COURT OF APPEAL FOR ONTARIO

CITATION: Shewchuk v. Blackmont Capital Inc., 2016 ONCA 912

DATE: 20161202

DOCKET: C60982

Strathy C.J.O., Weiler and Watt JJ.A.

BETWEEN

Robert B. Shewchuk

Plaintiff (Appellant)

and

Blackmont Capital Inc.

Defendant (Respondent)

Joseph Groia and Kevin Richard, for the appellant

Nigel Campbell and Doug McLeod, for the respondent

Heard: September 9, 2016

On appeal from the judgment of Justice Suhail A.Q. Akhtar
    of the Superior Court of Justice, dated August 14, 2015, with reasons reported
    at 2015 ONSC 5079.

Strathy C.J.O.:

A.

Introduction

[1]

The
    trial judge found that the parties contract was ambiguous. He considered the factual
    circumstances surrounding the contract to interpret it and to resolve the
    ambiguity. The main question on this appeal is whether he erred in also considering
    the parties
subsequent
conduct  that is, their
    conduct after the formation of the contract.

[2]

For
    the reasons that follow, I would dismiss the appeal. Because the contract was
    ambiguous, the trial judge properly considered the parties subsequent conduct
    to assess their evidence about the intended scope of their contract. The
    appellant has not identified either a palpable and overriding error in the
    trial judges factual findings about the parties subsequent conduct or an
    extricable error of law in his interpretation of the contract.

B.

The Facts

The parties

[3]

The
    appellant, a successful stockbroker, was employed by the respondent
[1]
as an investment advisor (IA) in its Calgary office. He was a member of the
    respondents Retail Group brokers, whose clients were primarily individual
    investors. The respondent also had a Capital Markets group, based in Toronto,
    which procured financing for banks, public companies, and other institutional
    clients.

The IA Compensation Plan

[4]

Each
    IA, like the appellant, had a Compensation Plan, which set out their commission
    scale. As a top-producing IA, the appellant was compensated at the highest
    level: 52 percent of the fees the respondent earned from a retail transaction.

[5]

The
    IA Compensation Plan identified several Special Payout Items, including Capital
    Markets Referrals. If an IA referred business to the Capital Markets group, he
    or she could earn a referral fee of up to 15% of the net revenue generated by
    the transaction. The amount of the fee was discretionary and was determined by
    executives of the Retail Group and Capital Markets, depending on the value
    added of the IAs relationship with the client, having regard to any
    pre-existing relationship between the respondent and the client.

[6]

The
    appellant and other IAs were dissatisfied with their compensation for
    transactions they referred to Capital Markets. The appellant, who was
    particularly vocal, initiated discussions for a new contract for himself,
    making it clear that he would leave the company if his concerns were not
    resolved to his satisfaction. His negotiations with the Calgary branch manager
    of the Retail Group culminated in the execution of a letter agreement dated
    April 11, 2006 (the April 11 Agreement).

The April 11 Agreement

[7]

The April 11 Agreement was, in essence, an amendment to
    the IA Compensation Plan. It had two financial components. First, it granted
    the appellant 100,000 deferred stock units in the respondents parent
    corporation, each of which entitled him to acquire one share. This was in
    addition to the stock units to which he was entitled as an IA upon meeting his
    investment targets in a given year. Second, it provided for compensation in
    addition to what he received under the IA Compensation Plan. Paragraph 3 of the
    April 11 Agreement provided as follows:

3.       With respect to the broker
    warrants
[2]
attributable to you for the transactions listed in Schedule A attached hereto
    and for all transactions (whether you are paid in the form of broker warrants,
    cash or fully paid shares) that are sourced directly by you following March 1,
    2006, Blackmont shall pay to you an additional 10% over and above that which is
    payable under [the IA Agreement] (the Finders Fee).

[8]

Schedule
    A to the agreement listed thirteen Qualified options eligible for [a] 10%
    Finders Fee and six non-qualified options. It provided that [a] Finders Fee
    of 10% will apply to  new positions garnered which could come in the form of
    traditional Broker B-Warrants, free trading shares, restricted shares or cash.
    These new positions will be added to Schedule A as they arise. The qualified
    options listed in Schedule A were related to Retail Group transactions.

[9]

The April 11 Agreement was expressed to be in full and
    final satisfaction of all compensation-related disputes between the appellant
    and the respondent. Paragraphs 2 and 10 provided that the IA Agreement would
    continue to govern the relationship:

2.     Except as outlined further below, payouts on broker
    warrants will be subject to Blackmonts standard [IA Compensation Plan] (the
    Broker Warrant Payments).

10. Other than as specifically stated above, all other terms of
    your employment remain unchanged and shall continue to be subject to [the IA
    Agreement] in existence at the relevant time.

[10]

The April 11 Agreement was expressed to be confidential
    and would be terminated if the appellant breached confidentiality, in which
    case his compensation would revert to the standard IA Compensation Plan. The
    appellant acknowledged that the confidentiality provision meant that he could
    not disclose the existence of the April 11 Agreement to Capital Markets
    personnel.

The disputed transactions

[11]

In his statement of
    claim, the appellant asserted, among other things, that he was entitled to a 52
    percent commission under the IA Compensation Plan, as well as a further 10
    percent commission under the April 11 Agreement, on four Capital Markets
    transactions in which the respondent was a member of the underwriting syndicate
    or a participant in the financing. He claimed to have directly sourced these
    transactions for the respondent through his connections with the clients.

[12]

The central issue at
    trial was whether the April 11 Agreement applied to Capital Markets
    transactions, as the appellant asserts.

The subsequent conduct

[13]

I will discuss the
    parties subsequent conduct in more detail below. Briefly, however, the trial
    judge heard evidence of what the respondent characterized as ongoing attempts by
    the appellant to negotiate compensation for deals he introduced to Capital
    Markets. The respondent argued that this conduct was inconsistent with the
    appellants assertion that the April 11 Agreement applied to Capital Markets
    transactions.

C.

The trial judges reasons

[14]

The trial judge
    identified the primary issue as whether the disputed transactions fell within
    the scope of the April 11 Agreement. This depended on whether the April 11
    Agreement was applicable only to retail transactions or whether it also applied
    to transactions involving Capital Markets. Each party argued that, properly
    interpreted, the agreement was unambiguous in its favour. The trial judge found
    that the agreement was ambiguous. The ambiguity could only be resolved, he
    said, by looking at the surrounding circumstances, including the parties
    conduct after the formation of the April 11 Agreement.

[15]

In response to the
    respondents submission that the parties conduct
subsequent
to the making of the contract could only be considered in the event of
    ambiguity, the trial judge expressed the view, at para. 82, that if subsequent
    conduct demonstrates the mutual and objective intentions of the words in the
    contract, it is as valuable as any conduct pre-existing the making of the
    contract.

[16]

The judge referred to
Sattva
    Capital Corp. v. Creston Moly Corp
., 2014 SCC 53, [2014] 2 S.C.R. 633,
    noting the role of the surrounding circumstances in determining the intentions
    of the parties at the time of formation of the contract. He  proceeded to
    consider the events leading up to the execution of the April 11 Agreement,
    including:

·

the Retail Groups historical grievances concerning remuneration
    of IAs who introduced transactions to Capital Markets;

·

the fact that Capital Markets personnel were not involved in the
    negotiation and execution of the April 11 Agreement; and

·

the fact that the April 11 Agreement was to be kept confidential
    by the appellant and not disclosed to Capital Markets.

[17]

He also noted the
    unlikelihood that the appellant would be entitled to a fixed commission on
    bought deals,
[3]
as the appellant would bear none of the risk of these deals. And he noted the
    absence of any express provision in the April 11 Agreement that would supersede
    the Capital Markets Referrals provision in the IA Agreement.

[18]

The trial judge also
    considered events occurring
after
the execution of
    the April 11 Agreement, including:

·

a proposal made by the appellant on November 5, 2006, for the
    division of compensation and a 15 percent Finders Fee on deals he brought to
    Capital Markets;

·

a meeting in November, 2006, in which the appellant attempted to
    negotiate an agreement with Capital Markets;

·

the appellants attempts to negotiate fees on particular Capital
    Markets transactions  fees that differed from and were less favourable to him
    than the fees he claimed were payable under the April 11 Agreement; and

·

other
    attempts by the appellant and his associate, Mr. Harris Watson, to negotiate an
    agreement with Capital Markets for a share of revenues from transactions
    arising out of the appellants relationship with clients.

[19]

The trial judge found
    that this course of conduct supported the inference that the April 11 Agreement
    was not intended to apply to transactions involving Capital Markets. He found
    it significant that in the course of these negotiations, the appellant did not
    take the position that he was entitled to share in the fruits of Capital
    Markets transactions by virtue of the April 11 Agreement.

[20]

He also found it
    significant that Capital Markets representatives were not involved in the
    negotiation of the April 11 Agreement; it was not signed by representatives of
    Capital Markets; and there were no terms dealing with transactions that
    included participation by Capital Markets. The appellant was expressly
    forbidden from even mentioning the existence of the agreement to Capital
    Markets. According to the trial judge, it would be unreasonable to expect that
    Capital Markets would agree to share the fees that it earned without any
    knowledge of or participation in the formation of the agreement.

[21]

The trial judge found
    that the IA Compensation Plan permitted the appellant to make agreements with
    Capital Markets on joint ventures in which he would participate. He had done so
    after the execution of the April 11 Agreement without ever suggesting that he
    was entitled to a share in the revenues from them as of right pursuant to the agreement.

[22]

In the course of
    analyzing the parties conduct after they signed the April 11 Agreement, the
    trial judge made adverse credibility findings against the appellant and Mr.
    Watson, who each testified that the agreement was intended to apply to Capital
    Markets transactions and fully resolve the appellants compensation dispute
    with the respondent.

[23]

The trial judge
    concluded that the April 11 Agreement was intended to heal the rifts between
    the appellant and the respondent, but that it did not override the IA Compensation
    Plan. Rather, the April 11 Agreement coexisted with the IA Compensation Plan.

D.

The parties submissions

[24]

I will discuss the
    parties submissions on appeal in the Analysis section below. They focus on
    three principal questions.

[25]

First:
    The Standard of Review
. The appellant submits that, notwithstanding the Supreme
    Court of Canadas decision in
Sattva
, the trial judges interpretation
    of the April 11 Agreement is reviewable on a correctness standard, because this
    is a case in which the factual matrix of the contract is relatively unimportant
    in the interpretive exercise. The respondent says that
Sattva
applies
    and that the trial judges decision is reviewable on a standard of palpable and
    overriding error.

[26]

Second:
    Ambiguity.
The appellant submits the contract was unambiguous. He argues
    that Paragraph 3 of the April 11 Agreement, when read together with Paragraphs
    2 and 10, clearly superseded the Capital Markets Referrals provision of the IA
    Compensation Plan. Its result was to guarantee the appellant a referral fee of
    10 percent over and above what would have been payable under the IA Compensation
    Plan for transactions he referred to Capital Markets. The respondent says the
    trial judge did not err by concluding that the contract was ambiguous. Although
    at trial each party argued that the contract was unambiguous, the trial judge
    correctly noted their respective arguments  advanced different and incompatible
    interpretations.

[27]

Third:
    Subsequent Conduct
. The appellant submits the trial judge committed a
    legal error by placing undue weight on the parties conduct subsequent to the
    formation of the April 11 Agreement. He says that subsequent conduct is not
    part of the factual matrix. It is admissible only in the event of ambiguity and
    it has a limited role to play in the interpretive exercise. The respondent
    submits that evidence of subsequent conduct was properly admitted in view of
    the ambiguity of the contract. Although the respondent agrees that such
    evidence must be approached with some caution, it maintains that the trial
    judge did not err in using it the way he did.

[28]

At the end of these
    reasons, I will briefly mention two additional grounds of appeal raised by the
    appellant.

E.

ANALYSIS

The
    standard of review

[29]

I reject the
    appellants submission that this courts decision in
Bell Canada v. The
    Plan Group
, 2009 ONCA 548, 96 O.R. (3d) 81, remains applicable in light of
Sattva
and that the trial judges interpretation of the contract can
    be reviewed on a correctness standard in the absence of an extricable error of
    law.

[30]

The Supreme Court made
    clear in
Sattva
, at para. 55, that a question of contractual
    interpretation is inherently fact specific and that, usually, appellate
    courts should show deference to first-instance fact finders (at para. 52). A
    less deferential standard should be applied only if the appellant demonstrates
    an extricable question of law within what was initially characterized as a
    question of mixed fact and law (at para. 53). See also
Fontaine v. Canada
    (Attorney General)
, 2016 ONCA 241, 130 O.R. (3d) 1, at para. 96; and
Ledcor
    Construction Ltd. v. Northbridge Indemnity Insurance Co
., 2016 SCC 37, 54
    B.L.R. (5th) 1, at para. 21.

[31]

The appellants
    reliance on this courts decision in
Bell Canada
is misplaced. In that
    case, the majority described the exercise of contract interpretation as a
    legal exercise (at paras. 25, 30). This approach has been expressly overtaken by
Sattva
(at paras. 49, 50, 55).

[32]

Finally, in
Bell
    Canada
the majority held, at para. 26, that even where a question of
    contractual interpretation is one of mixed fact and law, an appellate court
    must determine whether the question is primarily legal or primarily factual to
    select the appropriate standard of review. In
Sattva
, however, there
    is no mention of such a spectrum-based approach to the questions of mixed fact
    and law raised in contractual interpretation. Instead, as stated above, an
    appellate court must identify an extricable question of law within what was
    initially characterized as a question of mixed fact and law before a
    correctness standard applies.

Ambiguity

[33]

The appellant submits
    the trial judge made an extricable error in finding ambiguity in the April 11
    Agreement. He says that the language of all transactions in Paragraph 3,
    quoted above, means precisely what it says and necessarily includes both Retail
    Group and Capital Markets transactions. He relies on
Hobbs v. Esquimalt
    & Nanaimo Railway Co.
(1899), 29 S.C.R. 450, where the Supreme Court of
    Canada held that a sale of land included the transfer of rights to the
    minerals contained therein. If the vendor had meant to reserve the mineral
    rights by using the word land in the agreement of purchase and sale, he
    should have said so. Similarly, the appellant asserts that if the respondent
    wanted to exclude Capital Markets from all transactions, it should have said
    so. The effect, he says, is that the discretionary payment for Capital Markets
    referrals in the IA Agreement is replaced by a fixed 10 percent payment under
    the April 11 Agreement.

[34]

Leaving aside the fact that the approach to contractual
    interpretation in
Hobbs
has been overtaken by
    a century of jurisprudence, culminating in
Sattva,
the appellant concedes that the trial judge was required to
    consider the IA Compensation Plan in interpreting the April 11 Agreement, which
    expressly referred to the plan and confirmed its ongoing application. Paragraphs
    2 and 10 of the April 11 Agreement provided that the IA Compensation Plan,
    which included the discretionary Finders Fee provision, would continue, except
    as specifically set out in the April 11 Agreement. The trial judge found at
    para. 83 that the provision in the April 11 Agreement giving the appellant a 10
    percent Finders Fee on all transactions collided head on with the Capital
    Markets referral provision of the IA Compensation Plan, which made the IAs
    payment in the discretion of senior management of the Retail Group and Capital
    Markets, up to a ceiling of 15 percent.

[35]

I
    agree with the trial judge that the foregoing gave rise to an ambiguity, which he
    was required to resolve through the application of the rules of contract
    interpretation, having regard to the factual matrix surrounding the April 11
    Agreement.

[36]

There was an additional
    source of ambiguity not considered by the trial judge. The wording of the April
    11 Agreement that Blackmont shall pay to you an additional 10%
over and above that which is payable
under Blackmonts
    standard investment advisor compensation plan does not fit easily with the
    argument that it was intended to apply to Capital Markets referrals.
    Compensation for Capital Markets referrals in the IA Compensation Plan was entirely
    discretionary. It was possible for the appellant to receive no fee for a
    referral to Capital Markets, which, unlike his compensation for retail
    transactions, did not entitle the appellant to a fixed or minimum percentage
    for revenue. The use of the phrase over and above that which is payable makes
    sense in the context of a fixed amount or percentage, but is awkward when
    applied to a purely discretionary amount.

Subsequent
    Conduct

[37]

Having found ambiguity
    in the contract, the trial judge considered what he described at para. 84 as
    the surrounding circumstances of the April 11 Agreement and what happened
    afterwards in its implementation. He looked at the surrounding circumstances
    to see whether the parties intended the April 11 Agreement to apply to the
    disputed transactions involving Capital Markets. He looked to the parties
    subsequent conduct, he said at para. 85, to determine their intentions and
    understanding of the agreement.

[38]

I will conduct my
    analysis of this issue by addressing three questions:

1)

When is evidence of the subsequent conduct of the parties
admissible
to interpret their contract?

2)

How should courts assess the
weight
or cogency of that evidence?

3)

Did the trial judge make
appropriate use
of the evidence of subsequent
    conduct?

(1)

The admissibility
    of evidence of subsequent conduct

[39]

In
Sattva
,
    the Supreme Court held that evidence of the factual matrix or surrounding
    circumstances of a contract is admissible to interpret the contract and ought
    to be considered at the outset of the interpretive exercise. This approach
    contrasts with the earlier view that such evidence is admissible only if the
    contract is ambiguous on its face: see
Eli Lilly & Co. v. Novopharm Ltd
.,
    [1998] 2 S.C.R. 129, at paras. 55-56; and
Seven Oaks Inn Partnership
    (c.o.b. Best Western Seven Oaks) v. Directcash Management Inc
., 2014 SKCA
    106, 446 Sask. R. 89, at para. 13.

[40]

The issue addressed in
    this appeal is whether evidence of the contracting parties conduct subsequent
    to the execution of their agreement is part of the factual matrix such that it
    too is admissible at the outset, or whether a finding of ambiguity is a
    condition precedent to its admissibility.

[41]

In my view, subsequent
    conduct must be distinguished from the factual matrix. In
Sattva
, the
    Supreme Court stated at para. 58 that the factual matrix consist[s] only of
    objective evidence of the background facts
at the time of
    the execution of the contract
, that is, knowledge that was or reasonably
    ought to have been within the knowledge of both parties
at
    or before the date of contracting
 (citation omitted and emphasis
    added). Thus, the scope of the factual matrix is temporally limited to evidence
    of facts known to the contracting parties contemporaneously with the execution
    of the contract. It follows that subsequent conduct, or evidence of the
    behaviour of the parties after the execution of the contract, is not part of
    the factual matrix: see
Eco-Zone Engineering Ltd. v. Grand Falls  Windsor
    (Town)
, 2000 NFCA 21, 5 C.L.R. (3d) 55, at para. 11; and
King v.
    Operating Engineers Training Institute of Manitoba
, 2011 MBCA 80, 270 Man.
    R. (2d) 63, at para. 72.

[42]

There is an additional
    reason to distinguish subsequent conduct from the factual matrix  a reason
    rooted in the reliability of the evidence. In
Sattva
, the Supreme
    Court stated at para. 60 that consideration of the factual matrix enhances the
    finality and certainty of contractual interpretation. It sheds light on the
    meaning of a contracts written language by illuminating the facts known to the
    parties at the date of contracting. By contrast, as I will explain, evidence of
    subsequent conduct has greater potential to undermine certainty in contractual
    interpretation and override the meaning of a contracts written language.

[43]

There are some dangers
    associated with reliance on evidence of subsequent conduct. One danger,
    recognized in England where such evidence is inadmissible, is that the parties
    behaviour in performing their contract may change over time. Using their
    subsequent conduct as evidence of their intentions at the time of execution
    could permit the interpretation of the contract to fluctuate over time. Thus,
    in
James Miller & Partners Ltd. v. Whitworth Street Estates (Manchester
    Ltd.)
, [1970] A.C. 583 (H.L.), Lord Reid observed, at p. 603:

I must say that I had thought that it is now well settled that
    it is not legitimate to use as an aid in the construction of the contract
    anything which the parties said or did after it was made. Otherwise one might
    have the result that a contract meant one thing the day it was signed, but by
    reasons of subsequent events meant something different a month or a year later.

Indeed, in
F.L. Schuler A.G. v. Wickman Machine
    Tool Sales Ltd.
, [1974] A.C. 235 (H.L.), at p. 261, Lord Wilberforce
    described reliance on subsequent conduct as nothing but the refuge of the
    desperate.

[44]

Another danger is that
    evidence of subsequent conduct may itself be ambiguous. For example, as this
    court observed in
Canada Square Corp. v. Versafood Services Ltd
.
    (1981), 34 O.R. (2d) 250 (C.A.), at p. 261 quoting from the writing of
    Professor Stephen Waddams, the fact that a party does not enforce his strict
    legal rights does not mean that he never had them. As a consequence of the
    potential ambiguity inherent in subsequent conduct, some courts have gone so
    far as to assert that evidence of subsequent conduct will carry little weight
    unless it is unequivocal: see Geoff R. Hall,
Canadian Contractual
    Interpretation Law
, 3d ed. (Toronto: LexisNexis, 2016), at p. 105.

[45]

A third danger is that
    over-reliance on subsequent conduct may reward self-serving conduct whereby a
    party deliberately conducts itself in a way that would lend support to its preferred
    interpretation of the contract.

[46]

These dangers,
    together with the circumscription of a contracts factual matrix to facts known
    at the time of its execution, militate against admitting evidence of subsequent
    conduct at the outset of the interpretive exercise. Evidence of subsequent
    conduct should be admitted only if the contract remains ambiguous after
    considering its text and its factual matrix.

[47]

This approach is consistent with the weight of authority: see
Adolph
    Lumber Co. v. Meadow Creek Lumber Co.
(1919), 58 S.C.R. 306, at p. 307;
Corporate
    Properties Ltd. v. Manufacturers Life Insurance Co.
(1989), 70 O.R. (2d)
    737 (C.A.), at p. 745, leave to appeal to S.C.C. refused, [1990] S.C.C.A. No.
    48;
Arthur Andersen Inc. v. Toronto-Dominion
(1994), 17 O.R. (3d) 363
    (C.A.), at p.  372;
Montreal Trust Co. of Canada v. Birmingham Lodge
    Ltd.
(1995), 24 O.R. (3d) 97 (C.A.), at p. 108; and Hall, at p. 103. The
    leading Canadian case is
Re

Canadian National Railways and
    Canadian Pacific Limited
(1978), 95 D.L.R. (3d) 242 (B.C. C.A.), affd,
    [1979] 2 S.C.R. 668, in which Lambert J.A. stated, at p.  262:

In Canada the rule with respect to subsequent conduct is that
    if, after considering the agreement itself, including the particular words used
    in their immediate context and in the context of the agreement as a whole,
    there remain two reasonable alternative interpretations, then certain
    additional evidence may be both admitted and taken to have legal relevance if
    that additional evidence will help to determine which of the two reasonable
    alternative interpretations is the correct one.

The types of extrinsic evidence that will be admitted, if they
    meet the test of relevance and are not excluded by other evidentiary tests,
    include evidence of the facts leading up to the making of the agreement,
    evidence of the circumstances as they exist at the time the agreement is made
    and, in Canada, evidence of subsequent conduct of the parties to the agreement.

[48]

Despite its dangers,
    evidence of subsequent conduct can be useful in resolving ambiguities. It may
    help to show the meaning the parties gave to the words of their contract after
    its execution, and this may support an inference concerning their intentions
at the time they made their agreement
: see
Montreal
    Trust Co.
, at p. 108;
3869130 Canada Inc. v. I.C.B. Distribution Inc.
,
    2008 ONCA 396, 239 O.A.C. 137, at para. 55;
Whiteside v. Celestica
    International Inc.
, 2014 ONCA 420, 321 O.A.C. 132, at para. 58; and
Sobocynski
    v. Beauchamp
, 2015 ONCA 282, 125 O.R. (3d) 241, at para. 60 leave to
    appeal to S.C.C. refused, [2015] S.C.C.A. No. 243.

[49]

Canadian courts have
    never adopted the absolute exclusionary rule prevailing in the United Kingdom:
    see
Bank of Montreal v. University of Saskatchewan
(1953), 9 W.W.R.
    (N.S.) 193 (Sask. Q.B.), at p. 199;
Manitoba Development Corp. v. Columbia
    Forest Products Ltd.
(1973), 43 D.L.R. (3d) 107 (Man. C.A.), at p. 114;
Gastel
    v. Methner
, [1979] O.J. No. 1032 (S.C.), at para. 13; and
Three Hats
    Productions Inc. v. RCA Inc
., 1987 CarswellOnt 3295 (S.C.), at para. 36.

[50]

However, the lesson
    learned in Canada from the British position is that the parties subsequent
    conduct is relevant only to inferentially establishing their intentions
at the time they executed their contract
. Like evidence
    of post-offence conduct in criminal matters, it is a kind of circumstantial
    evidence that invokes a
retrospectant chain
    of reasoning; the trier of fact is invited to infer the parties prior
    intentions from their later conduct: see
R. v. Rybak
, 2008 ONCA 354,
    90 O.R. (3d) 81, at para. 142, leave to appeal to S.C.C. refused, [2008]
    S.C.C.A. No. 311; and
R. v. Vant
, 2015 ONCA 481, 324 C.C.C. (3d) 109,
    at para. 121. As Juriansz J. (as he then was) wrote in
Danforth-Woodbine
    Theatre Ltd. v. Loblaws Inc
, [1999] O.J. No. 2059 (Gen. Div.), at para.
    55:

[W]here evidence of the conduct of
    the parties and their method of performance is admissible, it is not admitted
    so that the contract may be construed to be consonant with the parties'
    conduct, but rather, it is admitted because the parties conduct and method of
    performance may be of assistance in determining what the signatories intended
    at the time they entered the contract.

(2)

The weight or
    cogency of evidence of subsequent conduct

[51]

In
Canadian
    National Railways
, Lambert J.A. suggested, at p. 262, that, once admitted,
    the weight or cogency of evidence of post-contractual conduct may depend on the
    circumstances:

However, to say that these types of evidence become admissible
    where two reasonable interpretations exist is not to say that the evidence, if
    tendered, must be given weight  In no case is it necessary that weight be
    given to evidence of subsequent conduct. In some cases it may be most
    misleading to do so and it is to this danger that allusions are made throughout
    the recent English cases, particularly
L. Schuler A.G. v. Wickman Machine Tool Sales Ltd.
,
    and
James Miller & Partners
    Ltd. v. Whitworth Street Estates (Manchester) Ltd
. In England the
    risks have been considered sufficiently grave that the possibility of
    illumination from the use of subsequent conduct has been ruled out. In Canada,
    they have not, but those risks must be carefully assessed in each individual
    case before determining to give weight to subsequent conduct. [Citations
    omitted.]

[52]

I agree. The inherent
    dangers of evidence of subsequent conduct mean that when it is admitted it must
    be used cautiously and its weight will vary from case to case: see
Danforth-Woodbine
    Theatre
, at para. 55;
Canada Square Corp.
, at pp. 260-261; and
Water
    Street Pictures Ltd. v. Forefront Releasing Inc
., 2006 BCCA 459, 57
    B.C.L.R. (4th) 212, at para. 27. When ascertaining its cogency, a court should
    evaluate the extent to which its inherent dangers are mitigated in the
    circumstances of the case.

[53]

In the usual course, evidence
    of subsequent conduct will be more reliable if the acts it considers are the
    acts of both parties, are intentional, are consistent over time, and are acts
    of individuals rather than agents of corporations: see
Canadian National
    Railways
, at p. 262. I agree with Kerans J.A. that subsequent conduct by
    individual employees in a large corporation are not always reliable indicators
    of corporate policy, intention, or understanding
: Mesa Operating Ltd.
    Partnership v. Amoco Canada Resources Lt
d. (1994), 19 Alta. L.R. (3d) 38
    (C.A.), at para. 52.

[54]

Evidence of subsequent
    conduct will have greater weight if it is unequivocal in the sense of being consistent
    with only one of the two alternative interpretations of the contract that
    generated the ambiguity triggering its admissibility:
Lewis v. Union of
    B.C. Performers
(1996), 18 B.C.L.R. (3d) 382 (C.A.), at para. 14, leave to
    appeal to S.C.C. refused, [1996] S.C.C.A. No. 182; and
Scurry-Rainbow Oil
    Ltd. v. Kasha
, 1996 ABCA 206, 39 Alta. L.R. (3d) 153, at para. 44, leave
    to appeal to S.C.C. refused, [1996] S.C.C.A. No. 391. For instance, in
Chippewas
    of Mnjikang First Nation v. Ontario (Minister of Native Affairs
, 2010 ONCA
    47, 265 O.A.C. 247, at para. 162, leave to appeal to S.C.C. refused, [2010]
    S.C.C.A. No. 91, this court found that the parties subsequent conduct was of
    assistance in determining which of two reasonable interpretations of a contract
    should be accepted because the conduct in question was overwhelmingly
    consistent only with the trial judges interpretation.

[55]

Evidence of subsequent
    conduct may also be given greater weight in proportion to the proximity of the subsequent
    conduct to the time of the contracts execution: see
Union Natural Gas Co.
    v. Chatham Gas Co.
(1918), 56 S.C.R. 253, at p. 271; and Hall, at pp.
    105-106.

[56]

In summary, evidence
    of the parties subsequent conduct is admissible to assist in contractual
    interpretation only if a court concludes, after considering the contracts written
    text and its factual matrix, that the contract is ambiguous. The court may then
    make retrospectant use of the evidence, giving it appropriate weight having
    regard to the extent to which its inherent dangers are mitigated in the
    circumstances of the case at hand, to infer the parties intentions at the time
    of the contracts execution.

(3)

Did the trial judge properly use the evidence of subsequent conduct?

[57]

With one
    qualification, it is my view that the trial judge properly used the evidence of
    the parties subsequent conduct to resolve any residual ambiguity in the April
    11 Agreement. The one qualification relates to the trial judges reference to
    subsequent conduct forming part of the factual matrix. As I have noted, since
    the factual matrix only encompasses circumstances at the time the contract was
    made, subsequent conduct does not enter into that part of the analysis.

[58]

However, the trial
    judge did not consider the subsequent conduct as part of the factual matrix. He
    used it to test the appellants contention that the parties intended the April
    11 Agreement to apply to Capital Markets transactions and to test the
    credibility of the appellants explanation of his subsequent conduct. He found
    that the appellants repeated attempts to negotiate a revenue sharing agreement
    with Capital Markets after April 11, 2006 were at odds with his contention that
    the relationship with Capital Markets had been resolved by the April 11
    Agreement. He found the appellants conduct was consistent with the
    respondents interpretation of the contract and rejected as incredible the
    appellants attempts to explain his conduct.

[59]

In my view, the trial
    judge did not err in giving undue weight to evidence of the appellants
    subsequent conduct. His considered the evidence to be relevant to the parties
    intentions at the time of executing the April 11 Agreement. The evidence was
    primarily about the appellants actions  the actions of an individual rather
    than corporate employees. The appellants repeated attempts to negotiate a new
    agreement after April 11, 2006 and his repeated failure to refer to the April
    11 Agreement in these negotiations were deliberate and consistent over time. His
    actions after the formation of the April 11 Agreement were unequivocal and were
    consistent with the conclusion that at the time of execution neither he nor the
    respondent viewed the agreement as applicable to Capital Markets. To echo the
    words of this court in
Chippewas of Mnjikang
,

the evidence
    was overwhelmingly consistent with the interpretation of the Agreement as being
    inapplicable Capital Markets transactions. It was also consistent with the
    trial judges conclusion that the factual matrix of the contract pointed to an
    agreement with the retail side of the business and not Capital Markets.

Other
    grounds of appeal

[60]

The
    appellant argues that the trial judge failed to give adequate consideration to
    the defendants pleading, which did not specifically raise the applicability of
    the April 11 Agreement to Capital Markets transactions. The issue was, however,
    raised by the respondent well before trial and was the subject of evidence and
    full argument at trial. The trial judge did not err in considering this issue.

[61]

Nor would I give effect to the appellants argument that the trial
    judge should not have considered the respondents corrected answers to
    undertakings. In accordance with settled authority, to which he referred, he
    was entitled to examine both the original and the corrected answers and to
    determine what weight, if any, to give to one or the other:
Marchand
    (Litigation Guardian of) v. Public General Hospital Society of Chatham
(2000), 51 O.R. (3d) 97 (C.A.). Having done so, he concluded that
    the original answers contained errors that were made in good faith and that the
    corrected answers more accurately reflected the facts.

[62]

I
    would not give effect to the other grounds of appeal, which were not pressed
    either in the appellants factum or in oral argument.

F.

order

[63]

For these reasons, I
    would dismiss the appeal, with costs to the respondent in the agreed amount of
    $55,000.00, inclusive of prejudgment interest and all applicable disbursements.

George R. Strathy
    C.J.O.

I agree K.M. Weiler
    J.A.

I agree David Watt
    J.A.

Released: December 2, 2016

[1]

During the material time, the respondents name was Blackmont
    Capital Inc., but it is now owned by Richardson GMP. Richardson GMP defended
    the action at trial and responded to the appeal in this court.

[2]

Broker warrants were a form of compensation provided by
    clients to the respondent and shared with IAs as part of their compensation.  A
    warrant gave the holder the right to purchase a share of the issuer at a
    specific price and for a specific time. The warrant could be exercised or
    cashed out within the exercise time.

[3]

A bought deal was a financial arrangement where the
    respondent, as an underwriter of an Initial Public Offering, agreed to finance
    the offering by purchasing securities from its client before the offering went
    public. If the offering was a success, and the shares were purchased in the
    market at or above the price at which the respondent bought them, it stood to
    make a substantial profit. If the IPO was not a success, the respondent bore
    the risk of substantial losses.


COURT OF APPEAL FOR ONTARIO

CITATION: Stuart Budd & Sons Limited v. IFS Vehicle
    Distributors ULC, 2016 ONCA 977

DATE: 20161223

DOCKET: C62235

Doherty, MacPherson and Lauwers JJ.A.

BETWEEN

Stuart Budd & Sons Limited, 290756 Alberta
    Ltd., Saab On The
Queensway Ltd., 798983 Ontario Inc., 9216-0415 Quebec Inc., 6847781
Canada Ltd., Forbes Saab And Used Car Shop Inc., and
Springman & Springman Limited

Plaintiffs (Respondents)

and

IFS Vehicle Distributors ULC, International Fleet
    Sales Inc.,
Michael Libasci and Peggy King

Defendants (Appellants)

Matthew J. Latella and Sarah Patricia Peterson, for the
    appellants

Andy Seretis, for the respondent

Heard: December 7, 2016

On appeal from the order of Associate Chief Justice Frank
    N. Marrocco of the Superior Court of Justice, dated May 3, 2016, with reasons
    reported at 2016 ONSC 2980 and from the costs order June 8, 2016, with reasons reported
    at 2016 ONSC 3798.

Lauwers J.A.:

[1]

The respondents are eight Saab car dealerships in five provinces. Three
    of the dealerships carry on business in Ontario. The respondents brought an
    action in Ontario seeking a declaration that they validly rescinded their Saab
    Sales and Service Agreements pursuant to Ontarios
Arthur Wishart Act
    (Franchise Disclosure) 2000, S.O. 2000
, c. 3. They also sought damages
    pursuant to s. 7(1) of the Act or for breach of contract.

[2]

The defendants are companies and individuals associated with the revival
    of the Saab automobile brand and dealer network in North America. IFS Vehicle
    Distributors ULC was incorporated in British Columbia and carried on business
    as the franchisor and supplier of the Saab dealership network. International
    Fleet Sales Inc. was incorporated in California, and carried on the business of
    supplying parts and accessories to IFS Vehicle Distributors ULC. IFS Vehicle
    Distributors ULC and International Fleet Sales Inc. are affiliated companies.
    Michael Libasci was the President and sole director of IFS Vehicle Distributors
    ULC and the President and CEO of International Fleet Sales Inc., and resided in
    California. Peggy King, now retired, was the Secretary and Treasurer of IFS
    Vehicle Distributors ULC and the Chief Financial Officer of International Fleet
    Sales Inc., and resided in California.

[3]

The appellants brought a motion challenging the Ontario courts
    jurisdiction to hear the action in respect of the five out of the eight
    respondent dealerships that are located and do business outside Ontario. They
    also submit that Ontario should decline to hear the case on the basis of
forum
    non conveniens.
The appellants submit that either of California or
    Michigan would be a more appropriate forum.

[4]

The motion judge dismissed the motion.

[5]

The appellants contend that the motion judge made four errors: first, in
    his application of the law germane to jurisdiction
simpliciter
; second,
    in his
forum non conveniens
analysis; third, by relying on a case that
    neither party cited. Fourth, the appellants dispute the motion judges decision
    relating to costs of the motion before Corbett J.

[6]

We address each issue in turn.

A.

jurisdiction
simpliciter

[7]

The law on jurisdiction
simpliciter
of the Ontario Superior
    Court was set out by the Supreme Court of Canada in
Van Breda v. Villages
    Resort Ltd.
, 2012 SCC 17. At para. 90 of
Van Breda
, LeBel J.
    established four presumptive connecting factors ("PCFs"), any one of
    which would, if present, entitle a provincial superior court to take
    jurisdiction over a legal dispute in tort law: (1) the defendant is domiciled
    or resident in the province; (2) the defendant carries on business in the
    province; (3) the tort was committed in the province; or (4) a contract
    connected with the dispute was made in the province.

[8]

There is no doubt that the action was properly brought by the three
    Ontario plaintiffs in Ontario. The contracts between the Ontario plaintiffs and
    IFS Vehicle Distributors ULC were negotiated and signed in Ontario.

[9]

The appellants argue that the out-of-province plaintiffs cannot be part
    of this action, and cannot sue an out-of-province defendant in Ontario. They
    are therefore not properly joined in this action. The appellants advise that if
    the individual out-of-province plaintiffs were to bring similar actions in
    their home provinces, the appellants will not contest the jurisdiction of the respective
    provincial superior courts. This would require four actions in addition to this
    action in Ontario.

[10]

The motion judge focussed his analysis on the second PCF under Van Breda:
    the defendant carries on business in the province. He found that IFS Vehicles
    Distributors ULC carried on business in Ontario, at para. 38. He then set out the
    supporting evidence for this conclusion, at para. 39:

The following uncontested facts are helpful in reaching this
    conclusion:

IFS Vehicle Distributors ULC obtained an extra-provincial license to
    permit it to carry on business in Ontario;

IFS Vehicle Distributors ULC negotiated and sold three SAAB dealerships
    in Ontario;

IFS Vehicle Distributors ULC sold vehicles and, through International
    Fleet Sales Inc., parts to dealers in Ontario;

The bank to which all Dealers were directed to make payment was the
    Scotiabank Main Branch in Toronto, Ontario;

IFS Vehicle Distributors ULC maintained a lockbox for collecting cheques
    in Toronto, Ontario;

IFS Vehicle Distributors ULC maintained a presence in Ontario at Budds
    Saab, located at 2400 South Service Road West, Oakville, Ontario, in the
    following ways:

-This address appeared on invoices
    for vehicles and parts;

-IFS Vehicle Distributors ULC told
    the Ontario government when it obtained its extra-provincial license that this
    address was its principal place of business in Ontario;

-IFS Vehicle Distributors ULC, in a
    Disclosure Document provided to some but not all of the plaintiffs, indicated that
    this address was its premises in Ontario;

-This address was used on the
    manufacturers certification provided to each of the plaintiffs.

[11]

Apart from these facts, the motion judge also referred to some
    admissions made by Jim Steinhagen, the CEO of IFS Vehicles Distributors ULC, as
    evidence of carrying on business in Ontario, at paras. 41-42. It appears that IFS
    Vehicles Distributors ULC had some presence at the Budd dealership address. There
    is some factual dispute about the degree of presence, but there is no dispute
    that an individual by the name of Serge St-Louis did attend from time to time
    on behalf of that appellant.

[12]

In oral argument, counsel for the appellants agreed with these facts, and
    considered them to be fair as far as they go except for the second bullet. He
    took some umbrage at the motion judges expression in the second bullet that
    IFS Vehicles Distributors ULC sold three Saab dealerships in Ontario. These
    were dealers who had sold Saabs in the past. However, counsel agreed that the new
    dealership agreements were negotiated in Ontario. We do not think that
    omitting the words and sold from the second bullet takes away from the force
    of it as support for the finding that IFS Vehicle Distributors ULC carries on
    business in Ontario.

[13]

The appellants dispute the sufficiency of these factors in establishing
    that IFS Vehicles Distributors ULC was carrying on business in Ontario, in
    light of the decisions of the courts in
Arsenault v. Nunavut
, 2015
    ONSC 4302, affirmed 2016 ONCA 207,
Essex Garments Canada Inc v. Cohen
,
    [2005] O.J. No. 5716, and
Chevron Corp. v. Yaiguaje
, 2015 SCC 42. Each
    of these cases, they assert, required a more substantial physical connection
    than the motion judge found for IFS Vehicle Distributors ULC.

[14]

In
Arsenault
the plaintiff sued the Government of
    Nunavut in Ontario for wrongful dismissal. Nunavut challenged the courts
    jurisdiction. Polowin J. found, at para. 64: that maintaining a small office
    in Ottawa for such a limited purpose cannot reasonably be said to be carrying
    on business in Ontario. The Liaison Office is not analogous to a division or
    branch of the corporations business in the province. She found that the
    Ontario Superior Court lacked jurisdiction
simpliciter
, and also found
    Nunavut to be a more appropriate place to try the case, on the basis of f
orum
    non conveniens
.

[15]

In
Essex Garments
, the plaintiff sued Gendis Inc.
    for past due invoices rendered to an affiliated company. Spies J. found, at
    para. 19:

Although Gendis Inc. through a wholly owned subsidy area owns
    real property in Ontario, that does not give Gendis Inc. a physical presence in
    Ontario. Nor do the other factors relied upon by the plaintiffs. Gendis Inc.
    does not have any offices in Ontario and does not itself carry on business
    anywhere in Ontario. The fact that it is registered and therefore able to do so
    is not enough.

[16]

Finally, in
Chevron
, the plaintiffs were seeking to
    have recognized and enforced a foreign judgment against Chevron by the Ontario
    Superior Court of Justice. Gascon J. noted, at para. 86: Chevron Canada has a
    physical office in Mississauga, Ontario based on the motion judges finding,
    which he quoted at para. 86:

Chevron Canada operates a business establishment in
    Mississauga, Ontario. It is not a mere "virtual" business. It runs a
    bricks and mortar office from which it carries out a non-transitory business
    with human means and its Ontario staff provides services to and solicits sales
    from its customers in this province.

[17]

Each case invoking the fourth PCF of carrying on business in
    Ontario must be considered on its unique facts. While a more substantial
    presence, along the lines discussed in the cases, would have added weight to
    the motion judges determination, we do not accept the appellants submission
    that the factors taken into account by the trial judge in finding jurisdiction
simpliciter
were insufficient.

[18]

At para. 61, the motion judge made the following observation: The
    Supreme Court of Canada made it clear in the
Van Breda
decision that
    once the court determines that a presumptive connecting factor has been
    established and not rebutted it should assume jurisdiction over all aspects of
    the case citing paras. 99-100.

[19]

In our view, once the action is properly constituted from
    the perspective of jurisdiction
simpliciter
, then the issue of
    efficiency in the litigation becomes relevant with respect to the joinder of
    other parties, as this court noted in
Trillium Motor World Ltd. v. General
    Motors of Canada Ltd.
, 2014 ONCA 497, at paras. 46-49. The Supreme Court affirmed
    this decision in
Lapointe Rosenstein Marchand Melançon LLP v. Cassels Brock
    & Blackwell LLP
, [2016] SCC 30, and noted, at paras. 32 and 44:

The fourth factor also promotes flexibility and commercial
    efficiency. As seen in
Van Breda
, all that is required is a connection
    between the claim and a contract that was made in the province where
    jurisdiction is sought to be assumed. A connection does not necessarily
    require that an alleged tortfeasor be a party to the contract. To so narrow the
    fourth presumptive factor would unduly narrow the scope of
Van Breda
,
    and undermines the flexibility required in private international law.

It is worth noting that nothing in
Van Breda
suggests
    that the fourth factor is unavailable when more than one contract is involved,
    or that a different inquiry applies in these circumstances. Nor does
Van
    Breda
limit this factor to situations where the defendants liability
    flows immediately from his or her contractual obligations, or require that the
    defendant be a
party
to the contract:
Pixiu
    Solutions Inc. v. Canadian General-Tower Ltd.
,

2016 ONSC
    906, at para. 28 (CanLII). It is sufficient that the dispute be connected to
    a contract made in the province or territory where jurisdiction is proposed to
    be assumed:
Van Breda
, at para. 117. This merely requires that a
    defendants conduct brings him or her within the scope of the contractual
    relationship and that the events that give rise to the claim flow from the
    relationship created by the contract: paras. 116-17.

[20]

We observe that taking litigation efficiency into account does not
    convert it into another PCF, contrary to the appellants submission.

B.

forum non conveniens

[21]

The motion judge provided detailed reasons for concluding that the
    appellants failed to discharge the onus of establishing that there is a better
    and more appropriate forum than Ontario, at para. 57:

I am satisfied based on all the evidence that the defendants
    have failed to discharge their onus of establishing that there exists a better
    and more appropriate forum than Ontario to fairly and efficiently dispose of
    this litigation. Specifically, the following factors are helpful in reaching
    this conclusion:

Three of the plaintiffs reside in Ontario;

The remaining five plaintiffs reside in Canada and would be able to
    attend court in Toronto or elsewhere in Ontario;

Two representatives of IFS Vehicle Distributors ULC, its CEO Mr. James
    Steinhagen and Mr. Jim Moreen, are in Southfield, Michigan, and their evidence
    can easily be taken in Windsor, Ontario, which borders Detroit;

Although not necessary for my decision, I note that attending outside of
    California is not unduly onerous for the defendants because the defendants have
    offered to consent to jurisdiction if each of the plaintiffs sues in their home
    province. Had the plaintiffs been so inclined, the defendants would then have
    appeared and defended in British Columbia, Alberta, Ontario, Québec and Nova
    Scotia;

All of the Dealership Agreements specify that they are governed by the
    law of Ontario, although it will be necessary to apply the Franchise Act of
    Alberta to the 290756 Alberta Ltd. agreement. It was not suggested during the
    course of argument that there is any provision in Albertas Franchises Act
    dealing with rescission, disclosure, franchisor associates or damages, which is
    materially different than the Arthur Wishart Act. In any event, any differences
    between the Arthur Wishart Act and the Franchises Act of Alberta would have to
    be proven by expert evidence if this matter were tried in California;

The claim against Michael Libasci, Peggy King and International Fleet
    Sales Inc. is based on the theory of liability that each of them is a
    franchisors associate or an associate of a franchisor and therefore
    jointly and severally liable with IFS Vehicle Distributors ULC pursuant to
    sections 6(6) and 7(1) of the Arthur Wishart Act and, with respect to 290756
    Alberta Ltd., section 1(2) of the Franchises Act of Alberta;

Trying this claim in Ontario will avoid the expense of proving Ontario
    law in a foreign jurisdiction by expert evidence.

[22]

The appellants did not devote any time in oral argument to this issue
    and addressed it only briefly in their factum. They complain that the
    respondents impeded cross-examination in this issue but brought no motion for
    relief before the motion was argued. This is a discretionary decision that took
    into account the relevant factors and we see no basis on which to interfere
    with it.

C.

relying on new authorities

[23]

The appellants contend that it was an error in principle for the motion
    judge to rely on a case that neither party cited. They criticize the motion
    judge for referring to
Cannon v. Funds for Canada Foundation
, 2010
    ONSC 4517, affd 2011 ONCA 185 as the basis for distinguishing
Lailey v.
    International Student Volunteers Inc.
, 2008 BCSC 1344, a decision on which
    the appellants relied.

[24]

In
Lailey
, two of the plaintiffs were British Columbia
    residents and one was an Ontario resident. They contracted with the defendant,
    a non-profit corporation with its principal office in Orange County,
    California, which offered travel programs to students consisting of adventure
    travel with volunteer work and optional language lessons. An incident occurred
    in Ecuador and the plaintiff sued for damages for breach of contract in failing
    to provide them with safe and secure accommodation among other things. The
    motion judge found that the British Columbia Supreme Court had jurisdiction
simpliciter
over the action between the British Columbia plaintiffs and the California
    defendant, but that did not permit it to adjudicate the claim of the Ontario
    plaintiff against the California defendant. The court said, at para. 34: this
    court has no territorial competence or relation to her claim. It cannot simply be
    bootstrapped onto the claims the two other plaintiffs about which the Court
    does have jurisdiction.

[25]

The motion judge in
Lailey
relied in part on the decision of
    Goodman J. (as he then was) in
Tridon Ltd. v. Otto Bahlier KG
(1978),
    1 O.R. (2d) 569 (H.C.)

[26]

The motion judge distinguished
Lailey
based on comments by
    Strathy J. (as he then was) in
Cannon Funds
, at paras. 80-91. Strathy
    J. noted, at para. 90, that
Tridon
had been effectively overruled on
    the basis that order and fairness are not accomplished by turning away
    jurisdiction where a fraction of the relief claimed may fall outside rule 17.02
    and where in other respects there is a real and substantial connection
    between the parties in the subject matter of the action in Ontario; Strathy J.
    quoted Hockin J. in
Overland Custom Couch Inc. v. Thor Industries Inc.
(1999), 46 O.R. (3d) 788, at para. 19.

[27]

We see nothing improper in the motion judges use of
Cannon Funds
to consider the application of
Lailey
. It was not a new case that
    arose after the argument on which the motion judge might have required further
    submissions. On the issue in question
Cannon Funds
is usefully
    analogous.

D.

leave to appeal costs

[28]

The motion judge ordered the defendants to pay the plaintiffs about
    $50,000 in costs, inclusive of fees, disbursements and HST. The appellants did
    not formally seek leave to appeal this costs award but challenge it nonetheless.

[29]

The motion judges reasoning is set out at paras. 4 through 7 of the
    costs endorsement :

The Court of Appeal left the matter of the costs of the first
    jurisdictional motion to me at paragraph 92 of its decision. Clearly, the Court
    of Appeal thought that the costs of the first motion could follow the costs of
    the second.(Para.5)

I do not accept the defendants submission that the conduct of
    the judge who heard the first motion was such that the plaintiffs should be
    denied costs for the April 2014 proceeding. While the Court of Appeal set aside
    the decision on the first motion, it did not indicate that there were no costs
    on account of the first motion. Rather the Court of Appeal left the costs of
    the first motion to be decided by the judge who heard the second motion.(Para.6)

I do not accept the defendants argument that they should be
    awarded costs because they successfully raised the fact that the plaintiffs
    affidavit evidence was deficient. (Para. 7)

[30]

The appellants have not identified any error in principle in what is clearly a discretionary decision. Accordingly, if leave to appeal costs were sought, it would have been refused.

E.

disposition

[31]

For these reasons, the appeal is dismissed with costs payable by the
    appellants to the respondents in the amount of $13,000, all-inclusive.

P. Lauwers J.A.

I agree Doherty
    J.A.

I agree J.C.
    MacPherson J.A.

Released: December 23, 2016


COUR DAPPEL DE LONTARIO

RÉFÉRENCE: Talbot c. Bergeron, 2016 ONCA 956

DATE: 20161219

DOSSIER: C62202

Les juges Weiler, Rouleau et
    Roberts

ENTRE

Monique Talbot

Requérante/Appelante

et

Michel Bergeron

Intimé

Raymond H. Gouin, pour lappelante

Mélanie H. Levesque, pour lintimé

Date de laudience : le
    10 novembre 2016

En appel du jugement du juge Robert
    Pelletier de la Cour supérieure de justice, en date du 27 avril 2016.

Le juge
    Rouleau :

A.

Introduction

[1]

Lappelante, Monique Talbot, porte en appel la
    décision du juge des requêtes rejetant la requête de lappelante. La requête demandait
    la destitution de lintimé Michel Bergeron en qualité de fiduciaire de deux
    testaments de leur père, Jean-Guy Bergeron (« le testateur »), en
    date du 20 janvier 2015, et cela pour la durée des procédures concernant la
    validité desdits testaments.

B.

Les Faits

[2]

Le testateur, décédé le 14 septembre 2015 à
    lâge de 73 ans, avait deux enfants, lappelante et lintimé. Le testateur avait
    fondé et opéré un commerce familial connu sous les noms « Les serres
    Bergeron » et « Bergeron fruits et légumes ». Le commerce
    comprenait de nombreuses serres, un magasin et des terres couvrant quelques 150
    acres.

[3]

En 1999, le testateur a souffert dun anévrisme
    qui a affecté sa capacité de gérer le commerce familial. Selon lappelante, le
    testateur avait perdu certaines capacités cognitives et, par conséquent, elle
    et lintimé se sont impliqués davantage dans la gestion du commerce.
    Lappelante soccupait de la production des serres et lintimé de laspect
    financier du commerce et des ventes.

[4]

Lappelante indique quelle a travaillé dans le
    commerce familial de 1979 à 2005. Ce travail a toujours été effectué à très bas
    salaire avec la promesse en retour de la part de son père quun jour le
    commerce familial serait le sien.

[5]

Pour sa part, lintimé reconnaît que lappelante
    a uvré au sein de lentreprise familiale mais il nie quil y a eu un
    engagement quant à la division des actifs. Il maintient que son père nétait
    pas content de la pression que lappelante exerçait sur lui pour quil lui lègue
    50% de ses terres. Selon lintimé, depuis longtemps lappelante savait quelle
    ne recevrait que la maison du testateur et un terrain en Floride.

[6]

Lintimé explique quen plus de travailler dans
    le commerce familial, il a, en 1986, démarré sa propre entreprise, Landtech
    Inc. Depuis à peu près 1994, il gère les opérations du commerce familial et les
    affaires de Landtech Inc. ensemble. Selon lintimé, il a dû, à divers moments,
    sauver lentreprise familiale qui baignait dans les dettes. Ces dettes ont été
    payées par lintermédiaire de Landtech Inc.

[7]

En outre, lintimé soutient quil, et non
    lappelante, détenait une procuration relative aux biens lautorisant à administrer
    les biens du testateur durant la période précédant sa mort en 2015. Après avoir
    subi son anévrisme en 1999, le testateur a exécuté une procuration perpétuelle
    relative aux biens nommant lappelante et lintimé comme ses procureurs aux biens.
    Le 20 octobre 2011, le testateur a révoqué cette procuration perpétuelle
    relative aux biens. Selon lintimé, il la fait à cause de la pression que lappelante
    exerçait sur le testateur et pour sassurer quelle nait pas le contrôle des
    terres. Le 28 octobre 2014, le testateur a exécuté une nouvelle procuration perpétuelle
    relative aux biens, dans laquelle il a désigné lintimé comme son procureur aux
    biens, et lappelante comme procureure suppléante aux biens dans le cas où lintimé
    refusait ou était incapable dagir.
[1]

[8]

En 2014, le testateur a été diagnostiqué dun
    cancer aux poumons. En octobre 2014, il a préparé un nouveau testament, dans
    lequel il divisait ses biens plus ou moins également entre ses deux enfants. En
    janvier 2015, il a exécuté deux nouveaux testaments rédigés en anglais:
    « the general property will » et « the limited property
    will ». Lintimé est fiduciaire testamentaire de ces testaments et reçoit
    la majorité des terrains du testateur, dont les terrains du testateur dune
    valeur de plusieurs millions. Lappelante ne reçoit quune propriété en
    Floride, de valeur inconnue, et la résidence personnelle du testateur, dune
    valeur dà peu près 225 000 $, mais qui est grevée dune hypothèque de 1,4
    millions de dollars.

[9]

Suite à la mort du testateur, lappelante a eu
    connaissance des testaments de janvier 2015. Elle sy est opposée, déposant une
    requête par laquelle elle conteste la validité de ces testaments et demande que
    lintimé soit destitué de sa qualité de fiduciaire pour la durée des procédures
    concernant la validité des testaments.

[10]

À lappui de sa requête, lappelante a déposé un
    affidavit qui soulève plusieurs faits mettant en question la validité des
    testaments et qui appuient sa demande quun fiduciaire testamentaire
    indépendant soit nommé.

[11]

Certains des faits allégués sont les suivants :

·

Les testaments de janvier 2015 ont remplacé un testament exécuté par
    le testateur à peine quatre mois plus tôt, soit celui doctobre 2014;

·

Les testaments de janvier 2015 sont nettement plus favorables à
    lintimé que celui doctobre 2014 et cela sans explication de la raison de ce
    changement;

·

La même journée que le testateur a exécuté les deux testaments de
    janvier 2015, il a transféré ses terrains en copropriété avec lintimé;

·

Malgré le fait que les terrains étaient détenus en copropriété, de
    sorte quà la mort du testateur les terrains seraient automatiquement
    transférés à lintimé, le testateur les a inclus dans les testaments de janvier
    2015 et les a légués à lintimé. Ceci, selon lappelante, suggère que le
    testateur ne comprenait pas les documents quil a signés;

·

De plus, il est probable que le testateur nait pas compris ce quil
    signait puisque les testaments de janvier 2015 sont des documents complexes
    rédigés en anglais, une langue que le testateur comprenait mal;

·

Selon le testament, des billets promissoires de 840 000 $ et de 50
    000 $ attestant des dettes de lintimé au testateur sont pardonnées, et cela
    sans explications;

·

En 2006, lintimé a organisé et effectué la vente dune parcelle des
    terrains du testateur, produisant la somme dà peu près 523 000 $ mais selon
    lappelante, les fonds nont jamais été reçus par le testateur;

·

Lintimé a, depuis plusieurs années, incorporé les finances du
    commerce familial avec celles de sa propre compagnie, Landtech Inc.;

·

Lintimé a toujours connu de sérieux problèmes financiers dans le
    cadre de lexploitation de son commerce Landtech Inc.;

·

Une hypothèque dun million de dollars a été consentie par le
    testateur en 2011 (et augmentée à 1,4 million de dollars en 2013), alors que le
    testateur était sous lemprise et le contrôle de lintimé. Cette hypothèque na
    pas bénéficié au testateur et aurait plutôt été accordée pour assurer la survie
    de Landtech Inc.;

·

Le traitement pour le cancer du testateur en 2014 et 2015 a aggravé ses
    problèmes cognitifs;

·

Les terrains possédés par le testateur lors de son décès avaient une
    valeur de 15 millions de dollars;

·

Il y a de lhostilité entre lintimé et lappelante; et

·

Lintimé exerce depuis plusieurs années la procuration du testateur
    et na pas rendu de comptes.

[12]

Selon lappelante, il appert de ces faits quil
    y a de bonnes raisons de croire que les testaments du testateur, en date de
    janvier 2015, ne reflètent pas lintention réelle du testateur et sont le
    produit dinfluence indue de lintimé. De plus, il est évident que lintimé est
    en conflit dintérêts depuis plusieurs années, puisquil contrôlait les actifs
    du commerce familial avant la mort du testateur et a mêlé les fonds du commerce
    familial avec ceux de son commerce Landtech Inc.

[13]

Pour sa part, lintimé a déposé un affidavit
    dans lequel il étale de la preuve à lappui de son affirmation que, jusquau
    moment de sa mort, le testateur comprenait bel et bien ce quil signait, y
    compris les testaments de janvier 2015. Selon lintimé, le testateur avait la
    capacité testamentaire et avait connaissance de ses biens, ayant choisi den
    disposer tel quindiqué dans ses testaments. La preuve présentée par lintimé démontre
    aussi que les testaments ont été préparés avec laide de professionnels dont un
    cabinet davocats. Lintimé a aussi annexé à son affidavit des déclarations de
    gens de la communauté et du médecin de famille du testateur attestant de létat
    desprit du testateur.

[14]

Lintimé a aussi expliqué que les diverses
    transactions mises en question par lappelante étaient appropriées. De fait, cétait
    grâce à son intervention que le commerce familial na pas fait faillite. Lintimé
    maintient que cest en reconnaissance des efforts constants déployés par
    lintimé et du fait que lappelante navait eu rien à faire avec le commerce
    familial après 2006 que le testateur aurait décidé de donner le commerce, y
    inclus les terrains, à lintimé.

C.

La Décision du Juge des Requêtes

[15]

Le juge des requêtes a rejeté la demande de
    lappelante. Dans ses motifs, le juge a correctement noté quà ce stage des
    procédures, il nétait pas appelé « à trancher la question ultime de la
    capacité testamentaire de Jean-Guy Bergeron » mais seulement la question
    de la destitution de lexécuteur testamentaire. Le juge a aussi fait référence
    au droit pertinent.

[16]

Par contre, le juge a ensuite commencé son
    analyse en concluant sur la question précise quil avait dit quil ne devait
    pas trancher, en loccurrence, la question ultime de la capacité testamentaire du
    testateur. Au par. 10 de ses motifs, il énumère cinq raisons pour lesquelles il
    a conclu que le testateur « ne souffrait daucune incapacité à gérer
    ses affaires selon sa propre volonté ». Au par. 11, il détermine qu'il « serait
    spéculatif et contraire à la prépondérance de la preuve de conclure que Jean-Guy
    Bergeron nétait ni apte à comprendre convenablement la langue anglaise, ni
    doté de la capacité à gérer ses propres affaires et exprimer volontairement ses
    désirs quant à sa succession. »

[17]

Ayant ainsi conclu quil ny avait pas de raison
    de questionner la validité des testaments, le juge sest ensuite tourné vers la
    demande de destitution du fiduciaire testamentaire. Sur cette question, il a
    déterminé, sans explications, quil nexistait aucune preuve concrète que
    « lintimé
se comportera
de façon négligente
    ou malicieuse dans lexécution de ses responsabilités fiduciaires » ou
    « que lintimé
se soit comporté
, à titre de
    fiduciaire, contre les intérêts de la succession ou les bénéficiaires. » (Cest
    nous qui soulignons.)

[18]

Finalement, en sappuyant sur le fait que
    lintimé est représenté par un cabinet davocats et quil a suivi les étapes
    typiques suite au décès du testateur, il a conclu que le simple fait que
    lintimé et lappelante étaient en conflit personnel ne constituait pas un
    motif suffisant pour remplacer lintimé comme fiduciaire testamentaire.

D.

Questions en Litige

[19]

En appel, lappelante maintient que le juge des
    requêtes a correctement énoncé les principes de droit pertinents, mais a fait
    erreur dans lapplication de ces principes. De plus, le juge a fait erreur en
    concluant sur la capacité testamentaire du testateur puisque ce nétait pas la
    question à trancher par la cour et la preuve nétait pas complète sur cette
    question.

[20]

Selon lappelante, le juge des requêtes a commis
    des erreurs en :

·

Exigeant quil y ait de la preuve que lintimé
se soit comporté
à titre de fiduciaire contre les
    intérêts de la succession ou des bénéficiaires;

·

Exigeant quil y ait de la preuve que lintimé
se comportera
de façon négligente ou malicieuse dans
    lexécution de ses responsabilités fiduciaires;

·

En passant sous silence tous les faits allégués par lappelante à
    lappui de sa demande; et

·

En ignorant les conflits dintérêt dans lesquels lintimé se trouve.

E.

Analyse

(1)

Question préliminaire

[21]

Lintimé soulève une question préliminaire. Il
    maintient que la décision portée en appel est interlocutoire. Par conséquent,
    lappel devrait être engagé devant la Cour divisionnaire avec autorisation de
    celle-ci. Selon lintimé, la Cour dappel na pas compétence dans cette
    affaire.

[22]

Après avoir entendu les parties sur cette
    question, nous avons rejeté cette prétention séance tenante, avons conclu que
    le jugement en appel est final et avons entendu lappel sur le fonds.

[23]

Lappel est du jugement et non des motifs du
    jugement. Ainsi, le fait que dans ses motifs, le juge indique quil ne voit pas
    le besoin de remplacer lintimé à titre de fiduciaire testamentaire « à
    lheure actuelle » ne fait pas en sorte que le jugement doit être
    considéré comme interlocutoire. En lespèce, la demande de lappelante a été
    initiée par voie de requête et le jugement rendu est très clair : il
    rejette la requête et tranche définitivement la question de destitution du
    fiduciaire pour la durée des procédures concernant la validité du testament du
    testateur. Cest donc un jugement final et lappel est à la Cour dappel.

(2)

Sur le fonds

[24]

En ce qui a trait à lappel, pour les motifs qui
    suivent, je suis davis quil doit être accordé.

[25]

Premièrement, tel quil lavait signalé, le juge
    des requêtes naurait pas dû en arriver à une conclusion quant à la validité
    des testaments. Ce nétait pas la question qui lui avait été posée. De plus,
    dans ses motifs, le juge cite plusieurs él
éments de
la preuve avancée par lintimé à lappui de sa décision, mais ne
    fait aucune référence aux nombreux faits relevés par lappelante. Ceux-ci sont
    susceptibles de soulever des doutes quant à la capacité testamentaire du
    testateur et la possibilité que les testaments de janvier 2015 soient le
    produit dinfluence indue. Le juge se devait dexpliquer pourquoi il les a
    rejetés.

[26]

Ainsi, bien quil ait bien énoncé les principes
    de droit pertinents, sa conclusion que les testaments sont valides la induit à
    commettre une deuxième erreur. Dans lapplication des principes pertinents, il
    a ignoré les conflits dintérêts importants qui découlent du fait que les
    testaments pourraient bien être déclarés invalides.

[27]

Les dispositions de droit pertinentes sont les
    suivantes :

·

Larticle 37 de la
Loi sur les fiduciaires
, L.R.O., 1990, chap.
    T. 23 qui prévoit :

La Cour supérieure de justice peut
    destituer un représentant successoral pour tout motif pour lequel elle peut
    destituer tout autre fiduciaire, et nommer une ou plusieurs autres personnes
    compétentes pour agir à la place de lexécuteur testamentaire ou de
    ladministrateur successoral ainsi destitué.

·

Larticle 28 sur la
Loi sur les successions
, L.R.O. 1990, chap.
    E. 21 qui dispose :

Pendant une action concernant la
    validité du testament dun défunt ou lobtention ou la révocation de lettres
    dhomologation ou dadministration, la Cour supérieure de justice est
    compétente pour accorder ladministration en cas de succession ab intestat et
    peut nommer un administrateur des biens du défunt. Ladministrateur ainsi nommé
    a tous les droits et pouvoirs dun administrateur général, sauf le droit de
    distribuer le reliquat des biens. Ladministrateur est soumis à la surveillance
    immédiate de la cour qui peut ordonner que ladministrateur reçoive, par
    prélèvement sur les biens du défunt, la rémunération raisonnable quelle estime
    appropriée.

[28]

Tel que noté par le juge des requêtes, la
    volonté du défunt de son vivant, tel quil appert dans le testament, est
    généralement honorée : voir
Chambers Estate v. Chambers
, 2013
    ONCA 511, [2013] O.J. No. 3659, au par. 95. Par contre, la situation est plus
    nuancée lorsquil sagit de la destitution de fiduciaire successoral où il y a
    contestation de la validité dun document testamentaire. Dans un tel cas, la règle
    générale est quen labsence du consentement de toutes les parties intéressées,
    les tribunaux vont plus facilement favoriser ladministration de la succession
    durant le litige par une partie autre quune partie en cause : voir
Re
    Bazos
, [1964] 2 O.R. 236 (C.A.).

[29]

De plus, quand la validité dun testament est
    questionnée et que le bénéficiaire principal de ce testament est le fiduciaire
    testamentaire, la cour saisie dune demande de destitution du fiduciaire doit
    évaluer sil sera difficile pour ce fiduciaire dagir de façon impartiale dans
    lexécution de son devoir. Il nest pas nécessaire davoir la preuve quil y a
    déjà eu de linconduite ou même la preuve concrète quil se comportera de façon
    malicieuse. Tel que la expliqué le juge Griffiths dans laffaire
Orenstein
    v. Feldman
, [1978] O.J. n. 630 (H.C.J.), la question est plutôt sil sera
    difficile pour le fiduciaire dagir de façon appropriée plutôt que la
    probabilité quil agira ainsi.

[30]

Contrairement à ce que le juge des requêtes a
    indiqué, lappelante ne devait pas démontrer que lintimé « se soit
    comporté, à titre de fiduciaire, contre les intérêts de la succession ou les
    bénéficiaires », ni devait-elle présenter de la preuve concrète quil se
    « comportera » de façon malicieuse. La question pertinente en
    lespèce était de savoir sil sera difficile pour lintimé dagir de façon
    appropriée. La seule mention par le juge de conflit dintérêts possible est
    celui de personnalité entre lintimé et lappelante. Par contre, la preuve démontrant
    le potentiel conflit dintérêts était abondante et le juge ny fait pas mention
    dans ses motifs. Ceci découle sans doute du fait quil a déterminé que le
    testateur « ne souffrait daucune incapacité à gérer ses affaires selon sa
    propre volonté ». Puisque le testateur pouvait gérer ses affaires, il y
    avait très peu dabus ou de conflit possible pour lintimé dans la gestion des
    biens du testateur durant son vivant, utilisant la procuration, ni après sa
    mort. Puisque le juge a conclu que les testaments sont valides, lintimé reçoit
    à peu près tout, à lexception de la maison familiale et du terrain en Floride.
    La gestion de la succession naurait donc aucun ou très peu dimpact sur
    lhéritage de lappelante.

[31]

Le juge aurait dû adopter le cadre danalyse exposé
    dans larrêt
Re Groner Estate
, [1994] O.J. n. 140 (Gen. Div.). Dans
    cet arrêt, la juge Greer a indiqué à bon droit quun juge saisi dune demande
    de destitution dun fiduciaire testamentaire, où la validité du testament est remise
    en question, devrait considérer, entre autre, la valeur de la succession, la
    présence de conflits dintérêts, lavantage potentiel davoir une personne
    neutre en place comme fiduciaire, le besoin dexpertise dans ladministration
    de la succession et les difficultés qui se présentent dans lidentification et
    ladministration des actifs et passifs de la succession.

[32]

En lespèce, la preuve déposée par lappelante
    soulève de sérieuses questions quant à la validité des testaments. La validité
    des testaments sera décidée soit lors dune comparution future, une fois que la
    preuve sur cette question est complétée, ou par voie de procès.

[33]

Dans lintérim, le conflit dans lequel lintimé
    se trouve est clair. Lintimé doit préparer un inventaire des actifs et passifs
    de la succession, mais ceux-ci et les opérations du commerce familial sont
    mêlés depuis plusieurs années à lopération de sa compagnie privée, Landtech
    Inc. Ainsi, il y a de bonnes raisons de nommer un expert indépendant pour
    préparer un inventaire des actifs et passifs de la succession. Une personne
    neutre, autre que le propriétaire de Landtech Inc. et qui a une certaine
    expertise en affaires, est beaucoup mieux placée que lintimé pour en faire
    linventaire.

[34]

De plus, selon lappelante, lintimé ne la
    jamais consultée et a toujours géré le commerce familial seul, en plus de gérer
    sa propre entreprise. Plusieurs des transactions exécutées par l'intimé que
    lappelante soulève à lappui de sa demande ont eu lieu durant cette période. Il
    reste à déterminer si, à un ou plusieurs moments après son anévrisme, le
    testateur était incapable de gérer ses affaires. Si oui, la gestion par
    lintimé aurait été faite utilisant la procuration et cela sans quil y ait eu
    de comptes rendus. Ceci ajouterait un élément de complexité dans lidentification
    des biens qui sont ou devraient être dans la succession.

[35]

En outre, lenjeu dans cette affaire est dune
    très grande valeur. Les terrains dont il est question ont, selon lappelante,
    une valeur de 15 millions de dollars. Lintimé maintient que ce montant est de
    loin exagéré; mais même selon ses estimations, les terrains ont une valeur
    entre 3,7 et 5,1 millions de dollars.

[36]

Pour ces motifs, jaccorderais lappel. Jannulerais
    le jugement et en substitution, je rendrais un jugement de destitution de
    lintimé en sa qualité de fiduciaire testamentaire pour la durée des procédures
    concernant la validité du testament du testateur. Jordonnerais la nomination
    de la firme Doyle Salewski, représentée par Marc Rouleau, en qualité de
    fiduciaire pour la durée des procédures concernant la validité du testament du testateur.
    La Cour supérieure demeurera saisie pour traiter de toutes demandes, y inclus
    des demandes de modifications de la présente ordonnance, qui pourraient être
    formulées par les parties.

[37]

En ce qui a trait aux dépens, jaccorderais à
    lappelante ses dépens en appel fixés au montant de 13 000 $, y compris
    débours et taxes. Jaccorderais aussi à lappelante ses dépens pour la requête
    en première instance fixés au montant de 7 500 $ y compris débours et
    taxes pertinentes.

Rendu le : « L.B.R. » 19
    décembre 2016

« Paul
    Rouleau j.c.a. »

« Je
    souscris K.M. Weiler j.c.a. »

« Je
    souscris L.B. Roberts j.c.a. »

[1]
Il ny a rien dans le dossier indiquant sil y avait une
    procuration relative aux biens en vigueur entre le 20 octobre 2011 et le 28
    octobre 2014.


COURT OF APPEAL FOR ONTARIO

CITATION: Toronto Distillery Co. v. Ontario (Alcohol and
    Gaming Commission), 2016 ONCA 960

DATE: 20161220

DOCKET: C62043

Cronk, Juriansz and Roberts JJ.A.

BETWEEN

Toronto Distillery Company Ltd.

Applicant (Appellant)

and

The Alcohol and Gaming Commission of Ontario, The
    Liquor Control Board of Ontario, and Her Majesty the Queen in Right of Ontario

Respondents (Respondents)

Charles Benoit, agent for the appellant

Scott C. Hutchinson, for the Alcohol and Gaming
    Commission of Ontario

Michael Dunn and Padraic Ryan, for the Attorney General
    of Ontario

M. Jill Dougherty and Lara Kinkartz, for the Liquor
    Control Board of Ontario

Heard: December 15, 2016

On appeal from the judgment of Justice Suhail A.Q. Akhtar
    of the Superior Court of Justice, dated April 1, 2016.

ENDORSEMENT

[1]

The appellant is a small distillery. The Alcohol and Gaming Commission
    of Ontario (AGCO) granted it a Manufacturers Licence and Retail Store
    Authorization to sell its spirits to the public on-site on condition that it
    enter into a contract with the Liquor Control Board of Ontario (LCBO).

[2]

The LCBOs contract was non-negotiable and required the appellant to
    first sell its spirits to the LCBO before putting the spirits up for sale in
    the distillery store. The distillery would then sell the spirits to the public
    as the LCBOs agent. The contract also granted the LCBO the power to set mark-up
    and commission rates on the spirits sold. The total mark-up, 139.7%, insured
    that prices at the distillery store were the same as prices at LCBO stores. The
    contract provided the appellant would receive a 13% commission for acting as
    the LCBOs agent in selling the spirits.

[3]

On July 23, 2015, the appellant brought an application for a declaration
    that the LCBOs mark-up was an unconstitutional tax. It argued it was an
    unconstitutional tax because under ss. 53 and 90 of the
Constitution Act,
    1867
, taxes must be imposed by Parliament or the provincial legislature. Regulatory
    bodies cannot be empowered to impose taxes.

[4]

The application judge dismissed the application. He found that
    the mark-up fit within the criteria set out in
Lawson v. Interior Tree
    Fruit and Vegetable Committee of Direction
,

[1931] S.C.R. 357
and

Eurig
    Estate (Re)
,

[1998] 2 S.C.R. 565. But he went on to find the levy escaped
    classification as a tax because it was a proprietary charge. In making this
    finding, he relied on
Ontario Cancer Treatment and Research
    Foundation v. Ottawa (City)
(1998), 38 O.R. (3d)
    224 (C.A.), at p. 251;
Labourers International Union of North
    America v. Ontario Construction Secretariat
(1996),31
    O.R. (3d) 261 (Div. Ct.), at para. 16;
Air Canada v. Ontario (Liquor
    Control Board)
,

[1997] 2 S.C.R. 581;
and
620 Connaught Ltd v. Canada (Attorney General)
,

[2008]
    1 S.C.R. 131.

[5]

The appellant seeks to avoid this result by urging a particular
    interpretation of the distinction between proprietary charges and taxes that
    Rothstein J. made in
620 Connaught Ltd.
Rothstein J. said at para. 49:

I agree that proprietary charges for goods and services
    supplied in a commercial context are distinct from either regulatory charges or
    taxes and may be determined by market forces.

[6]

The appellant observes that the amount of managerial discretion in
    commercial contexts falls along a spectrum and advocated interpreting
    commercial context in Rothstein J.s distinction to require the exercise of
    active management discretion on a transaction by transaction basis. Such an
    interpretation is required, he submits, to give meaning to the protection that
    s. 53 of the
Constitution Act
affords the public from indirect
    taxation.

[7]

We are not persuaded that Rothstein J. intended that commercial
    context be given such a restricted meaning. The application judge found the
    LCBO was the owner and commercial supplier of the spirits in question.  We
    agree with the application judges analysis and his conclusion that the mark-up
    is a proprietary charge and not a tax.

[8]

Furthermore, we agree with the application judges alternate conclusion
    that the mark-up is not a tax because the appellant agreed to it in its
    contract. It is well-established that obligations under a contract arise from
    the voluntary agreement of the parties, while the obligation to pay a tax does
    not. Under the contract, the LCBO owns the spirits in the appellants store. As
    owner of the goods, the LCBO must have the right to determine the prices for
    which they are sold, including the mark-up. It follows that the mark-up is not
    an exercise of the governments public authority but of its private law rights.

[9]

The appellant submits the application judge erred in finding it is not
    under a practical compulsion to obtain authorization to operate a retail
    store. We do acknowledge that, within the regulatory framework, this is the
    only way it can sell its products directly to the public, albeit through a
    third party. However, that requirement falls short of the restrictions discussed
    in
Canadian Industrial Gas & Oil Ltd. v. Government of Saskatchewan et
    al.
, [1978] 2 S.C.R. 545 (
CIGOL
), where a petroleum royalty
    surcharge was held to be a tax. We agree with the application judges
    observation that the applicant entered into a contract with the LCBO for a
    commercial advantage and it was clear that the applicant was not compelled to
    sell its products through its own store. Like others, it could sell its spirits
    through stores operated by the LCBO or, alternatively, to markets outside
    Canada.

[10]

The appeal is dismissed. The respondents costs are fixed in the amount
    of $5,000, inclusive of disbursements and HST, to be paid to each of the three
    respondents.

E.A. Cronk J.A.

R.G. Juriansz J.A.

L.B. Roberts J.A.