COURT OF APPEAL FOR ONTARIO

CITATION: Fairfield Sentry Limited v. PricewaterhouseCoopers
    LLP, 2018 ONCA 696

DATE: 20180824

DOCKET: C64006

Benotto, Brown and Miller JJ.A.

BETWEEN

Fairfield Sentry Limited, Fairfield Sigma
    Limited, Fairfield Lambda Limited and Kenneth Krys, as Liquidator for Fairfield
    Sentry Limited and Fairfield Sigma Limited and Fairfield Lambda Limited

Plaintiffs (Appellants)

and

PricewaterhouseCoopers LLP and Stephen Wall

Defendants
    (Respondents)

Peter F.C. Howard, Patrick O'Kelly and Aaron L. Kreaden,
    for the appellants

Gerald L.R. Ranking, Sarah J. Armstrong and Kimberly
    Potter, for the respondents

Heard: April 19, 2018

On appeal from the order of Justice Frank Newbould of the
    Superior Court of Justice, dated June 14, 2017, with reasons reported at 2017
    ONSC 3447, 48 C.B.R. (6th) 209.

BROWN J.A.:

I.

OVERVIEW

[1]

This appeal concerns an auditors liability action that arose out of the
    Ponzi scheme orchestrated by Bernard L. Madoff through his company, Bernard
    L. Madoff Investment Securities LLC (BLMIS). Investors who deposited funds
    with BLMIS thought their money was being invested in securities or other
    assets. It was not. Madoffs scheme was a fraud, which ran for some 20 years.
    It was only revealed on December 11, 2008 by Mr. Madoffs own confession.

[2]

The appellants, Fairfield Sentry Limited (Sentry), Fairfield Sigma
    Limited (Sigma), and Fairfield Lambda Limited (Lambda) (collectively, the
    Funds), invested in BLMIS. Sentry invested directly. Sigma and Lambda were
    feeder funds, indirectly investing in BLMIS through Sentry. The Funds were
    incorporated in the British Virgin Islands (BVI).

[3]

PricewaterhouseCoopers LLP audited the Funds financial statements for the
    years ending December 31, 2006 and December 31, 2007.

[4]

The Funds are in liquidation. By their BVI court-appointed Liquidators
    (the Liquidators), they have brought this action seeking damages from
    PricewaterhouseCoopers LLP and one of its partners, Stephen Wall (collectively
    PwC), asserting that PwC breached its contract and/or was negligent in
    performing the audits of the Funds financial statements for those two years.

[5]

Madoffs fraud was revealed publically on December 11, 2008. Shortly
    thereafter, BLIMIS was put into liquidation under the United States
Securities
    Investor Protection Act of 1970,
15 U.S.C. § 78aaa-78lll

(the
    SIPA). A court appointed Mr. Irving Picard (the SIPA Trustee) as trustee
    for the SIPA liquidation.

[6]

The Liquidators allege PwC should have uncovered Madoffs Ponzi scheme
    no later than April 24, 2007, when it delivered the Funds audited 2006
    financial statements. Because PwC did not do so, the Funds remained invested in
    BLMIS, as a result of which they contend they suffered damages of approximately
    $2.5 billion.

[7]

PwC moved for summary judgment dismissing the action on the basis that
    the Funds had not suffered any damages. For purposes of the motion, liability
    was assumed. The only issue was whether there was a genuine issue regarding
    damages that required a trial.

[8]

The motion judge granted summary judgment and dismissed the action. He
    applied the approach to calculating damages set out by this court in
Livent
    Inc. v. Deloitte & Touche
, 2016 ONCA 11, 128 O.R. (3d) 225; appeal
    allowed in part, 2017 SCC 63. He accepted the evidence of the damages expert
    tendered by PwC, Dr. M. Laurentius Marais. Applying the
Livent
methodology to that and other evidence, the motion judge concluded that the Funds
    had not suffered any damages and there was no genuine issue regarding damages
    that required a trial.

[9]

The Liquidators submit the motion judge erred in arriving at that
    conclusion. They advance five grounds of appeal, which involve findings made by
    the motion judge either in respect of questions of fact or mixed fact and law.
    Four of the grounds of appeal concern findings the motion judge made about
    certain elements of his
Livent
damages calculation. The other ground
    of appeal contends the motion judge erred in drawing adverse inferences against
    the Funds on certain issues.

[10]

The
    Liquidators argue the motion judge made palpable and overriding errors in
    respect of each ground of appeal. They contend that if they succeed on any one
    of the four grounds of appeal concerning the calculation of damages, then a
    genuine issue requiring a trial on damages arises, the order of the motion
    judge should be set aside, and the action should proceed to trial.

[11]

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

[12]

I
    will consider first: (i) the standard of review; (ii) the creation of the
    evidentiary record below; and (iii) whether the motion judge erred by
    improperly drawing an adverse inference against the Funds. I will then deal
    with each of the four additional grounds of appeal concerning the calculation
    of damages under the
Livent
methodology: (i) the motion judges
    treatment of the Funds withdrawal of $1.03 billion from BLMIS; (ii) his
    treatment of the non-forbearance amounts of judgments consented to by the Funds
    in favour of the SIPA Trustee; (iii) his treatment of actual and constructive
    fraudulent conveyance liabilities and investors liabilities; and (iv) his
    description, in para. 65 of his reasons, of the investor liabilities line
    item as a net increase in liabilities.

II.

THE STANDARD OF REVIEW

[13]

Absent
    an error of law, the exercise of powers under r. 20 of the
Rules of Civil
    Procedure
attracts deference. The motion judges determination, based on
    the exercise of his fact-finding powers under r. 20.04(2.1), as to whether
    there is a genuine issue requiring a trial involves a question of mixed fact
    and law. Where there is no extricable error in principle, findings of mixed
    fact and law should not be overturned absent palpable and overriding error:
Hryniak
    v. Mauldin
, 2014 SCC 7, [2014] 1 S.C.R. 87, at para. 81. Palpable and
    overriding error also is the standard of review for findings or inferences of
    fact:
Benhaim v. St-Germain
, 2016 SCC 48, [2016] 2 S.C.R. 352, at
    para. 36.

[14]

A
    highly deferential standard of review, palpable and overriding error means an
    error that is obvious and goes to the very core of the outcome of the case. In
    the language of the metaphors approved by the Supreme Court of Canada in
Benhaim
,
    a palpable and overriding error is in the nature not of a needle in the
    haystack, but of a beam in the eye; it does not involve pulling at leaves and
    branches, leaving the tree standing, instead the entire tree must fall: at
    paras. 38-39.

III.

THE EVIDENTIARY RECORD

[15]

By
    the time of the hearing of the summary judgment motion, the parties were
    proceeding on the basis that the method for assessing whether the Funds
    suffered any damages by reason of PwCs alleged negligence was that set out in
    the decision of this court in
Livent
, at paras. 62 and 63: Loss (L) =
    Actual Liquidation Deficit (ALD)  Estimated Liquidation Deficit (ELD) or, L =
    ALD  ELD.

[16]

In
    the present case, the date for calculating the Actual Liquidation Deficit would
    be December 11, 2008, when Madoffs fraud was revealed. The date for the
    Estimated Liquidation Deficit would be April 24, 2007, the date PwC delivered
    its audit for the Funds 2006 financial year.

[17]

Both
    parties adduced evidence on the issue of the losses allegedly sustained by the
    Funds. It is important to understand the substance of that evidence as it
    unfolded through the parties various filings.

PwCs initial evidence filing: November 2015

[18]

In
    its notice of motion for summary judgment, PwC alleged the Funds did not suffer
    any damage as they had gained and recovered a net value of $1.03 billion from
    BLMIS between the EDL and ADL dates.

[19]

By
    way of supporting evidence, PwC filed an affidavit from Stephen Wall, a PwC
    partner, as well as one from Dr. Marais, whom the motion judge accepted as
    qualified to provide expert evidence on the determination of damages.

[20]

In
    his first affidavit, Dr. Marais opined that the Funds had not suffered any
    damages because they withdrew more from BLMIS between the ELD date and ALD date
    than they had put in.

[21]

I
    would note that the Funds did not appeal the motion judges acceptance of Dr.
    Marais as an expert witness. The notice of appeal did state that the motion
    judge erred by uncritically accepting the evidence of the Respondents expert,
    Dr. Marais, who was not qualified to provide his opinion to the Court. However,
    apart from the occasional comment regarding Dr. Marais lack of accounting
    credentials, the Funds did not otherwise canvass in written or oral argument the
    issue of the motion judges acceptance of Dr. Marais as a qualified expert.

The Liquidators responding evidence: April 2016

[22]

In
    response, the Liquidators filed affidavits from: (i) Mr. Kenneth Krys, one of
    the two joint Liquidators for each fund; (ii) Mr. Ian Ratner, a business
    valuator; and (iii) Mr. Michael Pompeo, a New York attorney.

[23]

Mr.
    Krys was not tendered as an expert witness. His affidavit contained, at para.
    62, a chart showing a comparative balance sheet calculation of the Funds net
    assets as of the ELD and ALD (the Krys Chart). He deposed that the difference
    between the amounts revealed a best estimate of the Funds damages in the
    amount of $2.508 billion.

[24]

Mr.
    Ratner was accepted as a valuation expert. As described by the motion judge,
    Mr. Ratner did not provide any independent analysis of the damage claim but
    did opine that Mr. Krys has applied the appropriate approach and methodology to
    quantify damages. Mr. Ratner also was critical of the approach to value used
    by Dr. Marais in his first affidavit: at paras. 39-40.

[25]

Finally,
    the Liquidators filed an affidavit from Mr. Pompeo, who provided expert opinion
    evidence on matters of United States insolvency law.

PwCs request for information

[26]

In
    May 2016, PwC requested that the Liquidators produce the documents upon which
    Mr. Krys relied to calculate the assets, liabilities, redemptions, and SIPA
    claims set out in his affidavit.

[27]

In
    his supplementary August 11, 2016 affidavit, Mr. Krys produced the requested
    information and updated some of the figures used in his initial calculation,
    including an updated Krys Chart. Mr. Krys revised his best estimate of the
    Funds damages to $2.422 billion.

PwCs reply evidence: November 2016

[28]

In
    reply, PwC filed a second affidavit from Dr. Marais. In it, Dr. Marais used the
    approach that Messrs. Krys and Ratner deposed was the proper one for
    calculating the Funds damages. Dr. Marais started his analysis with the Krys
    Chart, as revised (Marais Ex. C), and then broke down the liabilities shown
    on the Krys Chart into their constituent parts (Marais Ex. D), identified four
    pairs of offsetting asset and liability line items (Marais Ex. E), and then cancelled
    the offsetting pairs and explained why he would disallow other line items as
    unsupported (Marais Ex. F). Dr. Marais concluded that the Funds liquidation
    deficit had decreased, not increased, between the ELD date and the ALD date,
    with the result the Funds had not suffered a loss.

[29]

PwC
    also filed an affidavit from Mr. Robert Gerber, a retired United States
    Bankruptcy Judge, who opined on issues of U.S. insolvency law.

2017 evidence

[30]

Mr.
    Krys was cross-examined on March 6, 2017. At the start of the cross-examination,
    the Liquidators tendered a revised chart prepared by Mr. Krys (hereafter Krys Ex.
    3). The major change Krys Ex. 3 made to the initial Krys Chart was altering
    the basis for calculating the liability line item, Madoff Investors. This
    change will be discussed below in the section dealing with the third ground of
    appeal concerning the judgments the Funds consented to in favour of the SIPA
    Trustee. In Krys Ex. 3, Mr. Krys revised his calculation of the Funds loss to
    $2.577 billion.

[31]

In
    response, about two weeks later PwC filed a second affidavit from Mr. Gerber in
    which he opined on U.S. legal issues raised by Krys Ex. 3.

[32]

The
    Liquidators cross-examined Dr. Marais on March 28, 2017; they cross-examined
    Mr. Gerber on March 31, 2017.

[33]

The
    Liquidators did not file any expert evidence to challenge Dr. Marais critique
    of Mr. Krys calculations. Nor did they file a further affidavit from Mr. Krys.

[34]

As
    this chronology of the evidentiary filings discloses, the damages theory first
    advanced by PwC in its notice of motion quickly shifted to the use of the
Livent
methodology, as propounded by the Liquidators. In the result, the motion judge
    decided whether a genuine issue regarding damages requiring a trial existed by
    applying the
Livent
methodology to the comparative liquidation deficit
    framework advanced by Mr. Krys in his various charts, as broken down and
    critiqued by Dr. Marais, and supplemented by the legal opinions of Mr. Gerber.

IV.

FIRST GROUND OF APPEAL: THE MOTION JUDGE MADE AN IMPROPER ADVERSE
    INFERENCE

[35]

The
    Liquidators did not file evidence replying to the critiques of the Krys charts
    made by Dr. Marais and Mr. Gerber. The Liquidators submit the motion judge
    erred when considering the significance of the absence of such evidence. They contend
    the motion judge improperly drew an adverse inference against the Liquidators for
    not seeking the courts permission to file sur-reply evidence, thereby failing
    to put their best foot forward on a summary judgment motion. According to the Liquidators,
    since the
Rules of Civil Procedure
did not permit them to file
    evidence responding to the second affidavits of Dr. Marais and Mr. Gerber as
    of right, it was inappropriate for the trial judge to hold their failure to do
    so against them. As well, the Liquidators contend the motion judge failed to
    consider whether additional evidence from them was necessary to address the
    issue on the motion. In their view, the record as it stood did not eliminate the
    possibility that the Liquidators could recover damages, so the motion judge
    could not grant summary judgment.

[36]

I
    am not persuaded by these submissions.

[37]

First,
    the motion judges reasons disclose that he did not make any adverse finding of
    fact against the Liquidators by reason of the absence of evidence responding to
    the second affidavits of Dr. Marais and Mr. Gerber. At one point in his reasons
    the motion judge did observe that the Liquidators had not adduced adequate evidence
    explaining certain issues, such as the inclusion of phantom profits in calculating
    the Funds liabilities to its investors: at paras. 80-82 and 85. He described
    that as a failure to put their best foot forward on those issues. The motion
    judge did not draw any adverse inference of fact against the Liquidators. He
    simply observed that certain arguments advanced by the Liquidators lacked
    evidentiary support.

[38]

Second,
    the Liquidators have no basis to complain that as part of his analysis the
    motion judge took into account the absence of evidence, expert or otherwise,
    responding to the critique by Dr. Marais of the Krys Chart or to Mr. Gerbers
    second affidavit. This was a Commercial List proceeding, case managed by the
    motion judge. Great flexibility is available in Commercial List proceedings to
    ensure the fairness of the ultimate hearing. If the Liquidators had wanted to
    file evidence responding to the detailed critique performed by Dr. Marais in
    his second affidavit or Mr. Gerbers evidence, notwithstanding that they had
    already conducted cross-examinations, all they had to do was ask the motion
    judge for leave: r. 39.02(2). In para. 36 of his reasons, the motion judge stated
    what his answer would have been to such a request:

It is said on behalf of the Liquidators that they had no right
    to file further affidavits under the rules because they had cross-examined on
    affidavits filed by PwC. I do not accept that. In the Commercial List, the
    right to file further affidavit material after cross-examinations is routine
    and had the Liquidators sought that right, I would no doubt have granted it to
    them.

[39]

Accordingly,
    I see no error in the motion judges treatment of this issue nor any procedural
    unfairness to the Liquidators from the motion judges conduct of the summary
    judgment motion. I would not give effect to this ground of appeal.

V.

SECOND GROUND OF APPEAL: THE Motion Judges treatment of the $1.03
    Billion at line 7.4 of the deconstructed Krys chart

[40]

The
    Liquidators submit the motion judge made a palpable and overriding error of
    fact by treating the Funds net withdrawal of $1.03 billion from BLMIS between
    the ELD and ALD as a benefit to the Funds and then using that amount to
    eliminate the Funds damages.

A.

The
    evidence

[41]

Assessing
    this ground of appeal requires an understanding of the multi-step approach the
    motion judge used when analyzing the evidence within the framework of the
Livent
methodology.

[42]

In
    his first affidavit, Dr. Marais opined that the Funds had realized a net gain
    on their investments between the ELD and ALD because during that period of time
    the Funds withdrew $1.03 billion more from BLMIS than they had invested in
    BLMIS over the same period.

[43]

Mr.
    Ratner criticized that methodology as inappropriate and incomplete because it
    failed to consider the losses related to all assets and liabilities of the
    Funds between April 2007 and December 2008. Instead, Dr. Marais improperly focused
    solely on the net change in investments and redemptions in BLMIS, which was
    only one component of the Funds total assets and liabilities.

[44]

Mr.
    Ratner stated that the appropriate methodology was that used by Mr. Krys, which
    compared the estimated liquidation deficit of the Funds on the ELD date with
    the actual liquidation deficit on the ALD date.

[45]

In
    his second affidavit, Dr. Marais accepted and applied the methodology used by
    Mr. Krys. The motion judge dealt with the motion on the basis, without
    deciding, that the damages calculation methodology used by Mr. Krys was the
    appropriate one: at para. 40.

[46]

The
    motion judge summarized his findings of fact on a chart contained at para. 86
    of his reasons (the Findings Chart). That chart had its genesis in the Krys
    Chart: at para. 48. As the motion judge observed, Dr. Marais broke down the
    figures on the Krys Chart into their constituent components on Marais Ex. D.
    The motion judge stated: [Dr. Marais] was not cross-examined on his breakdown
    and I accept it: at para. 66.

[47]

Using
    the deconstructed Krys Chart, the motion judge then considered adjustments made
    by Dr. Marais to the Krys Chart, as set out in Marais Exs. E and F. The motion
    judge gave clear, detailed reasons why he preferred the evidence of Dr. Marais
    over that of Mr. Krys on many points. He accepted Dr. Marais conclusion that,
    once proper adjustments were made to the Krys Chart, it showed the Funds were
    better off by some $857.5 million as between the ELD and ALD. The motion judge
    showed the mechanics of that analysis in his Findings Chart. Accepting the
    accuracy of the figures displayed on the Findings Chart, the motion judge
    concluded that the Liquidators had not established any damages. As a result,
    there was no genuine issue regarding damages that required a trial.

B.

Analysis

[48]

The
    Liquidators submit the motion judge erred in his treatment of the $1.03 billion
    entry at line 7.4, column (e), on his Findings Chart, under the Funds liabilities
    to its own investors: BLMIS holdings: Sentry net equity. The motion judge
    took that amount into account in conducting his comparative liquidation deficit
    analysis. The Liquidators submit he erred in so doing. In their factum they
    characterize the error as a palpable and overriding error of fact; during oral
    argument, their counsel described it as an error of law. On either
    characterization, I am not persuaded the motion judge erred.

[49]

It
    is clear from Marais Exs. C, D and E that line 7.4 traces its origins back to
    the single, aggregated line 7  Funds investors - on the initial Krys Chart. In
    his first affidavit, Mr. Krys explained that the Funds investors line item
    estimated the Funds liability to their own investors (not to third party
    investors in BLMIS). The figures he set out at the ELD and ALD dates showed the
    balance outstanding to investors in the Funds.

[50]

As
    mentioned, Dr. Marais took the aggregated line 7 figures for Funds investors
    in the Krys Chart and, using the information provided by Mr. Krys in response
    to PwCs request for production, broke them down into their constituent
    elements, including row 7.4. The motion judge specifically noted that Dr.
    Marais had accepted the entry at line 7.4 - BLMIS holdings: Sentry net equity
    - for a gain of $1.03 billion between the ELD and ALD: at para. 67.

[51]

The
    Liquidators cross-examined Dr. Marais on his two affidavits. However, that
    cross-examination did not involve questioning Dr. Marais on how he had deconstructed
    the Krys Chart  specifically, line 7 of the liabilities, Funds investors
    or how, as part of that deconstruction, he had arrived at the net figure of
    $1.03 billion shown on line 7.4 of Marais Ex. D. Nor was Dr. Marais cross-examined
    on how he ultimately treated the deconstructed $1.03 billion amount, in the light
    of other adjustments he made to the deconstructed Krys Chart, to arrive at his
    ultimate opinion that the Funds suffered no actual harm by reason of PwCs
    conduct. From the submissions made at the hearing of the appeal, it is clear
    that the absence of such cross-examination was a tactical decision made by the
    Liquidators.

[52]

Further,
    the Liquidators produced Krys Ex. 3 - a revised chart comparing the Funds
    balance sheets at the ELD and ALD dates - at the start of PwCs
    cross-examination of Mr. Krys, which was some three weeks before the
    Liquidators cross-examination of Dr. Marais. Krys Ex. 3 did not employ the
    deconstructed line items used by Dr. Marais on Marais Ex. D. Instead, Mr. Krys
    continued to present the ELD and ALD figures on the aggregated basis used in
    his initial Krys Chart.

[53]

Two
    comments follow from the Liquidators reliance on Krys Ex. 3. First, the net
    change of approximately $172 million in line 7 Investors Liabilities between
    the ELD and ALD shown on the initial Krys Chart  which Dr. Marais broke down
    into its constituent elements  was not removed by Mr. Krys in his Krys Ex. 3.
    This would suggest that Mr. Krys considered it appropriate to continue to
    include the embedded $1.03 billion line item 7.4 in the comparative liquidation
    deficit analysis. Second, at the start of Mr. Krys cross-examination the
    Liquidators could have filed a revised Krys Chart that responded to or modified
    the line item break downs performed by Dr. Marais, including the $1.03 billion.
    They chose not to do so.

[54]

The
    Liquidators did not file any evidence, from an expert or Mr. Krys, critiquing
    Dr. Marais deconstruction of and adjustments to the Krys Chart. Nor did they file
    any reply evidence countering the opinion of Dr. Marais that, in effect, the
    application of the
Livent
comparative liquidation deficit methodology
    to the values shown in the various rows on the deconstructed Krys Chart did not
    give rise to a genuine issue about damages requiring a trial.

[55]

In
    flagging this absence of evidence from the Liquidators, I am not suggesting
    that the Funds bore the ultimate burden of demonstrating the existence of a
    genuine damages issue requiring a trial. They did not. On a motion for summary
    judgment, the ultimate burden remains on the moving party to demonstrate that no
    genuine issue requiring a trial exists. However, on a motion for summary
    judgment a responding party runs significant litigation risk if it leaves
    unchallenged key evidence of the moving party adduced to establish there is no
    genuine issue requiring a trial.

[56]

Given
    the state of the record before him, I see no palpable and overriding error by
    the motion judge in including the $1.03 billion shown on line 7.4 of his Findings
    Chart in his comparative liquidation deficit analysis. The motion judge worked in
    a most transparent way with the evidentiary record placed before him by the
    parties. The starting point of his analysis on this issue was the evidence of
    the Liquidators, as then broken down by Dr. Marais in a manner that was not
    challenged by the Liquidators. Accordingly, his ultimate findings of fact, including
    the $1.03 billion at line 7.4, column (e), of his Findings Chart, were supported
    by the record and based on the comparative liquidation date framework for
    calculating damages advanced by the Liquidators in their evidence.

VI.

THIRD GROUND OF APPEAL: THE MOTION JUDGES TREATMENT OF THE
    NON-FORBEARANCE JUDGMENT AMOUNTS

A.

The issue
    stated

[57]

The
    Liquidators submit the motion judge committed a palpable and overriding error
    in his treatment of the amounts set out in certain judgments the Funds
    consented to in favour of the SIPA Trustee.

[58]

This
    ground of appeal brings into play two matters: (i) the key change made to the
    initial Krys Chart by the updated Krys Ex. 3 chart produced by the Liquidators
    at the start of Mr. Krys cross-examination; and (ii) the meaning and effect of
    the judgments granted by the Funds in favour of the SIPA Trustee as part of the
    May 9, 2011 Settlement Agreement reached between them (the Settlement
    Agreement).

The major change contained in Krys Ex. 3

[59]

In
    his initial Krys Chart, Mr. Krys included, at line 6, amounts for liabilities
    to Madoff investors. In his first affidavit, Mr. Krys described that
    liability as the recognition of potential claims by other investors in BLMIS
    against the Funds, under U.S. and state insolvency and avoidance law, to
    recover redemption payments made by BLMIS to Sentry. The figures at line 6
    represented Mr. Krys estimate of what he described as the Funds actual and
    constructive fraudulent conveyance liabilities to BLMIS investors for the
    six-year avoidance claw back periods prior to the ELD and ALD.

[60]

In
    his second affidavit, Dr. Marais broke line 6 down into two sub-lines. The
    first, line 6.1, set out Mr. Krys estimate of the liabilities of the two
    feeder funds, Sigma and Lambda, to the other investors in BLMIS. Dr. Marais
    opined that the inclusion of those amounts was a form of double-counting and he
    removed the amounts from his analysis.

[61]

The
    second sub-line, line 6.2, set out the estimate by Mr. Krys of Sentrys potential
    liability to other BLMIS investors for redemptions Sentry received from BLMIS during
    the avoidance claw back periods. Dr. Marais opined that those amounts should
    not be included in the analysis for two reasons. First, no such claim by
    another BLMIS investor had been documented notwithstanding that seven years had
    passed since the revelation of Madoffs fraud. Second, Dr. Marais understood
    from counsel that the applicable statutes of limitations bar any such claim
    from being asserted now or in the future.

[62]

In
    the result, Dr. Marais valued the Krys Charts line 6 liability at zero for
    purposes of the
Livent
methodology.

[63]

The
    first affidavit of Mr. Gerber, sworn around the same time as the second Dr.
    Marais affidavit, expressed opinions on matters of U.S. insolvency law and
    state avoidance law. In respect of the Krys Charts line 6 liability of the
    Funds to other BLMIS investors, Mr. Gerber made two main points. First, he
    pointed out that no BLMIS investor actually had asserted any fraudulent
    conveyance claim against the Funds and the limitation period for such claims
    had passed. Second, he stated, at para. 103 of his first affidavit:

[B]ack in December 2011, the SIPA Trustee assumed the necessary
    standing to assert Avoidance Action claims on behalf of the BLMIS estate. Those
    claims thereupon ceased to belong to individual BLMIS creditors, and individual
    BLMIS creditors thereupon lost standing to bring them. They still lack standing
    to bring them. At least unless and until a trustee abandons those claims to
    individual creditors, they belong only to the trustees estate, and creditors
    lack the power and standing to assert them.

[64]

Three
    months later Mr. Krys attended for cross-examination. As mentioned, just prior
    to the start of the cross-examination the Liquidators produced a revised Krys
    Chart, the Krys Ex. 3. The primary change made by Krys Ex. 3 was to the source
    for calculating the line 6 liability of the Funds to Madoff investors. Mr. Krys
    initially estimated the Funds potential liability for actual and constructive
    fraudulent conveyance claims that Madoff investors could bring. However, in Krys
    Ex. 3 he discarded his estimate of potential claims and replaced it with the
    actual amounts of the judgments in favour of the SIPA Trustee to which the
    Funds had consented under the Settlement Agreement, to which I now turn.

The Settlement Agreement

[65]

Under
    the May 9, 2011 Settlement Agreement between the Liquidators and the SIPA Trustee,
    the Liquidators paid the SIPA Trustee $70 million. In addition, the Liquidators
    consented to three judgments in favour of the SIPA Trustee, one against each of
    the Funds (collectively, the Judgments). The amounts of the Judgments were,
    in U.S. dollars: Sentry judgment - $3.054 billion; Sigma judgment - $752
    million; Lambda judgment - $52.9 million. Although the SIPA Trustee agreed to
    forbear from collecting on a defined portion of the Sentry judgment, the
    Settlement Agreement resulted in non-forbearance amounts under the Judgments against
    each Fund.

[66]

As
    long as the non-forbearance amounts of the Judgments remain unsatisfied, the Settlement
    Agreement requires the Liquidators to pay to the SIPA Trustee specified
    portions of recoveries made by the Liquidators against third parties in what
    the Agreement defines as Redeemer Action Recoveries and Service Provider
    Claim Recoveries (collectively, the Judgment Reducing Recoveries). For
    example, s. 4 of the Settlement Agreement provides that as long as the
    non-forbearance amounts of the Judgments have not been satisfied, the
    Liquidators shall pay the SIPA Trustee 15% of the Liquidators net recoveries
    from the specified Redeemer Actions against third parties.

[67]

The
    Settlement Agreement limits the right of the SIPA Trustee to enforce the
    Judgments against the Liquidators. The SIPA Trustee can only look to the
    Judgment Reducing Recoveries to reduce the non-forbearance amounts under the Judgments.

[68]

Shortly
    after the cross-examination of Mr. Krys at which the Funds tendered Krys Ex. 3,
    PwC filed a second affidavit from Mr. Gerber. That affidavit focused on Krys
    Ex. 3, including the revised charts reliance on the Judgments as the source
    for the line 6 liability of the Funds to Madoff Investors. Mr. Gerber expressed
    several opinions: (i) under the terms of the Settlement Agreement, the
    Judgments are not assignable, so only the SIPA Trustee can enforce them; (ii)
    the SIPA Trustee cannot get any distributions on account of the Judgments from
    the existing assets of the Funds but only from the agreed shared recoveries;
    (iii) the SIPA Trustee cannot execute or sue on the Judgments except in
    accordance with their terms as defined by the Settlement Agreement; and (iv)
    the Judgments effectively provide the means for determining when the SIPA
    Trustees entitlement to litigation recoveries under the sharing agreement will
    come to an end.

[69]

Mr.
    Gerber summarized his opinion at para. 41 of his second affidavit, where he
    stated:

Thus, with my knowledge of the U.S. bankruptcy law relating to
    the approval of settlements, and my ability to read an agreement, I cannot find
    the Judgments to be a basis for quantifying the liability of the Fairfield
    Funds to fellow BLMIS investors, or for providing a basis to collect over $3
    billion from PwC.

[70]

The
    Liquidators conducted a brief, 20-minute cross-examination of Mr. Gerber. They
    did not examine him on the opinions he expressed about the effect of the
    Settlement Agreement and Judgments. The Liquidators did not file evidence from
    an expert responding to or commenting on the opinions expressed by Mr. Gerber.

A.

Analysis

[71]

The
    Liquidators submit that the motion judge erred in eliminating the entire amount
    of the Judgments from the damages calculation. They argue in their factum that
    [t]he Judgments did not form part of Marais analysis, so the motion judges
    conclusion on this issue derives from his own interpretation of the Settlement
    Agreement and accounting of these numbers. The Liquidators contend he erred on
    both matters.

[72]

I
    do not accept this submission. I have described in the preceding section how
    the evidence on this issue unfolded and the state of the record before the
    motion judge. The motion judge followed the evidence and his finding was rooted
    in the evidence.

[73]

The
    motion judge summarized the nature of the Funds obligations arising under the
    Judgments in paras. 24 and 62 of his reasons:

The judgments were no ordinary
    judgments. They were subject to the Settlement Agreement which provided that
    part of the judgment against Sentry was forborne and not to be collected. The
    remainder of that judgment and the judgments against Sigma and Lambda were to
    be paid from amounts collected by the SIPA Trustee from third parties against
    whom claims had been made. In exchange, Sentry was granted an allowed claim in
    the SIPA proceeding in the amount of $230 million.

On a plain reading of the judgments and the Settlement
    Agreement, and as confirmed by Mr. Gerber, the judgments for the [non-]forbearance
    amount of the judgment against Sentry and the amounts of the judgments against
    Sigma and Lambda can only be satisfied from funds of third parties through the
    litigation to be pursued against those third parties. There can be no attempt
    to collect on those judgments from the Fairfield Funds or their Liquidators.

[74]

In
    these portions of his reasons, I see no misapprehension by the motion judge
    about how the Funds were to satisfy the non-forbearance amounts of the Judgments
    under the Settlement Agreement. His interpretation was grounded solidly in the
    language of the Settlement Agreement, Judgments, and evidence.

[75]

As
    I understand their submission, the Liquidators main quarrel is with what the
    motion judge wrote in the ensuing portion of para. 62 of his reasons:

Thus I agree with PwC that Mr. Krys erred in including in
    liabilities of the Fairfield Funds any liability of the Fairfield Funds or
    their Liquidators to the SIPA Trustee or to customers of BLMIS. This applies to
    both the ELD as at April 24, 2007 and the ALD as of December 11, 2008.

[76]

The
    Liquidators submit the motion judge erred in failing to treat the Funds
    obligations under the Judgments as a liability for purposes of the comparative
    ELD and ALD analysis using the
Livent
methodology. First, the Liquidators
    repeat the submission they made to the motion judge that since the non-forbearance
    amounts of the Judgments in favour of the SIPA Trustee would be liabilities on
    the Funds financial statements, those amounts should be treated as a loss
    for purposes of the
Livent
damages calculation, notwithstanding that
    the Settlement Agreement limits the obligation to repay those amounts to any
    recoveries the Funds obtains from third parties.

[77]

Second,
    at para. 69 of their factum, the Liquidators argue that since the Settlement
    Agreement requires the Liquidators to pay the SIPA Trustee some portion of
    their net recoveries from third parties until the non-forbearance amounts of
    the Judgments are satisfied  for example, 15% of Redeemer Action Recoveries  the
    Judgments constitute an actual liability of the Funds that must be included in
    the damage calculation.

[78]

The
    motion judge gave clear reasons for rejecting the Liquidators submission
    stating, at para. 63 of his reasons:

In argument, [counsel for the Funds] asserted that the amount
    of the judgments is an item on the Fairfield Funds balance sheets and whether
    they can be paid or not is irrelevant. I disagree.
First,
    there is no accounting evidence of any kind that a balance sheet at the
    relevant dates would include as a liability the judgments in this case in which
    no payments will come from the Fairfield Funds.
It would make little
    sense for a balance sheet to list a liability that did not have to be paid by
    the particular Fund. Moreover,
the formula in
    the Livent case was to take into account the actual losses (the
    Actual Liquidation Deficit or ALD) and the actual estimated loss, (the
    Estimated Liquidation Deficit or ELD)
, in that case involving losses on
    the sale of assets. In this case, the expert valuation expert for the
    Liquidators, Mr. Ratner, said the same thing, although in this case he said
    there are other things to be valued at the ALD and ELD dates, including the
    liabilities of the Fairfield Funds. What is to be garnered from the various
    calculations is the loss (or liquidation deficit) actually incurred and the
    loss (or liquidation deficit) estimated that would have actually occurred at
    the earlier date.
A loss is not some paper entry that
    bears no reality to what actually occurred.
[Emphasis added]

[79]

I
    see no reversible error in that conclusion. The motion judge correctly stated
    the damages formula approved by this court in
Livent
. The extent to
    which liabilities such as the Funds limited obligations under the
    non-forbearance Judgments would amount to an actual loss for the purpose of
    the
Livent
damages calculation turned on the evidence. As the motion
    judge noted: [T]here is no accounting evidence of any kind that a balance
    sheet at the relevant dates would include as a liability the judgments in this
    case in which no payments will come from the Fairfield Funds. It would make
    little sense for a balance sheet to list a liability that did not have to be
    paid by the particular Fund. That finding was firmly anchored in the
    evidentiary record, including the expert evidence of Mr. Gerber set out above
    in paras. 68-69.

[80]

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

VII.

FOURTH GROUND OF APPEAL: THE Motion Judges Treatment of OTHER LINE
    ITEMS

[81]

The
    Liquidators next argue the motion judge failed to consider the effect of what
    they contend was the improper removal of two line items from the Krys Chart, as
    reproduced at para. 81 of their factum: Actual and constructive fraudulent
    conveyance liabilities to Madoff Investors and Investors Liabilities.

[82]

I
    am not persuaded by this submission. It attempts to isolate certain line items
    without taking into account the motion judges multi-step analysis of the EDL/ADL
    comparison, as described in the preceding sections.

[83]

To
    repeat, the motion judge started his analysis with the appellants evidence
    the Krys Chart. The motion judge then accepted the deconstructed version of
    that chart adduced by Dr. Marais and explained, in considerable detail, his
    findings in respect of various line items on that chart. The Liquidators did
    not file expert or other evidence responding to Dr. Marais adjustment of the
    figures prepared by Mr. Krys or to Mr. Gerbers evidence about the Settlement
    Agreement and Judgments. It was open to the motion judge to prefer the evidence
    adduced by PwC, as long as he gave reasons for so doing that found support in
    the evidence. He did so. His Findings Chart was the result.

[84]

Accordingly,
    I see no palpable and overriding error by the motion judge on this issue.

VIII.

FIFTH
    GROUND OF APPEAL: The motion judges treatment of INVESTOR LIABILITIES

[85]

Finally,
    the Liquidators advance a further ground of appeal in respect of the motion
    judges treatment of Investor Liabilities. They argue the motion judge made a
    palpable and overriding error in describing, at para. 65 of his reasons, the
    change between the EDL and ADL Investor Liabilities line item as a net
    increase in liabilities.

[86]

I
    do not accept this submission. Instead, I accept the submission made by PwC at
    para. 64 of its factum as the proper way in which to understand the description
    used by the motion judge in his reasons:

While a reduction in the Fairfield Funds liabilities is a
    benefit, rather than a loss, the error is actually only one of terminology  It
    is clear that the Motion Judge did not misapprehend the evidence and correctly
    removed from Mr. Krys calculation non-existent liabilities (in respect of the
    Judgments), offsetting entries, entries that were double-counted and Fictitious
    Profits. Having done so, the Motion Judge correctly identified the gain in
    line 7.4 of [Marais] Exhibit F

[87]

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

IX.

DISPOSITION

[88]

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

[89]

Based
    on the agreement reached by the parties regarding the costs of the appeal, I
    would award PwC costs of $70,000, inclusive of disbursements and applicable
    taxes.

Released: DB Aug 24 2018

David Brown J.A.
I agree. M.L. Benotto J.A.
I agree. B.W. Miller J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Fontaine v. Canada (Attorney General), 2018 ONCA
    693

DATE: 20180823

DOCKET: C63804

Hoy A.C.J.O., Juriansz and Miller JJ.A.

BETWEEN

Larry Philip Fontaine, et al.

Plaintiffs

and

The Attorney General of Canada, et al.

Defendants/Respondents

In the Matter of the Request for Directions by
IAP Claimant H-15019
Pertaining to St. Annes Indian Residential School

Requestor/Appellant

In the Matter of the Request for Directions by
Edmund Metatawabin
and by IAP Claimant K-10106
Pertaining to St. Annes Indian Residential School

Requestors/Appellants

Proceedings under the
Class Proceedings Act
,
    1992, S.O. 1992, C.6

Margaret L. Waddell and Fay K. Brunning, for the
    appellants Claimant H15019, Claimant K-10106 and Edmund Metatawabin

Catherine A. Coughlan and Brent Thompson, for the
    respondent Attorney General of Canada

Peter C. Wardle, for the intervenor

Diane Soroka, David Schulze and Maryse Décarie-Daigneault,
    for the Independent Counsel

Heard: March 13, 2018

On appeal from the judgment of Justice Paul M. Perell of
    the Superior Court of Justice, dated April 24, 2017.

COSTS ENDORSEMENT

[1]

We have received and reviewed the submissions of the parties and
    Independent Counsel regarding the costs of the appeal.

[2]

Canada, which was successful on the appeal, does not seek costs against
    the appellants. Further, it has dropped its prior request that appellants
    counsel be ordered to pay costs personally.

[3]

Although unsuccessful on the appeal, the appellants seek costs against
    Canada on a partial indemnity scale. The appellants argue that costs are
    warranted given what they characterize as the unique circumstances of, and
    public interest underlying, the case.

[4]

Independent Counsel supported the appellants position on appeal. They
    submit that they should also be entitled to costs. They argue that they
    provided the court with helpful background information on the Indian
    Residential Schools Settlement Agreement (2006) and made different submissions
    than the appellants.

[5]

Canada opposes the award of costs to the appellants and Independent
    Counsel. They submit that costs are not appropriate in this case because the
    issues on appeal were predominantly procedural, the issues were largely settled
    in earlier litigation in which several of the litigants were involved, and the
    conduct of the appellants counsel is incongruous with a costs award.

[6]

This court upheld the order of the administrative judge. He dismissed
    the appellants Requests for Directions
without costs
.
    We see no reason why a different costs disposition should prevail on appeal.
    The nature of the issues raised on this appeal do not warrant a costs award in
    favour of the appellants or Independent Counsel.

[7]

Accordingly, there shall be no costs of the appeal.

Alexandra Hoy A.C.J.O.

R.G. Juriansz J.A.

B.W. Miller J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Fortress Real Developments Inc. v. Rabidoux, 2018
    ONCA 686

DATE: 20180830

DOCKET: C63350

Doherty, Brown and Huscroft JJ.A.

BETWEEN

Fortress Real Developments Inc., Fortress Real
    Capital Inc., Jawad Rathore and Vince Petrozza

Plaintiffs (Appellants/Respondents in the Cross-Appeal)

and

Ben Rabidoux

Defendant (Respondent/Appellant in the
    Cross-Appeal)

Jeremy Devereux and Andrea Campbell, for the appellants/respondents
    in the cross-appeal

Gil Zvulony, for the respondent/appellant in the
    cross-appeal

Heard: June 27, 2017

On appeal from the order of Justice Andra Pollak of the
    Superior Court of Justice, dated January 11, 2017, with reasons reported at
    2017 ONSC 167, 6 C.P.C. (8th) 373, and from the costs order, dated April 4,
    2017.

Doherty J.A.:

A.

overview

[1]

The appellants (sometimes collectively referred to as Fortress) sued
    the respondent, Ben Rabidoux, for defamation and breach of contract. Fortress
    alleged that Mr. Rabidoux made various defamatory comments about its business
    operations and the personal appellants on his Twitter account. They further
    alleged that the comments breached an agreement that Mr. Rabidoux had made with
    the appellants in which he had promised to make no further comments about the
    appellants and their business operations. Fortress alleged that Mr. Rabidoux
    had agreed that if he breached the agreement, he would pay $10,000 for the
    legal costs incurred by Fortress in responding to Mr. Rabidouxs various
    allegedly defamatory comments.

[2]

Mr. Rabidoux did not file a statement of defence. Instead, he moved for
    an order under s. 137.1 of the
Courts of Justice Act
, R.S.O. 1990, c. C.43
(
CJA
),
    dismissing Fortresss lawsuit.

[3]

The motion judge found that Mr. Rabidouxs tweets that precipitated the
    lawsuit related to a matter of public interest, as that term is used in s.
    137.1(3) of the
CJA
. She further held that Fortress had not satisfied
    her that the harm caused or likely to be caused to Fortress by Mr. Rabidouxs
    tweets was sufficiently serious that the public interest in permitting Fortress
    to proceed with its lawsuit outweighed the public interest in protecting Mr.
    Rabidouxs freedom of expression. Having determined that Fortress had failed to
    meet its onus under s. 137.1(4)(b), the motion judge dismissed the claims
    against Mr. Rabidoux.

[4]

The motion judge, relying on s. 137.1(7), awarded costs to Mr. Rabidoux
    on a full indemnity basis in the amount of $129,106.61.

[5]

There are three appeals before this court. Fortress appeals from the
    order dismissing its claims. If that appeal fails, Fortress seeks leave to
    appeal the costs order, arguing that costs should have been awarded on a
    partial indemnity basis. Mr. Rabidoux also seeks leave to cross-appeal the
    costs order. He submits that costs were correctly awarded on a full indemnity basis,
    but that the amount awarded does not constitute full indemnity, as it does not
    take into account HST or the costs arising out of an additional attendance
    before the motion judge.

[6]

For the reasons that follow, I would dismiss Fortresss appeal from the
    order dismissing its action. I would grant leave to both Fortress and Mr.
    Rabidoux to appeal the costs order, but would vary the costs order only to the
    extent of adding HST.

B.

the facts

(i)

The Parties

[7]

Mr. Rabidoux operates his own one-man business. He provides market
    research and opinions to institutional investors and to various media outlets.
Mr. Rabidoux focuses on the real estate market in
    Canada. In his affidavit filed on the motion, Mr. Rabidoux indicates that he is
    regarded as a leading expert in Canadian housing and household credit trends.
    He holds the view that Canadian real estate is, generally speaking, overvalued
    and that some of those who promote certain kinds of real estate investments,
    such as some kinds of syndicated mortgages, significantly underestimate the
    risks associated with those investments. In essence, Mr. Rabidoux sees the real
    estate investment market in Canada as overhyped and under-regulated.

[8]

Mr. Rabidoux is not shy about expressing his opinions. He does so
    regularly through various forums, including his Twitter account. The evidence
    on the motion was that as of April 2016, he had about 3,880 followers. At least
    some of Mr. Rabidouxs followers are avid supporters. He and his supporters
    often retweet each others tweets.

[9]

The corporate appellants, Fortress Real Developments Inc. and Fortress
    Real Capital Inc., are in the real estate development business across Canada.
    They identify and develop large real estate projects, including condominiums
    and commercial properties. Their projects are mainly financed by large
    institutional lenders and by individuals through syndicated mortgage loans.
    Fortress also offers advice to other real estate developers.

[10]

The
    personal appellants, Jawad Rathore (Mr. Rathore) and Vince Petrozza (Mr.
    Petrozza), are senior officers and directors of the corporate appellants. They
    started the business together.

[11]

Fortress
    operates a very successful business. Its projects are valued in the billions of
    dollars. At the time of the motion, Fortress had raised about $700 million in
    investments from syndicated mortgage loans.

(ii)

The Tweets

[12]

The alleged defamatory tweets were made in the course
    of an ongoing Twitter exchange between
Mr. Rabidoux and his supporters on
    one side, and Fortress and its supporters on the other. Their exchanges have
    gone on for years. Many are referred to in the motion record. Some of the
    comments made by both sides take on the tone of what would be described in the
    sports world as trash talk. Most of the tweets can be understood only by
    persons who are familiar with the prior Twitter exchanges and the subject
    matter of those exchanges. Some of the comments, coming from both sides, are
    sarcastic and seem more calculated to entertain or to embarrass than to
    enlighten.

[13]

The
    Statement of Claim and the affidavits filed by both parties refer at length to
    many tweets between many parties going back to 2014. In the course of the
    proceedings, Fortress limited its claim for damages to tweets made by Mr.
    Rabidoux in December 2015 and early January 2016. The other tweets are offered
    as context for the tweets that are the subject matter of the claims.

[14]

Mr.
    Rabidoux has expressed concerns about Fortresss marketing practices for some
    time, particularly as they relate to syndicated mortgages. In late September
    and early October 2014, he posted a series of tweets that attracted Fortresss
    attention.

[15]

Fortress
    took these tweets to imply that it was misleading investors, or at least
    encouraging brokers to mislead investors on its behalf, and receiving improper
    payments from those brokers. Fortress also viewed one of the tweets as
    defamatory in that it compared Fortresss projects to a product with
    Ponzi-like characteristics.

[16]

Lawyers
    for Fortress wrote to Mr. Rabidoux demanding that he retract the statements he
    had made and not make any further such statements. After correspondence between
    counsel for Fortress and for Mr. Rabidoux, Mr. Rabidoux posted a retraction. In
    that posting, he completely and without reservation retracted any and all
    comments he had made about Fortress and promised not to repeat any of those
    comments. In exchange for the retraction, Fortress released Mr. Rabidoux from
    any further claims arising out of the comments.

[17]

In
    February 2015, Mr. Rabidoux posted another set of tweets that again attracted
    Fortresss attention. These tweets made reference to an article that appeared
    in the Globe and Mail on September 10, 2014. The article referred to
    proceedings before the Ontario Securities Commission (OSC) in 2011 and the
    British Columbia Securities Commission in 2014. Those proceedings related to
    the market manipulation of shares in the stock of OSE Corp., a small oil and
    gas exploration company. The proceedings had involved Mr. Rathore, Mr.
    Petrozza, a company they operated called Phoenix Credit Risk Management
    Consulting Inc., and several other individuals. Clients of Phoenix had lost
    money investing in OSE Corp. Mr. Rathore and Mr. Petrozza, among other parties,
    had reached a settlement with the OSC in 2011 and agreed to make payments of
    over $3.3 million.

[18]

Mr.
    Rathore and Mr. Petrozza regarded Mr. Rabidouxs comments as defamatory. In
    their view, he improperly implied, through selective and inaccurate references
    to the Globe and Mail article, that Mr. Rathore and Mr. Petrozza had been
    implicated in the market manipulation. According to Mr. Rathore and Mr.
    Petrozza, neither the Globe and Mail article nor the decisions of the respective
    securities commissions offered any support for that allegation.

[19]

Once
    again, lawyers for Mr. Rathore and Mr. Petrozza contacted Mr. Rabidoux. They
    demanded an apology and an immediate retraction of his comments. They also served
    a libel notice on Mr. Rabidoux.

[20]

In
    March 2015, Mr. Rabidoux agreed once again to publicly retract the impugned
    statements. He issued a retraction and an apology. He also indicated that he
    would not make any further comments, suggestions, opinions or statements of
    any kind whatsoever about Messrs. Rathore, Petrozza or their businesses,
    subsidiaries, affiliates, directors, officers, employees, agents,
    representatives, business associates, partners, projects or in respect of any
    brokerage or EMD offering investment in any Fortress project in any forum.

[21]

In
    his affidavit, Mr. Rabidoux indicated that he was afraid of being drawn into
    costly and drawn-out litigation. He elected to make the apology and promise in
    exchange for a release.

[22]

In
    addition to the apology and retraction, Mr. Rabidoux agreed that if he breached
    his promise not to make further statements, he would pay damages of $10,000
    representing the legal fees incurred to date to address all of the defamatory
    comments made by [him].

[23]

Mr.
    Rabidoux did not receive the promised release from Fortress until April 2016,
    about two months after this action was commenced.

[24]

Mr.
    Rabidoux posted a third series of tweets in December 2015 and early January
    2016. These are the allegedly defamatory tweets for which the appellants claim
    damages. These tweets did not refer specifically to Fortress or to the personal
    appellants. In the tweets, Mr. Rabidoux made sarcastic remarks about the impact
    of the downturn of the real estate market in Calgary on the value of real-estate-based
    investments in that city. Another tweet referred sarcastically to the
    suggestion, apparently made by unnamed sources, that the Winnipeg real estate
    market was attracting significant foreign investment. Fortress had substantial
    real estate projects in Calgary and Winnipeg.

[25]

Mr.
    Rabidoux posted three tweets on December 13, 2015. In these tweets, he
    predicted that the OSC would soon assume responsibility for the regulation of
    syndicated mortgage investments. He predicted that the OSC would sla[m the]
    door on shadier operators. The tweets went on to assert that some operators
    would be in immediate trouble with the OSC because they had previously been
    sanctioned by the OSC. Finally, Mr. Rabidoux tweeted, all thats assuming
    these guys dont blow themselves up before that, which may very well happen.

[26]

Fortress
    alleged that, put in the context of Mr. Rabidouxs earlier tweets, a reader
    would understand that the reference to shadier operators who had previous
    difficulties with the OSC was a reference to Mr. Rathore and Mr. Petrozza, who
    had been the subjects of the OSC proceeding in 2011. Fortress also alleged that
    the reader would understand that the reference in the third tweet to these
    guys was a reference to Fortress, Mr. Rathore, and Mr. Petrozza, and an
    assertion that Fortresss developments could well fail in the near future.

[27]

Fortress
    commenced this action in early 2016. It alleged that none of the
    representations or innuendo flowing from Mr. Rabidouxs tweets were true.
    Fortress alleged that the assertions and implications defamed both Fortress and
    the personal appellants. Fortress further alleged that Mr. Rabidoux breached
    the March 2015 settlement agreement when he tweeted about the affairs of
    Fortress and the personal appellants in December 2015 and January 2016.
    Fortress claimed $150,000 in damages for defamation and $10,000 in damages for
    breach of the settlement agreement.

C.

the reasons of the motion judge

[28]

The
    motion judge recognized that Mr. Rabidoux had the onus under s. 137.1(3) to demonstrate
    that the tweets that were the subject matter of the claims related to a matter
    of public interest. If he failed to meet that onus, his motion had to be
    dismissed.

[29]

After
    outlining the competing interpretations of s. 137.1(3) advanced by the parties,
    the motion judge adopted the broader interpretation set down by the motion
    judge in
Able Translations Ltd. v. Express International Translations Inc.
,
    2016 ONSC 6785, 410 D.L.R. (4th) 380, affd 2018 ONCA 690. She concluded, at
    para. 21:

I agree with the submissions of Mr. Rabidoux that, objectively
    considered, the subject matter of the communication as a whole relates to OSC
    violations, syndicated mortgages and condo developments in the context of the
    business of the Plaintiffs. Considered in their totality, a review of the
    Tweets that Mr. Rabidoux posted which are alleged to be defamatory and in
    breach of the settlement agreement in the Action can, in my view, be
    characterized as being matters of a public interest.

[30]

The
    motion judge then turned to s. 137.1(4) of the
CJA
. She indicated that
    s. 137.1(4)(a) put the onus on Fortress to show reasonable grounds to believe
    both that its claim had substantial merit and that Mr. Rabidoux had no valid
    defence. She further noted, at para. 27, that s. 137.1(4)(b) also put the onus
    on Fortress to satisfy her that:

The harm likely to be or have been suffered by the responding
    party [Fortress] as a result of the moving partys [Mr. Rabidouxs] expression
    is sufficiently serious that the public interest in permitting the proceeding
    to continue outweighs the public interest in protecting that expression.
    [Emphasis omitted.]

[31]

The
    motion judge appreciated that unless Fortress could meet its onus under both
    ss. 137.1(4)(a) and (b), she was obliged to allow the motion and dismiss the
    action against Mr. Rabidoux. The motion judge chose to proceed directly to a
    consideration of s. 137.1(4)(b). She did not consider s. 137.1(4)(a).

[32]

In
    assessing the harm caused or likely to be caused to Fortress, the motion judge
    focused almost exclusively on the damages, if any, suffered or likely to be
    suffered by Fortress. She concluded that Fortress provided no evidence of any
    specific damage that it suffered and no evidence to support any reasonable
    belief that the impugned tweets had harmed the business reputation of Fortress
    or of the personal appellants. The motion judge determined that, absent any
    evidence of damages, Fortress had failed to show harm that would warrant
    allowing its action to proceed. The motion judge did not consider the public
    interest, if any, in protecting the tweets in issue.

D.

The Main Appeal

[33]

Fortress
    raises two grounds of appeal. First, it argues that the motion judge
    interpreted s. 137.1(3) too broadly and without regard to either the
    appellants established right to sue for defamation, or the kind of expression
    s. 137.1 was designed to protect. Fortress submits that the phrase matter of
    public interest in s. 137.1(3) must, as a matter of statutory interpretation,
    be read narrowly to minimize the interference with a plaintiffs established
    right to seek compensation for damages arising from defamatory statements.
    Fortress further argues that the legislation is only intended to protect
    responsible and legitimate expression on matters of public interest.

[34]

Second,
    Fortress submits that the motion judge erred in her interpretation of s.
    137.1(4)(b). Fortress argues that the motion judge wrongly limited her harm
    assessment to evidence of specific damages suffered as a direct consequence of
    the impugned expression. Fortress further submits that the motion judge erred
    in failing to consider the nature of the public interest engaged in protecting
    the actual expression found in the impugned tweets. Fortress refers to the
    tweets as insults or invective intended to harm the Appellants with no real
    public interest value.

[35]

Fortress
    submits that had the motion judge properly weighed the harm it suffered against
    the nature of the public interest served by protecting Mr. Rabidouxs tweets,
    she would have concluded that Fortress suffered significant harm and that there
    was virtually no public interest in protecting the contents of the tweets.
    According to Fortress, the balance clearly favoured allowing its action to
    proceed.

(i)

The Interpretation of Section 137.1(3)

[36]

The
    meaning of the phrase relates to a matter of public interest in s. 137.1(3)
    was considered in
1704604 Ontario Ltd. v. Pointes Protection Association
,
    2018 ONCA 685, at paras. 50-66 (released concurrently with these reasons). Like
    the motion judge, this court has opted for a broad reading of the phrase,
    consistent with the analysis in
Grant v. Torstar Corp.
, 2009 SCC 61,
    [2009] 3 S.C.R. 640. In
Pointes
, at para. 65, this court said:

In summary, the concept of public interest as it is used in
    s. 137.1(3) is a broad one that does not take into account the merits or manner
    of the expression, nor the motive of the author. The determination of whether
    an expression relates to a matter of public interest must be made objectively,
    having regard to the context in which the expression was made and the entirety
    of the relevant communication. An expression may relate to more than one
    matter. If one of those matters is a matter of public interest, the defendant
    will have met its onus under s. 137.1(3).

[37]

The
    arguments advanced by Fortress were considered and rejected in
Pointes
.
    I will, however, make brief reference to Fortresss principal argument.

[38]

Fortress
    submits that s. 137.1(3) must be strictly construed because it restricts an
    individuals right to sue for defamation. Counsel refers to the well-known rule
    of statutory interpretation that explicit language is required to divest a
    person of existing rights:
Crystalline Investments Ltd. v. Domgroup Ltd.
,
    2004 SCC 3, [2004] 1 S.C.R. 60, at para. 43.

[39]

Section
    137.1(3) does not restrict Fortresss right to bring an action for defamation.
    A finding under s. 137.1(3) that the expression in issue relates to a matter
    of public interest in no way prevents Fortress from pursuing its lawsuit. A
    finding that Mr. Rabidoux met his onus under s. 137.1(3) does no more than open
    the door to the two-pronged inquiry required under s. 137.1(4). The outcome of
    that inquiry determines whether Fortresss claim survives Mr. Rabidouxs s.
    137.1 motion.

[40]

Applying
    the analysis in
Pointes
, I read the tweets as intended to educate and
    caution the investing public about the risks associated with certain kinds of
    real estate-based investments. The identified risks include sudden downturns in
    the real estate market, false predictions of future investments, and shady, inadequately
    regulated operators who understate the risks associated with certain kinds of
    investments. In my view, alerting the investing public to risks associated with
    the purchase of certain products in the public marketplace is a matter of
    public interest.

[41]

I
    see no error in the motion judges determination that the tweets related to a
    matter of public interest.

(ii)

The Public Interest Analysis Under Section 137.1(4)(b)

[42]

The
    operation of s. 137.1(4)(b) is considered in
Pointes
,
at paras. 85-101. Fortress submits that,
    under s. 137.1(4)(b), it is required only to show grounds to believe that the
    harm it has or will suffer because of the tweets is sufficiently serious to
    make the public interest in allowing its claim to proceed outweigh the public
    interest in protecting Mr. Rabidouxs freedom of expression. This submission
    misreads the section. The phrase grounds to believe appears in s. 137.1(4)(a)
    and not in s. 137.1(4)(b). Under s. 137.1(4)(b), Fortress must satisfy the
    judge that the harm it has suffered or is likely to suffer is sufficiently
    serious that the public interest in allowing Fortress to vindicate that harm
    through litigation outweighs the public interest in protecting the expression
    in issue. The word, satisfy, connotes the usual balance of probabilities
    standard.

[43]

I
    agree with the submissions of counsel for Fortress that the motion judges
    public interest analysis is deficient in certain respects. In my view,
    however, the motion judge correctly focused on the evidence of damages when
    considering what harm Fortress had shown that it had suffered or was likely to
    suffer as a result of the tweets. As explained in
Pointes
, at para.
    88, harm under s. 137.1(4)(b) will usually be measured primarily, although not
    exclusively, by reference to monetary damages, special or general, suffered by
    the plaintiff as a result of the defendants expression.

[44]

The
    motion judge considered Mr. Rathores evidence (adopted in Mr. Petrozzas
    affidavit) that Fortress, as well as he and Mr. Petrozza, had suffered damage
    to their reputation as a result of the tweets and that the tweets may have had
    a negative impact on Fortresss business fortunes. The motion judge was not
    impressed with the evidence, mostly because it consisted almost entirely of Mr.
    Rathores unsubstantiated opinion as to the effect of the tweets. I cannot say
    the motion judge was wrong in her assessment of this evidence.

[45]

I
    also agree with counsel for Fortress that the motion judge should have
    considered potential general damages. Counsel correctly notes that general
    damages are assumed in libel cases: see
Hill v. Church of Scientology of
    Toronto
, [1995] 2 S.C.R. 1130, at para. 164;
Grant v. Torstar Corp.
,
    at para. 28. Those damages, however, may be nominal: see
Raymond E. Brown,
Defamation Law: A Primer
, 2d
    ed. (Toronto: Carswell, 2013), at p. 321; Raymond E. Brown,
Brown on
    Defamation: Canada, United Kingdom, Australia, New Zealand, United States
,
    loose-leaf, 2d ed., vol. 8 (Toronto: Carswell, 1999), at pp. 25-46 to 25-48
.

[46]

Had
    the motion judge considered general damages in assessing the potential harm to
    Fortress, nothing in the motion record would support anything more than nominal
    general damages. As Mr. Rathores cross-examination and some of the tweets from
    Fortress executives demonstrate, Fortress regards Mr. Rabidoux to be an inconsequential
    lightweight with no influence in its investment world. Mr. Rabidoux is treated
    more as a noisy irritant than a threat to Fortresss business or reputation. To
    the extent that the record offers any insight into the reach of Mr. Rabidouxs
    opinions concerning Fortress, that reach seems confined to persons who already
    share Mr. Rabidouxs views. A consideration of the potential general damages
    flowing from the tweets would add little to the monetary harm caused or likely
    to be caused to Fortress.

[47]

Counsel
    for Fortress submits, once again correctly, that the motion judge failed to
    consider its contract claim in assessing harm caused to Fortress. Fortress
    argues that the December 2015 and January 2016 tweets clearly breached the
    March 2015 agreement and that under the terms of the agreement, Mr. Rabidoux
    had agreed to pay $10,000 in damages. Fortress contends that the motion judge
    should have considered both the monetary consequences of the breach of the
    agreement, and the harm caused to Fortresss reasonable expectation that
    concerns about any future litigation with Mr. Rabidoux had been ended by the
    agreement. As observed in
Pointes
, at para. 89,

a reasonable
    expectation of finality in litigation is an interest that warrants protection
    when considering harm to a plaintiff under s. 137.1(4)(b).

[48]

However,
    a review of the language used in the agreement crafted by Fortress and signed
    by Mr. Rabidoux strongly indicates that Fortress was seeking much more than
    finality in litigation when it drafted this agreement. The agreement prohibited
    Mr. Rabidoux, under threat of a $10,000 penalty, from saying anything of any
    kind whatsoever about Mr. Rathore, Mr. Petrozza, or any of their businesses,
    projects, or investments. The agreement demanded total silence from Mr.
    Rabidoux on all business matters relating to Mr. Rathore and Mr. Petrozza,
    regardless of the nature or content of any comment Mr. Rabidoux might make.

[49]

The
    sweeping nature of the language in the agreement, and the requirement that Mr.
    Rabidoux pay $10,000 for any breach  regardless of whether the breach caused
    any harm  strongly suggests that this agreement was designed more to silence
    Mr. Rabidoux than to gain any finality for Fortress in relation to potential
    litigation with Mr. Rabidoux. Indeed, the terms of the agreement all but
    guaranteed further litigation unless Mr. Rabidoux found a different line of
    work or changed his opinions.

[50]

The
    gag Fortress tried to place on Mr. Rabidoux by the terms of the agreement
    speaks to the potential damage done to the public interest in protecting Mr.
    Rabidouxs freedom of expression if Fortresss claim were allowed to proceed.
    By advancing a claim under the agreement, Fortress seeks to exclude Mr.
    Rabidoux from any public discourse relating to Fortress and its principals. In
    my view, that consequence sits firmly on the side of the public interest
    analysis in s. 137.1(4)(b) that favours Mr. Rabidouxs position.

[51]

Nor
    do I accept Fortresss submission that the tone and content of the impugned
    tweets render them unworthy of any public interest protection. In keeping with
    the medium and the intended audience, the tweets are conclusory and, in some
    respects, sarcastic. There is, however, no basis upon which to conclude that
    they are deliberately false or were intended to mislead. While the subject
    matter and tone may disentitle Mr. Rabidoux from claiming any special or added
    public interest in the expressions, the tweets retain the inherent value that
    most expressions on matters of public interest have: see
Pointes
, at
    para. 93.

[52]

In
    summary, while the motion judges public interest analysis was not as fulsome
    as it should have been, my analysis arrives at the same result. Fortress failed
    to show that the harm caused or likely to be caused to it by the impugned
    tweets is sufficiently serious to outweigh the public interest in protecting
    Mr. Rabidouxs right to freedom of expression.

[53]

I
    would dismiss the main appeal.

E.

the cost appeals

[54]

In
    their submissions on costs before the motion judge, counsel filed a document
    entitled Costs Amounts Agreed by Counsel. It read:

Partial Indemnity:

$75,000 + HST

Substantial Indemnity:

$99,000 + HST

Full Indemnity:

$129,106.61 + HST

[55]

The
    parties also agreed that in light of the motion judges dismissal of the
    proceeding, s. 137.1(7) applied. It provides:

If a judge dismisses a proceeding under this section, the
    moving party is entitled to costs on the motion and in the proceeding on a full
    indemnity basis, unless the judge determines that such an award is not
    appropriate in the circumstances.

[56]

Fortress
    argued that it was appropriate in the circumstances to order that Mr. Rabidoux
    should have his costs on a partial indemnity basis. Mr. Rabidoux submitted
    there was no reason that he should not have his costs on a full indemnity
    basis, as provided for in s. 137.1(7).

[57]

The
    motion judge, in a very brief endorsement, indicated that she agreed with Mr.
    Rabidouxs submissions. She held that:

[T]he appropriate costs award should be on a full indemnity
    basis in the agreed to amount of $129,106.61 and I so order.

[58]

The
    actual order reads:

This court orders that the Plaintiffs shall pay to the
    Defendant costs of the motion in the amount of $129,106.61
inclusive
of disbursements and HST. [Emphasis added.]

(i)

Should Leave to Appeal
    be Granted?

[59]

Fortress
    seeks leave to challenge the scale of costs awarded by the motion judge. Mr.
    Rabidoux seeks leave to challenge two aspects of the quantification of the
    costs ordered by the motion judge. Section 137.1(7) is a new provision that
    clearly takes a different approach to costs than is normally taken in civil
    proceedings. Both counsel have made submissions that have application beyond
    the specifics of this case. I think this is an appropriate case to grant leave
    and offer some guidance on the operation of s. 137.1(7).

(ii)

Section 137.1(7)

[60]

Section
    137.1(7) does two things. First, it creates a starting point for the motion
    judges determination of costs when the defendant (moving party) has been
    successful in dismissing the action on a s. 137.1 motion. Section 137.1(7)
    directs that the motion judge start from the premise that the defendant should
    receive costs on both the motion and in the proceeding on a full indemnity
    basis.

[61]

As
    counsel for Mr. Rabidoux argues, s. 137.1(7) and its companion provision in s.
    137.1(8) are intended to impose cost consequences that will serve as a strong
    deterrent to SLAPPs and will encourage defendants to seek the quick termination
    of that kind of litigation by way of a s. 137.1 motion.
[1]

[62]

Section
    137.1(7), however, goes on to confirm that the ultimate decision with respect
    to costs under s. 137.1(7), like the determination of costs generally, is a
    matter for the discretion of the judge. The presumed order of full indemnity
    costs to the defendant should not be made if such an award is not appropriate
    in the circumstances.

[63]

In
    my view, a motion judge, when deciding how he or she should exercise his or her
    discretion under s. 137.1(7), will be guided by the considerations that guide
    the exercise of discretion with respect to costs in other civil proceedings.
    These include the factors identified in r. 57.01 of the
Rules of Civil
    Procedure
, R.R.O. 1990, Reg. 194. They also include the overriding
    objective in any costs order that the award be fair and reasonable, having
    regard to all of the relevant factors including any applicable legislation: see
Boucher v. Public Accountants Council for the Province of Ontario
(2004), 71 O.R. (3d) 291 (C.A.);
Neuberger v. York
, 2016 ONCA 303, 131
    O.R. (3d) 143, at para. 17.

[64]

In
    summary, s. 137.1(7) makes an important change to the starting point of the
    assessment of an appropriate costs order in cases to which the section applies.
    It maintains, however, the overriding judicial discretion to ultimately impose
    the order that is appropriate in all the circumstances.

[65]

Fortress
    submits that the full indemnity costs provided for in s. 137.1(7) are reserved
    for those cases in which the motion judge is satisfied that the plaintiff has
    brought forward meritless litigation for strategic purposes. In effect,
    Fortress argues that a defendant should receive full indemnity costs under s.
    137.1(7) only where the bringing of the action amounted to an abuse of process.

[66]

The
    language of s. 137.1(7) offers no support for Fortresss narrow reading, nor
    does the legislative history of the provision. The language is clear. If the
    defendant is successful on the motion, the defendant should receive full
    indemnity costs, subject to the motion judge deciding that full indemnity is
    not an appropriate award in the circumstances. The starting point is not
    predicated on the basis upon which the defendant succeeds on the motion.

[67]

The
    motion judge, in determining whether the circumstances warrant an order other
    than costs on a full indemnity basis, will consider a variety of factors,
    including any determinations made under ss. 137.1(4)(a) and (b), any findings
    made as to the motivation of the parties, and the manner in which the parties
    have conducted the proceedings.

[68]

While
    I do not accept Fortresss reading of s. 137.1(7), I also do not accept Mr.
    Rabidouxs submission that when the motion judge determines that the defendant
    should receive costs on a full indemnity basis, the amount awarded must reflect
    the amount that the defendant is out of pocket. Even if costs are awarded on
    a full indemnity scale, those costs must be reasonable full indemnity costs:
Romspen
    Investment Corporation v. 6711162 Canada Inc.
, 2014 ONSC 3480, 35 C.L.R.
    (4th) 193, at para. 3.

(iii)

Did the Motion Judge Err in Awarding Costs on a Full Indemnity Basis?

[69]

The
    motion judges reasons are cryptic. It would appear that she agreed with Mr.
    Rabidouxs submission that Fortress had advanced no reason to depart from the
    default cost provisions of the legislation: at para. 5. In the absence of any
    examination by the motion judge of Fortresss arguments, I propose to address
    its submissions in this court on the merits rather than simply by reference to
    the reasonableness of the motion judges ultimate assessment.

[70]

For
    the reasons set out above, the fact that the motion judge did not find
    Fortresss claim to be meritless was no bar to an order for costs on a full
    indemnity basis. The motion judge did not address the merits of the claim
    because, on her analysis, Fortress had not shown any significant harm as a
    consequence of the alleged defamation. A defamation claim without any
    meaningful harm can be properly described as a technical claim.

[71]

In
    the absence of any significant harm to Fortress, I think the inference can
    fairly be drawn that the litigation was brought to silence Mr. Rabidoux. The
    terms of the March 2015 agreement authored by Fortress add strong force to that
    inference. This lawsuit had the strong
indicia
of a true SLAPP. The full indemnity starting point for the assessment of costs
    established by s. 137.1(7) is intended to disincentivize this kind of
    litigation.

[72]

Fortress
    also argued that Mr. Rabidoux unnecessarily complicated and lengthened the
    proceedings by introducing irrelevant and inaccurate allegations and material
    that improperly impugned the appellants reputation. The motion record did, in
    some instances, go well beyond what was necessary for the proceeding. Each side
    aggressively pursued the other. To some extent, the litigation took on the same
    tone as the tweets that the parties had exchanged for years. However, I do not
    think Mr. Rabidouxs conduct, any more than Fortresss conduct, lengthened the
    proceedings and resulted in higher costs.

[73]

Having
    examined the arguments advanced by Fortress, I, like the motion judge, do not
    think Fortress has demonstrated that costs on a full indemnity basis is not the
    appropriate order in all of the circumstances.

[74]

Mr.
    Rabidouxs cross-appeal can be dealt with in brief order. Mr. Rabidoux submits
    that he should have received costs in relation to an additional appearance that
    was required before the motion judge. The motion judge declined to order
    additional costs in respect of that hearing. In doing so, she exercised her
    discretion. There is no reason for this court to interfere.

[75]

There
    is merit to Mr. Rabidouxs other argument. The amounts agreed upon by counsel
    in the document filed with the motion judge referred to costs plus HST. The
    relevant paragraph in the motion judges endorsement does not refer to HST. The
    order indicates that the amount is inclusive of HST.

[76]

I
    think the language in the order is a slip. The parties acknowledged in the
    document filed with the court that the amounts referred to in the document did
    not include HST, but that HST should be added to the amounts. The costs order
    should be varied to indicate that Mr. Rabidoux is entitled to full indemnity
    costs in the amount of $129,106.61 plus HST.

F.

conclusion

[77]

I
    would dismiss Fortresss appeal from the order dismissing its action. I would
    grant leave to both parties to appeal costs, but would vary the costs order
    only to the extent of allowing HST on the amount ordered.

[78]

Mr.
    Rabidoux should have his costs of the appeal on a partial indemnity basis. Taking
    into account his submissions on costs, I would fix those costs at $25,000,
    inclusive of disbursements and HST.

Released: DD  AUG 30 2018

Doherty J.A.

I agree D.M. Brown
    J.A.

I agree Grant Huscroft
    J.A.

[1]

SLAPP refers to Strategic Lawsuits Against Public
    Participation.


COURT OF APPEAL FOR ONTARIO

CITATION: Freund v. Toronto Standard Condominium Corporation
    No. 1703, 2018 ONCA 692

DATE: 20180821

DOCKET: C64829

Sharpe, Juriansz and Roberts JJ.A.

BETWEEN

Nuala Donly Freund

Applicant
(Appellant)

and

Toronto Standard Condominium Corporation No. 1703

Respondent
(Respondent)

Jordan Goldblatt, for the appellant

Mark H. Arnold, for the respondent

Heard: August 17, 2018

On appeal from the judgment of Justice J.A.
    Desotti of the Superior Court of Justice, dated December 14, 2017, with reasons
    reported at 2017 ONSC 7169, and on leave to cross-appeal from the costs order
    dated February 5, 2018, with reasons reported at 2018 ONSC 840.

REASONS FOR DECISION

[1]

The appellant appeals
    from the dismissal of her application under ss. 119 and 135 of the
Condominium Act
, 1998, S.O. 1998, c. 19
.

[2]

The application
    arises out of the appellants objection to the renovations that the respondent
    proposed to carry out to the condominium units that formed part of the
    condominiums hotel rental pool and to the removal of her unit from the pool
    when she refused to permit the renovations to her unit to bring it up to the
    luxury standard mandated by the respondent and the other participants in the
    pool.  The appellant commenced her application following her unsuccessful
    arbitration concerning the respondents right to require the renovations as a
    condition of her unit remaining in the pool.

[3]

The appellant
    submits that t
he
    application judge erred in dismissing her application on the basis that she lacked
    standing to bring her application because she was no longer the owner of her
    unit.  Second, the appellant maintains that the application judge found that
    the respondent was in breach of s. 19 of its own Declaration because it failed
    to obtain an architect or an engineer certificate for the proposed renovations.
    As a result, the application judge erred in concluding that none of the
    respondents impugned conduct was oppressive, threatening or unfairly prejudicial,
    nor unfairly disregarded the interests of the appellant.

[4]

We
    find it necessary to deal with only the second submission
.

[5]

The application
    judge did not determine there was a breach of the Declaration.  He found no
    oppressive conduct by the respondent.  The appellant failed to demonstrate that
    the proposed renovations required a certificate from an architect or engineer.
    The application judge concluded that even if they did, the lack of a
    certificate did not amount to a breach of contract, as conceded by the
    appellants counsel on the application.  He accepted the findings of the
    arbitrator that there was no breach by the respondent of its obligations in
    requiring the unit renovations as a condition of remaining in the hotel rental
    pool and that it was the appellant who was in breach of her obligation to maintain
    her unit in accordance with the luxury standard recognized and adopted by the
    other participating unit owners.

[6]

We do not accept
    the appellants submission that she would not have incurred the legal costs
    related to the arbitration had the certificates been provided as she says was
    required under the Declaration.  As the application judge found, the appellants
    real objection was the cost occasioned by the renovations, and she wanted to
    stay in the hotel rental pool without the renovations.  The application judge
    determined that the appellant was not obliged to carry out the proposed
    renovations to her unit; however, she could not then insist on remaining in the
    hotel rental pool when her unit did not meet the requisite luxury standard of
    all the other units in the pool.  Moreover, the appellant was not without
    choices in that she could rent out her unit in its current condition or use it
    as a residential suite, as contemplated by the Declaration.

[7]

The application
    judges conclusions were amply supported by the record and contain no
    reversible error.

[8]

Given our reasons
    disposing of the appeal, it is not necessary to determine whether the
    application judge erred in holding that the appellant had no standing to bring
    her application because she was no longer a unit owner.  However, we should not
    be taken as agreeing with or otherwise upholding the application judges
    decision on this issue.

Disposition

[9]

For these reasons,
    the appeal is dismissed.

[10]

The respondent seeks
    costs on a substantial indemnity scale.  It submits that this court should take
    into account a settlement offer made on the application below and find that
    this appeal represents the latest in a long serious of unmeritorious
    proceedings instigated by the appellants common law spouse against the
    respondent.

[11]

We are not
    persuaded by these submissions.  First, while unsuccessful, the appeal was not
    frivolous, vexatious or an abuse of process, and does not attract the
    extraordinary level of substantial indemnity costs.  Further, we are not
    obliged or inclined to take into account a settlement offer that the
    application judge already considered in making his costs award.  The respondent
    abandoned its cross-appeal of that costs award.

[12]

Accordingly, the
    respondent is entitled to its partial indemnity costs in the amount of $15,000,
    including disbursements and all applicable taxes.

Robert J.
    Sharpe J.A.

R.G.
    Juriansz J.A.

L.B.
    Roberts J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Holterman v. Fish, 2018 ONCA 683

DATE: 20180815

DOCKET: C63361

Sharpe
, Pepall and Roberts JJ.A.

BETWEEN

F. Marc Holterman and
    Thomas S. Tiffin

Appellants

and

S. Andrew Fish and The Attorney General of Canada

Respondents

Marc Holterman and Thomas Tiffin, self-represented

Edward Harrison and Nancy Arnold for the respondents

Heard and released orally: August 14, 2018

On appeal from the
    order of Justice Thomas R. Lederer of the Superior Court of Justice, dated
    January 19, 2017.

REASONS FOR DECISION

[1]

The appellants, who were unsuccessful at trial, appeal the award of
    costs made by the trial judge in favour of the respondents. The appellants
    failed to seek leave to appeal costs, but in the circumstances, we will treat
    this oral hearing as a request for leave for leave to appeal.

[2]

The appellants argue that no costs should be awarded because of the
    conduct of the respondents.

[3]

The fundamental problem with that submission is that the very same
    complaint about the conduct of the respondents was the subject of the
    appellants unsuccessful claim for misfeasance in public office.

[4]

The appellants discontinued their claim midway through trial after the
    trial judge pointed out that they bore the onus of establishing an essential
    element of their case for which they had no evidence. They then sought to
    reopen the claim based on fresh evidence. The trial judge rejected that motion
    on the basis that the fresh evidence could not have affected the outcome: 2016
    ONSC 3275. This court dismissed an appeal from that decision: 2017 ONCA 769.
    Both the trial judge and this court found that the fresh evidence did not
    provide the essential facts needed to make out a case of misfeasance in public
    office. The Supreme Court of Canada dismissed the appellants motion for leave
    to appeal: July 5, 2018.

[5]

The appellants contention that they should not have to pay costs
    because of the conduct of the respondents is based upon the same evidence and
    amounts to a collateral attack on those decisions.

[6]

Moreover, the trial judge, who is fully conversant with the background
    of this case, considered whether the respondents conduct should deprive them
    of costs. He took their conduct into account and he reduced the costs claimed
    by the respondents to less than partial indemnity. We see no basis upon which
    we could properly interfere with the exercise of his discretion.

[7]

Accordingly, leave to appeal costs is refused. Costs to the respondents
    fixed at $5000 inclusive of taxes and disbursements.

Robert J. Sharpe
    J.A.

S.E. Pepall J.A.

L.B. Roberts
    J.A.