argues that the risk of
    flight is greater now than ever before.  The Attorney General says that the
    court should be concerned about flight, given the Applicants demonstrated
    disregard for court orders.  The Attorney General points to the fact that when the
    Applicant was initially arrested under the Act, he possessed, without supervision,
    a device permitting him to access the internet.  He was, therefore, in wilful
    breach of his bail conditions.  The Attorney General also notes that having
    been committed for extradition a second time, the Applicant is that much closer
    to the possibility of a term of incarceration of up to 30 years in an American prison.
    Finally, the Attorney argues that given the limitations on electronic
    monitoring, the proposed conditions do not adequately alleviate the risk of
    flight.

[29]

To these considerations, I would add that the
    Applicant is well-versed in travel.  He lived for a number of years in
    Australia, in various locations.  When he returned to Canada in 2011, he worked
    in Labrador and Thunder Bay, among other places.  I acknowledge that his
    passport was seized by police in March of 2012.  However, flight is not limited
    to places outside of Canada.

[30]

In the circumstances, the Applicant has failed
    to show that he is not a flight risk.

(c)

Detention is necessary in the public
    interest

[31]

In my view, this application clearly fails on
    the third criterion  the Applicants continued detention is necessary in the
    public interest.

[32]

The public interest has two components: (1)
    public safety; and (2) public confidence in the administration of justice:
R.
    v. Farinacci
(1993), 86 C.C.C. (3d) 32 (Ont. C.A.); and
R.
    v. Forcillo
, 2016 ONCA 606, at para. 9.  A consideration
    of both components leads to the conclusion that the Applicants continued
    detention is necessary.

[33]

Before turning to those components, it is
    important to recognize the change in the ROC before the court at the second
    committal hearing.  That ROC contained information that was not before either
    Benotto J. or Laskin J.A. because it arose from the United States search of
    the Applicants computer.  At the time of his bail application before Benotto
    J., she was aware that evidence of seventeen identified victims had been
    located on the Applicants computer, in addition to the allegations relating to
    the two sisters in Virginia.  Laskin J.A. considered only the evidence relating
    to the latter two victims.

[34]

The ROC now shows that, as a result of searching
    the Applicants computer, United States officials have concluded that the
    Applicant sexually exploited a great many more young girls.  The United States
    authorities have located approximately 300 different chats that reveal a
    similar
modus operandi

of intimidating,
    threatening and abusing vulnerable young girls in sexually sadistic ways.  In
    its provisional arrest request materials, the United States alleged that the
    Applicant successfully exploited a further 80 victims, 70 in the United States
    and 10 in other countries.

[35]

It is within that context that I consider first
    public safety and thereafter public confidence in the administration of
    justice.

(i)

Public safety

[36]

This application raises grave concerns about
    public safety.  The evidence against the Applicant demonstrates an ongoing systematic
    pattern of intimidating, threatening and exploiting vulnerable children through
    sadistic sexual acts.  The risk of re-offending, if the Applicant is released,
    has not been met by the proposed plan of supervision.

[37]

It is acknowledged that electronic monitoring
    cannot restrict the Applicants movements and is subject to the possibility of
    technological deterioration or failure.  Further, the proposed plan of
    supervision leaves open a real risk that the Applicant might obtain access to
    the internet.  There will still be an internet line into his parents home,
    where he would reside.  His parents both work outside the home, with the result
    that he will be home alone for at least 20 hours each week.  Access to wireless
    internet now is ubiquitous, as the Attorney General argued.  All of this is
    compounded by the sureties admittedly limited technological capabilities which
    translates into their limited capacity to supervise the Applicants use of
    technology.

(ii)

Public confidence in the administration of
    justice

[38]

In considering whether continued detention is
    necessary to maintain the publics confidence in the administration of justice,
    the court must consider how a reasonable and properly-informed member of the
    public would perceive the granting of bail:
R. v. St-Cloud
, 2015 SCC 27, [2015] 2 S.C.R. 328, at para. 87.  In my view, such a
    person would not be satisfied that it is in the public interest to release the
    Applicant pending his appeal.

[39]

This case involves grave criminal conduct.  The
    alleged offences are violent, heinous and involved vulnerable victims.  There
    is compelling evidence that the scope of the Applicants criminal conduct is
    much more extensive and serious than was known at the time of his previous bail
    applications.  There is also strong and compelling evidence that the Applicant
    engaged in, and was successful in, the lengthy, continuous, systematic
    exploitation of young girls that involved brutal and sadistic sexual violence.

[40]

In
France v. Ouzghar
, 2009 ONCA 137, 95 O.R. (3d) 187, at para. 14, this court indicated
    that where legitimate public interest concerns are raised in connection with
    the applicants release, a harder look at the merits of the application will
    be justified.  While I have found that the proposed grounds of appeal meet the
    low threshold of not frivolous, in my view, the merits are very weak.  The
    evidence is extremely strong that the Applicant committed the offences for
    which extradition is sought.  The issues raised on appeal relate to the
    legality of the gathering of the evidence, not to the sufficiency of the
    evidence that establishes that he committed the offences.

[41]

The totality of the circumstances leaves me in
    no doubt that this application must be dismissed.

Disposition

[42]

For these reasons, the application is
    dismissed.

Released: December 23, 2016 (E.E.G.)

Eileen E. Gillese J.A.

[1]
Although these reasons refer, for the sake of simplicity, to the
    Applicants computer, the United States Record of the Case relies upon
    evidence from a laptop and a separate hard drive.  The Applicant has indicated
    that, on appeal, he will challenge the validity of the searches conducted in
    Ontario that led the police to seize the Applicants electronic devices.


COURT OF APPEAL FOR ONTARIO

CITATION: Weinmann Electric Ltd. v. Niagara (Regional
    Municipality), 2016 ONCA 990

DATE: 20161230

DOCKET: C60955

Doherty, Brown and Huscroft JJ.A.

BETWEEN

Weinmann Electric Ltd.

Plaintiff (Appellant)

and

The Regional Municipality of Niagara

Defendant (Respondent)

David Levangie, for the plaintiff (appellant)

Paul DeMelo and Alexandra DeGasperis, for the defendant
    (respondent)

Heard: December 22, 2016

On appeal from the judgment of Justice Joseph W. Quinn of
    the Superior Court of Justice, dated August 6, 2015.

ENDORSEMENT

[1]

The appellant electrical contractor appeals from the decision of the
    trial judge dismissing its action against the respondent regional municipality
    alleging a failure to follow its bylaws governing contracting for the provision
    of goods and services. The consequence of the failure, according to the
    appellant, was that it was denied the opportunity to provide electrical work
    for the region for over 10 years.

[2]

The procedure governing contracting is set out in a series of four
    consecutive bylaws. The bylaws established different and more onerous
    requirements that must be met as the value of the goods and services being
    purchased increased. Broadly speaking, department staff were authorized to
    issue a simple purchase order for procurements of less than $10,000, whereas
    purchases above that amount required the use of increasingly more formal
    quotation processes.

[3]

The region maintained a list of pre-qualified contractors, who provided
    a fixed price for particular services for a two-year period. The list was open
    to all interested contractors. The appellant was on the list for much, but not
    all, of the relevant period.

[4]

From 2006 onwards, the bylaws prohibited contract-splitting as
    follows:

No Contract for Goods and Services may be divided into two (2)
    or more parts to avoid the requirements of this By-law (s. 34(b)).

[5]

At trial, the appellant argued that the region breached its bylaws by
    contracting with a competitor, Regional Trenching, without following the
    competitive purchasing processes set out in the bylaws, and by a pervasive
    practice of contract-splitting. The appellant alleged that Regional Trenching
    wrongly obtained approximately $11 million in contracts from the region over a
    10-year period.

[6]

On appeal, the appellant argues that the trial judge erred in law in
    interpreting the bylaws and that the trial judge made palpable and overriding
    errors of fact in concluding that the regions conduct did not violate the
    bylaws.

The interpretation of the bylaws

[7]

The trial judges interpretation of the bylaws is a question of law that
    is subject to review for correctness. We are satisfied that the trial judge
    made no errors in interpreting the bylaws.

[8]

The appellant submits that the prohibition on contract-splitting
    required the total project or annual requirement to be considered in applying
    the graduated procurement process. Given that the value of the work performed
    on an annual basis was approximately $750,000 per annum, it defies logic that
    the region was unable to determine that its project or annual requirements
    would exceed the $10,000 threshold.

[9]

We note that this submission was not put before the trial judge. In any
    event, the difficulty with this submission is that it is based on a provision
    in the 2004 bylaw that was deleted from successor bylaws and replaced by the
    prohibition against contract-splitting in 2006. There is no basis for the old
    provision to modify the interpretation of the subsequent bylaws.

[10]

Although the bylaws (since 2006) prohibit contract-splitting, they do
    not specify the scope of work that a contract must cover. On a reading of the
    plain language of the bylaws, the region is free to determine the scope of the work
    encompassed by any contract it enters into  it can define a contracts scope
    of work to cover as little or as much of a particular project as it considers
    appropriate and consistent with the objectives of the bylaws.

[11]

The various purposes, goals, and objectives of the bylaws cannot all be
    realized in respect of every contracting decision. The bylaws are designed to
    offer a variety of Purchasing methods, and to use the most appropriate method
    depending on the particular circumstances of the acquisition. As well, they
    seek to maximize savings for taxpayers. At the same time, the bylaws seek to
    encourage competitive bidding and, to the extent possible, to ensure
    openness, accountability and transparency while protecting the best interests
    of the [region] and [its] taxpayers.

[12]

The trial judge concluded that the bylaws do not restrict the amount of
    work that may be procured from a single supplier and do not prevent the region
    from using a task-oriented approach in completing projects rather than a
    contract-based approach. The trial judge concluded, further, that the prohibition
    on contract-splitting applied only to contracts, not to tasks.

[13]

We see no error in the trial judges interpretation. We are mindful of
    the concern that the prohibition on contract-splitting should not be
    circumvented by subterfuge, but the trial judge found no evidence of any
    wrongdoing on the part of the region. On the contrary, the trial judge found
    that the regions task-oriented approach was both sensible and economic.

Did the trial judge make palpable and overriding errors?

[14]

The trial judge carefully reviewed the evidence in a detailed and
    considered decision that addressed all 40 issues raised by the appellant. He
    found as follows:

·

There was no evidence that the appellant was treated unfairly or
    differently than other bidders or those who were pre-qualified suppliers (and
    pre-qualified suppliers were not entitled to be provided with work in any
    event).

·

There was no credible evidence that the region had engaged in
    contract-splitting to avoid the procurement regime set out in the bylaw.

·

There was no evidence that the regions invoicing was a sham
    designed to avoid compliance with the bylaw. On the contrary, Regional
    Trenching was reasonably priced, if not the least expensive contractor, was reliable,
    and did good work.

·

There was no evidence that the region directed contracts to
    Regional Trenching or did anything improper in purchasing goods and services
    from Regional Trenching.

[15]

The appellant invites the court to infer that its inability to obtain
    work from the region could be explained only by the regions disregard and/or
    manipulation of the contracting bylaws. According to the appellant, the sheer
    scale of the monthly invoicing by Regional Trenching should remove any doubt
    that the region was not following the procurement process set out in the
    bylaws.

[16]

However, in our view, there is no basis to draw this inference. The
    trial judges findings to the contrary are supported on the record that was
    before him, and they are fatal to the appeal.

Damages

[17]

Even assuming that the appellant could succeed in establishing a violation
    of the bylaws, the appellant failed to establish any damages. The argument that
    it would have obtained contracts if competitions in accordance with the bylaws
    higher value purchases quotation procedures had been held is speculative. The
    trial judge concluded as follows:

There is no evidence that the plaintiff would or should have
    been successful in obtaining work from the defendant in the years it was on the
    pre-qualified list (and there certainly is no evidence that the plaintiff would
    or should have been successful in obtaining such work in the years it was not
    on the list).

[18]

The appellant did not argue in its
    factum that the trial judge erred concerning damages. However, in oral argument,
    the appellant submitted that damages could be calculated based on its success
    rate in bidding for work against the same contractors and a profit margin
    suggested by its damages expert.

[19]

The trial judge rejected this
    submission as irrelevant and not established by evidence in any event. Further,
    the trial judge concluded that the evidence of the damages expert was
    undermined by his failure to use financial information relating to the
    plaintiff, and the fact that his evidence was based on a single project for
    which he failed to obtain back-up information.

[20]

The trial judge made no error in
    this regard. In short, the appellant simply failed to prove damages.

Disposition

[21]

The appeal is dismissed.

[22]

The respondent is entitled to costs on the appeal of $20,000, inclusive
    of taxes and disbursements.

Doherty J.A.

David Brown J.A.

Grant Huscroft J.A.