CITATION: Leggat v. Direct Leverage Limited, 2015 ONSC 2639

DIVISIONAL COURT FILE NO.: DC 61/15

DATE: 20150422

SUPERIOR COURT OF JUSTICE – ONTARIO – DIVISIONAL COURT

RE: ROY LEGGAT and PATRICIA LEGGAT (Responding Parties/Plaintiffs)

and

DIRECT LEVERAGE LIMITIED, DIANA METZEN, TEUTON HOLDINGS, JOSEPH METZEN and LOARN METZEN (Moving Parties/Defendants)

COUNSEL: Jennifer Teskey and Kristine Spence, for the Moving Parties Symon Zucker, for the Responding Parties

HEARD: In Toronto, in writing

E N D O R S E M E N T

(Leave to Appeal to the Divisional Court)

MOLLOY J:

Introduction

[1] The defendants seek leave to appeal to the Divisional Court from the Order of Spence J. dated January 22, 2015, dismissing a motion for a stay brought by the defendants.

[2] In 2004, the plaintiffs entered into a joint venture agreement with Direct Leverage Limited (“DLL”) pursuant to which the plaintiffs transferred $954,600 to DDL for investment. The plaintiffs commenced the within action against the defendants for damages and an accounting for fraudulent misappropriation of funds and a constructive trust, alleging that the defendants used the funds for an improper purpose and that the funds were not invested in accordance with the joint venture agreement. The joint venture agreement contained an arbitration clause stating that “any controversy or claim arising out of or relating to this agreement, or breach thereof” shall be settled by arbitration under the laws of the United Kingdom, with hearings to take place in Gibraltar. The defendants brought a motion to stay or dismiss the action on the grounds that the dispute falls within the arbitration clause.

[3] The motion judge ruled that the plaintiffs’ action was in essence a claim in fraud and that it relates to or arises from the joint venture agreement only in the sense that the agreement was the instrumentality used by the defendants to implement the fraud. As such, he found that the plaintiffs’ claim was not covered by the arbitration clause and dismissed the defendants’ motion for a stay of proceedings.

The Test for Granting Leave to Appeal

[4] The test for granting leave to appeal under Rule 62.02(4) is well-settled. It is recognized that leave should not be easily granted and that the test to be met is a very strict one. There are two possible branches upon which leave may be granted. Both branches involve a two-part test and in each case, both aspects of the two-part test must be met before leave may be granted.

[5] Under Rule 62.02(4)(a), the moving party must establish that there is a conflicting decision of another judge or court in Ontario or elsewhere (but not a lower level court) and that it is in the opinion of the judge hearing the motion “desirable that leave to appeal be granted”. A “conflicting decision” must be with respect to a matter of principle, not merely a situation in which a different result was reached in respect of particular facts: Comtrade Petroleum Inc. v. 490300 Ontario Ltd.¸(1992), 7 O.R. (3d) 542 (Div.Ct.).

[6] Under Rule 62.02(4)(b), the moving party must establish that there is reason to doubt the correctness of the order in question and that the proposed appeal involves matters of such importance that leave to appeal should be granted. It is not necessary that the judge granting leave be satisfied that the decision in question was actually wrong; that aspect of the test is satisfied if the judge granting leave is satisfied that the correctness of the order is open to “very serious debate”: Nazari v. OTIP/RAEO Insurance Co., [2003] O.J. No. 3442 (S.C.J. per Then J.); Ash v. Lloyd’s Corp. (1992), 8 O.R. (3d) 282 (Gen Div., per Farley J.). In addition, the moving party must demonstrate matters of importance that go beyond the interest of the immediate parties and involve questions of general or public importance relevant to the development of the law and the administration of justice: Rankin v. McLeod Young Weir Ltd. (1986), 57 O.R. (2d) 569 (H.C.J. per Catzman J.); Greslik v. Ontario Legal Aid Plan (1988), 65 O.R. (2d) 110 (Div.Ct.).

Ruling

[7] There are no conflicting decisions in which different legal principles are chosen to decide a comparable problem. The decision of the motion judge is consistent with other decisions of this Court and the Court of Appeal as to whether claims in fraud and deceit fall within a broadly worded arbitration clause such as the one at issue here. Further, I see no reason to doubt the correctness of the decision of the motion judge in this case. On the contrary, I consider it to be correct, and in accordance with established precedent.(See Dell Computer Corp v. Union des consommateurs, 2007 SCC 34; Dancap Productions Inc. v. Key Brand Entertainment, 2009 ONCA 135; Diamon & Diamond v. Srebrolow, [2003] O.J. No. 5929, 46 C.P.C. (5th) 304 (Ont.S.C.J.), aff’d [2003] O.J. No. 4004 (Ont.C.A.).)

[8] Accordingly, this leave to appeal motion is dismissed.

[9] The moving parties requested that if leave was granted, costs of this motion should be left to the Court hearing the appeal. In the event that leave was refused, the defendants requested that there be no order as to costs on the basis that the issues were novel and it was reasonable to have brought the motion. I see no reason why costs should not follow the event.

[10] The plaintiffs seek costs on a partial indemnity basis in the amount of $13,878.92, of which $725.72 is disbursements. The amount claimed is completely out of line with a motion of this nature. Costs are fixed at $3500.00 payable by the moving party defendants forthwith.

MOLLOY J.

Date: April 22, 2015