TABLE OF CONTENTS | CIVIL DECISIONS |  SHORT CIVIL ENDORSEMENTS| CRIMINAL DECISIONS

Good afternoon,

Following are the summaries for this week’s civil decisions of the Court of Appeal for Ontario. There was one noteworthy decision released relating to Bernard Madoff’s Ponzi scheme. Almost 10 years have passed since Madoff’s confession!

In Fairfield Sentry Limited v. PricewaterhouseCoopers LLP, several Fund companies that invested heavily into Madoff’s scheme brought an action against auditors PWC, asserting that PWC was negligent in performing the audits of the Funds’ financial statements for the two years prior to Madoff’s fraud confession in December 2008.  The Funds alleged that PWC should have uncovered the Ponzi scheme and its failure to do so resulted in damages to the Funds of $2.5 billion. PWC brought a successful motion for summary judgment dismissing the action (note PWC assumed liability for the purposes of the motion and the only issue was whether there was a genuine issue for trial regarding damages). The Court of Appeal dismissed the Funds’ appeal and found that the motion judge, who was faced with several expert opinions ranging from accounting and insolvency to United States law, correctly applied the facts and evidence of this case to the test established in Livent Inc. v Deloitte & Touche for calculating damages.

Other topics included Condominium Law, Environmental Law and Child Custody and Access.

Have a great weekend.

John Polyzogopoulos
Blaney McMurtry LLP
416.593.2053  Email

TABLE OF CONTENTS

Fairfield Sentry Limited v. PricewaterhouseCoopers LLP, 2018 ONCA 696

Keywords: Auditors, Financial Statements, Negligence, Breach of Contract, Summary Judgment, No Genuine Issue Requiring a Trial, Damages, Livent Inc. v. Deloitte & Touche, 2016 ONCA 11

Lemon v. Lemon, 2018 ONCA 684

Keywords: Custody, Access, Best Interests of the Children, Maximum Contact Principle, Freedom of Religion, Equality Rights, Charter of Rights and FreedomsChildren’s Law Reform Act, R.S.O. 1990, c. C.12

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

Keywords: Breach of Contract, Oppressive Conduct, Costs, Substantial Indemnity, Condominium Act, 1998, SO 1998, c 19

Mississippi Valley Conservation Authority v. Mion, 2018 ONCA 691

Keywords: Environmental Law, Contempt, Wetland Restoration, Deference, Conservation Authorities Act, RSO 1990, c C 27

For Short Civil Endorsement, click here.

For Criminal Decisions, click here.


CIVIL DECISIONS

Fairfield Sentry Limited v. PricewaterhouseCoopers LLP, 2018 ONCA 696

[Benotto, Brown and Miller JJ.A.]

Counsel:

P.F.C. Howard, P. O’Kelly, and A.L. Kreaden, for the appellants

G.L.R. Ranking, S.J. Armstrong, and K. Potter, for the respondents

Keywords: Auditors, Financial Statements, Negligence, Breach of Contract, Summary Judgment, No Genuine Issue Requiring a Trial, Damages, Livent Inc. v. Deloitte & Touche, 2016 ONCA 11

Facts:

The appellants were funds incorporated in the British Virgin Islands (“BVI”), and were investors in Bernard Madoff’s Ponzi scheme.  The truth of the scheme only became known in December of 2008 when Madoff confessed. The respondents audited the appellants’ financial statements for 2006 and 2007.

The appellants were put into liquidation subsequent to the revelation of Madoff’s scheme, following which — by their BVI court-appointed liquidators (the “Liquidators”) — the appellants brought an action seeking damages from the respondents for breach of contract and/or negligence in performing the funds’ audits. The Liquidators alleged that the respondents should have uncovered Madoff’s Ponzi scheme no later than April 24, 2007, when they delivered the funds’ audited 2006 financial statements. Because the respondents did not do so, the funds remained invested in the Ponzi scheme, as a result of which they argued they suffered approximately $2.5 billion in damages.

The respondents 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.

The motion judge granted summary judgment and dismissed the action, applying the approach to calculating damages set out by the Ontario Court of Appeal in Livent Inc. v Deloitte & Touche, 2016 ONCA 11. He accepted the evidence of the respondents’ damages expert in concluding that the funds had not suffered any damages, and there was therefore no genuine issue that required a trial.

The appellants appealed this decision.

Issues:

(1) Did the motion judge make an improper adverse inference against the appellants for not seeking the court’s permission to file “sur-reply evidence” in response to the respondents’ reply evidence?

(2) Did the motion judge commit a palpable and overriding error by treating the appellants’ withdrawal of $1.03 billion from Madoff’s company between the date the respondents delivered their audits for the 2006 year (the date for calculating the “Estimated Liquidation Deficit” or “ELD”) and the date Madoff’s fraud was revealed (the date for calculating the “Actual Liquidation Deficit” or “ALD”) as a “benefit” to the appellants, subsequently eliminating that amount from the appellants’ damages?

(3) Did the motion judge commit a palpable and overriding error in his treatment of the amounts set out in certain non-forbearance judgments that the appellants consented to in favour of the trustee for Madoff’s investment company?

(4) Did the motion judge fail to consider the effect of what was, in the Liquidators’ view, the improper removal of two line items from a balance sheet calculation chart submitted in support of the damages estimate of $2.5 billion?

(5) Did the motion judge commit a palpable and overriding error in describing as a “net increase in liabilities” the change in the “Investor Liabilities” line item between the ELD and the ALD?

Holding:

Appeal dismissed.

Reasoning:

(1) No. First, the motion judge’s reasons disclose that he did not make any adverse finding of fact against the Liquidators’ absence of evidence responding to the respondents’ reply evidence. He simply observed that certain of the Liquidators’ arguments lacked evidentiary support. Second, the appellants had no basis on which to complain about this supposed inference. Given that this was a Commercial List proceeding, case-managed by the motion judge, it was open to the appellants to ask the motion judge for leave to introduce “sur-reply evidence” in response to the respondents’ reply evidence. Indeed, the motion judge indicated in his reasons that he would have granted them leave had they requested it, but they declined to do so.

(2) No. The starting point of the motion judge’s analysis on this issue was the evidence of the Liquidators, as then broken down by the respondents’ expert witness, Dr. Marais, in a manner that was not challenged by the Liquidators. Accordingly, his ultimate findings of fact, including his finding with respect to the $1.03 billion, were supported by the record and based on the comparative liquidation date framework for calculating damages advanced by the Liquidators in their evidence.

(3) No. The motion judge correctly stated the damages formula approved by the Court of Appeal 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… it would make little sense for a balance sheet to list a liability that did not have to be paid.” The motion judge’s finding was firmly anchored in the evidentiary record, including the evidence of another of the respondents’ expert witnesses, Mr. Gerber.

(4) No. The motion judge started his analysis with the appellants’ evidence then accepted the deconstructed version of that evidenced adduced by Dr. Marais and explained, in considerable detail, his findings in respect of various items. The Liquidators did not file any evidence responding to Dr. Marais’ deconstructed version of the evidence, nor to Mr. Gerber’s expert evidence. It was open to the motion judge to prefer the evidence adduced by the respondents, as long as he gave reasons for so doing that found support in the evidence. He did so.

(5) No. The motion judge may have made an error in terminology by referring to the change in the “Investor Liabilities” line item as a “net increase in liabilities”, but it was clear from the record that the motion judge did not misapprehend the evidence and correctly conducted the relevant calculations.

Lemon v. Lemon, 2018 ONCA 684

[Feldman, Hourigan and Brown JJ.A.]

Counsel:

A. Nenniger, for the appellant

D.C.L. and S.L., acting in person

Keywords: Custody, Access, Best Interests of the Children, Maximum Contact Principle, Freedom of Religion, Equality Rights, Charter of Rights and FreedomsChildren’s Law Reform Act, R.S.O. 1990, c. C.12

Facts:

The appellant was the biological mother of two children who, early in their lives, were voluntarily transferred by the appellant to the care of the respondents (the appellant’s brother and sister-in-law). Three years after the children had been transferred, the custody dispute began as a result of the respondents’ consultation with a lawyer regarding the possibility of obtaining custody of the children. When the appellant learned of this development, she took the children to come live with her.

The respondents consequently brought an application for custody of the children. A judge of the Superior Court ordered interim custody to the respondents, with access in favour of the appellant. Pursuant to court requests, the Ontario Children’s Lawyer became involved and an initial report and an update were prepared by the same clinician: the first report recommended granting custody to the respondents with access in favour of the appellant; the update recommended that the appellant be granted custody of the children with access to the respondents.

After an eight-day trial, the trial judge found that it was in the children’s best interests to remain in the sole custody of the respondents, with access in favour of the appellant. In ruling in favour of the respondents, the trial judge made several findings relevant to this appeal: first, that the appellant’s current romantic relationship was not a stable one, and that by extension the appellant’s own life was unstable; second, that is was in the children’s best interests to be in the sole custody of the respondents; and third, that it was the children’s preference to live with the respondents. The trial judge’s custody order prohibited the mother from including the children in any activity or festivity contrary to the respondents’ Jehovah’s Witness religious beliefs.

The appellant appealed this decision.

Issues:

(1) Did the trial judge err by finding that the appellant’s relationship was not stable, and that the appellant was not stable by extension?

(2) Did the trial judge err by failing to consider the maximum contact principle?

(3) Did the trial judge err by failing to appreciate that parents have a favoured status when competing with non-parents for custody of their child?

(4) Did the trial judge misapprehend the relevant status quo?

(5) Did the trial judge err by treating the appellant’s secular beliefs as less significant at law than the respondent’s faith?

Holding:

Appeal allowed in part; access order altered to grant the appellant greater access to her children.

Reasoning:

(1) No. While the Court of Appeal disagreed with the finding that the appellant’s romantic relationship was unstable, the finding that her life was unstable was nevertheless supported on the record by reference to her employment and finances – especially by comparison to the respondents’ demonstrated ability to provide for the children.

(2) No. The Children’s Law Reform Act (“CLRA”) already contemplates the maximum contact principle, so the trial judge was correct to rely on the “best interests” framework set out in s. 24(2) of the CLRA. That being said, the trial judge did misapprehend the evidence to some extent by failing to give sufficient consideration of the children’s views and preferences. Both children were clear that they wished to spend more time with their mother, and that they loved her deeply. The trial judge failed to give this evidence its proper due by instead simply stating that they wished to stay with the respondents. That being said, this error was not sufficient to warrant overturning the trial judge’s decision to award sole custody to the respondents.

(3) No. Similar to issue (2) the CLRA already contemplates the importance of the parental bond, so the trial judge made no error in this respect by relying on the “best interests” framework. Also similar to issue (2), however, the trial judge failed to properly consider the evidence for the same reasons stated.

(4) No. The trial judge did not explicitly consider the status quo, but to the extent that he did so implicitly, the Court of Appeal could find no error.

(5) Yes. Given that the appellant was living in a committed same-sex relationship – itself an activity contrary to the religious beliefs of the respondents (both of whom were Jehovah’s Witnesses) – the wording of the order was such that the children would be precluded from being with the appellant because of her sexual orientation. In crafting the order, the appellant’s sexual orientation and her secular beliefs were entitled to the same level of respect as the respondents’ beliefs by virtue of her Charter rights.

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

[Sharpe, Juriansz and Roberts JJ.A.]

Counsel:

J. Goldblatt, for the appellants

M. Arnold, for the respondent

Keywords: Breach of Contract, Oppressive Conduct, Costs, Substantial Indemnity, Condominium Act, 1998, SO 1998, c 19

Facts:

This appeal arose out of the appellant’s objection to the renovations that the respondent proposed to carry out to the condominium units that formed part of the condominium’s 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.

Following an unsuccessful arbitration concerning the respondent’s right to require the renovations as a condition for the appellant’s unit remaining in the pool, the appellant applied to the Superior Court for relief under ss. 119 and 135 of the Condominium Act, 1998, SO 1998, c 19.

The application judge dismissed the application, finding that there was no oppressive conduct by the respondent.

The application judge additionally found that the appellant’s real objection was the cost occasioned by the renovations, and that she wanted to stay in the hotel rental pool without the renovations. He determined that the appellant was not obliged to carry out the proposed renovations to her unit, but nor could she 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.

Issues:

(1) Did the application judge err in concluding that none of the respondent’s conduct was oppressive, threatening or unfairly prejudicial to the appellant’s interests?

(2) Did the application judge err in dismissing the appellant’s application on the basis that she lacked standing?

(3) Should the respondent be awarded costs on a substantial indemnity scale?

Holding:

Appeal dismissed.

Reasoning:

(1) No. This argument was premised upon the argument that the applicant judge found there to be a breach of the Declaration, when in fact he made no such finding. In actual fact, the application judge found that the appellant failed to demonstrate that the proposed renovations required a certificate from an architect or engineer, and that even if they did, the lack of a certificate did not amount to a breach of contract. 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.

The Court of Appeal similarly rejected the appellant’s 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. The Court instead referred to the application judge’s finding that the appellant’s real animus for litigation was her objection to the cost of renovations.

(2) The Court of Appeal declined to address this submission, holding that it need only address the first submission to dispose of the appeal. However, the Court stressed that should not be taken as agreeing with or otherwise upholding the application judge’s decision on this issue.

(3) No. While unsuccessful, the appeal was not frivolous, vexatious or an abuse of process, and therefore did not attract the extraordinary level of substantial indemnity costs. The Court similarly declined to take into account a settlement offer that the application judge already considered in making his costs award.

Mississippi Valley Conservation Authority v. Mion, 2018 ONCA 691

[Sharpe, Juriansz and Roberts JJ.A.]

Counsel:

Y. Hameed, for the appellants

H.R. Brodmann, for the respondent

Keywords: Environmental Law, Contempt, Wetland Restoration, Deference, Conservation Authorities Act, RSO 1990, c C 27

Facts:

The appellants had been convicted under the Conservation Authorities Act, RSO 1990, c C 27, following their interfering with and removing material from wetlands and were ordered by Lahaie J. of the Ontario Court of Justice to “rehabilitate and restore the wetlands to conform with the guidelines and requirements set by the Mississippi Valley Conservation Authority [(“MVCA”)] with[in] 6 months of the date of this Order or such further time as the MVCA may permit in writing.” An application judge in the Ontario Superior Court of Justice then found them in contempt of this order. The appellants appealed this finding, arguing that they should not have been found in contempt because the application judge found the order ambiguous.

Issue:

(1) Was the application judge correct in finding them in contempt of the order of Lahaie J.?

Holding: Appeal dismissed.

Reasoning:

(1) Yes. The Court of Appeal found that the order could have been expressed in more specific terms, but the application judge was correct in reading the order in the context of the reasons given by Lahaie J. The application judge was correct in finding that the appellant’s professed need for clarity of the order to be disingenuous. The appellants never took the position that the terms of the order were unclear or made inquiries of the MVCA as to the remedial steps to be taken until the contempt motion. Furthermore, at the hearing of the charges against them, the appellants took the position that they were able to remediate the property, meaning they should be taken as knowing what they removed, from where, and in what quantities. Based on this, the Court of Appeal found the application judge’s conclusion that the appellants deliberately and wilfully ignored the order and defied it in a public way was deserving of deference and was amply supported by the record.


SHORT CIVIL ENDORSEMENTS

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

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

Counsel:

M.L. Waddell and F.Y. Brunning, for the appellants Claimant H15019, Claimant K-10106 and E.M.

C.A. Coughlan and B. Thompson, for the respondent Attorney General of Canada

P.C. Wardle, for the intervenor

D. Soroka, D. Schulze and M. Décarie-Daigneault, for the Independent Counsel

Keywords: Appeal Costs


Criminal Decisions

R. v. Thomas, 2018 ONCA 694

[Doherty, Pepall and Nordheimer JJ.A.]

Counsel:

N. Jamaldin and P. Genua, for the appellant

A. Alvaro, for the respondent

Keywords: Jury Charge, Admissible Evidence, Similar Act Instruction, Circumstantial Evidence, R v Stubbs, 2013 ONCA 514, R v White, 2011 SCC 13, R v Merz (1999), 46 OR (3d) 161 (CA), R v Lucas (1983), 9 CCC (3d) 71 (Ont CA), R v Villaroman, 2016 SCC 33, R v National Post, [2010] 1 SCR 477

R. v. Szilagyi, 2018 ONCA 695

[Feldman and Benotto JJ.A. and Sachs J. (ad hoc)]

Counsel:

A. Menchynski, for the appellant

R. Visca, for the respondent

Keywords: Search and Seizure, Admissibility, Exclusion, Charter of Rights and Freedoms ss. 8, 9 and 24(2), R v Grant, 2009 SCC 32, R v Rocha, 2012 ONCA 707, R v Morelli, 2010 SCC 8, R v Learning, 2010 ONSC 3816, R v Debot, [1989] 2 SCR 1140, R v Paterson, 2017 SCC 15

R. v. Magyar, 2018 ONCA 697

[Watt, Huscroft and Fairburn JJ.A.]

Counsel:

C. Sewrattan, for the appellant

J. Streeter, for the respondent

Keywords: Garofoli Application, Search and Seizure, Admissibility, Exclusion

The information contained in our summaries of the decisions is not intended to provide legal advice and does not necessarily cover every matter raised in a decision. For complete information or for specific advice, please read the decision or contact us.

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Photo of John Polyzogopoulos John Polyzogopoulos

John has been the editor of Blaneys Appeals since the inception of the blog in the Summer of 2014. He is a partner at the firm with almost two decades of experience handling a wide variety of litigation matters. John assists clients with matters ranging from appeals, to injunctions, to corporate, breach of contract and other business litigation, to estates and matrimonial litigation, and to debtor-creditor and insolvency litigation. John also represents amateur sports organizations in contentious matters and advises them in matters of internal governance. John can be reached at 416-593-2953 or jpolyzogopoulos@blaney.com.