DATE: 20030626

DOCKET: C39390

COURT OF APPEAL FOR ONTARIO

RE: OUTSET MEDIA CORPORATION (Plaintiff/Respondent) v. STEWART HOUSE PUBLISHING INC. and KEN THOMSON (Defendants/Appellants)

BEFORE: O’CONNOR A.C.J.O., MORDEN and SHARPE JJ.A.

COUNSEL: R. Andrew Biggart and John R. Hart for the appellants

Robert C. Taylor for the respondent

HEARD: June 18, 2003

ORALLY

RELEASED: June 18, 2003

On appeal from the judgment of Justice Angus D.K. MacKenzie of the Superior Court of Justice dated December 16, 2002.

E N D O R S E M E N T

[1] In our view, the appellant, Ken Thomson, is entitled to raise the argument that the motion judge erred in concluding that Stewart House held the monies in trust even though Stewart House itself has not continued its appeal after its bankruptcy. The conclusion of the motion judge that there was a trust affected the appellant’s interest and is a conclusion that is as much against the appellant as it is against Stewart House. The appellant is therefore entitled to appeal that conclusion.

[2] In our view, on the record before him, the motion judge erred holding that the amounts owing to the respondent were impressed with a trust. In his reasons, the motion judge misconstrued the legal effect of the provision in the agreement relating to the payments by Stewart House to the respondent.

[3] The motion judge said the following:

Upon sale of the product, Stewart House acquired a contractual right to appropriate to itself 25% of the sale price as a selling agent’s commission for the product. Upon appropriating that 25% of the sale price to itself, the remaining funds or net proceeds of sale which represented the product remained the property of the plaintiff.

[4] We do not think that the agreement, properly interpreted, means that the net proceeds of sale “remained the property of the respondent”. Rather, the agreement provided that Stewart House was contractually obligated to pay to the respondent 75% of the amount invoiced to purchasers. Payments to the respondent did not depend on receipt of payment by Stewart House. The risk of non-payment was assumed by Stewart House not by the respondent. Indeed, there was a specific provision in the agreement to this effect.

[5] This arrangement for payment to the respondent is inconsistent with the notion that the proceeds received from sales of the games were impressed with a trust in favour of the respondent.

[6] Another factor which points away from the existence of a trust is that the agreement made no provision for the segregation of the funds received by Stewart House from the sale of the games.

[7] Accordingly, the appeal is allowed, the judgment as against the appellant, Thomson, is set aside and the motion for summary judgment is dismissed. The costs of the appeal are fixed on a partial indemnity basis in the amount of $12,000, inclusive of disbursements and G.S.T.

“Dennis O’Connor A.C.J.O.”

“J.W. Morden J.A.”

“Robert J. Sharpe J.A.”