Aaron L. Kreaden

The Supreme Court of Canada dismissed the auditors’ appeal and confirmed that an expert witness must be able and willing to provide fair, objective, and non-partisan assistance to the court as a threshold admissibility requirement, with remaining concerns about independence generally addressed at the gatekeeping weighing stage.

The plaintiff brought a motion for summary judgment against the individual defendant for repayment of a USD$1 million loan and over $400,000 in interest.

The funds had been advanced to a corporate entity controlled by the defendant, who failed to account for them.

Applying the Hryniak framework, the court found no genuine issue requiring a trial regarding the principal amount, as the defendant provided no credible explanation for the missing funds.

However, the court found a trial was necessary to determine if the defendant was personally liable for the contractual interest rate.

The defendants moved to transfer a civil proceeding from Hamilton to Toronto.

Applying Rule 13.1.02 of the Rules of Civil Procedure, the court held the moving party failed to establish that Toronto was a significantly better venue or that transfer was desirable in the interests of justice.

The court emphasized the shorter trial and motions lists in Hamilton, the prior procedural history already conducted there, and the absence of evidence of significant added inconvenience to parties or witnesses.

The motion was dismissed and costs were awarded to the plaintiff.

Following a prior motion decision, the parties were unable to agree on costs and sought a determination from the court.

The defendants sought substantial indemnity costs, arguing the motion was vexatious and unnecessary, while the plaintiff sought partial indemnity costs and argued the motion was required to secure payment of outstanding costs awards and attendance for an examination in aid of execution.

The court held that success on a motion must be assessed by comparing the circumstances before and after the motion and whether the motion induced compliance.

The court found the motion was necessary to obtain payment of outstanding costs awards and to secure attendance for examination.

Partial indemnity costs were awarded to the plaintiff, reduced to reflect lack of success on one issue.

Following judgment awarding damages for auditor negligence, the court determined the appropriate prejudgment interest rate and start date under the Courts of Justice Act.

The court rejected the plaintiff’s proposed interpretation of the Ministry interest rate tables and held that the statutory quarterly rate corresponding to the commencement of the action applied.

The court also declined to average interest rates over the period absent compelling justification, emphasizing that deviations from the statutory scheme require substantial evidence.

Applying ss. 128 and 130 of the Act, the court structured the accrual of prejudgment interest to reflect when losses were actually incurred rather than the breach date alone.

Interest was calculated in stages culminating in a total prejudgment interest award exceeding $33 million.

The moving corporate defendant sought summary judgment dismissing claims arising from a US$1 million investment loan advanced through a convertible debenture for a solar energy project.

The plaintiff alleged the individual defendant acted as agent for the corporate defendant and that the corporation was liable for breach of contract, unjust enrichment, conspiracy, and conversion.

The court held that the evidentiary record was incomplete, particularly due to the absence of evidence from key individuals alleged to have negotiated the transaction.

Given unresolved issues concerning agency, corporate identification, and the ultimate destination of the funds, the court concluded that genuine issues requiring a trial remained.

Summary judgment was therefore refused.

Livent Inc., through its Special Receiver, sued its former auditors, Deloitte & Touche, for negligence and breach of contract in failing to detect massive corporate fraud perpetrated by Livent's directing minds, Garth Drabinsky and Myron Gottlieb.

The court found that Deloitte failed to conduct its 1996 and 1997 audits in accordance with generally accepted auditing standards (GAAS), particularly regarding preproduction costs and complex revenue transactions.

The court rejected Deloitte's defences based on the corporate identification doctrine and ex turpi causa, holding that the fraud of the directing minds could not be attributed to the company to shield the negligent auditors.

Damages were assessed at $84,750,000, representing the increase in Livent's liquidation deficit caused by the delayed discovery of the fraud, discounted by 25% for business contingencies.

Following an appeal from an arbitral award concerning mining concessions and a contractual right of first offer, the court addressed costs of the appeal.

The earlier decision allowed the appeal in part, confirming that the right of first offer was triggered but overturning the arbitrator’s findings regarding partnership, fiduciary duties, and the remedy ordered.

Both parties claimed substantial success and sought partial indemnity costs.

The court held that success on the appeal was divided, as each side prevailed on significant issues.

In the circumstances, the appropriate disposition was for each party to bear its own costs.

A bank mistakenly wired duplicate funds to a recipient’s account and sought summary judgment to recover the second payment.

The respondent argued he merely acted as a trustee for another party and had already disbursed the funds without knowledge of the bank’s error, relying on the defence of change of position in unjust enrichment.

The court held that recovery of mistaken payments is permitted where the recipient is enriched without juristic reason and rejected the change of position defence because the respondent knew or ought to have known of the error.

The evidence showed rapid withdrawals, refusal to authorize repayment, and inability to explain expenditures.

The court concluded there was no genuine issue requiring a trial and granted summary judgment for repayment of the mistaken funds.

Appeal from an arbitral award under s. 45(1) of the Arbitration Act, 1991 concerning a joint venture relating to mining concessions in Peru.

The arbitrator held that the appellants breached a contractual right of first offer and a trust relationship by granting a cesión minera (assignment of concession rights) to a third party without offering the opportunity to the respondents.

The court upheld the arbitrator’s finding that entering into the cesión minera triggered the right of first offer and constituted a breach of the contractual trust arrangement.

However, the court found the arbitrator erred in law by concluding that the parties’ relationship constituted a partnership giving rise to broader fiduciary duties and by crafting a remedy tied to the broader share purchase agreement rather than the cesión minera itself.

The appeal was therefore allowed in part and the matter remitted to the arbitrator to determine appropriate terms for offering the cesión minera to the respondents.