COURT OF APPEAL FOR ONTARIO

CITATION: Ontario Securities Commission v.
    Money Gate Mortgage Investment Corporation, 2020 ONCA 812

DATE: 20201216

DOCKET: C68064

MacPherson, Zarnett and Jamal
    JJ.A.

BETWEEN

Ontario
    Securities Commission

Applicant

and

Money Gate Mortgage Investment
    Corporation

Respondent

Eli Karp, for the non-party appellant,
    2496050 Ontario Inc.

Maya Poliak, for the respondent, Grant
    Thornton Limited in its capacity as court-appointed receiver of Money Gate
    Mortgage Investment Corporation

Heard: November 26, 2020 by video conference

On
    appeal from the order of Justice Cory A. Gilmore of the Superior Court of
    Justice, dated March 17, 2020, with reasons reported at 2020 ONSC 783.

Zarnett J.A.:

INTRODUCTION

[1]

The appellant, 2496050 Ontario Inc., appeals
    from a final determination of rights made on a motion for advice and directions
    in receivership proceedings. The motion judges order declared that a mortgage
    (the 254 Mortgage) in favour of the company in receivership, Money Gate Mortgage
    Investment Corporation (Money Gate), was valid and enforceable. It also
    ordered that funds realized from the sale of the property against which the mortgage
    had been registered (the Sale Proceeds) be paid to the respondent, Grant
    Thornton Limited, Money Gates court-appointed receiver (the Money Gate receiver),
    for distribution.

[2]

The 254 Mortgage was a second mortgage granted
    by a company in which the appellant is a shareholder, 254656 Ontario Limited
    (254), as security for a loan that, prior to its receivership, Money Gate had
    made to 254. Upon the sale of the property secured by the mortgage, funds (that
    is, the Sale Proceeds) were available in excess of what was required to be paid
    to the first mortgagee.

[3]

The Money Gate receivers position was that the
    Sale Proceeds were an asset of Money Gate and should be available for
    distribution to those with proper claims against Money Gates assets, primarily
    the investors who had funded Money Gates mortgage lending activities.

[4]

The appellant took the position that the 254
    Mortgage was invalid because: (i) 254 required unanimous shareholder approval
    to borrow and grant security; (ii) the appellant had not consented to the 254 Mortgage,
    or had only consented conditionally and the condition (that it receive a
    portion of the mortgage proceeds) was not fulfilled; and (iii) fraud was
    involved.

[5]

On a motion for advice and directions by the Money
    Gate receiver, the motion judge found that the validity of the mortgage could
    be determined in a summary fashion. She found that the mortgage was valid, as there
    had been shareholder consent. Furthermore, even if the appellant had consented
    on the condition that 254 would pay it a portion of the loan proceeds when
    received, the non-fulfillment of the condition did not affect the validity of
    the mortgage but was an issue between the appellant and 254s other shareholder.
    And although the appellant alleged fraud, the motion judge held that there was
    no evidence to support this contention.

[6]

The appellant argues that the motion judge was
    not entitled to decide the matter summarily, and that in any event her decision
    was legally flawed, made on the basis of factual findings that were unavailable
    on a paper record, and improperly granted what was, in effect, partial summary
    judgment. The appellant asks us to direct what it says the motion judge should
    have directeda trial.

[7]

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

[8]

It is important, given the exigencies of
    receivership proceedings, that a court supervising the receivership decide
    issues on a summary basis, rather than pursuant to the costlier and more time
    consuming process of a trial, in cases where a summary process can determine
    the merits of a dispute fairly and justly. The motion judge did not err, in
    deciding that this matter could be dealt with summarily, by borrowing from the
    approach applied on motions for summary judgment, an approach designed to
    ensure that a case is disposed of without a trial only where to do so will
    result in its fair and just determination.

[9]

The factual findings the motion judge made were
    available on the record and her rejection of the appellants argument of
    invalidity based on an unfulfilled condition of consent was free of legal
    error.

[10]

The principles that inform when a court should
    decline to grant what would be a partial summary judgment ought to be applied
    in the receivership context with due consideration for the time sensitive and
    multi-stakeholder nature of a receivership proceeding. The motion judge did not
    infringe any principle against granting partial summary judgment in the context
    of this case.

BACKGROUND

(i)

Money Gates Receivership

[11]

Money Gate was a mortgage investment corporation
    that lent money secured by residential and commercial mortgages. Between August
    2014 and April 2017, in order to fund its activities, it raised approximately
    $11 million from multiple investors by selling them preferred shares. However,
    Money Gate never filed a prospectus, was not a reporting issuer, and was not
    registered with the Ontario Securities Commission (OSC) in any capacity.

[12]

In April 2017, the staff of the OSC (Staff)
    commenced an investigation of Money Gate, an affiliated corporation, and two
    individuals, Ben and Payam Katebian (the Katebians), who were Money Gates
    directors and officers. A temporary cease trade order was made by the OSC,
    preventing Money Gate from raising more capital. In December 2017, Staff filed
    a Statement of Allegations against the targets of its investigation alleging
    that they had misled investors and engaged in unregistered trading and illegal
    distributions of securities. In October 2018, the allegations were expanded to
    include diversion of corporate funds.

[13]

The OSC has the power to apply to the Superior
    Court for the appointment of a receiver of a company where the appointment is
    in the best interests of the companys creditors, security holders, or
    subscribers, or is appropriate for the due administration of Ontario securities
    law:
Securities Act,
R.S.O. 1990, c. S.5, ss. 129 (1) and (2).

[14]

In November 2018, the OSC made such an
    application in respect of Money Gate. The affidavit in support of the
    application stated that as at November 2, 2018, Money Gates loan portfolio
    consisted of nine outstanding loans, the majority of which were in default, and
    that the portfolio had a realizable value that was significantly less than the amounts
    Money Gate had raised from investors.

[15]

On November 6, 2018, Hainey J. made an order
    appointing the respondent as receiver in relation to all of the assets,
    undertaking and properties of Money Gate, including any mortgages in favour of
    Money Gate. The Money Gate receiver was given broad powers to take possession
    and control of Money Gates assets, and collect any money owing to it.
    Proceedings against the Money Gate receiver were not to be taken or continued
    without its consent or leave of the court. The Money Gate receiver was given
    the power to take or defend proceedings relating to Money Gates assets, and
    was granted leave to apply to the court for advice and directions in the discharge
    of its powers and duties.

(ii)

The 254 Mortgage

[16]

One of the mortgages that Money Gate held at the
    time of the receivership was the 254 Mortgage. Using funds that had been raised
    from investors, Money Gate advanced $611,000 to 254s lawyers on May 29, 2017. On
    June 5, 2017, the 254 Mortgage, signed by 254s sole director, was registered
    as a second mortgage against property owned by 254 on Dovercourt Road, Toronto
    (the Dovercourt Property), charging that property in favour of Money Gate as
    security for the repayment of the loan.

[17]

It is not in dispute that the funds advanced by
    Money Gate to 254 were not repaid.

(iii)

254

[18]

254 was incorporated in November 2016. Until May
    24, 2017, its sole shareholder was Payam Katebian.

[19]

On May 15, 2017, 254s sole shareholder executed
    a resolution (the Resolution) amending its Articles by restricting 254s
    ability to borrow or grant a mortgage without the consent of a majority of its
    shareholders voting at a meeting, or the consent in writing of all of its shareholders.

[20]

On May 24, 2017, the appellant acquired 50% of
    the shares of 254.

[21]

The sole director of 254 at the time of the 254
    Mortgage was Rouzbeh Behrouz (Behrouz).

(iv)

The Dovercourt Receivership and the Sale of the
    Dovercourt Property

[22]

On July 4, 2018, on the application of Money
    Gate, a receiver was appointed over the Dovercourt property. In January 2019,
    the Dovercourt property was sold, with court approval. From the proceeds, the
    first mortgagee and the expenses of sale were paid. The balancethe Sale
    Proceedswere to be paid to the Money Gate receiver, to be held pending a court
    order for distribution. The Sale Proceeds ultimately received by the Money Gate
    receiver ($556,078.73) are significantly less than the amount of investor
    provided funds ($611,000) that were originally advanced under the 254 Mortgage,
    and the amount owing by 254 on that mortgage at the time of the property sale
    ($768,161.45).

(v)

The Money Gate receivers motion for advice and
    directions

[23]

In order to determine if it could distribute the
    Sale Proceeds to investors, the Money Gate receiver brought a motion seeking
    advice and directions of the court. In the motion, the Money Gate receiver
    noted that it had heard from the appellant, who claimed an entitlement to the
    funds on the basis that the 254 Mortgage should be declared invalid as the
    appellant did not consent to the granting of that mortgage and its consent, as
    a 50% shareholder of 254, was required.
[1]

(vi)

The Motion Judges Decision

[24]

The motion judge granted the Money Gate
    receivers request that the 254 Mortgage be declared valid and enforceable, and
    directed that the Sale Proceeds could be released for distribution.

[25]

The motion judge recognized that the motion for
    advice and directions resulted in a form of summary judgment, as it disposed of
    the appellants claim that the 254 Mortgage was invalid and its claim to the
    proceeds of the sale of the Dovercourt Property. She rejected the argument that
    this was procedurally improper, and held that there was sufficient evidence
    before her to meet the high threshold for a summary judgment type determination,
    which she noted was the absence of a genuine issue requiring a trial.

[26]

The motion judge examined the evidence, and
    concluded that on its face, the 254 Mortgage was valid. She found that there
    was no evidence of fraud. She rejected the argument that the 254 Mortgage was
    invalidated by an alleged lack of consent by the appellant. She found that the
    appellant had consented. The non-fulfillment of the condition the appellant imposed
    on its consent, that 254 pay it a portion of the loan proceeds, did not
    invalidate the mortgage. It gave rise, rather, to an issue between the
    appellant and Payam Katebian, who had allegedly retained or diverted those
    funds.

[27]

Alternatively, the motion judge reasoned that Money
    Gate was entitled to an equitable mortgage and the indoor management rule could
    be applied to overcome any complaint of non-compliance with the Resolution. She
    rejected the argument that Payam Katebians role at Money Gate and 254
    prevented either conclusion, given that the investors who funded the mortgage
    advance had no knowledge of any wrongdoing or corporate non-compliance.

ISSUES ON APPEAL

[28]

The appellant advances what are essentially
    three arguments.

[29]

First, the appellant argues that the motion
    judge lacked the authority, on a motion for advice and directions, to grant
    what was effectively summary judgment.

[30]

Second, the appellant submits that the factual
    record, viewed against the backdrop of the prevailing law, made the case
    inapposite for summary disposition without a trial. The appellant submits that
    there are issues surrounding whether and on what terms it consented to the
    mortgage, and about the conduct of the Katebians and Behrouz in orchestrating
    the transaction and the flow of funds, that require a trial for their proper
    resolution. Additionally, the appellant argues that the motion judge made an
    error of law in conflating the investors whose money went into Money Gate, with
    Money Gate itself, thereby disregarding the separate corporate identity of
    Money Gate.

[31]

Third, the appellant complains that what was
    granted was an improper partial summary judgment in light of the claims it
    wishes to continue against the Katebians and Behrouz.

ANALYSIS

(i)

The Availability of Summary Disposition in a Receivership Proceeding

[32]

The motion below was for advice and directions,
    brought in a receivership proceeding. In my view, this gave the motion judge the
    power to decide the merits of the dispute about the validity of the 254
    Mortgage, and the entitlement to the Sale Proceeds, in a summary way without a
    trial, following an approach modelled upon that used on motions for summary
    judgment. The context and purpose of the receivership support that conclusion.

[33]

The Money Gate receiver was appointed under
    statutory authority that aims at the protection of the best interests of a
    companys creditors and security holders.  The receivers broad powers, to
    bring in Money Gates assets and to hold them for distribution, are in the
    service of that purpose.

[34]

It is clearly foreseeable that, in seeking to
    collect the companys assets with a view to maximizing what will be available
    to creditors and security holders, the receivers efforts may come into
    collision with positions taken by third parties who dispute the companys
    ownership or entitlement, and assert their own. Resolving such disputes in a timely
    way can be key to the effective fulfillment of the object of the receivership.

[35]

I see no reason in principle why the receivers
    right to apply to the court for advice and directions, a right specifically
    provided for in the receivership order, cannot be used to resolve a dispute of
    the type presented here. The asset in question, the 254 Mortgage, was
    ostensibly an asset of Money Gate, as it was given in its favour. The Sale
    Proceeds had been paid over to the Money Gate receiver. The question as to entitlement
    was being raised by the appellant, who was otherwise an outsider to the
    receivership. The Money Gate receiver was entitled to advice and directions of
    the court as to whether the assetthe Sale Proceeds representing a recovery
    under the 254 Mortgagewas properly available for distribution in light of the
    appellants claim.

[36]

In support of its position that there are severe
    limits on what can be done under a motion for advice and directions, the appellant
    relies on
Re Urbancorp Cumberland 2 GP Inc
.
, 2017 ONSC 7649, 56
    C.B.R. (6th) 86, a case in which a motion for advice and directions by a
    companys Monitor, appointed under the
Companies Creditors Arrangement Act
,
    R.S.C. 1985, c. C-36 (
CCAA
), was dismissed. Myers J. held that the
    Monitor was not truly seeking advice and directions, but was seeking under that
    guise to assert a claim of the
CCAA
debtor against a third party for
    monetary relief: at para. 19.

[37]

In
Urbancorp
, however, the Monitor had
    not been given the power to bring proceedings on behalf of the
CCAA
debtor. The issue in
Urbancorp
was therefore not about whether a
    summary determination of rights between a third party and the debtors estate
    could ever be accomplished by a motion for advice and directions. It was about
    whether the Monitor actually had the power to assert the type of claim it was
    advancing. Myers J. observed that if the Monitor had the power to bring
    proceedings, they can be brought summarily: at paras. 18-22.

[38]

Here, the Money Gate receiver was expressly
    given the power, in the receivership order, to initiate, prosecute and defend
    proceedings with respect to Money Gate or its assets. The Money Gate receiver
    is not simply attempting, under the guise of a motion for advice and
    directions, to exercise a power it does not have.

[39]

Accordingly,
Urbancorp
does not support
    the appellants position.

[40]

The question of whether a motion for advice and
    directions may be resorted to by a receiver for the resolution of a dispute
    with a third party about the companys assets is a separate question from
    whether the court should deal with the motion summarily, or order a trial. In
    my view, on the latter question, the key determinant should be whether the
    dispute raises a genuine issue requiring a trial, in other words, by analogy to
    the procedure for summary judgment. I reach that conclusion for several
    reasons.

[41]

First, the summary judgment process is designed
    to be a means to adjudicate and resolve disputes without undue process and
    protracted trials, and thus avoid unnecessary expense and delay:
Hryniak v.
    Mauldin
, 2014 SCC 7, [2014] 1 S.C.R. 87. A receivership signals that
    creditors and other stakeholders are in need of protection. Unnecessary expense
    and delay can further imperil their positions.

[42]

Second, summary judgment is designed to be a
    fair and just process to resolve a dispute and apply the relevant legal
    principles to the facts as found:
Hryniak
, at para. 28. The interests
    of the third partythe stranger to the receivershipare therefore respected.

[43]

Third, the dividing line between a case that can
    be disposed of summarily and one where there should be a trialthe genuine
    issue requiring a trial testhas been the subject of authoritative
    jurisprudence and is dealt with regularly by Superior Court judges. The same is
    true of the surrounding features of the test which address how the record is
    developed and whether it is adequate to make summary judgment the
    proportionate, expeditious and less expensive means of achieving a fair result.
    It is preferable to use an established test than to try to construct a new one.
    In motions seeking a final decision that are not formally motions for summary
    judgment, the summary judgment procedure provides useful assistance by analogy:
Polywheels Inc. (Re)
, 2010 ONSC 1265, at paras. 6-7.

[44]

I therefore conclude that the motion judge did
    not err in entertaining the matter although it was raised by a motion for advice
    and directions, and in analogizing it to a motion for summary judgment.

[45]

Nor was there unfairness to the appellant in the
    motion judge proceeding this way. The Money Gate receiver had been directed to
    hold the Sale Proceeds pending a distribution motion. The Money Gate receivers
    material on the motion described the history of the 254 Mortgage, noted the
    appellants position that it was asserting a claim to the Sale Proceeds, and
    set out the receivers position that the appellant was aware of and supported
    254 borrowing funds and providing a second mortgage. It was clear that the
    receiver was seeking a final disposition of the appellants claim by motion,
    not by a trial. It was equally clear that the appellant was required, if it
    wished to oppose the receivers request, to support its position as to the
    merits of its claim and the appropriate process to determine it, on the basis of
    evidence, which it had the opportunity to file.

(ii)

Did The Motion Judge Err in Deciding that the
    254 Mortgage was Valid and that The Sale Proceeds Should Be Available For
    Distribution Without Ordering A Trial?

[46]

In my view the motion judges essential finding,
    that there was no genuine issue that required a trial, is unassailable.

[47]

The Money Gate receivers position that the 254
    Mortgage was valid and the Sale Proceeds should be available for distribution was
    firmly rooted in uncontested facts. Money Gate advanced $611,000 to 254 as a
    loan, and it was not repaid. The 254 Mortgage was signed by 254s sole director
    and registered against property owned by 254. The Sale Proceeds were funds
    available to the second mortgage holder, and thus were paid to the Money Gate
    receiver.

[48]

On the other hand, the appellants position that
    there was a lack of required shareholder consent to the mortgage, and that a
    fraud was perpetrated on the appellant, suffers from factual and legal
    infirmities.

[49]

The motion judge found that there was no
    evidence of fraud. The principal of the appellant who filed an affidavit did
    not mention fraud. The appellant did not seek or obtain the evidence of the Katebians
    or Behrouz. By analogy to summary judgment, the appellant was required, by
    affidavit or other evidence, to set out specific facts showing a genuine issue
    requiring a trial. It was required to put its best foot forward.

[50]

In any event, the fraud that the appellant
    alleges was perpetrated on itinducing it to consent to 254 granting a mortgage
    on the condition that 254 would pay it a portion of the proceeds, and then not
    honouring that commitment, would not impugn the validity of the 254 Mortgage.

[51]

A mortgage that is registered is valid and
    enforceable according to its nature and intent unless it is a fraudulent
    instrument:
Land Titles Act
, R.S.O. 1990, c. L.5 (
LTA
),
    ss. 78 (4) and (4.1).

[52]

Fraudulent instrument is a narrowly defined
    term. It includes a charge given by a fraudulent person, meaning a person who
    forged the instrument, a fictitious person, or a person who holds oneself out
    in the instrument to be the owner but knows they are not:
LTA
,

s.
    1. The appellants argument does not address or explain how its fraud theory,
    if proven, could satisfy that aspect of the definition of fraudulent
    instrument. The 254 Mortgage was given by 254, the owner of the property
    charged, not by a non-existent person. It was executed by 254s sole director.
    No signature was forged:
1168760 Ontario Inc. v. 6706037 Canada Inc.
,
    2019 ONSC 4702 (Div. Ct.), at paras. 33-42.

[53]

The definition of fraudulent instrument also
    includes an instrument that perpetrates a fraud as prescribed with respect to
    the estate or land affected by the instrument. Fraud as prescribed is the
    registration of a cessation of a charge by a fraudulent person:
LTA
,
    s. 1; R.R.O. 1990, Reg. 690, s. 63. The appellant does explain how its fraud
    theory, if proven, could satisfy this aspect of the definition.

[54]

Absent fraud, the appellants position that the
    254 Mortgage lacked its consent as required by the Resolution lands even
    farther from the statutory requirement of a fraudulent instrument.

[55]

Moreover, the motion judge properly found that
    the appellant did consent to the 254 Mortgage. She rooted her finding in the
    appellants principals evidence on cross-examination that he consented subject
    to a condition, and in emails produced by the appellant that referred to the second
    mortgage transaction proceeding. Her interpretation of this evidence was
    reasonable, namely that there was a consent, and that fulfilment of the
    condition of the consenta payment by 254 to the appellant out of the loan
    proceedsdid not affect the validity of the loan transaction between 254 and Money
    Gate.

[56]

Indeed, the fundamental flaw in the appellants
    position about conditional consent is that for the transaction to have taken
    place as the conditional consent contemplated, Money Gate would first have had to
    advance the loan and be granted the 254 Mortgage. Only then would 254 be in a
    position to fulfill the condition and pay the appellant. The appellant fails to
    explain how the non-fulfillment of the condition by 254, after Money Gates
    advance was made and the 254 Mortgage was granted, justifies Money Gate losing
    the right to recover what it advanced.

[57]

Accordingly, there was no genuine issue
    requiring a trial. These findings were sufficient to ground the disposition
    that the motion judge made.

[58]

It is therefore unnecessary to address the
    appellants arguments that the motion judge conflated the investors and Money
    Gate. The alleged conflation appears only in the portion of the decision
    dealing with an alternative theory of equitable mortgage or the ability to rely
    on the indoor management rule, and does not affect the main ground of the
    motion judges decision.

(iii)

The Motion Judge Did Not Grant an Inappropriate
    Partial Summary Judgment

[59]

The appellant argues that the motion judges
    decision was nevertheless improper because it deals with only part of the
    appellants dispute, and is based on findings that may be inconsistent with
    what may be found if the appellant pursues its claims against the Katebians and
    Behrouz.

[60]

I would not give effect to this argument.

[61]

The motion judges decision resolved the entire
    dispute between the appellant and the Money Gate receiver concerning the
    validity of the 254 Mortgage and the Sale Proceeds. The fact that the appellant
    commenced an action in early 2019 against the Money Gate receiver and others
    does not make this determination a partial one, in the sense of resolving part
    of an action while the remainder proceeds. The action against the Money Gate receiver,
    commenced without leave, was correctly considered a nullity as against the
    receiver by the motion judge, who also noted that the appellant had not
    proceeded at all with the action since its commencement.

[62]

Nor, in my view, is there a material risk of
    inconsistent findings even if one were to take into account the appellants desire
    to proceed with its action against others. The motion judge made no finding
    that the non-fulfilment of the appellants condition was proper as between the
    appellant and those responsible for that fulfillment. She only held that
    non-fulfillment did not invalidate the 254 Mortgage. Indeed, the fact that a
    valid mortgage was created is consistent, not inconsistent, with the appellants
    claim that it suffered a loss as a result of the conduct of Behrouz and the Katebians
    in not following through to fulfill the condition the appellant says it imposed
    when it gave its consent.

[63]

The principles that limit the grant of partial
    summary judgment are aimed at avoiding proceeding in a manner that will not be
    cost effective, judicious or expeditious because overlapping issues will proceed
    to trial:
Service Mold + Aerospace Inc. v. Khalaf
, 2019 ONCA 369, 146
    O.R. (3d) 135, at para. 14. As I have stated a material risk of inconsistent
    results is not present. Directing a trial and waiting for the appellant to
    proceed with its long dormant claim against others would involve delays and
    would not be cost effective, judicious or expeditious. Nor would it be consistent
    with the goals of the receivership.

CONCLUSION

[64]

For these reasons I would dismiss the appeal.

[65]

In accordance with the agreement of counsel, I
    would award the respondent its costs of the appeal fixed in the sum of $15,000,
    inclusive of taxes and applicable disbursements.

Released: December 16, 2020 JCM

B.
    Zarnett J.A.

I
    agree. J.C. MacPherson J.A.
I agree. M. Jamal J.A.

[1]

The appellant commenced an action against the Money Gate
    receiver, Payam Katebian, 254 and Rouzbeh Behrouz in early 2019. It included a
    claim to declare the 254 Mortgage invalid. The appellant did not obtain leave
    to commence that action against the Money Gate receiver, as required by the
    order of Hainey J. appointing it. The Money Gate receiver advised the appellant
    it would not respond to the action and considered it a nullity. The action has
    not proceeded.


COURT OF APPEAL FOR ONTARIO

CITATION: Polla v. Croatian (Toronto) Credit
    Union Limited, 2020 ONCA 818

DATE: 20201218

DOCKET: C66800

van Rensburg, Pardu and Thorburn
    JJ.A.

BETWEEN

Ferdinando Polla

Plaintiff (Appellant)

and

Croatian (Toronto)
    Credit Union Limited,

Zvonimir

Josipovic
,
Stephen P. Kovacevic
,
Stanko Bingula
,
Anton

Jurincic
,
Mato Menalo
,
Ante Mimica
,
Ignac Radencic
,
Joe

Sertic
,
Josip Vinski, Deposit Insurance Corporation
    of

Ontario,
Retford
    & Bates LLP
and Financial Services

Commission of Ontario

Defendants (
Respondents
)

Benjamin Salsberg, for the appellant

Frank E.P.
    Bowman, Douglas B.B. Stewart and Deepshikha Dutt, for the respondents Zvonimir
    Josipovic, Stephen P. Kovacevic, Stanko Bingula, Anton Jurincic, Mato Menalo,
    Ante Mimica, Ignac Radencic and Joe Sertic

Sandra E. Dawe and Jonathan Miller, for
    the respondent Retford Lane Bates LLP

Heard: July 15, 2020 by
    videoconference

On appeal from the judgment of Justice Jane
    Ferguson of the Superior Court of Justice, dated March 13, 2019, with reasons
    reported at 2018 ONSC 1641.

van Rensburg J.A.:

A.

Introduction

[1]

This is an appeal from a judgment dismissing the appellants action. The
    appellant sued various parties to recover his lost investment of $5 million in the
    Croatian (Toronto) Credit Union Limited (the CCU). He had discontinued or
    dismissed his claims against the two regulators of the CCU, the Deposit
    Insurance Corporation of Ontario (DICO) and the Financial Services Commission
    of Ontario (FSCO), and he had obtained default judgment against Josip Vinski,
    the CCUs former chief executive officer, who was bankrupt. The action proceeded
    to trial against the respondents, who were the members of the CCUs board of
    directors (the Board) and CCUs external auditors, Retford Lane Bates LLP
    (RLB), in respect of claims for misrepresentation in an offering statement,
    under the
Credit Unions and Caisses Populaires Act
,
1994
,
    S.O. 1994, c. 11 (the Act), and common law negligence.

[2]

After three weeks of trial, the appellant proposed to amend his Amended
    Statement of Claim to allege a misrepresentation in the offering statement that
    was not previously pleaded: essentially, that the offering statements
    description of the CCUs lending services as based on a propertys appraised
    value was a materially untrue statement because the CCU often based
    residential mortgage loan approvals on the value provided in the propertys
    purchase and sale agreement, instead of obtaining an independent appraisal
    opinion. The appellant argued that it was not until midway through the trial that
    he discovered that some mortgage loans were being made by the CCU based on the
    price in purchase and sale agreements, and without appraisals. The parties
    agreed to continue with the trial and to argue the motion at its conclusion as
    part of their closing submissions. By the end of the trial, it was evident that
    the appellants original allegations of common law and statutory misrepresentation
    and negligence against the Board and RLB were not going to succeed, and the
    appellants closing submissions made it clear that he was only pursuing the statutory
    misrepresentation claim set out in his proposed amended pleading.
[1]

[3]

The trial judge refused leave to the appellant to amend his pleading, on
    the basis that the amendment asserted a new claim for statutory
    misrepresentation that was statute-barred, and that, in any event, the
    respondents would be irreparably prejudiced if the amendment were permitted. She
    went on to decide the issues that would have required determination had leave
    to amend been granted, finding against the appellant on all issues in respect
    of both liability and damages. The trial judge concluded that the impugned passage
    in the offering statement was neither a misrepresentation, nor was it material.
    Even if there had been a material misrepresentation, the respondents were
    entitled to the statutory defence under s. 82(5) of the Act (they did not
    believe and had no reasonable grounds to believe that there had been a
    misrepresentation). Finding that the appellant would have known about the
    alleged misrepresentation at the time of his investment, the trial judge
    concluded that his deemed reliance was rebutted under s. 82(2) of the Act. She
    also determined that the loss of the appellants investment, which was the
    basis for his claim for damages, was not caused by the alleged
    misrepresentation, and that there was contributory negligence.

[4]

The appellant raises a number of arguments on appeal, addressing the trial
    judges refusal to grant leave to amend, as well as her treatment of the
    various issues respecting liability and damages based on the misrepresentation
    claim set out in the proposed amendment.

[5]

For the reasons that follow, I would dismiss the appeal. I see no error
    in the trial judges refusal to permit the appellant to amend the Amended Statement
    of Claim because the limitation period for his new statutory misrepresentation
    claim had expired. As the amendment was properly refused, it is unnecessary to
    address the appellants other grounds of appeal.

B.

Facts

[6]

The trial judges reasons for judgment set out a comprehensive account
    of the litigation, the appellants claims, the respondents defences, and the
    evidence at the trial. The facts relevant to this appeal can be briefly stated.

[7]

The CCU was a financially troubled credit union. As a result of a
    cheque-kiting scheme (referred to by the parties and in the court below as the
    Perfex fraud), and the subsequent withdrawal of a significant number of member
    deposits, the CCU fell below its liquidity and capital requirements as
    prescribed under the Act, and increased its overdraft with Credit Union Central
    of Ontario (CUCO) to over $18 million. In order to continue operations, the
    CCU needed to address the overdraft and to borrow additional funds from CUCO. Working
    with the regulators and CUCO, CCU prepared a recovery plan. As part of the
    recovery plan, the CCU issued an offering statement dated May 23, 2008 with the
    primary purpose of raising at least $3.5 million so that it could overcome the
    deficiencies created by the Perfex fraud and re-establish lending activity.

[8]

The appellant, a retired lawyer, was looking to get back into the
    mortgage business. The trial judge described the investment as a dream come
    true for the appellant, who wanted to arrange mortgage financing for his
    clients and earn referral fees. In June 2008, the appellant, through a family
    company, purchased 50,000 preferred shares of the CCU for $5 million.

[9]

By July 23, 2008, and after receiving monies from various subscribers, the
    CCU had met its required liquidity and capital ratios and was approved to
    resume lending. In August 2008, the appellant obtained a mortgage loan for $2.7
    million from the CCU. This was in addition to a $100,000 loan he had received,
    arranged by Mr. Vinski, before the CCU was approved to resume lending. Arnold
    Milan, who was a long-time member of the CCU and business partner of the
    appellant, and Mr. Milans wife also borrowed $2.6 million in August 2008.

[10]

These
    loans, which were discovered by the Board in November 2008, caused the CCU to
    again fall below its liquidity requirements. The regulators responded with an
    investigation, resulting in the CCU being placed into administration and DICO
    taking over its operations in July 2009.

[11]

Months
    after the CCU was placed into administration, and after Mr. Vinski had been
    suspended from his employment with the CCU, a fraudulent scheme referred to as
    the Oklahoma Mortgage Fraud (the OMF), was discovered. This was a complex
    fraud involving Mr. Vinski and various external parties, in which vacant
    properties were flipped from one fraudster to another at significantly
    inflated values. Mr. Vinski was convicted of fraud and sentenced to prison, but
    no one else at the CCU was suspected or charged for participation in the OMF.

[12]

The
    assets of the CCU were eventually liquidated, and the appellant lost his investment.

The Action

[13]

The
    appellant commenced an action in 2010, pleading common law negligence against
    the respondents. In March 2012, the statement of claim was amended (the
    Amended Statement of Claim) to plead that the appellants action against the respondents
    was also brought under s. 82 and related sections of the Act.

[14]

The
    Act requires, among other things, that an offering statement provide full,
    true and plain disclosure of all material facts relating to the securities that
    the credit union proposes to issue: s. 77(3). Section 82 provides for a
    statutory cause of action for misrepresentation in an offering statement as
    follows:

82 (1) If an offering statement  contains
    a misrepresentation, a purchaser of a security shall be deemed to have relied
    upon the misrepresentation if it was a misrepresentation when the purchase was
    made.

(2) Subsection (1) does not apply if
    the purchaser knew about the misrepresentation when purchasing the security.

(3) The purchaser has a right of
    action for damages against,

(a) the credit union;

(b) every person, other than an
    employee of a credit union, who sells the security on behalf of the credit
    union;

(c) every director of the credit
    union at the time the offering statement  was filed with the Superintendent
[2]
;

(d) every person whose consent
    has been filed pursuant to a requirement of the regulations but only with
    respect to reports, opinions or statements that have been made by them; and

(e) every person who signed the
    offering statement  other than the persons included in clauses (a) to (d).

(5) A person who signed the
    disclosure certificate  or a director is not liable under this section if [the
    person] proves one of the following:

3. The person had no reasonable
    grounds to believe, and did not believe, that there had been a
    misrepresentation.

(6) In this section,

misrepresentation means,

(a) an untrue statement of
    material fact, or

(b) an omission to state a
    material fact that is required to be stated or that is necessary to make a statement
    not misleading in light of the circumstances in which it was made.

[15]

The
    Amended Statement of Claim, at para. 12, asserts the following claims against
    the Board members:

12. The Plaintiff pleads that the Defendants,
    Zvonimir Josipovic, Stephen P. Kovacevic, Stanko Bingula, Anton Jurincic, Mato
    Menalo, Ante Mimica, lgnac Radencic and Joe Sertic negligently induced the
    Plaintiff to purchase shares in [CCU] in the following manner:

(a) They permitted an Offering Statement to go
    out to the public when they knew or ought to have known that it was misleading;
    in particular, they knew that the true financial difficulty of the Credit Union
    was not simply a consequence of a members account deficiency, but rather the
    result of a fraud or frauds perpetrated upon the Credit Union by its own
    officers in conspiracy with third parties;

(b) They permitted Josip Vinski to remain in a
    position of authority, speaking for [CCU] until April 30, 2009 when they were
    or ought to have been aware that he was unfit for the position and had already
    acted fraudulently in the "Oklahoma" mortgages described below and
    the Perfex matters. They knew or ought to have known that he was likely to
    mislead members of the public in the future, including those in the position of
    the Plaintiff herein;

(c) They permitted the mass redemption of term
    deposits in excess of $100,000.00 by the Credit Union in favour of their
    friends and acquaintances.

[16]

Paragraph
    15 of the Amended Statement of Claim asserts the following claims against RLB:

15. The Plaintiff pleads that the Defendant, [RLB]
    negligently induced the Plaintiff to invest in shares in [CCU] in the following
    manner:

(a) [RLB] failed to abide by the terms of its
    own engagement letter with [CCU] in failing to recognize the fraud perpetrated
    upon the Credit Union by the "Oklahoma" mortgage fraudsters as
    described in Superior Court action #CV-09-8471-00CL;

(b) [RLB] failed to recognize and indicate
    that loans in excess of [CCUs] permissible limit of $300,000.00 had frequently
    been made;

(c) [RLB] negligently failed to recognize the
    absence of appraisals in the "Oklahoma" loan files of the Credit Union
    as described in Superior Court action #CV-09 8471-00CL;

(d) [RLB] prepared and delivered financial statements
    which they knew or ought to have known did not fairly represent, in all material
    respects, the financial position of the Credit Union.

[17]

Although
    the Amended Statement of Claim pleads that the claim for damages is at common
    law and pursuant to the provisions of the [Act], the only claim against the
    respondents in respect of a misrepresentation in an offering statement is as
    stated in para. 12(a)  that the offering statement was misleading
in
    particular, [the Board] knew that the true financial difficulty of the Credit
    Union was not simply a consequence of a members account deficiency, but
    rather the result of a fraud or frauds perpetrated upon the Credit Union by its
    own officers in conspiracy with third parties
 (emphasis added).

[18]

At
    the appellants examination for discovery in December 2011, an undertaking was
    given to set out the misleading and/or misleading by omission statements in
    the [offering statement]. The undertaking answers provided in March 2012 did
    not mention, expressly or by implication, any misstatement or omission relating
    to appraisals.
[3]

The Motion to Amend

[19]

Approximately
    three weeks into the trial, the appellant sought to further amend the Amended Statement
    of Claim. He proposed to add the following paragraph:

11 A. The aforementioned Offering Statement provided,
inter alia
, at page 17, as follows:

Lending Services

CCU [Croatian (Toronto) Credit Union Limited] is
    licensed by the FSCO as a Class 2 Credit Union under the Act. As part of its
    license, CCU is subject to certain limits on its lending. The Board has
    approved, and management follows, lending policies in all areas to minimize the
    risk of loan losses. These lending policies are in compliance with the Act and
    are applied by the Corporations Credit Committee. For Residential Mortgages,
    the Corporation will lend up to 95% of the appraised value of the property
    where an insurance company insures the mortgage. Otherwise, the loan will be
    limited to a maximum of 75% of the appraised value. The Corporation also has a
    recommended debt service level of 40% of the borrowers available income.

[20]

The
    appellant also proposed to amend para. 12(a) of the Amended Statement of Claim to
    add to the pleading against the Board that they knew that the Credit Union had
    made, and was continuing to make, mortgage loans without appraisals, and to
    add a pleading against RLB, as para. 15(e):

(e) [RLB] consented to the attachment of the
    Audited Financial Statement of the [CCU] for the years 2015, 2016 and 2017 when
    they knew that the contents of the Offering Statement at page 17 thereof
    respecting appraised values were untrue and that the said financial
    statements were prepared on the basis that appraisals were not always required
    and taken by the credit union in respect of mortgage loans made and advanced by
    it. The Plaintiff pleads that such conduct is contrary to the provisions of s.
    82 of the [Act] and the standard of care applicable to professional accountants
    in like circumstances.

[21]

Essentially
    the representation that the appellant proposed to assert in his proposed amendment
    was that the CCU was making loans on the security of residential properties
    only in accordance with the terms of its credit policies, that is, where there
    had been an appraisal, and that this was a misrepresentation because the CCUs practice
    was to proceed without appraisals in some circumstances. The appellants theory
    was that if the CCU had required appraisals to lend on residential properties,
    as represented in the offering statement, rather than using agreements of
    purchase and sale, the OMF would have been detected and the CCU would not have
    failed.

[22]

The
    motion to amend was supported by the affidavit of one of the appellants lawyers
    (not his counsel on appeal). The lawyer deposed that it was determined only
    during the trial that the CCU was routinely and extensively lending on the
    security of residential mortgages without first obtaining appraisals of the
    subject properties, and that this was contrary to the representation concerning
    lending services as expressed at p. 17 of the offering statement. The lawyer
    deposed that the motion to amend was brought out of an abundance of caution,
    and that the proposed amendment consisted of facts that were known to the
    Board, that were never previously disclosed to the appellant and that already
    formed part of the existing factual matrix as pleaded in the Amended Statement
    of Claim. The lawyer confirmed under cross-examination out of court that in 2012,
    during the course of the proceedings, he and the appellant had received a copy
    of the CCUs Board-approved 2002 credit policy, which disclosed that when
    making loans, purchase and sale agreements could substitute for an appraisal.

[23]

On
    the suggestion and with the agreement of all counsel, the trial judge directed
    that the motion to amend would not be determined at the time it was brought,
    but that it would be argued by counsel as part of their closing submissions. Counsel
    for all parties confirm that this procedure was adopted in order to minimize
    further disruption to the trial schedule, and that the trial continued under
    the assumption that the amendment had been allowed for evidentiary purposes and
    the understanding that the motion was opposed.

[24]

The
    trial judge noted that, by the end of the trial, the appellant was advancing
    only claims for statutory misrepresentation in relation to the
    misrepresentation that he sought to add in his motion to amend, and that he had
    abandoned his other claims in the action.
[4]

The Trial Judges Reasons for Refusing the
    Amendment

[25]

The
    trial judge noted that the appellant proposed to amend the Amended Statement of
    Claim to allege a new misrepresentation  essentially, that the offering
    statement represented that the CCU always based its mortgages on the opinion of
    a professional appraiser, even though the Board knew that the CCU frequently
    approved mortgages based on an agreement of purchase and sale.

[26]

The
    respondents opposed the amendment on the basis that this was a new and separate
    misrepresentation claim that was discoverable since 2012 when the appellant
    received a copy of the CCUs 2002 credit policy, and that the two-year
    limitation period for asserting a claim in respect of this misrepresentation
    had accordingly expired. The respondents also opposed the amendment on the
    basis that it would cause them prejudice which could not be compensated for by
    costs.

[27]

The
    trial judge agreed with the respondents that the proposed amendment sought to
    advance a new and separate misrepresentation claim. Referring to para. 12(a)
    of the Amended Statement of Claim, she observed that the appellant was pleading
    that the defendants were at fault for their failure to disclose a fraud or
    frauds from which the CCU was suffering. Although the factual matrix as
    pleaded set out the broad context in which this misrepresentation occurred, the
    act complained of was fundamentally different. While the existing pleading
    pleaded a misrepresentation in the offering statement, the proposed amendment
    was based on a different act of the defendants, a separate alleged failure to
    disclose: at para. 158. The trial judge observed that the proposed
    amendment [alleged] an entirely separate misrepresentation or failure to
    disclose on the part of the defendants, and that it [was] not part and
    parcel of the dealings already described in the existing amended statement of
    claim: at para. 159.

[28]

The
    trial judge concluded that the misrepresentation referred to in the proposed
    amendment was discoverable since 2012 when the appellant received the 2002
    credit policy, which clearly noted that agreements of purchase and sale could
    be used to determine property values, and that this was not, as the appellant
    had argued, a bombshell that was dropped during the trial.
[5]
A reasonable person would have assumed that the 2002 credit policy was in place
    at the time that the CCU distributed the offering statement, and [i]f this had
    struck [the appellant] as giving rise to material misrepresentation in the [offering
    statement], he could have amended his statement of claim to add that allegation
    at that time: at para. 160. The two-year limitation period under s. 4 of the
Limitations
    Act, 2002
, S.O. 2002, c. 24, Sched. B had expired.

[29]

The
    trial judge concluded that, in any event, the respondents, who had defended the
    action for eight years and into the trial based on the original pleaded
    misrepresentations, would suffer irreparable prejudice if she allowed an
    amendment that was raised only after the appellant and several other material
    witnesses had testified: at para. 162. She characterized the appellants
    attempt to amend his pleadings as a wild goose chase, and she stated that [h]e
    [could not] evolve his claim mid-way during trial to address different acts by
    the defendants based on an entirely new theory of the case: at para. 163.

C.

Analysis

[30]

The
    appellant asserts that the trial judge erred (1) in concluding that the
    proposed amendment was the pleading of a new claim which was statute-barred;
    and (2) in refusing the amendment in any event on the basis of prejudice to the
    respondents.

[31]

The
    trial judges conclusion that the proposed amendment made a new claim is a
    legal determination, which is subject to the correctness standard of review
    on appeal: see
Blueberry River First Nation v. Laird
, 2020 BCCA 76, 32
    B.C.L.R. (6th) 287, at paras. 20-21;
Strathan Corporation v. Khan
,
    2019 ONCA 418, at paras. 7-8. Her conclusion that the limitation period had expired
    is a determination of mixed fact and law, that was based in this case on a
    finding of fact as to when the appellant ought to have known about the new
    misrepresentation, and reviewable on a standard of palpable and overriding
    error: see
Longo v. MacLaren Art Centre
, 2014 ONCA 526, 323 O.A.C.
    246, at para. 38. The same deferential standard of review applies to the
    refusal of an amendment based on an assessment of prejudice:
Tuffnail v.
    Meekes
, 2020 ONCA 340, 449 D.L.R. (4th) 478, at para. 120, leave to appeal
    refused, [2020] S.C.C.A. No. 269.

[32]

The
    general rule respecting the amendment of pleadings is that an amendment
shall
be granted at any stage of a proceeding on such terms as are just, unless
    prejudice would result that could not be compensated for by costs or an
    adjournment:
Rules of Civil Procedure
, R.R.O. 1990, Reg. 194, r. 26.01.
    The expiry of a limitation period in respect of a proposed new claim is a form
    of non-compensable prejudice, where leave to amend to assert the new claim will
    be refused:
Klassen v. Beausoleil
, 2019 ONCA 407, 34 C.P.C. (8th) 180,
    at para. 26.

[33]

There
    is no real dispute between the parties about the applicable test. In
1100997
    Ontario Limited v. North Elgin Centre Inc.
, 2016 ONCA 848, 409 D.L.R.
    (4th) 382, this court observed that an amendment to a statement of claim will
    be refused if it seeks to assert a new cause of action after the expiry of
    the applicable limitation period. As this court explained, at para. 19, in this
    context, a cause of action is a factual situation the existence of which
    entitles one person to obtain from the court a remedy against another person
    (as opposed to the other sense in which the term cause of action is used  as
    the form of action or legal label attached to a claim: see the discussion in
Ivany
    v. Financiere Telco Inc.
, 2011 ONSC 2785, at paras. 28-33).

[34]

The
    relevant principles are summarized in Paul M. Perell & John W. Morden,
The
    Law of Civil Procedure in Ontario
, 4th ed. (Toronto: LexisNexis Canada, 2020),
    at pp. 220-21, as follows:

A new cause of action is not asserted if the
    amendment pleads an alternative claim for relief out of the same facts
    previously pleaded and no new facts are relied upon, or amount simply to
    different legal conclusions drawn from the same set of facts, or simply provide
    particulars of an allegation already pled or additional facts upon [which] the
    original right of action is based.

This passage has been cited with approval by this
    court. See
1100997 Ontario Limited
, at para. 20,
Davis v. East
    Side Marios Barrie
, 2018 ONCA 410, at para. 32, and
Klassen
,
    at para. 29.

[35]

The
    appellant asserts that the trial judge erred when she characterized the
    proposed amendment as pleading a new cause of action. He argues that the facts
    that were pleaded in the Amended Statement of Claim  before the motion to
    amend was brought during the trial  were broad enough to encompass the statutory
    misrepresentation claim that was advanced during the trial. He submits that he
    was not asserting a new cause of action but simply a specific particular of his
    case that arose out of the factual matrix already pleaded: that there was an
    offering statement that contained misrepresentations. Specifically, he asserts
    that there was a single instance of tortious conduct contravening the Act,
    namely the distribution of the [offering statement] to [the appellant].

[36]

I
    disagree.

[37]

The
    necessary starting point is to consider the substance of the appellants claim
    before he sought the pleadings amendment. What acts or omissions that would
    give rise to the respondents liability were already at issue in the action? The
    court must determine whether the existing pleading already contains the factual
    matrix to support any claim to which the proposed amendment relates, or whether
    the amendment seeks to put forward additional facts that are necessary and
    material to a new and different claim.

[38]

In
    conducting this assessment, the court must read the pleadings generously in
    favour of the proposed amendment:
Klassen
,

at para. 30;
Rabb
    Construction Ltd. v. MacEwen Petroleum Inc.
, 2018 ONCA 170, 29 C.P.C.
    (8th) 146, at para. 8. The existing pleadings, together with the proposed
    amendment, must be considered in a functional way  that is, keeping in mind
    that the role of pleadings is to give notice of the
lis
between the
    parties. As such, the question in this case is whether the respondents would reasonably
    have understood, from the Amended Statement of Claim and the particulars
    provided on discovery, that the appellant was pursuing a claim in respect of
    the matter addressed by the proposed amendment.

[39]

The
    trial judge accepted that there was a connection between the facts pleaded in
    the Amended Statement of Claim and the proposed amendment, since the appellant was
    always pleading that there was a misrepresentation in the offering statement. As
    such the factual circumstances or matrix that were already pleaded provided
    the broad
context
in which the statutory misrepresentation referred to
    in the proposed amendment arose. The original pleading however alleged that the
    misrepresentation (by omission) was a failure to disclose frauds, while the
    proposed amendment was based on a different act of the respondents and a
    separate failure to disclose.

[40]

There
    is no error here. The trial judges understanding of the appellants claims was
    based not only on her comparison of the proposed amendment to the Amended
    Statement of Claim. She knew that the appellant had further particularized his
    claims for misrepresentation (in 2012), at which time the misrepresentation referred
    to in the proposed amendment had not been raised. She also had the benefit of
    presiding over the trial, including the period leading up to the proposed
    amendment, when the claims that the appellant was pursuing had been set out and
    addressed in the evidence of the witnesses. All of this informed her conclusion
    that the appellant was seeking to evolve his claim mid-way during trial to
    address different acts by the defendants based on an entirely new theory of the
    case: at para. 163.

[41]

The
    appellants existing claim was not, as he asserts before this court, a statutory
    claim in respect of a misleading offering statement. The distribution of the
    offering statement was not the act or omission that he was pursuing in his
    claim. Rather, he was pursuing a claim for statutory misrepresentation under
    the Act. The wording of s. 82 of the Act makes it clear that the claim is in
    respect of a misrepresentation (as defined by the Act) in an offering
    statement, and not in respect of the distribution of the offering statement
    itself. Section 82(1) provides for deemed reliance upon
the misrepresentation

    (emphasis added) where the offering statement contains
a misrepresentation
if it was
a misrepresentation
when the purchase of securities was made. The
    statutory defences also relate to specific misrepresentations. Under s. 82(2),
    deemed reliance does not apply if the purchaser knew about
the
    misrepresentation
when purchasing the security (emphasis added). Section
    82(5) provides that a person who signed the disclosure certificate or a
    director is not liable if the person proves [t]he person had no reasonable
    grounds to believe, and did not believe, that there had been
a misrepresentation

    (emphasis added).

[42]

Having
    pursued an action in respect of a statutory misrepresentation in an offering
    statement, it was not open to the appellant to change course in the middle of
    the trial  to advance a claim in respect of a new and different
    misrepresentation regarding the failure to obtain appraisals  that had not
    been pursued up to that point in the action. The existing pleading did not
    contain the factual matrix that would support the claim asserted in the proposed
    amendment. The proposed amendment, although related to the same offering
    statement, alleged an entirely different misrepresentation from what had been pleaded
    in the Amended Statement of Claim and particularized during the discovery
    process. As such, the trial judge was correct in concluding that the
    misrepresentation relating to the basis on which the CCU made loans was based
    on a different act of the respondents, a separate alleged failure to disclose,
    and as such was not part and parcel of the claims the appellant was advancing
    in his Amended Statement of Claim.

[43]

Finally,
    the appellant challenges the trial judges conclusion that the misrepresentation
    claim that he proposed to advance in the amendment to his Amended Statement of
    Claim was discoverable in 2012. The appellant asserts that he only discovered this
    misrepresentation during the trial, after hearing the evidence of two Board
    witnesses and seeing the 2005 credit policy, and that, as such, his pleading is
    not statute-barred.

[44]

This
    argument cannot succeed. While the appellant may only have adverted to the
    claim giving rise to the amendment in the course of the trial, the trial judge
    concluded that the alleged misrepresentation was discoverable in 2012 when the
    appellant received the Board-approved 2002 credit policy, which clearly noted
    that agreements of purchase and sale were being used to determine property
    values, and that after that point, a reasonable person would have assumed that
    the 2002 credit policy was in place when the offering statement was
    distributed. There is no reason to interfere with the trial judges conclusion
    that the new misrepresentation claim was discoverable in 2012. Her conclusion was
    fully supported by the evidence. As such the amendment of the Amended Statement
    of Claim to assert a new statutory misrepresentation claim was properly refused
    because that claim was statute-barred.

[45]

The
    conclusion that the new misrepresentation claim, which was ultimately the only
    claim relied on by the appellant at trial, was properly dismissed because it
    was statute-barred is sufficient to dispose of this appeal.

D.

Disposition

[46]

For
    these reasons I would dismiss the appeal. I would award costs to the
    respondents in the amounts agreed between the parties: $45,000 to the Board
    respondents and $30,000 to RLB, both amounts inclusive of disbursements and
    applicable taxes.

Released: December 18, 2020 (K.M.v.R.)

K.
    van Rensburg J.A.

I
    agree. G. Pardu J.A.

I
    agree. Thorburn J.A.

[1]

The
    reasons for judgment deal almost entirely with the statutory misrepresentation
    claim raised by the proposed amendment. The trial judge did however address and
    dismiss the appellants common law negligence claim against the Board
    notwithstanding that the appellants closing submissions focused only on the
    statutory misrepresentation claim raised by the proposed amendment: see paras.
    176-186.

[2]

The
    Act has since been amended to reflect the fact that the Financial Services
    Regulatory Authority of Ontario (FSRA) replaced FSCO and DICO, including
    replacement in this passage of the reference to the Superintendent (of FSCO) by
    the Chief Executive Officer (of FSRA): S.O. 2018, c. 8, Sched. 7, s. 5.

[3]
This
    is from the trial judges reasons at para. 155(vi).
The answers to
    undertakings were not part of the appeal record. According to the written
    submissions at trial by RLB, which were filed on the appeal, the appellants answers
    to undertakings pointed to the following instances of alleged misstatement or
    omission: (1) the 'Perfex fraud' is misdescribed in the Offering Statement; (2)
    the assets of the Credit Union are overstated by $8.2 million; (3) the Offering
    Statement does not disclose that there were mass redemptions of deposits in
    June and July, 2007; (4) the Offering Statement does not disclose that most of the
    commercial loan portfolio was a loan on one property in which Mr. Vinski had an
    interest; and (5) the Offering Statement does not disclose that Mr. Vinski
    operated without supervision by the Board of the Credit Union.

[4]
Reasons for Judgment, at paras. 8 and 139.
Notwithstanding that she
    regarded the other claims as having been abandoned, the trial judges reasons
    briefly addressed and dismissed the appellants common law negligence claim
    against the Board. See note 1 above.

[5]

As the trial judge noted, the Board-approved credit policy
    that was in place when the offering statement was distributed was the 2005 credit
    policy, however, its relevant terms were essentially the same as the 2002
    credit policy.


WARNING

The President of the panel
    hearing this appeal directs that the following should be attached to the file:

An order restricting
    publication in this proceeding under ss. 486.4(1), (2), (2.1), (2.2), (3) or
    (4) or 486.6(1) or (2) of the
Criminal Code
shall continue.  These
    sections of
the Criminal Code
provide:

486.4(1)       Subject
    to subsection (2), the presiding judge or justice may make an order directing
    that any information that could identify the victim or a witness shall not be
    published in any document or broadcast or transmitted in any way, in
    proceedings in respect of

(a)     any of the
    following offences;

(i)      an offence
    under section 151, 152, 153, 153.1, 155, 159, 160, 162, 163.1, 170, 171, 171.1,
    172, 172.1, 172.2, 173, 210, 211, 213, 271, 272, 273, 279.01, 279.011, 279.02,
    279.03, 280, 281, 286.1, 286.2, 286.3, 346 or 347, or

(ii)      any offence
    under this Act, as it read at any time before the day on which this
    subparagraph comes into force, if the conduct alleged involves a violation of
    the complainants sexual integrity and that conduct would be an offence
    referred to in subparagraph (i) if it occurred on or after that day; or

(iii)     REPEALED: S.C.
    2014, c. 25, s. 22(2), effective December 6, 2014 (Act, s. 49).

(b)     two or more offences being dealt
    with in the same proceeding, at least one of which is an offence referred to in
    paragraph (a).

(2)     In proceedings
    in respect of the offences referred to in paragraph (1)(a) or (b), the
    presiding judge or justice shall

(a)     at the first
    reasonable opportunity, inform any witness under the age of eighteen years and
    the victim of the right to make an application for the order; and

(b)     on application
    made by the victim, the prosecutor or any such witness, make the order.

(2.1) Subject to
    subsection (2.2), in proceedings in respect of an offence other than an offence
    referred to in subsection (1), if the victim is under the age of 18 years, the
    presiding judge or justice may make an order directing that any information
    that could identify the victim shall not be published in any document or
    broadcast or transmitted in any way.

(2.2) In proceedings in
    respect of an offence other than an offence referred to in subsection (1), if
    the victim is under the age of 18 years, the presiding judge or justice shall

(a) as soon as feasible,
    inform the victim of their right to make an application for the order; and

(b) on application of
    the victim or the prosecutor, make the order.

(3)     In proceedings
    in respect of an offence under section 163.1, a judge or justice shall make an
    order directing that any information that could identify a witness who is under
    the age of eighteen years, or any person who is the subject of a
    representation, written material or a recording that constitutes child
    pornography within the meaning of that section, shall not be published in any
    document or broadcast or transmitted in any way.

(4)     An order made
    under this section does not apply in respect of the disclosure of information
    in the course of the administration of justice when it is not the purpose of
    the disclosure to make the information known in the community. 2005, c. 32, s.
    15; 2005, c. 43, s. 8(3)(b); 2010, c. 3, s. 5; 2012, c. 1, s. 29; 2014, c. 25,
    ss. 22, 48; 2015, c. 13, s. 18.

486.6(1)       Every
    person who fails to comply with an order made under subsection 486.4(1), (2) or
    (3) or 486.5(1) or (2) is guilty of an offence punishable on summary conviction.

(2)     For greater
    certainty, an order referred to in subsection (1) applies to prohibit, in
    relation to proceedings taken against any person who fails to comply with the
    order, the publication in any document or the broadcasting or transmission in
    any way of information that could identify a victim, witness or justice system
    participant whose identity is protected by the order. 2005, c. 32, s. 15.

COURT OF APPEAL FOR ONTARIO

CITATION: R. v. C.B., 2020 ONCA 828

DATE: 20201217

DOCKET: C68372

Hoy,
    Hourigan and Trotter JJ.A.

BETWEEN

Her Majesty the Queen

Respondent

and

C.B.

Appellant

C.B., in person

Brian Snell, appearing as duty counsel

Madeline Lisus, for the respondent

Heard: December 9, 2020 by videoconference

On appeal from
    the order of Justice Nathalie Champagne of the Superior Court of Justice, dated
    February 21, 2020, dismissing an appeal from the conviction entered on September
    21, 2018 and the sentence imposed on November 26, 2018, by Justice Diane M.
    Lahaie of the Ontario Court of Justice.

REASONS FOR DECISION

[1]

The appellant was convicted of sexual assault,
    assault, and mischief to property under $5,000. The case was prosecuted by way
    of summary procedure. The appellant was sentenced to six months imprisonment,
    followed by two years of probation. The trial judge made other ancillary
    orders.

[2]

The appellant appealed to the Summary Conviction
    Appeal Court on issues that were factual in nature, mostly related to the
    credibility of witnesses who testified at trial. Her appeal from conviction and
    sentence was dismissed.

[3]

The appellant seeks leave to appeal to this
    court. In our view, she has failed to raise a question of law alone, which is
    a prerequisite to a further appeal to this court:
Criminal Code
,
    R.S.C. 1985, c. C-46, S. 839(1). However, with the consent of the Crown, we
    would vacate the victim fine surcharge of $300.

[4]

The application for leave to appeal is
    dismissed.

Alexandra Hoy J.A.

C.W. Hourigan J.A.

Gary Trotter J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: R. v. Cleland, 2020 ONCA 837

DATE: 20201223

DOCKET: C65950

MacPherson, Lauwers and Paciocco
    JJ.A.

BETWEEN

Her Majesty the Queen

Respondent

and

Theo Cleland

Appellant

Frank Addario and Wesley Dutcher-Walls,
    for the appellant

Michael S. Dunn, for the respondent

Heard: December 15, 2020 by
    video conference

On appeal from the conviction entered by
    Justice David A. Broad of the Superior Court of Justice, sitting with a jury, on
    June 7, 2018.

REASONS FOR DECISION

[1]

Theo Cleland appeals his conviction by jury of
    aggravated assault. He argues that the jurys verdict was unreasonable and
    requests that the conviction be set aside, and an acquittal be ordered. In the
    alternative, Mr. Cleland seeks a new trial, claiming that the trial judge
    misdirected the jury by providing a confusing jury direction relating to the
    identification evidence against Mr. Cleland, thereby overstating the
    significance of the Crowns identification evidence. For reasons that follow, we
    would dismiss Mr. Clelands appeal.

THE MATERIAL FACTS

[2]

The complainant, Mitchell Wotton, was at a
    university house party (the house party) when an uninvited group of young men
    arrived and attempted to enter the house, leading to an altercation. It is not
    disputed that Hussein Karshe was one of those uninvited young men and was
    involved in the scuffle that ensued. Mr. Karshe received an injury to his hand,
    which bled.

[3]

It is also agreed that Mr. Cleland was part of Mr.
    Karshes group of friends and was present outside the house party. There was no
    evidence that Mr. Cleland was involved in the scuffle.

[4]

Shortly after the uninvited men left the house
    party, Mr. Wotton, Andrew Zaduban, and Sean Redmond also left. At the time, the
    three young men were roommates and good friends. Each of them had consumed
    approximately five beers, or more. Mr. Wotton may have consumed eight beers. Shortly
    after leaving, the three men met up with Gabrielle DAmelio and they walked
    together.

[5]

Before long, Mr. Wottons group encountered several
    young men, including Mr. Karshe. It was conceded before us, and supported by
    trial evidence, that Mr. Cleland, who is white and 510, was part of Mr. Karshes
    group. Mr. Cleland was wearing a white t-shirt, and his hair was tied in a bun.

[6]

Mr. Wotton and Mr. Karshe exchanged words and then
    began to fight. Others became involved, including Mr. Zaduban and Mr. Redmond.
    Mr. Zaduban and Mr. Redmond testified that they were not striking anyone but were
    merely attempting to protect Mr. Wotton, who had been knocked to the ground and
    was being kicked and punched. The fight ended shortly after it began, when the
    police arrived. Mr. Karshe and his group fled.

[7]

During the fight, Mr. Wotton was badly cut and
    his jaw was broken. Mr. Zaduban and Mr. Redmond accompanied him to the hospital.
    It was only later, after they had discussed what had happened, that their
    police statements were prepared.

[8]

Approximately 15 minutes after the police arrived,
    Mr. Cleland was arrested nearby. He broadly met the on-scene description that
    Mr. Wotton had provided to the police.

[9]

At the time of his arrest, Mr. Clelands hair
    was in a bun. There was blood on the left side of his white t-shirt, in the
    area of his left pectoral muscle. His shirt was also stained with dirt. His
    knuckles were slightly swollen, and he had a scratch on his face, blood on his
    ring, and what appeared to be blood on his arm.

[10]

The blood from the shirt and the ring was subjected
    to DNA analysis. Mr. Karshe was the source of the blood on the ring, and his
    DNA was also extracted from the blood on the shirt. The blood on Mr. Clelands
    shirt was from more than one source, but the amount of DNA that remained after
    Mr. Karshes DNA was isolated was too small for analysis.

[11]

Mr. Karshe was not arrested on the night of the
    fight. He was identified the next day by Rachel Gluek, a witness from the house
    party, with the assistance of social media, and subsequently arrested.

[12]

Ms. Gluek also selected a photograph of Kwasi
    Adjei. Mr. Wotton, Mr. Zaduban, and Mr. Redmond were convinced that Mr. Adjei
    had been involved, and Mr. Adjei was interviewed by police as a suspect.
    Ultimately, Mr. Adjei provided an alibi and was not charged.

[13]

During the trial, Ms. Gluek testified that she
    had seen Mr. Cleland on the lawn at the house party and had learned his
    identity from photographs on social media. Three police officers involved in
    Mr. Clelands arrest identified him in court as the person they arrested. None
    of the witnesses to the fight in which Mr. Wotton was injured purported to identify
    Mr. Cleland prior to trial or in court. The case against Mr. Cleland was built
    on descriptions provided by Mr. Zaduban, Mr. Redmond, and Mr. Wotton, and Mr.
    Clelands condition and appearance when arrested.

[14]

When Mr. Zaduban described the fight, he
    testified that after Mr. Wotton punched Mr. Karshe, Mr. Karshes whole group
    went after Mr. Wotton really quickly. He said the members of the group were
    punching and kicking Mr. Wotton. When asked if anybody from Mr. Karshes group
    was not involved, he said, Its hard to say, cause its a blur, but it felt
    like the whole group was attacking [Mr. Wotton].

[15]

He also testified that he remembered three of
    the people who were kicking Mr. Wotton, including a white guy with a man-bun,
    wearing a white shirt with blood on it, who seemed pretty average height, Id
    say 511, 510, 511. When asked where the blood was on this mans shirt,
    he said, Its on his left side of his torso, and he agreed it was on the
    mans pec.

[16]

Mr. Zaduban testified that he saw the blood when
    the man was right beside him, kicking Mr. Wotton. When confronted with his
    earlier statement that he had observed the blood on the man wearing his hair in
    a bun when he first encountered the group, he said he could not remember when
    he first saw the blood, but agreed that he had been attempting to be truthful
    in that statement and that his memory was fresher at the time.

[17]

Mr. Redmond testified that shortly after Mr.
    Karshe and Mr. Wotton began fighting, the rest of their group starts punching
    [Mr. Wotton]. He remembered three of the people in Mr. Karshes group,
    including a white male, about 58, with a white t-shirt and long, brown hair
    in a bun. When asked why he remembered these three men, he explained that they
    were the most aggressive and were punching and kicking Mr. Wotton.

[18]

Mr. Wotton testified that after meeting Mr. Karshes
    group, and before the fight began, he recognized a guy from the party that had
    a man-bun, and a light shirt. He also testified that while he was fighting
    Mr. Karshe, Mr. Karshes group all rush in and jump me. He said he could not
    see specifically who was punching and kicking him, but he said, I have a
    specific recollection of all members of their party coming in.

[19]

The jury ultimately found both Mr. Karshe and
    Mr. Cleland guilty of aggravated assault.

WAS THE VERDICT UNREASONABLE?

[20]

Mr. Cleland argues that the verdict of guilty against
    him was unreasonable. He argues that the inculpatory evidence is so unreliable
    that guilt is not a verdict that a properly instructed jury, acting judicially,
    could have rendered. He urges that when the evidence is reviewed and weighed through
    the lens of judicial experience, the verdict can be seen to be flawed in light
    of the unreasonable result that it produced:
R. v. Biniaris
, 2000 SCC
    15, [2000] 1 S.C.R. 381, at paras. 39-40.

[21]

In his argument, Mr. Cleland focused on six
    flaws in the evidence: (1) each witness was under the influence of alcohol; (2)
    Mr. Zaduban, Mr. Redmond, and Mr. Wotton had each misidentified Mr. Adjei as
    present that evening, and were therefore demonstrated to be unreliable
    identification witnesses; (3) these three witnesses were friends who had
    discussed the case; (4) the fight was brief and chaotic and these three
    witnesses were involved, compromising their opportunity to observe who else was
    involved in the fight; (5) Mr. Zadubans description of his memories as a blur
    with flashes or impressions shows his evidence to be unreliable; and (6) the
    evidence of the blood on Mr. Clelands shirt is neutral because evidence shows
    that the blood came from Mr. Karshe, and Mr. Clelands shirt may well have been
    stained from the injury Mr. Karshe had sustained during the house party
    altercation, before the fight in which Mr. Wotton was injured.

[22]

We would dismiss this ground of appeal.

[23]

There was ample, reliable evidence that Mr.
    Cleland was part of Mr. Karshes group at the time of the fight in which Mr.
    Wotton was injured, a fact that was conceded before us. Based on the evidence
    of Mr. Zaduban, Mr. Redmond, and Mr. Wotton, the jury could reasonably have
    found that all members of Mr. Karshes group, including Mr. Cleland, joined in
    the assault on Mr. Wotton, which led, foreseeably, to his aggravated injuries.
    On that basis alone, there was sufficient evidence to support the conviction.

[24]

Moreover, there was circumstantial evidence that
    would permit a jury to reasonably conclude beyond a reasonable doubt that Mr.
    Cleland was the assailant with his hair in a bun described by Mr. Zaduban and
    Mr. Redmond. Mr. Cleland was known to be present during the fight, he fit the
    description of the assailant, including wearing his hair in a bun, and he
    proved to have blood on his shirt in the very location that Mr. Zaduban described.
    That bloodstain evidence is not neutral, regardless of its source or when that
    stain occurred. Its relevance as identification evidence derives from the
    improbability that both the assailant and Mr. Cleland would have similar stains
    on their shirts and be in the same general area at the same time.

[25]

Further, when Mr. Cleland was arrested nearby,
    shortly after the fight, his appearance indicated that he had been involved in a
    recent altercation, most likely outdoors.

[26]

We are not of the view that the flaws that Mr.
    Cleland identifies in the incriminating evidence furnished by Mr. Zaduban, Mr.
    Redmond, and Mr. Wotton are significant enough that judicial experience would
    require its rejection, particularly given that Mr. Cleland proved to have blood
    on his shirt exactly where Mr. Zadubans evidence indicated it would be. The
    trial judge in his careful charge, with the assistance of defence counsel, alerted
    the jury to each of the material challenges to the credibility and reliability
    of these witnesses, and assisted the jury in understanding their evidence. It
    was for the jury to decide whether to accept the evidence and to determine
    whether the circumstantial case against Mr. Cleland proved his guilt beyond a
    reasonable doubt. We are far from persuaded that the jury verdict was beyond
    the reasonableness limit:
R. v. Lira
, 2017 ONCA 214, at para. 7.

DID THE TRIAL JUDGE MISDIRECT THE JURY?

[27]

Mr. Cleland argues that the trial judge
    misdirected the jury by providing a misleading picture of the identification
    evidence. The police officers involved in Mr. Clelands arrest identified Mr.
    Cleland in court. Ms. Gluek testified that she saw Mr. Cleland on the lawn at
    the house party and later identified him from photographs she viewed on social
    media. None of the witnesses to the fight in which Mr. Wotton was injured
    purported to identify Mr. Cleland. Mr. Cleland contends that the trial judge
    failed to point this out in his charge, instead treating both categories of
    witnesses  those who identified Mr. Cleland as Mr. Cleland, and those who
    merely gave descriptions of an assailant wearing his hair in a bun  the same,
    creating the real risk that the jury would be misled into believing that there
    was evidence that Mr. Cleland had been identified as having been involved in
    the fight. He says that, as a result, the jury charge was misleading and did
    not leave the jury with a sufficient understanding of the facts as they relate
    to the relevant issues:

R. v. Jacquard
, [1997] 1 S.C.R. 314, at
    para. 14.

[28]

Mr. Cleland relies specifically on two passages
    from the jury charge.

[29]

First, when summarizing the Crown position, the
    trial judge recounted the Crown submission that Mr. Cleland was identified by
    his matching the description at the time of his arrest of one of the
    participants in the fight, by his condition upon arrest, and by the place of
    his arrest. The trial judge then continued, In addition to this strong
    uncontradicted evidence of identity, Mr. Cleland was identified in dock or in
    court by several Crown witnesses.

[30]

Mr. Cleland appears to be suggesting that this
    passage elides the descriptive evidence and the identification evidence,
    obscuring the important distinction between these two kinds of proof.

[31]

Second, when summarizing specific shortcomings
    in the Crowns evidence, the trial judge said:

Ten, certain of the witnesses made in court
    identifications of Theo Cleland and Hussein Karshe. In court identification
    occurs when a witness identifies an accused person during the trial in the courtroom.
    It is well established in the law that in court identification is to be given
    negligible, if any, weight.

Eleven, in addition to the four eyewitnesses
    to the altercation on University Avenue that I referred to, there was another
    witness, Rachel Gluek, who offered identification evidence. She identified Theo
    Cleland as having been among the group that had attempted to gain entry to the
    party on the lawn afterwards. Her identification of Theo Cleland derived from
    an observation of a photograph posted on Facebook. No photos supporting
    identification of Theo Cleland were provided to police and identification on
    Facebook deprived the police of the opportunity to conduct a photo line-up with
    the various witnesses to support a positive identification. Moreover, Rachel
    Glueks description of Theo Clelands hairstyle when she observed him on the
    lawn differed from other witnesses. She confirmed that the individual she
    identified did not have a ponytail or a man-bun.

[32]

As indicated, Ms. Gluek testified to seeing Mr.
    Cleland on the lawn at the house party. Mr. Cleland contends that, together,
    points ten and eleven, above, once again obscure the distinction between
    witnesses who identified Mr. Cleland and those who merely described the
    assailant.

[33]

We would dismiss this ground of appeal, as well.
    The jury would not have been misled by the jury charge. The trial judge drew a
    clear distinction in his charge between descriptive evidence and identification
    evidence.

[34]

The trial judge began his charge relating to the
    issue of identity by explaining the risks of eyewitness identification and
    how it is to be evaluated. He made clear in his comments that eyewitness
    identification evidence involves observations and descriptions. The trial judge
    then identified the four witnesses who gave eyewitness evidence relating to the
    incident, namely, Mr. Wotton, Mr. Redmond, Mr. Zaduban, and Ms. DAmelio. At no
    time did he suggest that they had identified Mr. Cleland as the bun-wearing
    assailant.

[35]

In point ten, quoted above, the trial judge
    defined in-court identification evidence as occurring when a witness
    identifies an accused person during the trial in the courtroom. In this way,
    he equipped the jury to identify who the in-court identification witnesses
    were. It would have been apparent to the jury, applying that definition, that
    none of the witnesses to the fight were in-court identification witnesses.

[36]

Nor would the jury have been confused by the
    description of Ms. Gluek as an eyewitness who offered identification evidence,
    in point eleven, quoted above. It was not inaccurate to describe Ms. Gluek in
    this way. As the impugned passage makes clear, Ms. Gluek identified Mr. Cleland
    in the circumstances described, and she also gave eyewitness evidence relevant
    to his identification as having been at the house party. Given the clear
    description by the trial judge of the nature of the evidence given by the
    eyewitnesses to the fight in which Mr. Wotton was injured, we see no realistic
    risk that the way he described Ms. Glueks evidence would cause the jury to
    mistakenly believe that Mr. Cleland had been identified by witnesses as having
    participated in the fight.

[37]

Finally, no objection on this issue was taken to
    the charge. Although we take Mr. Clelands point that Mr. Cleland would have
    received no tactical benefit from a charge that created confusion about whether
    eyewitnesses to the incident had identified him in court, the failure to object
    says something about both the overall accuracy of the jury instructions and
    the seriousness of the alleged misdirection:
Jacquard
, at para. 38.

[38]

We are satisfied that the charge as a whole
    enabled the trier of fact to decide the case according to the law and the
    evidence:
R. v. Calnen
, 2019 SCC 6, [2019] 1 S.C.R. 301, at para. 8.

CONCLUSION

[39]

Mr. Clelands appeal is dismissed.

J.C. MacPherson J.A.
P. Lauwers J.A.
David M. Paciocco J.A.