CITATION: Charter Building Company v. 1540957 Ontario Inc.
      (Mademoiselle Womens Fitness & Day Spa), 2011 ONCA 487

DATE: 20110704

DOCKET: C52439

COURT OF APPEAL FOR
          ONTARIO

Armstrong, Epstein and Karakatsanis
          JJ.A.

BETWEEN

Charter Building Company

a division of Ladson Properties Limited

Plaintiff
          (Respondent)

And

1540957 Ontario Inc. c.o.b. as Mademoiselle Womens
          Fitness & Day Spa,

1540958 Ontario Inc. c.o.b. as Mademoiselle Womens
          Fitness & Day Spa,

1540959 Ontario Inc. c.o.b. as Mademoiselle Womens
          Fitness & Day Spa

and Neil Proctor

Defendants (Appellants)

F. Scott Turton, for the
          appellants

Harry Korosis and Mark Labenski,
          for the respondent

Heard: January 24, 2011

On appeal from the order of
          Justice Jane A. Milanetti of the Superior Court of Justice dated June 17, 2010.

Epstein J.A.:
I.

OVERVIEW
[1]

In February 2008,
    the respondent started a lawsuit against the appellants. In the months that
    followed, a negotiated settlement was reached. When the appellants failed to
    comply with the terms of the settlement agreement, the respondent sought and
    obtained default judgment. At the time of the default judgment, a waiver of
    defence was in place.  As a result, the judgment was irregularly obtained and,
    on consent, was set aside.
[2]

Once the judgment
    was set aside, the respondent returned to the settlement agreement and sought an
    order for its enforcement.  The motion judge agreed with the respondents
    position that a settlement had been reached and granted the order.
[3]

The issue on this
    appeal is whether, having proceeded with the action, the respondent is barred
    from seeking the enforcement of the settlement agreement.
[4]

I would allow the
    appeal on the basis that the respondent, by electing to pursue its rights under
    the action, is precluded from pursuing its rights under the settlement
    agreement.  In my view, the motion judge erred in concluding that the
    consequences of this election were academic and that she had the discretion
    to order that the settlement be enforced.
II.

FACTUAL
    BACKGROUND
[5]

In February of
    2008, the respondent sued one of the corporate appellants and the appellant,
    Neil Proctor, on a promissory note and the other two corporate appellants for
    unpaid invoices.  The amounts claimed totalled an amount in excess of $200,000.
[6]

In March of 2008,
    the appellants served a notice of intent to defend and a demand for
    particulars.
[7]

The respondent
    granted a waiver of defence to allow settlement discussions to take place, and
    as such, no statement of defence was served. At the end of August 2008, a
    tentative agreement was reached between the parties.  The terms of this
    agreement, particularly in relation to a repayment schedule, were fine-tuned
    over the next month or so to the point where, on October 15, 2008, counsel for
    the respondent provided detailed minutes of settlement for signature by the
    appellants.  Despite follow-up by counsel for the respondent, the appellants
    did not sign the minutes of settlement or communicate further with the
    respondent in any respect.  Notably they did not make any payments contemplated
    by the agreed-upon repayment schedule.
[8]

As a result of
    this non-communication, in March 2009, the respondent obtained default
    judgment. Through inadvertence, counsel for the respondent failed to revoke the
    waiver of defence.  Eight months later, counsel for the respondent wrote to the
    appellants enclosing the default judgment and informing the appellants that writs
    of seizure and sale had been filed with the Sheriff. The appellants were
    advised that the Sheriff was going to be directed to enforce the writs if the
    judgment was not paid.
[9]

The appellants
    brought a motion to have the default judgment set aside. The respondent brought
    a cross-motion seeking to enforce the settlement.
III.

THE MOTION
    DECISION
[10]

The appellants took
    the position that since the waiver of defence remained in force, the default
    judgment was irregularly obtained. As previously indicated, the respondent
    conceded this point and the motion judge set aside the judgment.
[11]

In defence to the
    respondents cross-motion for enforcement of the settlement, the appellants
    argued that, having elected to abandon the settlement and proceed with the
    action, the respondent was no longer in a position to seek to enforce its
    terms.
[12]

The motion judge
    found that the parties had reached a settlement agreement in October 2008,
    despite the failure to sign the minutes of settlement. She went on to reject
    the appellants argument that the respondent had waived its right to rely on
    the agreement, reasoning as follows:
Although
    the argument that the plaintiff elected [words missing] the settlement but
    proceeded with the action (as is the election under Rule 49) is interesting, it
    is academic given that the noting of default has been set aside on consent. In
    any event it is not in the interests of justice to allow the defendant to
    enforce its non-payment of the agreed to settlement, nor legal [illegible] to
    the statement of claim served on February 08/05 and now say there is a real
    defence to the action.
[13]

The specific term
    of the order provides that the settlement reached between the parties to this
    action shall be enforced.
IV.

THE
    ISSUES
[14]

The only issue on
    this appeal is whether the respondent, by pursuing its rights under the action
    through erroneously obtaining default judgment, is precluded from seeking to
    enforce the settlement agreement.  This issue invokes the doctrine of election.
V.

ANALYSIS
[15]

The essence of
    the doctrine of election is that a person is precluded from exercising a right
    that is inconsistent with another right if he has consciously and unequivocally
    exercised the latter.
[16]        The doctrine is set out in the oft-quoted decision of Lord Atkin, in

United Australia Ltd. v Barclays Bank Ltd.
, [1941] A.C. 1 (H.L), in which the
    appellant had started an action against a company on a cheque, framing the
    action as money had and received to the use of the appellant. The cheque had
    been unlawfully issued. The action was discontinued and no judgment obtained.
    The appellants then brought an action against the bank for conversion of the
    cheque. It was held that the commencement of the first action did not amount to
    an election to waive the tort so as to preclude the bringing of the second
    action. In the course of his decision, Lord Atkin said at pp. 29-30:
It seems to me that in this respect it is
    essential to bear in mind the distinction between choosing one of two alternative
    remedies, and choosing one of two inconsistent rights. As far as remedies were
    concerned, from the oldest time the only restriction was on the choice between
    real and personal actions. If you chose the one you could not claim on the
    other
...
On the other hand, if a man is entitled to
    one of two inconsistent rights it is fitting that when with full knowledge he
    has done an unequivocal act showing that he has chosen the one he cannot
    afterwards pursue the other, which after the first choice is by reason of the
    inconsistency no longer his to choose. Instances are the right of a principal
    dealing with an agent for an undisclosed principal to choose the liability of
    the agent or the principal: the right of a landlord where forfeiture of a lease
    has been committed to exact the forfeiture or to treat the former tenant as
    still tenant and the like. To those cases the statement of Lord Blackburn in
Scarf
    v. Jardine
[(1882) 7 App. Cas. 345, 360] applies where a man has an option
    to choose one or other of two inconsistent things when once he has made his election
    it cannot be retracted. In a later passage [(1882) 7 App. Cas. 345, 361] Lord
    Blackburn speaks of a man choosing between two remedies: but it is plain that
    he is speaking of remedies in respect of the inconsistent things as stated above.
    The case was one where the plaintiff had a right of recourse against two former
    partners, or against two new partners: but obviously not against both. Lord
    Blackburn quotes
Dumpor's
case [(1601) 4 Co. Rep. 119(b)] which was a plain
    case of inconsistent rights, the question of waiver of a forfeiture. I
    therefore think that on a question of alternative remedies no question of
    election arises until one or other claim has been brought to judgment.
[17]        The doctrine has
    been endorsed by Canadian courts. See, for example:
Findlay v. Findlay
, [1952]
    1 S.C.R. 96, at pp. 103-104 and 110.
[18]

The doctrine of
    election has been broken down into two categories  the common law doctrine of
    election and the equitable doctrine of election.
[19]

Election at
    common law takes place where a party is faced with a choice between two
    inconsistent courses of action that affect another partys rights or
    obligations, and knowing that the two courses of action are inconsistent and
    that he or she has the right to choose between them, makes an unequivocal
    choice and communicates that choice to the other party.  The doctrine provides
    that the party making the election is afterwards precluded from resorting to the
    course of action that he has rejected.  The election is effective at the point
    of communication on the basis that the parties to an ongoing relationship are
    entitled to know where they stand:
The Commonwealth of Australia v. Verwayen
(1990), 170 C.L.R. 394 (H.C.A), at pp. 421-422.
[20]         Subsequent to
    the development of the common law doctrine, the courts of equity developed a
    separate principle  the equitable doctrine of election  in the context of
    wills and trusts.  The doctrine is based on the fact that the electing party,
    having obtained a particular benefit from a transaction, must accept all of the
    consequences that flow from that transaction, including those to his detriment:
Granot v. Hersen
(1999), 43 O.R. (3d) 421 (C.A.), at p. 424; Piers
    Feltham, Daniel Hochberg & Tom Leech,
The Law Relating to Estoppel by
    Representation
, 4
th
ed. (London: LexisNexis UK, 2004), at pp.
    361-362.
[21]        The two doctrines
    are distinct. This point is clearly stated in the following passage in
Banner
    Industrial and Commercial Properties Ltd. v. Clark Paterson Ltd.
, [1990] 2
    EGLR 139:
There is, however,
    another principle upon which a party may be held to his choice and that is the
    doctrine of election.  Election, as Viscount Maugham pointed out in
Lissenden
    v CAV Bosch Ltd
[1940] AC 412 at pp 417-418, is a term used in different
    senses.  There is an equitable doctrine of election (known in Scotland as the
    doctrine of approbate and reprobate) encapsulated in Lord Eldons dictum that
    no person can accept and reject the same instrument:
Ker v Wauchope
(1819) 1 Blight 1 at p 21.  Its main application has been to a will, deed or
    other instrument which confers a benefit upon a party and at the same time
    purports to dispose of his property to someone else.  The principle requires that
    if he accepts the benefit, he must also accept the burden of giving effect to
    the purported disposition of his own property or compensating the person
    intended to benefit thereby.  There is also the common law principle of
    election, under which in certain circumstances a party faced with a choice of
    remedies (such as whether to affirm or repudiate a contract induced by
    misrepresentation) may be held to the choice he has made.
The circumstances
    in which the two doctrines will apply are quite distinct
. [Emphasis added].
[22]

As can be seen,
    there is a fundamental difference between the two doctrines. The equitable
    doctrine of election does not involve choice between alternatives. To establish
    an election in equity, it is unnecessary to show that the electing party made a
    conscious choice between inconsistent rights at the time when the original
    decision was made.  In fact, an equitable election does not involve making a
    choice at all  it involves accepting the consequences of a decision already
    made.  On the other hand, the common law doctrine is all about choice.  It
    applies to prevent a person who has made a decision from resorting to an
    inconsistent course of action that he has specifically rejected.
[23]

Here, the common
    law doctrine clearly applies.
[24]

The respondent
    sued the appellants and agreed to hold the action in abeyance while settlement
    discussions proceeded.  A settlement was reached but the appellants did not
    honour their obligations under the agreement.  At that point, the respondent,
    faced with a fundamental
    breach of the settlement agreement by the appellants, had a choice between two
    inconsistent courses of action.  It could have elected to affirm the settlement
    and hold the appellants to the performance of their contractual obligations.
    Or, it could have elected to accept the breach as a repudiation of the contract
    and proceed with the action.
[25]        The decision of
    what to do in the face of a repudiatory breach or renunciation of a contract by
    the other party is one of the situations most often cited as a typical example
    of a common law election.  Lord Goff, in his description of the principles of
    election in the
Motor Oil Hellas (Corinth) Refineries S.A. v. Shipping
    Corporation of India (The Kanchenjunga)
, [1990] 1 Lloyds Rep 391,
    at p. 398, makes this observation:
Election itself is a
    concept which may be relevant in more than one context. In the present case, we
    are concerned with an election which may arise in the context of a binding
    contract, when a state of affairs comes into existence in which one party
    becomes entitled, either under the terms of the contract or by the general law,
    to exercise a right, and he has to decide whether or not to do so. His
    decision, being a matter of choice for him, is called in law an election.
    Characteristically, this state of affairs arises where the other party has
    repudiated the contract or has otherwise committed a breach of the contract
    which entitles the innocent party to bring it to an end, or has made a tender
    of performance which does not conform to the terms of the contract. But this is
    not necessarily so. An analogous situation arises where the innocent party
    becomes entitled to rescind the contract, i.e. to wipe it out altogether, for
    example because the contract has been induced by a misrepresentation; and one
    or both parties may become entitled to determine a contract in the event of a
    wholly extraneous event occurring, as under a war clause in a charter-party.
    Characteristically, the effect of the new situation is that a party becomes
    entitled to determine or to rescind the contract, or to reject an uncontractual
    tender of performance; but, in theory at least, a less drastic course of action
    might become available to him under the terms of the contract. In all cases, he
    has in the end to make his election, not as a matter of obligation, but in the
    sense that, if he does not do so, the time may come when the law takes the
    decision out of his hands, either by holding him to have elected not to
    exercise the right which has become available to him, or sometimes by holding
    him to have elected to exercise it.  Once an election is made, however, it is
    final and binding (see
Scarf v. Jardine
, per Lord Blackburn, at p. 360).

There are numerous
    examples of the application of this principle of election in English law.
    Perhaps the most familiar situation is that which arises when one contracting
    party repudiates the contract. The effect is that the other contracting party
    then has a choice whether to accept the repudiation (as it is called) and bring
    the contract to an end; or to affirm the contract, thereby waiving or
    abandoning his right to terminate it. If, with knowledge of the facts giving
    rise to the repudiation, the other party to the contract acts (for example) in
    a manner consistent only with treating that contract as still alive, he is
    taken in law to have exercised his election to affirm the contract.
[26]

Here, in choosing
    to proceed with the action through obtaining default judgment, the respondent
    unequivocally treated the settlement agreement as at an end.  The fact that the
    initial step the respondent took was irregular  the default judgment was
    technically unavailable  does not, in my view, in any way alter the fact that
    the respondent chose to pursue its rights under the action rather than seeking
    to enforce the settlement.
[27]

Canadian case law
    confirms that an election, once made, is binding.  See, for example,
Morrison-Knudsen
    Co., Inc. et al. v. British Columbia Hydro and Power Authority
(1978), 85
    D.L.R. (3d) 186, at p. 224, which specifically addressed the concept of
    election when a party is faced with a repudiation of the contract:
When
    faced with a fundamental breach the innocent party is put to an election. He
    may elect to affirm the contract and to hold the other party to the performance
    of his obligations and sue for damages as compensation for the breach. He may,
    on the other hand, elect to treat the breach as a fundamental breach and accept
    it as such. Thus he would terminate the contract and thereafter be relieved of
    any further duty to perform and he could sue at once for damages or
quantum
    meruit
for performance to that point.
It is essential that such
    election, an election between inconsistent rights, be made promptly and
    communicated to the guilty party. Once made, the election is binding and cannot
    be changed.
[Emphasis added.]

[28]

I acknowledge
    that decisions may be found where statements have been made suggesting that the
    common law election rules should not be applied too strictly.  I refer to the
    decisions in
Oliver Ashworth Ltd v. Ballard Ltd.
, [2000] Ch 12 (C.A.)
    and
Tang Man Sit v. Capacious Investments Ltd.
, [1996] 1 A.C. 514
    (P.C.).
[29]

However, in
    Canada this view has been restricted. Both of these cases cite
Johnson v.
    Agnew
, [1980] AC 367 (HL).  In
James v. Klaus
(1987), 40 D.L.R. (4
th
)
    763 (B.C.C.A.), at p. 765, counsel for the plaintiff relied on
Johnson v.
    Agnew
for the general proposition that the court has a discretion whether
    to hold a party to an election. Justice Hutcheon, correctly in my view,
    rejected this argument, holding that
Johnson v. Agnew
should be confined
    to the situation where a party sues for specific performance and then later
    wants to accept repudiation and seek damages:
I agree with Mr.
    Cadman, counsel for the trustee, that
Johnson v. Agnew
must be read
    cautiously on the issue of election.
All that was held in that case was that
    if the vendor has obtained a decree for specific performance that election is
    not irrevocable: the vendor may later accept the repudiation and ask for
    damages.
That was based on the proposition that the contract was still in
    being, a proposition that emerges from this passage in the speech of Lord
    Wilberforce at p. 894:
In my opinion, the argument based on irrevocable
    election, strongly pressed by the appellants counsel in the present appeal, is
    unsound. Election, though the subject of much learning and refinement, is in
    the end a doctrine based on simple considerations of common sense and equity.
It
    is easy to see that a party who has chosen to put an end to a contract by
    accepting the other party's repudiation cannot afterwards seek specific
    performance. This is simply because the contract has gone, what is dead is
    dead.
But it is no more difficult to agree that a party, who has chosen to
    seek specific performance, may quite well thereafter, if specific performance
    fails to be realised, say, Very well, then, the contract should be regarded as
    terminated. It is quite consistent with a decision provisionally to keep
    alive, to say, Well, this is no use -- let us now end the contracts life. A
    vendor who seeks (and gets) specific performance is merely electing for a
    course which may or may not lead to implementation of the contract; what he
    elects for is not eternal and unconditional affirmation, but a continuance of
    the contract under control of the court which control involves the power, in
    certain events, to terminate it.
[30]

In my view,
    therefore, the law is clear.  Once a party accepts repudiation of a contract by
    pursuing a course of action that is inconsistent with the existence of the contract,
    that party is no longer entitled to assert its rights under the contract.  The
    court has no discretion to rule otherwise.
[31]

Here, when the
    appellants failed to honour their obligations under the settlement agreement,
    the respondent could have sought to enforce the agreement.  Instead, it made a
    binding election to treat the settlement agreement as if it had never been and
    to proceed with the litigation.  It follows that, from the point in time that
    this election was communicated to the appellants, all rights and obligations of
    the parties to the agreement came to an end.
[32]

The motion judge
    erred in making an order to enforce the terms of an agreement that no longer
    existed.  The order, therefore, cannot stand.
VI.

DISPOSITION
[33]

I would therefore
    allow the appeal and set aside the order of the motion judge.  Pursuant to the
    agreement between counsel, I would award the appellants their costs in the
    amount of $6,000 inclusive of disbursements and applicable taxes.
RELEASED:
RPA                                                Gloria
    Epstein J.A.
JUL -4 2011                                  I
    agree Robert P. Armstrong J.A.
I
    agree Karakatsanis J.A.


CITATION: Church of Our Lady Fatima v. Canadian Equity
      Builder Inc., 2011 ONCA 524

DATE: 20110718

DOCKET: C51433

COURT OF APPEAL FOR ONTARIO

Doherty, Laskin and Simmons JJ.A.

BETWEEN:

Church of Our Lady Fatima

Applicant (Appellant)

and

Canadian Equity Builder Inc., EQB Ltd., Equity Three
          Holdings Inc. and 3085 Hurontario Street Ventures Inc. c/o EQB. Ltd.

Respondents (Respondents in Appeal)

John Russo, for the appellant

James R. Smith, for the respondents

Heard: July 15, 2011

On appeal from the judgment of
          Justice Gordon D. Lemon of the Superior Court of Justice, dated November 16,
          2009.

APPEAL BOOK ENDORSEMENT

[1]

Despite Mr. Russos able argument, we would dismiss the appeal.  The
    application judge was alive to the competing position and the divergent
    interpretations of the various documents.  He focused on the offer to lease (in
    effect the lease) and the renewal document.  In our view, he was entitled to do
    so and his reading of these documents reveals no error.

[2]

We see no unfairness to the appellant in the application judges fixing
    of the actual amounts owing based on his interpretation of the lease.  The
    appellant had a fair chance to put forward its position on the quantification
    issue.

[3]

The appeal is dismissed.  Costs to the respondent fixed at $5,000,
    inclusive of disbursements and all applicable taxes.


CITATION: Cimmaster Inc. v. Piccione (Manufacturing
      Technologies Company), 2011 ONCA

DATE: 20110704

DOCKET: C51635

COURT OF APPEAL FOR ONTARIO

Rosenberg, Feldman and Juriansz JJ.A.

BETWEEN

Cimmaster Inc.

Plaintiff/Respondent

and

Lynda J. Piccione c.o.b. as Manufacturing Technologies
          Company

Defendant/Appellant

Michael G. McQuade, for the appellant

Kevin J. Scullion, for the respondent

Heard: February 2, 2011

On appeal from the order of Justice Douglas K. Gray of the
          Superior Court of Justice dated January 6, 2010, with reasons reported at
          2010 ONSC 96.

Rosenberg J.A
.:
[1]

The appellant, Lynda Piccione, appeals from the decision of Gray J.
    dismissing her counterclaim against the respondent, Cimmaster Inc.  She also
    seeks leave to appeal the costs order in respect of the claim and
    counterclaim.  The issue on the appeal concerns the application of s. 30(2) of
    the
Sale of Goods Act
, R.S.O. 1990, c. S.1, which deals with contracts
    for the sale of goods to be delivered by instalments.  The appellant submits
    that because of deficiencies in the first instalment, the respondent should be
    deemed to have repudiated the contract.  Accordingly, the appellant was
    entitled to compensation for the loss of profit she would have earned from the resale
    of the goods that were to have been delivered in the second and third
    instalments.
[2]

For the following reasons I would dismiss the appeal with respect to the
    counterclaim but grant leave to appeal the costs order, and reduce the costs of
    the trial payable by the appellant to $40,000.
THE FACTS
[3]

The appellant is a sole proprietor, who, along with her husband Nicholas
    Piccione, carries on a business as Manufacturing Technologies Company (MTC).
    MTC carries on business as a broker of manufactured parts.  The parts in issue
    in this case are known as whistle castings.  In the summer of 2003, Rick Purdie
    of Canadian General Filters Limited (CGF) contacted Mr. Piccione, when he was
    working for another company, about supplying whistle castings to it.  However,
    CGF wanted a lower price than on prior shipments.  Mr. Piccione eventually
    found a company, Brampton Foundries, that could supply the castings at the
    required price.  He placed an order for 33,000 castings with Brampton Foundries
    to be supplied to CGF at a cost of $3.05 per piece.  Unbeknownst to Mr. Piccione,
    Brampton Foundries did not produce the part themselves, but rather contracted
    with the respondent.  The castings were supplied as required.  Mr. Piccione
    then had them machined at another shop.  There was no problem with this
    shipment.  A short time later, Mr. Piccione left his employer to set up MTC.
[4]

In January 2004, Mr. Purdie of CGF again contacted Mr. Piccione about
    supplying another product called adaptor plates.  Mr. Piccione again approached
    Brampton Foundries about supplying these parts, as he had previously dealt with
    Brampton Foundries in respect of this product as well.  Brampton Foundries told
    Mr. Piccione that they had obtained these parts from the respondent and he
    should deal with them directly.  Mr. Piccione accordingly contacted Mr. Leung,
    the respondents representative.  Mr. Piccione placed the order and
    received the adaptor plates.  Again there was no problem with the shipment.
[5]

The problem with Cimmaster began in June 2004, when CGF placed an order
    with MTC for 90,000 whistle castings to be delivered in 2005.  Mr. Piccione
    again approached Brampton Foundries and was told that the earlier shipment of
    whistle castings had also been obtained from the respondent and that Mr.
    Piccione should deal directly with the respondent and Mr. Leung.  Based on the
    price from the respondent, after machining and painting the castings, Mr.
    Piccione believed he could make a profit of approximately $100,000 on the
    90,000 castings.  Mr. Piccione told Mr. Leung that he would need the 90,000
    parts in three batches with the first batch required by December 1, 2004.  CGF
    placed the order with MTC on July 15, 2004.  Mr. Piccione, in turn, placed the
    order with the respondent on October 4, 2004.  The purchase order for 90,000
    castings includes these words:  First release 30,000 units required a.s.a.p.
    (Dec 1/04).  Mr. Piccione and Mr. Leung agreed orally that the second
    shipment would be ordered after the first shipment was delivered, and the
    parties were satisfied with the product.  The respondent in turn issued a purchase
    order with its supplier, Shenyang Construction in China.
[6]

The first indication of a problem came in late November 2004, when Mr.
    Leung told Mr. Piccione that there was a problem with the casting machine in
    China.  He asked if the respondent would take half of the order at that time.
    After speaking to CGF, Mr. Piccione told Mr. Leung that a partial shipment
    would not suffice.  Over December 2004 and January 2005, Mr. Piccione kept
    calling Mr. Leung to check on the shipment but did not get satisfactory
    responses.  The parts finally arrived in Canada on January 25, 2005 and were
    delivered to the machine shop, Jroberts Mfg. Inc. (Jroberts), on January 31.
[7]

The next problem arose on February 7, 2005, when Jroberts called Mr.
    Piccione to say that they were having difficulty machining some of the parts.
    Mr. Piccione called Mr. Leung to complain and to request new castings.  Mr.
    Leung refused, at least until he had spoken to the Chinese company.  In the
    meantime, Jroberts continued to try to machine the parts.  Jroberts told Mr. Piccione
    that it was taking two weeks to machine 2,500 parts; ordinarily they were able
    to do 2,000 in a day.  By March 22, 2005, Jroberts had machined about 8,700
    castings but refused to do any more because the machining was damaging its
    equipment.  Mr. Piccione had still not heard back from Mr. Leung.  Mr. Piccione
    was able to find another machine shop to complete the job.  This machine shop
    encountered the same types of problems as did Jroberts.  They were having
    problems with about 50 percent of the castings.  By April 20, 2005, MTC was
    able to deliver a further 6,860 castings to CGF.  However, MTC was incurring
    additional costs of its own because of the arrangement it had been obliged to
    make with the new machine shop.
[8]

Mr. Piccione testified that on April 25, 2005, he finally heard from Mr.
    Leung who had heard from his supplier in China.  According to Mr. Leung, the
    Chinese supplier said that half the castings were produced during the day
    shift and the other half were done during the night shift and at the cooler air
    at night, and apparently it was during the winter the cooler air at night would
    have gotten to those castings, chilled  so, okay, now we know  However,
    because there were no lot or batch numbers, it was impossible to tell which
    castings had been manufactured at night and which during the day.  On May 2,
    2005, Mr. Leung asked for 2000 castings so that he could conduct his own
    inspection and testing.  Mr. Piccione never heard back from Mr. Leung.  Two
    weeks later Mr. Piccione sent some castings to another company to try a
    different process.  This helped somewhat.
[9]

A few days later, CGF ordered another 40,000 adaptor plates.  Mr.
    Piccione in turn ordered the parts from the respondent.  He thought he might be
    able use this further order as an incentive to get some movement on the problem
    with the whistle castings.
[10]

By June 24, 2005, MTC had been able to deliver 26,589 castings to CGF.
    MTC had incurred almost $10,000 in extra costs in order to do so.  Throughout
    this time, MTC had been keeping CGF apprised of the problems.  In early July,
    CGF cancelled the order for the further 60,000 pieces because of the delivery
    problems.  MTC, however, never cancelled the order with the respondent and
    never paid the balance owing for the 30,000 pieces that had been delivered.  It
    also never placed the order for delivery of the further 60,000 pieces.  After
    the 40,000 adaptor plates were delivered, MTC refused to pay the balance owing
    on that order as well.  The respondent commenced its action for the outstanding
    balance on the orders for the whistle castings (U.S. $7,623) and the adaptor
    plates (U.S. $16,132).  The appellant counterclaimed for her loss of profit of
    $70,403.88, being a combination of the loss from the first shipment because of
    extra costs incurred and the projected loss of profit from the balance of the
    contract, the 60,000 pieces.
REASONS OF THE TRIAL JUDGE
[11]

The trial judge held that resolution of the appellants counter-claim
    turned on s. 30(2) of the
Sale of Goods Act
, which provides as
    follows:
(2)
Where there is a contract for the sale of goods to be delivered by stated
    instalments that are to be separately paid for
and the seller makes
    defective deliveries in respect of one or more instalments
or fails to
    deliver one or more instalments or the buyer neglects or refuses to take
    delivery of or pay for one or more instalments,
it is a question in each
    case depending on the terms of the contract and the circumstances of the case
    whether the breach of contract is a repudiation of the whole contract or
    whether it is a severable breach giving rise to a claim for compensation but not
    to a right to treat the whole contract as repudiated
.  [Emphasis added.]
[12]

The trial judge accepted that there had been a defective delivery in
    respect of the first instalment but there had not been repudiation of the whole
    contract by the respondent.  In the result, what occurred was a severable
    breach entitling the appellant only to compensation for the problems with the
    first instalment but not loss of profit for the balance of the contract.  The
    trial judge applied the test from
Maple Flock Co. v. Universal Furniture
    Products (Wembley) Ltd.,
[1934] 1 K.B. 148 (C.A.) which had considered the
    identical United Kingdom legislation.  The court in
Maple Flock,
at p.
    156, characterized the issue as to whether the seller had delivered the earlier
    instalment in such circumstances as to lead to the inference that it cannot  or
    will not deliver any other kinds of goods in the future.  The trial judge
    applied the approach outlined at p. 157 of
Maple Flock
:
With the help of these authorities we deduce that
    the main tests to be considered in applying the sub-section to the present case
    are, first, the ratio quantitatively which the breach bears to the contract as
    a whole, and secondly the degree of probability or improbability that such a
    breach will be repeated.
[13]

The trial judge held that the defective delivery of the first instalment
    did not reasonably give rise to an inference that similar breaches would occur
    with respect to the other two instalments.  He relied on the following
    circumstances:
1.         The respondent had supplied satisfactory
    goods in the past, including a previous order of this same part.
2.         Time was not of the essence of the
    contract; the timing of the second and third instalments was left entirely
    open; even with the delay of the first instalment, the goods were accepted.
3.         The cause of the problem that one-half
    of the units had been cast at night was discovered by April 25, 2005; once the
    nature of the problem was discovered, it could not be assumed that the
    difficulty would be repeated in subsequent deliveries, particularly because
    there had been the previous satisfactory delivery.
[14]

The trial judge also noted that MTC never actually took the position
    with the respondent that the contract was repudiated.  As he said at para. 66:
I also note that MTC did not actually take the
    position, with Cimmaster, that the contract was repudiated as a result of the
    defective delivery of the first instalment. In my view, there is a strong
    argument to be made that it is incumbent on a party in the position of MTC to
    notify the other party that the contract was repudiated. In this case, MTC said
    nothing. Accordingly, for that reason alone I think it is doubtful that MTC can
    now take the position that the contract is repudiated, notwithstanding that it
    never advised Cimmaster that it took that position. However, in view of my
    conclusion that there was no repudiation in any event, I need not consider that
    issue further.
[15]

The trial judge awarded the respondent U.S. $16,132 that was owing for
    the adapter plates. He dismissed the respondents claim for the balance owing
    for the whistle castings and allowed the appellants counterclaim to the extent
    of $5,454.60 and U.S. $2,148.93, being extra expenses for machining the
    defective parts and an overpayment for 3,411 units that were never delivered.
    The counterclaim for lost profit was dismissed.
ANALYSIS
Repudiation of the contract
[16]

Counsel for the appellant submitted that the trial judge erred in law in
    finding that there had been no repudiation of the entire contract by Cimmaster by
    reason of the defective delivery of the first instalment.  He submitted that
    there was no evidence to give rise to an inference that similar breaches would not
    occur with respect to the other two instalments.  I do not accept that
    submission.  There was a body of evidence upon which the trial judge could find
    that there was no repudiation.
[17]

The real question is whether, in applying the
Maple Flock
test,
    the trial judge made palpable and overriding errors of fact.  It also became
    apparent in the course of oral argument that the appellants main complaint was
    that the trial judge relied upon the contents of the conversation of April 25,
    when Mr. Leung relayed the information that he had received from China as to
    the cause of the problem.
[18]

The evidence about the April 25 call was adduced by the appellant during
    the testimony of Mr. Piccione as part of the narrative of his dealings with the
    respondent.  The information relayed by Mr. Leung to Mr. Piccione about what
    the people in China said about the problem was obviously hearsay; in fact, it
    was double hearsay.  Nevertheless, it is apparent that Mr. Piccione accepted
    the statement as true.  This is what he said in his examination in chief:
Q.        Okay. So take your time, be clear.  What
    does Mr. Leung tell you at that point in time?
A.        He tells me that half the castings are
    hard and half the castings are soft.
Q.        How does he know that?
A.        Well, he says that the China factory
    reported back that half the castings were produced during the day shift and the
    other half were done during the night shift and at the cooler air at night, and
    apparently it was during the winter the cooler air at night would have gotten
    to those castings, chilled them, and that you know, so, okay, now we know.
Q.        You know what?
A.        We know that half the batch is hard. Now,
    then I say okay, half the batch is hard is there anyway, any information on the
    boxes that we can identify any kind of batch marking, traceability and he says
    that say no, theres no traceability. The castings are all mixed together and
    we have no idea. So, at that point I realize castings, from Arthurs source are
    six weeks away. For me for another source theyre five months away. If we look
    at the time that it took Arthur to produce the parts for BMP Metal on the first
    order it took five months from July through to November to produce the orders,
    so I know Ive got nowhere to go, yet. So I asked Arthur well okay now you know
    theyre hard. You know you sent me half garbage, but its more than half garbage
    really because its all mixed together. If we could separate the parts and know
    we could take this box out take that box out these are good okay then we can
    work with that, but as we all know these are all mixed together so potentially
    if theyre perfectly mixed every second one with a break an insert every second
    one would be hard. So I asked him to get me some more castings that these
    obviously you bought crap, you sold me crap, please get me some casings. Arthur
    says look they may be hard, but they can still be machined. I can machine
    them.
[19]

When Mr. Leung testified in examination in chief, he too related the
    contents of his call with Mr. Piccione on April 25.  There was no objection to
    the admissibility of this evidence.  The only objection from counsel for the
    appellant was earlier in Mr. Leungs evidence when he attempted to relay the
    results of tests that his own staff had done of the castings.  The following
    dialogue occurred:
MR. MCQUADE: Sorry, to interrupt. I dont know who the
    witness knows, is it something that was told to him?
THE COURT: Well go ahead. There was plenty of
    equivalent hearsay in your evidence, your friend didnt object.
MR. MCQUADE: I understand, but I want to understand
    what this gentleman knows that he saw or heard. We called other witnesses to collaborate
    what my client said Im wondering if they will be calling people to testify on
    this evidence.
MR. SCULLION: No, Im not and I will go past this.
    If the objection is to hearsay coming from him, Ill leave that topic alone.
THE COURT: Okay.
[20]

Counsel for the appellant returned to the April 25 conversation in
    cross-examination of Mr. Leung:
Q.        And then you told us about a conversation
    you had with Mr. Piccione on April 25th. Do you remember this conversation ...
A.        Yes.
Q.        ...this where you report that you tell
    Mr. Piccione that youve learned information from China that 50 percent are
    hard, 50 percent are soft  they were run some were run in the evening, some
    were run in the daytime kind of thing. Do you remember that, telling us about
    that conversation?
A.        Yes.
Q.        And what if anything did you tell Mr.
    propose Mr. Piccione do to deal with this problem that you discussed on April
    you never told him that you think the problem is they were hard and soft
    because of the cool of the evening. What if anything did you propose that Mr.
    Piccione do during the conversation on April 25th to address this problem?
A.        I proposed to him again that to resolve
    his problem I would do the machining for $1.00; the same price he would have
    given to other machine shop.
...
Q.        Youre now, in addition to what I asked
    you a moment ago, youve now been told that 15,000 of these parts are hard
    you know theres a problem. Is this part of your normal business practice then?
    Is that what we understand?
A.        Having problem is very often in the
    manufacturing business. Dealing with the problem is therefore  its just normal
    to  in a normal business relationship would have quality  non-conformance
    issues, whether it is non-conformance to the strictest term is yet to be
    decided; um so the, in the manufacturing industries, problem occurs. Under
    normal business relationship, we find the root cause; we try to find a
    solution, to work through it under normal business relationship. Just like what
    Mr. Neil Andrews have referred to in his testimony.
Q.        So between April 25th  when you were told
    by China of this problem and the May 3rd email from Mr. Piccione, what
    investigation if any did you your company, what did you guys do?
A.        Actually, before we got um the answer
    from China we were doing our due diligence and agreed to that we would look
    into the problem, so we do whatever we could on our side including try to
    measure the hardness.
Q.        No, I asked you once youre told by China
    the problem is 15,000 hard and 15,000 soft, what investigation did you do?
A.        About which?
Q.        Any investigation. You now know where the
    problem  whats causing the problem. Correct? China finally comes back to you
    on April 25th and says heres whats causing the problem. What do you do at
    that stage? Do you do any investigation of your own to try and see what you can
    do to solve the problem?
A.        No, understanding that, there is [not] much
    we could do at this end other than you know sort them out and identify it in
    the hard and the soft, because even at that time we did not know the  how high
    the hardness. We did the testing; it was not as high as if were were in hard
    machining, so knowing that there isnt all that much we could do further, we
    know that there were hardness issue, so the annealing that was proposed would
    have one of very few solutions if any.
...
Q.        Can I ask you one more time, sir? You
    told me a moment ago, once you were advised by China of this 15,000 hard,
    15,000 soft problem, you said, There is not much we could do at this end,
    except you suggested for Mr. Piccione and you discussed annealing. Correct?
A.        I said it with the reason I gave you.
[21]

The evidence about the April 25 conversation was admissible as part of
    the narrative to explain the unfolding of the events that led to the eventual
    cancellation by CGF of the balance of the contract.  In my view, in the
    circumstances of this case, it was also open to the trial judge to use Mr.
    Leungs statement to Mr. Piccione for the truth of its contents.  In other
    words, the trial judge could take as a fact that the reason for the problem had
    been discovered.  I say that because all the parties proceeded on that basis at
    the trial, as is apparent from the testimony and from the appellants counsels
    opening statement to the trial judge:
MR. MCQUADE:
Basically what happens, and its
    not really disputed in this case
, in fact, its admitted by the defendant.
    We dont find out until much, much later. What happened in this when these
    parts were manufactured in China, admitted half of them were ...
THE COURT: When you say defendant, you mean
    defendant by counter claim?
MR. MCQUADE: Im sorry, defendant by counter claim,
    yes.
THE COURT: All right.
MR. MCQUADE: Thank you. By Cimmaster.
THE COURT: Yes.
MR. MCQUADE:
They come back then and say what
    happened was half of the parts were manufactured during the day at one
    temperature
. Half of them are manufactured at night by a different
    temperature. And youll hear evidence in this case  what happens is when you
    cool these things down too quickly ...
THE COURT: Yes.
MR. MCQUADE: ...the term that you heard from my
    friend is its apparently its not a technical term but they all use is glass
    hard.
THE COURT: Yes.
MR. MCQUADE: Basically what happens its almost
    like it...
THE COURT: It becomes brittle?
MR. MCQUADE: ...correct.
...
MR. MCQUADE: So, again he follows up with Cimmaster
    saying listen whats going on? I need an answer. April 25th, they finally got
    back to him to tell him they found out the problem.
Half of them were made
    in the day in China, half of them were made in the night. And this is what we
    believe is causing the hardness problem
. But thats from, you know they
    were delivered February, he doesnt get this information until April 25th. [Emphasis
    added.]
[22]

The issue at trial was not the truth of the explanation but whether,
    even accepting the explanation, the contract had been repudiated by Cimmaster because
    of the delays and the nature of the defects.  Having accepted that the
    explanation was accurate and not having objected to the admissibility of this
    evidence, in my view, it is not now open to the appellant to object on appeal.
    Had the appellant objected to the admissibility or use of the evidence at the
    time, the respondent could at least have considered whether to adduce other
    evidence about the cause of the problem with the pieces. See S. Schiff,
Evidence
    in the Litigation Process
, 4th ed. (Scarborough: Carswell, 1993) vol. 1 at pp.
    178-79.
[23]

Accordingly, I would dismiss the appeal with respect to the
    counterclaim. There was evidence to support the finding that Cimmaster did not
    repudiate the entire contract based on the defective delivery of the first
    instalment and the trial judge did not err in relying on the contents of the
    April 25 conversation.
The costs appeal
[24]

The trial judge awarded $60,000 in costs to the respondent.  In doing
    so, the trial judge held that the respondent was entitled to costs on a partial
    indemnity basis to the date of its offer to settle, and substantial indemnity
    costs thereafter.  On appeal, the appellant submits that the trial judge erred
    in awarding substantial indemnity costs because the offer to settle did not
    contain an element of compromise.  Following oral argument the court requested
    further submissions with respect to Rule 49 and in particular whether the trial
    judge had erred in acting under rule 49.10(1), rather than rules 49.10(2) and
    49.14.
[25]

The respondent served an offer to settle which called for the appellant
    to pay $8,000, plus interests and costs.  The trial judge noted that after
    setting off the appellants modest success on her counterclaim, the respondent
    obtained a judgment of just over $9,000, slightly in excess of the respondents
    offer to settle.  The trial judge rejected the appellants submission that
    there should be no order for costs.  He noted that the significant issue at
    trial and the issue that required the bulk of the trial time concerned the
    appellants counterclaim for the lost profit.  He characterized the other
    issues in the case as relatively insignificant.
[26]

He then considered the question of the application of Rule 49 as
    follows:
In my view, there is insufficient reason to depart
    from the plain terms of Rule 49.10. I do not agree that Cimmasters Offer to
    Settle did not contain a real element of compromise. Cimmaster proposed a real
    compromise, consisting of a proposal that MTC abandon the major portion of its
    counterclaim, and make a modest payment to resolve the remaining claims. Had
    MTC accepted the offer, six days of trial would have been avoided. The
Celanese
case, relied on by MTC, is not analogous. In that case, the successful party
    had made an offer that was 3% less than the total amount claimed in the action.
    That is not this case.
In the result, Cimmaster is entitled to costs on a
    partial indemnity basis to the date of its Offer to Settle, and substantial
    indemnity costs thereafter.
[27]

The trial judge then awarded the respondent $60,000 in costs, slightly
    less than the approximately $67,000 sought by the respondent.
[28]

I agree with the trial judge that the offer to settle contained a real
    element of compromise.  In determining whether the offer contains a real
    element of compromise, as referred to in this courts decision in
Celanese
    Canada Inc. v. Canadian National Railway Co.
(2005), 196 O.A.C. 60, leave
    to appeal refused, [2005] S.C.C.A. No, 245, the comparison is with the amount
    of the claim, not between the amount of the offer and the amount of the
    judgment.  In this case, the respondents claim was for U.S. $16,132.00 for the
    amount owing on the adapter plates and U.S. $7,623.00 for the amount owing on
    the whistle castings.  An offer to settle this claim of over U.S $23,000.00 for
    U.S. $8,000.00 had a real element of compromise within the meaning of
Celanese
.
[29]

The more difficult issue is how to apply the cost consequences of this
    offer to settle given the prominence of the counterclaim.  While technically
    the respondent was the plaintiff, in reality this trial was about the
    counterclaim and the appellant was the plaintiff in the counterclaim.  The
    appellant never disputed that she owed the respondent money for the adaptor
    plates.  In these circumstances, some consideration had to be given to rule
    49.14, which provides as follows:
Rules 49.01 to 49.13 apply, with necessary
    modifications, to counterclaims, crossclaims and third party claims.
[30]

On the counterclaim, the appellant was in the position of plaintiff and
    the respondent was in the position of defendant.  Viewed in that way, rule
    49.10(1) had limited application to this case.  That rule provides as follows:
(1) Where an offer to settle,
(a) is made by a plaintiff at least seven days
    before the commencement of the hearing;
(b) is not withdrawn and does not expire before
    the commencement of the hearing; and
(c) is not accepted by the defendant,
and the plaintiff obtains a judgment as favourable
    as or more favourable than the terms of the offer to settle, the plaintiff is
    entitled to partial indemnity costs to the date the offer to settle was served
    and substantial indemnity costs from that date, unless the court orders
    otherwise.
[31]

The rule with somewhat greater application was rule 49.10(2), dealing
    with offers to settle from a defendant:
(2) Where an offer to settle,
(a) is made by a defendant at least seven days
    before the commencement of the hearing;
(b) is not withdrawn and does not expire before
    the commencement of the hearing; and
(c) is not accepted by the plaintiff,
and the plaintiff obtains a judgment as favourable
    as or less favourable than the terms of the offer to settle, the plaintiff is
    entitled to partial indemnity costs to the date the offer was served and the
    defendant is entitled to partial indemnity costs from that date, unless the
    court orders otherwise.
[32]

I recognize that the circumstances in which the court should exercise
    its discretion not to award costs in accordance with rule 49.10(1) are narrow.
    On the other hand, there is no defined set of circumstances as to when the
    court should order otherwise.  As this court said in
Niagara Structural
    Steel (St. Catharines) Ltd. v. W.D. LaFlamme Ltd.
(1987), 58 O.R. (2d) 773
    (C.A.), at p. 777 :
As far as the occasions for resort to the exception
    are concerned, if the framers of the rules could have expressed the relevant
    bases or factors with any degree of comprehensive detail it may be assumed that
    this would have been done. Accordingly, it would be wrong, for several reasons,
    to attempt to do so by judicial declaration. Keeping the matter on a general
    plane, it can be said that resort should only be had to the exception where,
    after giving proper weight to the policy of the general rule, and the
    importance of reasonable predictability and the even application of the rule,
    the interests of justice require a departure.
[33]

In my view, an important consideration in this case was the prominence
    of the counterclaim and accordingly the quite different cost implications
    flowing through the combined effect of rules 49.14 and 49.10(2).  In theory,
    applying rule 49.10(1), the respondent might be entitled to those costs of the
    trial on a substantial indemnity basis attributable to the claim.  However, the
    claim was never in dispute and occupied little time at trial as is apparent
    from the trial judges reasons and the transcript of evidence.  In my view, given
    these circumstances, this was not a case for substantial indemnity costs and I
    would reduce the costs order at trial to $40,000 inclusive of disbursements and
    applicable taxes.
DISPOSITION
[34]

Accordingly, I would dismiss the appeal with respect to the
    counterclaim.  I would grant leave to appeal the costs order and reduce the
    costs to $40,000 inclusive of disbursements and applicable taxes.  In view of
    the divided success, I would give the respondent its costs of the appeal fixed
    in the amount of $6,000 inclusive of disbursements and applicable taxes.
Signature:      M. Rosenberg J.A.
I agree K. Feldman
    J.A.
I agree R. G.
    Juriansz J.A.
RELEASED: MR JULY 4, 2011


CITATION: Cooke v. Toivonen, 2011 ONCA 499

DATE: 20110706

DOCKET: C53430

COURT OF APPEAL FOR ONTARIO

Moldaver, MacPherson and Epstein JJ.A.

BETWEEN

Clyde Cooke and Jennifer Cooke

Plaintiffs (Respondents)

and

Donald C. Toivonen, Tong Thanh Nguyen, Thi Nhac Thai,
          Marcus Collette, Brian W. Price, Fisher Controls Inc., Randall O. Robinson
          and Peggy Robinson

Defendants (Appellants/Respondents)

Siobhan McClelland, for Brian W. Price and Fisher Controls
          Inc., appellants in the appeal

Lori Kruse, for Donald Toivonen, respondent in the appeal

Heard and endorsed: July 5, 2011

On appeal from the judgment of Justice Helen M. Pierce of the
          Superior Court of Justice, dated February 24, 2011.

APPEAL BOOK ENDORSEMENT

[1]

With respect to the motion judge, we are of the view that there was some
    evidence upon which a trier of fact could find that the Cooke vehicle struck
    the Toivonen vehicle before being struck by the Price vehicle. On that
    scenario, there is a basis for making a finding of liability against Toivonen.
    Accordingly, the appeal is allowed, the order of Pierce J. is set aside and the
    motion for summary judgment is dismissed.
[2]

The appellants are entitled to costs below which the parties agree
    should be $7,000 inclusive of disbursements and H.S.T. With respect to the
    appeal, the appellants are entitled to costs fixed at $5,000 inclusive of
    disbursements and H.S.T.


CITATION:
Edwards
          Estate v. Food Family Credit Union, 2011 ONCA 497

DATE:
          20110706

DOCKET: C53449

COURT OF APPEAL FOR ONTARIO

Moldaver, MacPherson and Epstein JJ.A.

BETWEEN

In the matter of
          the Bankruptcy of Rodney Patrice Edwards, of the City of Toronto in the
          Province of Ontario (Summary Administration)

and

Rusinek &
          Associates Inc. Trustee of the Estate of Rodney Patrice Edwards, Bankrupt

Applicant (Respondent)

and

Food Family Credit Union

Respondent (Appellant)

Robert G. Tanner, for the appellant

Frank Bennett, for the respondent, Rusinek & Associates
          Inc.

Sean Hanley, for the intervenor, Attorney General of Ontario

Heard
and released orally: July 4, 2011

On appeal from the judgment of Justice Frank N. Marrocco of
          the Superior Court of Justice, dated March 11, 2011, overturning the order of
          Registrar Scott W. Nettie dated October 15, 2010.

ENDORSEMENT

[1]

The appellant Food Family Credit Union (FFCU) appeals
    from the judgment of Marrocco J. of the Superior Court of Justice dated March
    11, 2011 in which he allowed an appeal from the order of Registrar Nettie dated
    October 15, 2010.

[2]

Registrar Nettie had dismissed the Trustees motion
    pursuant to s. 95 of the
Bankruptcy and
    Insolvency Act
, R.S.C. 1985, c. B-3 (
BIA
)
    seeking the return of certain payments from the bankrupt Rodney Edwards to FFCU
    on the basis that they were a fraudulent preference. Registrar Nettie held that
    the Trustees claim fell outside the two year limitation period prescribed in
    s. 4 of the
Limitations Act
,
2002
, S.O. 2002, c. 24 (
LA
). In reaching this conclusion, the
    Registrar determined that the provincial limitation period applied to the federal
BIA
.

[3]

Justice Marrocco disagreed and allowed the appeal. He
    concluded:

In my view, the absence of a specific limitation
    period for commencement of proceedings pursuant to s. 95 represents a
    determination by Parliament that a trustee, acting solely under that section,
    is temporarily restrained only by the section itself; namely, that arms-length
    transfers of property by the bankrupt within three months of the date of the
    initial bankruptcy event are void against the bankruptcy trustee.

The application of a provincial limitation period
    would, thus, trigger a conflict of laws and, in accordance with the doctrine of
    paramountcy, render the
Limitations Act
inoperative.

[4]

With respect, we do not agree with this conclusion. In
Gingras v. General Motors
, [1975] 1
    S.C.R. and
Employers Liability Assurance
    Corp. v. Ideal Petroleum
, [1978] 1 S.C.R. 230, the Supreme Court of Canada
    held that general limitation periods in provincial statutes apply to bankruptcy
    proceedings.

[5]

Nothing in the development of conflict/paramountcy
    doctrine since these decisions calls into question their continuing validity.
    In recent years, the Supreme Court of Canada has consistently emphasized that
    provincial laws should be rendered constitutionally inoperative in relation to
    federal subject matters in only limited circumstances, namely where (1) the
    provincial law is in an operational conflict with a federal law, such that
    there is an impossibility of dual compliance or (2) the operation of the
    provincial law would frustrate the purpose of the federal law: see
Canadian Western Bank v. Alberta
, [2007]
    2 S.C.R. 3 at paras. 74-75. The relationship between s. 4 of the
LA
and s. 95 of the
BIA
does not fall afoul of either of these categories.

[6]

Accordingly, Registrar Nettie was correct to conclude
    that there was no conflict between s. 4 of the
LA
and s. 95 of the
BIA
.
    He reasoned:

In s. 95
BIA
,
    there is no stated limitation period to commence the proceeding contemplated
    therein. Neither is there a general catch all section of the
BIA
which provides for a limitation if
    the
BIA
is otherwise silent. As there
    are provisions of the
BIA
which
    provide for limitation periods, one must assume that Parliament was alive to
    the issue of prescribing time periods within which certain proceedings under
    the
BIA
, such as appeals, must be
    launched, and did not simply omit a limitation period for s. 95
BIA
.

[7]

We agree with this analysis and conclusion.

[8]

In light of our view of the constitutional issue, it is
    necessary to consider the Trustees two additional arguments: (1) the Registrar
    erred by holding that the Trustee discovered the preference issue by May 15,
    2006 for the purposes of the two year limitation period, and (2) the Registrar
    erred by concluding that there was not an implied agreement between counsel
    tolling the operation of the limitation period.

[9]

These submissions challenge the findings of the
    Registrar that involve mixed fact and law. In our view, the Registrars factual
    findings are supported by the record and we see no error in his legal analysis.

[10]

The appeal is allowed, the order of Marrocco J. is set
    aside, and the order of Registrar Nettie is reinstated. The respondent is
    entitled to its costs of the appeal fixed at $8,000, inclusive of disbursements
    and HST payable forthwith by the Trustee personally in its corporate capacity.
    Registrar Netties costs order is reinstated. We would not interfere with
    Justice Marroccos costs order.

[11]

The intervenor Attorney General of Ontario does not
    seek costs and therefore should neither pay nor receive costs.

Moldaver J.A.

J.C. MacPherson J.A.

G.J. Epstein J.A.


CITATION: Harris v. Levine, 2011
      ONCA 530

DATE:  20110720

DOCKET: C53216

COURT OF APPEAL FOR ONTARIO

Doherty, Laskin and Simmons JJ.A.

BETWEEN

Mark Harris and Fiona Harris

Appellants (Plaintiffs)

and

Lorne Levine

Respondent (Defendant)

Joseph Markin, for the appellants (plaintiffs)

Louis Sokolov, for the respondent (defendant)

Heard:  July 14, 2011

On appeal from the decision of Justice E. Eva Frank of the Superior
          Court of Justice dated October 14, 2010.

APPEAL BOOK ENDORSEMENT

[1]

With respect to the motion judge, we think that it is artificial to
    distinguish between the trial phase and the sentencing phase of the criminal
    process when addressing allegations of solicitors negligence and tolling of
    the limitation period.  The appellants alleged negligence in the conduct of the
    defence relating to both the pre and post-verdict phases.  The limitation
    period did not begin to run until the trial was complete and the sentence
    imposed.
[2]

The respondent also raises an abuse of process argument based on the
    appellants convictions which were offered on appeal.  There may be merit to
    that argument and, if so, it can be advanced at trial.
[3]

The appeal is allowed.  Costs to the appellants fixed at $1,500 in this
    court and $1,500 in the court below, inclusive of disbursements and all
    applicable taxes.


CITATION:
Hungary v.
Toth
, 2011 ONCA 532

DATE: 20110726

DOCKET: C52445  C53192

COURT OF APPEAL FOR ONTARIO

Laskin, Rosenberg and Karakatsanis JJ.A.

BETWEEN

The Attorney
          General of Canada on Behalf of the  Republic
          of Hungary and
          the Minister of Justice

Respondent

and

Tibor Toth

Appellant/Applicant

P. Andras Schreck and Crystal Tomusiak, for the appellant

Nancy Dennison, for the respondent

Heard:  June 7, 2011

On appeal from the Order of Committal of Justice G. E. Taylor
          of the Superior Court of Justice, dated July 21, 2010.

Karakatsanis J.A.:

[1]

The appellant is wanted in the Republic of
    Hungary to be prosecuted for fraud over $5,000. He is alleged to have engaged
    in an ongoing fraudulent scheme in which he defrauded banks of about $49,000 CAD
    by submitting false car leasing agreements with information he had access to as
    managing director of a dealership which sells and leases automobiles in
    Hungary. He is also alleged to have defrauded banks and individuals of about
    $35,800 CAD by entering into loan agreements that he did not intend to repay,
    and using collateral that he did not own. The extradition judge found that the
    evidence was sufficient to justify the appellants committal for fraud over
    $5,000.

[2]

The appellant appeals the extradition judges
    order of committal, arguing that there is no evidence in either of the Records
    of the Case that the appellant committed the alleged fraud. He has also filed
    an application for judicial review. He concedes that if the appeal against
    committal is unsuccessful, there is no basis to interfere with the Ministers Surrender
    Order.

[3]

For the reasons that follow, I am of the
    view that the available evidence certified in the Records of the Case is
    sufficient to justify the appellants committal. As a result, I would dismiss
    the appeal and deny the application for judicial review.

The extradition hearing

[4]

The evidence filed in support of the
    extradition consists of a first Record of the Case dated August 3, 2004, and a
    second Record of the Case dated October 29, 2004, as well as a Supplement dated
    January 14, 2009. The Records of the Case allege that the appellant committed
    fraud over $5,000 and summarize the evidence relating to ten different
    transactions, listed as examples.

[5]

A number of the allegations involve the
    submission of false leasing contracts to banks and the misappropriation of the
    resulting leasing fees; they allege that the appellant prepared and submitted
    the false contracts using the information of customers who had in fact
    purchased the vehicles from the car dealership that he managed. The Records of
    the Case identify the injured parties, the false leasing contracts, the vehicles,
    and the customers involved in the purchase.

[6]

The Canadian authorities requested that
    Hungary identify the evidence that establishes the appellants identity as the
    person who committed the acts summarized in the Records of the Case. The
    Supplement certified that the identification of the appellant had been
    performed by virtue of the various contracts and documents attached by the
    injured parties, as well as upon the testimony of the witnesses identified in
    the Records of the Case.

[7]

At the extradition hearing, the appellant
    conceded that the fraud involving the first allegation was sufficient to
    justify committal, based upon the customers identification of the appellant
    from a photograph. He argued that the remaining nine examples did not support a
prima facie
finding of fraud as there
    was insufficient evidence identifying the appellant as the person involved in
    the fraud.

[8]

The extradition judge reviewed the
    evidence as a whole. He noted that

The Record of the Case states ... that the
    identification of Tibor Toth will be proven by the testimony of the injured
    party in each of the examples. How the identification will be proven is not
    specified.

He further noted
    that certification raises a presumption that the evidence in the Records of the
    Case is reliable and that the appellant had presented no evidence to suggest
    that the certification of the identification evidence was incorrect.
    Accordingly, he accepted that there was evidence to establish the identity of the
    appellant in Hungary and was satisfied that there was sufficient evidence which
    would justify a committal for trial in Canada for the offence of fraud over
    $5,000.

The position of the parties

[9]

During the argument on appeal, the
    appellant accepted that the various allegations relate to one charge of fraud
    over $5,000 and that it would not be necessary to show there was sufficient
    evidence for all the examples alleged.

[10]

While the appellant does not dispute that there is
    sufficient evidence to establish fraud, his position is that there is no
    evidence to identify the appellant as the person who created the false
    documents or who entered into the fraudulent transactions with the injured
    parties. The appellant argues that he ought not to be bound by the erroneous
    concession by counsel at the hearing that there was sufficient evidence to
    establish identity on the first allegation.

[11]

The appellant submits that the extradition judge erred
    in law by conflating the concepts of reliability and sufficiency; and, in the
    absence of any indication how the documents or witnesses would establish the
    identification of the appellant as the perpetrator of the fraud, that the
    extradition judge erred by accepting the bald assertion of the requesting state
    that the various documents and witnesses would establish identification.

[12]

While the respondent agrees that conclusory or bare
    assertions are not sufficient to justify committal, the respondent argues that it
    is not necessary to provide the precise source or manner in which the evidence
    is to be proved. It is the position of the respondent that there is sufficient evidence,
    when the Records of the Case are read together, to justify committal.

Guiding legal principles

[13]

Section 29 of the
Extradition
    Act
, S.C. 1999, c. 18 requires the extradition judge to order the committal
    of a person into custody to await surrender only if there is evidence
    admissible under this Act of conduct that, had it occurred in Canada, would
    justify committal for trial in Canada on the offence.

[14]

In
United States
    of America v. Ferras
, [2006] 2 S.C.R. 77, the Supreme Court of Canada noted
    that although certification by the requesting state raises the presumption that
    the evidence in a Record of the Case is reliable and available, the appellant
    is entitled to challenge the reliability and sufficiency of that evidence, with
    evidence or by way of submissions. As the Court noted at para. 58, where a
    state makes only a bare assertion that evidence exists without providing any
    description whatsoever of its content or form  the availability of the
    evidence may be in doubt.

[15]

Similarly, if the material presented in the record of
    the case is so bereft of detail, such as the witness means of knowledge, that
    the judge cannot determine its sufficiency, the judge will have to discharge
    the person sought for prosecution:
United
    States of America v. Yang
(2001), 56 O.R. (3d) 52 (C.A.), at para. 63.

[16]

The extradition judge must look to the whole of the
    evidence presented at the extradition hearing and determine whether it
    discloses a case on which a jury could convict. The judge must be satisfied
    that the evidence adduced contains some evidence, which is available and is not
    manifestly unreliable, on every essential element of the equivalent Canadian
    offences. It does not matter if the case is weak or unlikely to result in a
    conviction, as that is a matter for the trial court in the requesting state:
    see
Ferras
at paras. 54 and 46 and
United States of America v. Thomlison
(2007), 84 O.R. (3d) 161 (C.A.), at para. 42.

The charge
    and available evidence

i.

The
    fraudulent car leasing contracts  examples 1, 2, 3, 7, 9 and 10

[17]

The Records of the Case allege that between October 25,
    1996 and February 26, 1998, the appellant engaged in an ongoing fraudulent
    scheme in which he defrauded banks by submitting false car leasing agreements
    with information he had access to as managing director of Sigma 2000, a car
    dealership selling and leasing cars in Hungary.

[18]

The first three examples in the fraud charge allege
    that the appellant received and misappropriated leasing fees by preparing and
    sending false leasing contracts to banks. The customers named in the false
    documents did not lease the cars; they purchased the cars from Sigma 2000. The
    appellant is alleged to have prepared the false leasing documents using the
    information provided by the customers in the sales contracts. The appellant was
    the managing director of Sigma 2000 and the transactions of leasing deals connected
    therewith belonged, among other, to the scope of his activities.

[19]

The Records of the Case describe the available evidence
    as the contracts and other documents submitted by the banks as well as testimony
    from the customers that the documents were false and that they did not lease, but
    rather purchased the cars from Sigma 2000. The customer from the first
    allegation identified the appellant from a photograph. The customers in both
    the first and second examples purchased their cars from Sigma 2000. Neither
    customer signed the leasing contracts.

[20]

In addition, the third example alleges that the
    customer purchased the car from the appellant; he was given the false leasing
    contract to sign at the time he signed the purchase contract; and he paid cash
    to the appellant for the purchase of the car. The evidence available for the
    third allegation includes the evidence of the customer and the documents.

[21]

Similarly, the seventh allegation is that the appellant,
    as the managing director of Sigma 2000, sold a vehicle to one customer and then
    drew up and provided the bank with a false leasing contract for the same
    vehicle, based upon information provided by another customer. As a result, the
    appellant received and misappropriated the transferred purchase price. The Records
    of the Case describe the available evidence as reports to the police, the
    contracts and other documents submitted by the banks, and the evidence from the
    customers that the documents provided to the banks were false. The actual
    purchaser of the car will establish his purchase of the car from Sigma 2000, and
    the purported purchaser, Ivady, will confirm he did not lease the car and did
    not sign the leasing contract. Ivady provided information and concluded a
    verbal agreement with the appellant prior to withdrawing from the purchase
    agreement referred to in the ninth example. Ivady was also the purported
    purchaser in the ninth and tenth allegations.

[22]

The final two allegations relate to two separate
    payments for the purchase of the same car by Ivady. The ninth example alleges
    that the appellant, as managing director of Sigma 2000, sold a car to a company
    in order to allow it to conclude a hire-purchase agreement with Ivady. After
    the bank had transferred the purchase price, Ivady withdrew from the contract. The
    appellant agreed to repay the money to the bank but stopped paying after the
    first instalment.

[23]

The tenth allegation is that Toth, as managing director
    of Sigma 2000, also submitted a false leasing agreement to another bank, indicating
    that Ivady had purchased the car (after he had withdrawn from the agreement).  After he received the purchase price sent by
    that bank, the appellant advised the bank that the customer had withdrawn from
    the agreement and promised to repay the entire fee within eight days. He did
    not do so.

[24]

The Records of the Case describe the available evidence
    for examples 7, 9 and 10 as: the contracts and other documents submitted by the
    banks, the reports to police by the banks, and evidence from Ivady that he
    concluded only a verbal agreement with Toth and withdrew from the leasing prior
    to the actual agreement in writing.

[25]

Following the Canadian request for the evidence that
    would prove the appellants identity, the Supplement to the Summary Report
    certifies that the identification of the appellant had been performed by virtue
    of the various contracts and documents attached by the injured parties as well
    as the testimony of witnesses identified in the Records of the Case.

ii.

Personal
    Loans  examples 4, 5, 6, 8 and 9

[26]

The Records of the Case allege that the appellant
    defrauded banks and individuals by entering into loan agreements that he did
    not intend to repay, and using collateral he did not own.

[27]

The fourth example relates to a loan by the appellant, concluded
    before a Notary Public, in which he provided his sons car and property not
    owned by him as collateral. The car was also offered as collateral on the loan
    in the fifth example. With respect to the fourth, the appellant made the first
    payment and then left for an unknown place.

[28]

The sixth and eighth examples relate to loans from two
    individuals. The appellant delayed the repayments and then left for an unknown
    place.

[29]

The Records of the Case indicate as available evidence
    the police reports by the injured parties; the loan and mortgage agreements; and
    the results of unsuccessful efforts to find the collateral as well as the
    appellant. For the fourth example, two witnesses will give evidence that their
    company owned the property offered as collateral and that the appellant did not
    have title to the property.

[30]

Once again, the Supplement to Summary Report certifies
    that the identification of the appellant had been performed by virtue of the
    various contracts and documents attached by the injured party as well as by the
    testimony of the witnesses  identified in
    the Records of the Case. Furthermore, the Supplement states that on the fifth
    allegation, the principal of the bank would identify the appellant as the
    person who concluded the loan agreement and offered the car as collateral (although
    there is no indication of any evidence to show the car did not belong to him
    but to his son). With respect to the unpaid loans in the sixth and eighth examples,
    the lenders will provide documents and testify.

Analysis

[31]

The appellant submits that although the customers can
    identify the appellant as the person involved in the sale of their vehicles,
    there is no indication that they have any knowledge of the appellants dealings
    with the banks. He also submits that the record is silent as to what evidence
    there is that the appellant was the person who had such dealings with the banks.
    The appellant argues that it is not clear whether the transactions were alleged
    to have taken place in person, or whether his name or signature is purported to
    be on the contract. The appellant submits that the statements that the
    documents and testimony could establish that the appellant was the person who
    participated in the fraudulent transactions are bald assertions that evidence
    of identity would be available, and are not a substitute for evidence.

[32]

However, while the Record of the Case must contain
    sufficient detail to permit the extradition judge to assess the sufficiency of
    the evidence, it need not describe the specific feature of the documents or the
    specific testimony that will support the summary of the evidence. In
United States of America v. Lee
(2009), 258
    O.A.C. 72 this Court held at
para
. 17: The substance
    of this evidence is clear, even though the Record of the Case does not name a
    particular witness who will give it. There is no doubt about the content of the
    evidence that is certified to be available for trial.  In the instant case, the Records of the Case
    provide summaries of the evidence and particulars of ten specific transactions
    of the alleged fraud and the summaries are sourced to the testimony of named
    witnesses and specific documentary evidence.

[33]

It would, of course, have been preferable if the
    Records of the Case articulated specifically how the false leasing contracts
    implicate the appellant. The Records of the Case do not specify whether the
    appellants name is on the documents, whether the documents are signed by the
    appellant or whether the appellant was the directing mind behind the company
    that submitted the documents. Furthermore, it would have been desirable to have
    a more fulsome description of the nature of the witnesses evidence that will
    identify the appellant as the person who was involved with the false leasing
    documents and the banks. However, it is clear from the response to the Canadian
    request, that the Hungarian officials did not appreciate the level of
    specificity requested in the outline of precisely how the evidence would
    establish identity. They confirmed, apparently of the view that the answer was self-evident,
    that the evidence summarised in the Records of the Case would be proven by
    virtue of the various documents and the various witnesses named. Where legal
    cultures differ, we must be careful not to expect that approaches or styles of legal
    documentation will necessarily follow familiar patterns.

[34]

The Supplement refers back to the summaries in the
    Records of the Case and certifies that identification will be proven by virtue
    of the documents and by the testimony of those witnesses. The assertion must
    therefore be considered in the context of the Records of the Case.

[35]

In the context of the summaries of the specific
    allegations, the assertion that identity would be proven by virtue of the
    documents and the testimony of the witnesses is not a bald assertion of
    identity. Nor is it bereft of detail. It is not based upon the mere demand of
    the requesting state. There can be no doubt of the alleged conduct of the
    appellant; the specific documents and witnesses are integral to the
    transactions and the misconduct alleged. Read as a whole, there is evidence
    from which the appellants identity as the perpetrator could be inferred.

[36]

With respect to frauds involving the car leasing
    documents, the inference that it was the appellant who prepared and submitted
    the false documents to the banks is supported by the evidence that the
    appellant was the directing manager of the dealership, would have had access to
    the information of its customers, and was personally involved in the some of
    the sales transactions involving the vehicles and customers named in the false
    leasing contracts. Those customers named in the false leasing contracts can
    provide evidence that they had not signed, or knowingly signed, the false
    leasing contracts, but had provided the information used in the false documents
    when purchasing their vehicles from Sigma 2000. The appellants photograph can
    be identified by one of the customers (example 1) who bought a car from Sigma
    2000, managed by the appellant. Another customer (example 3) can testify that he
    bought the car directly from the appellant, paid the appellant in cash and was asked
    to sign the false document when signing the sale documents. The evidence of one
    further customer,
Ivady
, (examples 7, 9 and 10) can
    show that he dealt directly with the appellant, concluded an oral agreement to
    purchase a vehicle, but did not sign the agreements submitted to the banks.
    Ivady can also testify that he withdrew from the purchase agreement before the
    false leasing agreement was submitted to the second bank. Finally, the
    appellant was the directing manager of Sigma 2000 and leasing contracts were
    within the scope of his activities.

[37]

It was therefore open to the extradition judge to find
    that there was sufficient evidence of the conduct of the appellant to support
    an inference that the appellant was the person who was involved in providing
    the banks with the false agreements.

[38]

In addition, the
    appellant borrowed money and provided property that was not owned by him as
    collateral for the loans. He pledged the same car to two different lenders and
    left for unknown places.

[39]

These circumstances, read as a whole, provide evidence
    sufficient to support the inference that the appellant was the perpetrator of
    the fraud.

Conclusion

[40]

For these reasons, I am unable to conclude that the
    extradition judge erred in ordering the appellants committal. I would dismiss
    the appeal and, consequently, the application for judicial review.

RELEASED:  JUL 26 2011
    (J.I.L.)

Karakatsanis J.A.

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

I agree. M. Rosenberg J.A.