Court of Appeal for Ontario

Date: 2017-07-10 Docket: C59933

Judges: Hoy A.C.J.O., van Rensburg and Roberts JJ.A.

Between

1162740 Ontario Limited, Joseph Pingue and Sabatino Pingue Jr. Plaintiffs (Respondents)

and

Venanzio Pingue, 2077626 Ontario Inc. and 912618 Ontario Limited Defendants (Appellants)

Counsel

For the Appellants: Ryan Wozniak, Eric Sherkin and Kevin Sherkin

For the Respondents: Hari S. Nesathurai and Glen M. Perinot

Heard: June 19, 2017

Appeal Information

On appeal from the judgment of Justice Linda M. Walters of the Superior Court of Justice, dated December 22, 2014, with reasons reported at 2014 ONSC 7418.

Reasons for Decision

Overview

[1] The appellants appeal from the judgment of the trial judge granting a constructive trust over their properties, declaring that the appellant, Venanzio Pingue, is not a shareholder of the respondent, 1162740 Ontario Limited ("116"), and removing him as an officer and director of 116 in light of her finding that he breached his fiduciary duties.

[2] These proceedings arise out of a failed business venture among two brothers – Venanzio Pingue and the respondent, Sabatino Pingue Jr. – and their cousin, Joseph Pingue, involving the purchase of an apartment building at 315 Glendale Avenue in St. Catharines.

[3] The trial judge made the following findings concerning the agreement among the parties with respect to the ownership of 315 Glendale Avenue and the shareholdings of 116. Although it was ostensibly set up as a bare trustee, the parties treated 116 as the absolute owner of 315 Glendale Avenue. Joseph Pingue advanced the monies to purchase 315 Glendale Avenue. In consideration of his providing these funds, Sabatino and Venanzio Pingue transferred their respective shares in 116 to Joseph. The shares of Venanzio and Sabatino Pingue Jr. represented 50% of the shares of 116. Venanzio and Sabatino Pingue Jr. had a period of five years to reacquire their shares by repaying Joseph Pingue their respective portions of the monies, interest free, that he had advanced to purchase 315 Glendale Avenue and keep the second mortgage in good standing, and also by repaying any profits that he had re-invested for capital improvements. Venanzio never paid Joseph Pingue for his shares. The relationship foundered when Joseph and Sabatino Pingue Jr. discovered that Venanzio had misappropriated $592,671.43 from 116.

[4] The trial judge granted judgment for the respondents and imposed a constructive trust over three properties owned by the appellants to secure repayment of the misappropriated funds. She declared that Venanzio Pingue was not a shareholder of 116 because he had not paid for his shares, and removed him as an officer and director of 116 because of his breach of his fiduciary duties to 116.

[5] The appellants advance the following main grounds of appeal:

i. The trial judge erred in disregarding the parties' written agreements and in finding that Venanzio Pingue was under an obligation to repurchase his shares, which the appellants submit were held by 116 as a bare trustee for the three shareholders.

ii. The trial judge erred in failing to admit the forensic accounting report prepared by the appellants' expert. Leave to file the report was mandatory under r. 53.08 of the Rules of Civil Procedure. Moreover, the trial judge's refusal to grant leave created trial unfairness to the appellants because it left unchallenged the expert's report of the respondents on which the trial judge principally relied for her findings of misappropriation and breach of fiduciary duty.

[6] For the reasons that follow, we reject these grounds of appeal.

(1) Did the trial judge err in her interpretation of the parties' agreement?

[7] The appellants submit that the trial judge erred by effectively re-writing the parties' written agreements, which, they submit, provided in clear and unambiguous terms that 116 would hold 315 Glendale Avenue as a bare trustee for the three shareholders. As a result, the trial judge erred in determining that Venanzio had to pay any monies for his shares. Moreover, according to the appellants, the trial judge granted rectification of the written agreements when this relief was neither pleaded nor requested by any party.

[8] We disagree. In their amended statement of claim, their evidence and their written submissions at trial, the respondents clearly maintained that the parties had never treated 116 as a bare trustee but always as absolute owner of 315 Glendale Avenue, and that Venanzio had transferred his shares to Joseph Pingue but never paid for them.

[9] The trial judge interpreted the parties' written agreements and found them to be confusing and incomplete. This was a finding that was open to her on the record. As she was entitled to do, the trial judge accepted the respondents' evidence as to the parties' agreement concerning their relationship and the structure of their business venture. She determined that 116 was the absolute owner of 315 Glendale Avenue and that Venanzio and Sabatino Pingue Jr. were required to pay for their shares by reimbursing Joseph Pingue for his advances within five years. She found that Venanzio Pingue never paid for his shares and that Joseph Pingue remained beneficial owner of them. We see no basis to interfere with her conclusions.

[10] While not pressed at the hearing of the appeal because of their position that Venanzio Pingue was not obliged to repurchase his shares of 116, the appellants submitted in their factum that the trial judge erred in finding that Venanzio had not paid for his shares of 116 when there was clear evidence of a cheque and a bank deposit in payment of his shares. Given our rejection of the appellants' first ground of appeal, it becomes necessary to deal with this ground.

[11] We also reject this ground. The appellants challenge the trial judge's finding of fact that Venanzio Pingue did not pay for his shares. Giving detailed and cogent reasons, the trial judge rejected Venanzio's evidence that the proffered cheque represented payment for his shares, preferring the respondents' evidence that the cheque was in reimbursement for unauthorized withdrawals by the appellants. This finding was open to the trial judge on the evidence before her and, again, is entitled to deference by this court. We see no palpable and overriding error in her finding that would justify interference with it.

(2) Did the trial judge err in refusing to admit the appellants' expert report?

[12] Granting of leave under r. 53.08 of the Rules of Civil Procedure is mandatory in that it requires the trial judge to grant leave on just terms, unless the court determines that granting leave will cause prejudice to the other party or undue delay in the conduct of the trial: Pavao v. Pinarreta, [1995] O.J. No. 1197, 40 C.P.C. (3d) 84 (C.A.), at para. 11. The right to obtain leave under r. 53.08 is therefore not absolute because it is subject to the court's exercise of discretion having regard to the questions of prejudice and undue delay, and the overarching consideration of trial fairness to the parties.

[13] The trial judge's decision to dismiss the appellants' motion for leave to file their expert's report was discretionary and is subject to considerable deference by this court. Absent an error of law or palpable and overriding error, we cannot intervene. We see no error here. The trial judge carefully and thoroughly considered and balanced all relevant factors. She determined, correctly in our view, that the admission of the expert's report at the end of the already lengthy second trial, following the conclusion of all of the evidence, would result in non-compensable prejudice to the respondents and undue delay.

[14] There is no basis for the appellants to complain of trial unfairness in the circumstances of this case because the appellants are entirely responsible for the late service of their expert's report. The appellants were aware since the pre-trial conference in June 2010 that expert reports were necessary and they had the respondents' expert's report since September 2011. Most significantly, the appellants failed, without reasonable excuse, to comply with the October 19, 2011 order following the first trial that they deliver an expert report by January 26, 2012.

[15] Notwithstanding their clear failure to comply with the court order, the appellants did not move before or at the beginning of the second trial in October 2013 for leave to file their expert's report. Rather, they inexplicably waited until after the completion of all of the evidence, including Venanzio Pingue's testimony, to retain their expert to prepare a report. They then further delayed until the 37th day of the 40-day trial to serve their motion for leave to file her report. The appellants' long, unexplained delay distinguishes the present case from the cases (such as, for example, in Pavao) where the parties seeking leave to file their experts' reports had sought and were granted that relief at or close to the beginning of trial.

[16] In these circumstances, we agree with the trial judge's determination that the admission of the report would have effectively resulted in another trial and enormous trial unfairness to the respondents who had prepared for and participated in the trial in the absence of any expert report from the appellants.

(3) Motion to Admit Fresh Evidence

[17] The appellants seek to admit as fresh evidence a copy of the parcel register that shows that 315 Glendale was sold by 116 on January 25, 2017 for the amount of $7,200,000. The appellants submit that this evidence demonstrates the tremendous importance to Venanzio Pingue of the loss of his shares in 116. This evidence is not necessary or relevant to any issue on this appeal, and we dismiss the motion.

(4) Leave to Appeal Costs Order

[18] Finally, the appellants seek leave to appeal the trial judge's order that they pay the respondents their substantial indemnity costs in the amount of $350,000.00.

[19] It is well-established that an appellate court is not entitled to interfere with a trial judge's discretionary assessment of costs absent error of law or overriding and palpable error. We see no such error here. The trial judge awarded substantial indemnity costs because she found that the judgment obtained by the respondents was more favourable than their three offers to settle. She further found that Venanzio Pingue had misappropriated thousands of dollars, breached his fiduciary obligations, and attempted to deceive the court. These findings justified the award at a substantial indemnity rate. We also agree that the amount awarded of $350,000 was fair, reasonable and proportionate in the circumstances of this second, 40-day trial. There is no basis to intervene.

(5) Disposition

[20] Accordingly, the appeal from the judgment, the motion to admit fresh evidence, and the motion for leave to appeal the costs order are dismissed.

[21] The respondents, as the successful parties, shall have their partial indemnity costs in relation to the appeal and all preliminary appeal motions in the amount of $25,000, inclusive of disbursements and HST.

"Alexandra Hoy A.C.J.O."

"K. van Rensburg J.A."

"L.B. Roberts J.A."