Borrelli, in his Capacity as Trustee of the SFC Litigation Trust v. Chan

[Indexed as: SFC Litigation Trust v. Chan]

Ontario Reports

Court of Appeal for Ontario

Hoy A.C.J.O., D.M. Brown and Zarnett JJ.A.

June 24, 2019

147 O.R. (3d) 145 | 2019 ONCA 525

Case Summary

Corporations — Actions — Company's overstatement of its assets on its financial statements enabling it to raise billions of dollars in capital market — Company's stakeholders commencing class actions against company when overstatement came to light — Company ultimately obtaining protection under Companies' Creditors Arrangement Act ("CCAA") after defaulting on its debt obligations — Company's causes of action transferred to litigation trust under CCAA plan of compromise and reorganization — Trustee of litigation trust successfully suing chairman of company's board of directors for damages for fraud and breach of fiduciary duty to company — Defendant's appeal dismissed — Trial judge not erring in finding that claims advanced in action were causes of action that had been held by company and not those that had been advanced in class actions — Transfer of shares of company's subsidiaries to holding companies owned by company's creditors under plan not constituting election that barred trustee from suing for damages — Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36.

Damages — Double recovery — Company's overstatement of its assets on its financial statements enabling it to raise billions of dollars in capital market — Company's stakeholders commencing class actions against company when overstatement came to light — Company ultimately obtaining protection under Companies' Creditors Arrangement Act ("CCAA") after defaulting on its debt obligations — Company's causes of action transferred to litigation trust under CCAA plan of compromise and reorganization — Trustee of litigation trust successfully suing chairman of company's board of directors for damages for fraud and breach of fiduciary duty to company — Defendant's appeal dismissed — Award of damages against defendant not resulting in double recovery against him as company's causes of action against defendant were separate and distinct from those asserted in class actions — Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36.

Debtor and creditor — Companies' Creditors Arrangement Act — Deferential standard of appellate review applying to trial judge's interpretation of terms of plan of compromise and arrangement under Companies' Creditors Arrangement Act — Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36.

Facts

SFC's overstatement of its assets on its financial statements enabled it to raise billions of dollars in the debt and equity markets. When the overstatement came to light, SFC defaulted on its debt obligations and a number of class actions were commenced against SFC and its directors, auditors, underwriters and consultants. SFC obtained insolvency protection under the Companies' Creditors Arrangement Act. Under a CCAA plan of compromise and reorganization (the "plan"), SFC's interests in its subsidiaries were transferred to holding companies owned by SFC's creditors, and SFC's causes of action were transferred to the SFC litigation trust (the "litigation trust") constituted for the benefit of its creditors. In exchange, SFC's creditors released their claims for repayment of debts owed to them by SFC. The trustee of the litigation trust commenced an action against the defendant, who was SFC's CEO and the chairman of its board of directors, for damages for fraud and breach of fiduciary duty. The action was allowed. The trial judge found that the defendant had directed a massive fraud in breach of his fiduciary duties to SFC and that his conduct caused a loss to SFC. He awarded damages equal to what he found to be SFC's loss -- $2,627,478 -- as well as punitive damages in the amount of $5 million. The defendant appealed.

Held

The appeal should be dismissed.

A deferential standard of appellate review applies to a trial judge's interpretation of the terms of a CCAA plan of compromise and arrangement. Absent an extricable error of law, an interpretation that involves palpable and overriding errors of fact, or one that is clearly unreasonable, the trial judge's interpretation should not be interfered with.

The trial judge did not err in his conclusion that the claims advanced in this action were causes of action that had been held by SFC and that had been transferred to the litigation trust by SFC under the plan. He properly rejected the defendant's argument that the claims were not causes of action that were transferred to the litigation trust because they were the same as, or overlapped with, the claims made in the class actions. Shareholders and noteholders may have causes of action arising from misrepresentations made to them when acquiring securities, and may have rights to sue for damages they personally have suffered. But the existence of those causes of action does not detract from the existence of a separate and distinct cause of action of the corporation, based on wrongdoing against or breach of duties owed to it. The causes of action asserted by the litigation trust did not become indistinguishable from the personal rights of action of creditors of SFC because the credits were litigation trust beneficiaries.

The trial judge did not err in his causation analysis or assessment of damages. His conclusion and his assessment of damages were premised on five core factual findings: that SFC's raising of money in the debt and equity markets was something which was caused by the defendant's wrongdoing; that but for the defendant's deceit, SFC would never have undertaken obligations of that magnitude to lenders and shareholders; that but for the defendant's wrongdoing, SFC would not have entrusted the funds raised on the capital markets to the defendant and his management team; that the defendant, rather than directing SFC's spending on legitimate business operations, poured hundreds of millions of dollars into fictitious or over-valued lines of business where he engaged in undisclosed related-party transactions and funneled funds to entities that he secretly controlled; and that SFC suffered losses as a result. Those findings were available to him on the record. He applied the appropriate legal principles to his causation analysis. He approached the "but for" causation test on the robust common sense approach the law contemplates. He was alive to the need to be satisfied that the loss was caused by the chain of events flowing from the wrongdoing after considering whether there were intervening causes that broke the chain of causation.

The trial judge's assessment of damages did not create the risk of double recovery from the defendant, as SFC's causes of action against the defendant were separate and distinct from those asserted in the class actions.

The transfer of the shares of SFC's subsidiaries to holding companies owned by SFC's creditors pursuant to the plan was not an election that barred the trustee from suing for damages arising from the defendant's conduct.

The defendant's complaints about the trial judge's approach to certain evidence did not justify any interference with the judgment the trial judge reached. The trial judge assiduously reviewed the evidence given in a lengthy trial, and his factual conclusions were supported by the evidence.

APPEAL from the judgment of Penny J., [2018] O.J. No. 1436, 2018 ONSC 1429 (S.C.J.) for the plaintiff in an action for damages for fraud and breach of fiduciary duty.

Robert Rueter, Sara J. Erskine and Malik Martin, for appellant.

Robert W. Staley, Jonathan G. Bell, William A. Bortolin, Jason M. Berall and Preet Bell, for respondent.

The judgment of the court was delivered by

ZARNETT J.A.:

I. Introduction

[1] The appellant, Allen Tak Yuen Chan, was the co-founder, chief executive officer and chairman of the board of directors of Sino-Forest Corporation ("SFC"), a corporation which had its head office in Ontario and whose shares traded on the Toronto Stock Exchange.

[2] SFC's subsidiaries carried on an integrated forest plantation and products business with assets located predominately in the People's Republic of China ("PRC").

[3] Between 2003 and the second quarter of 2011, SFC's consolidated financial statements reported rapid growth, including in assets and revenues. A significant portion of the reported assets in the second quarter of 2011 -- some $2.99 billion -- was "BVI standing timber", that is, standing timber held under what was known as the "BVI model". Sales of BVI standing timber accounted for $1.3 billion of SFC's reported consolidated revenue in 2010, and over 90 per cent of its reported consolidated income.

[4] Representing BVI standing timber as an asset with significant value on the SFC financial statements enabled SFC to raise money in the debt and equity markets -- approximately $3 billion up to 2010.

[5] In June 2011, a report was issued by a short seller's research company (the "Muddy Waters Report") which was, to say the least, highly critical of SFC. It alleged, among other things, that SFC did not hold anything close to the full amount of the timber assets reported on its financial statements and that it greatly overstated its revenues. SFC formed an Independent Committee to investigate. It was unable to rebut the allegations or confirm ownership of the BVI standing timber. SFC could not issue further financial statements and advised the public, following discussions with its external auditors, that prior years' financial statements should not be relied upon. The Ontario Securities Commission ("OSC") ordered that trading in SFC securities cease. SFC defaulted on its debt obligations. A number of class actions were commenced against SFC and its directors, auditors, underwriters and consultants.

[6] On March 30, 2012, SFC obtained insolvency protection under the Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36 ("CCAA"). On December 10, 2012, the Superior Court sanctioned SFC's CCAA plan of compromise and reorganization (the "Plan"). Under the Plan, SFC's interests in its subsidiaries were transferred to holding companies owned by SFC's creditors and its causes of action were transferred to the SFC Litigation Trust (the "Litigation Trust") constituted for the benefit of its creditors. In exchange, SFC's creditors released their claims for repayment of debts owed to them by the company.

[7] In 2014, the respondent, as trustee of the Litigation Trust, commenced this action alleging that the appellant had committed fraud against, and breached his fiduciary duty to, SFC.

[8] After a 48-day trial, the trial judge found that the appellant had directed a "massive fraud" in breach of his fiduciary duties to SFC, causing SFC to misrepresent its assets and their value. This enabled SFC to raise significant funds in the capital markets. SFC would not have undertaken obligations of this magnitude to lenders or shareholders, or entrusted the funds raised to the appellant and his management team, but for the appellant's fraud. The trial judge found that the appellant's conduct caused a loss to SFC. The funds raised were either directed by the appellant into fictitious or over-valued lines of business which dealt with third parties secretly related to and entities secretly controlled by the appellant, or were largely consumed by the necessity of dealing with the consequences of the discovery of the appellant's fraud and the collapse of SFC that followed. The trial judge awarded damages equal to what he found to be SFC's loss -- $2,627,478 -- as well as punitive damages of $5 million Canadian.

[9] The appellant asks us to reverse the trial judgment, making the following principal arguments:

(a) The respondent is only entitled to advance claims that were transferred to the Litigation Trust under the Plan. Properly interpreted, the Plan did not transfer the claims advanced in this action to the Litigation Trust.

(b) The trial judge's award of damages is flawed because he did not conduct a proper causation analysis and awarded compensation for losses not of SFC, but of its stakeholders (its noteholders and shareholders). In doing so, he improperly exposed the appellant to duplicate claims and created risks of double recovery.

(c) The respondent's claim ought to have been rejected under the doctrine of election. When SFC transferred the assets, contracts and businesses of its subsidiaries as contemplated by the Plan (by transferring its subsidiaries' shares), there was an election to treat them as valid. Yet the respondent's claim is premised on those same assets, contracts and businesses being fraudulent and invalid.

(d) The trial judge made various errors in his acceptance of evidence, including evidence based on documents that had not been translated into English and on opinions from a non-expert, which make his factual conclusions unsafe to rely upon.

[10] For the reasons which follow, I would dismiss the appeal. As I explain below:

(a) The trial judge did not err in his conclusion that the claims advanced in the action were causes of action that had been held by SFC, had been transferred to the Litigation Trust by SFC under the Plan, and could be pursued by the respondent against the appellant.

(b) The trial judge did not err in his causation analysis or assessment of damages. His determinations in that regard were not the product of legal errors and there is no basis to interfere with his factual determinations, which are subject to deference from this court.

(c) There is no merit to the argument that the transfer of the shares of SFC's subsidiaries pursuant to the Plan was an election that barred the respondent from suing for damages arising from the appellant's conduct.

(d) The complaints of the appellant about the trial judge's approach to certain evidence do not justify any interference with the judgment the trial judge reached. The trial judge assiduously reviewed the evidence given in a lengthy trial and his factual conclusions were supported by the record.

II. The Facts and the Trial Judge's Award

[11] In addition to the facts outlined above, the following facts are important to appreciation of the issues on the appeal. I set them out based on the trial judge's findings, since on the first three issues that the appellant raises, he contends the trial judgment cannot stand even on those findings. I then deal separately, as the parties did, with the appellant's complaints about the trial judge's fact-finding.

(1) The appellant's role and the nature of the wrongdoing

[12] The trial judge found that the appellant had ultimate control over nearly all aspects of SFC's and its subsidiaries' operations, directly and through a small group of individuals he directed on his management team (the trial judge referred to them collectively as "inside management").

[13] The trial judge identified four different, but related, frauds for which the appellant was responsible and one other transaction in which there was a breach by the appellant of his fiduciary duties. I summarize these below.

(a) The BVI model fraud

[14] The most significant fraud found by the trial judge had to do with the reporting, on SFC's consolidated financial statements, of assets held and revenue and income generated under the BVI model.

[15] The BVI model involved SFC subsidiaries incorporated in the British Virgin Islands ("BVIs"). It was designed in light of restrictions at one time imposed by the PRC under which foreign entities were not permitted to have PRC bank accounts, operate or sell timber plantations, or own land use rights in the PRC.

[16] To circumvent these restrictions, the BVI model contemplated that SFC's BVI subsidiaries would acquire standing timber from third parties known as "Suppliers", who in turn would acquire it from others, typically rural or business collectives. The BVIs would sell standing timber indirectly, through authorized intermediaries ("AIs") that acted as their customers. The BVIs would not pay the Suppliers or receive payment from the AIs. Instead, the AIs and Suppliers would be directed to set off payments so that payment from an AI for the sale of standing timber rights would be rolled forward into the purchase of new BVI standing timber rights from a Supplier. Consequently, no cash would flow through the BVIs' or SFC's bank accounts in connection with the BVI standing timber and money associated with the BVI standing timber would be locked up in the PRC to be rolled forward into further BVI standing timber purchases.

[17] Under the BVI model, the BVIs would not acquire actual land use rights in the PRC. Instead, they ostensibly would acquire a contractual right to the standing timber itself.

[18] As noted above, significant valuable assets were reported by SFC as held, and revenue and profit-generating activity was reported as occurring, under the BVI model. By the second quarter of 2011, SFC's consolidated financial statements showed BVI standing timber assets valued at $2.99 billion. Trading under that model was the biggest contributor to the revenues and profits shown on the statements.

[19] After the Muddy Waters Report, the Independent Committee was, however, unable to locate key documents to confirm valid title to the BVI standing timber or to even determine its location. Collections of accounts receivable from AI's, which had been represented to take place with 100 per cent success, dropped to close to 0 per cent. Consultants retained by SFC's creditors were also unable to locate or verify the BVI standing timber assets. When the monitor for SFC appointed under the CCAA made unannounced site visits to Suppliers and AIs at their registered addresses, it found, with only one exception, little to no evidence of any operations. Those entities were later established to have undisclosed connections to the appellant and his management team.

[20] The inability to locate or verify the BVI standing timber assets continued after the Plan was sanctioned by the Superior Court. Under the Plan, the rights to any such assets were transferred to entities owned by former SFC creditors; they were subsequently sold to a third-party purchaser, New Plantations. The transferees had strong economic motivations to locate the standing timber assets. None of the transferees could do so.

[21] The trial judge considered, among other things, expert and other evidence about the type of documents that would be required to validly show title to the reported BVI standing timber assets and evidence of the efforts taken to locate and establish ownership or valid title to the standing timber assets that had been represented on the SFC consolidated financial statements as having a value of $2.99 billion. He found that:

(a) Proper documentation to establish valid title to the assets did not exist. For example, maps, essential to establish the locations of the alleged standing timber assets, were produced by the appellant and his management team for only 1 per cent of the claimed assets.

(b) Despite efforts by persons with significant motivation to locate those assets so they could be monetized, they had not been located even up to the time of trial in 2017.

[22] The trial judge concluded that the BVI standing timber model was a fraud perpetrated by the appellant, that the assets reported simply did not exist, and that the transactions reported as resulting in revenue and income were paper transactions without substance. He stated [at paras. 551-553]:

The former assets of [SFC] have now been in the hands of New Plantations for more than a year. Even with Mr. Chan's assistance, New Plantations has not produced any evidence that it has been able to find, prove title to or monetize any purported interest in the BVI standing timber assets. It has not paid anything to EPHL [the former-creditor-owned company] under the RAPA arising out of the sale of any BVI assets. The best [the appellant] can offer in this regard is revealed in the evidence of Alvin Lim, who testified that New Plantations is "still in the process of investigation."

Six years have passed since the Muddy Waters Report was released and nobody, despite enormous financial incentives to do so, (incentives motivating [SFC], the bondholders, the purchaser Emerald [the former-creditor-owned company], the purchaser New Plantations and [the appellant] himself), has been able to locate, confirm ownership of, or monetize the BVI assets. When considered in the context of all the evidence, the inescapable conclusion is that [SFC] did not own the BVI assets that it claimed to own.

All of the evidence considered as a whole, leads to the inescapable conclusion that the BVI standing timber model was a fraud. The logical and reasonable inferences to be drawn from the totality of the evidence, based on a preponderance of probabilities, are that:

i) the defendant and others inside and outside [SFC] management operated an elaborate system of nominee companies ultimately controlled by [the appellant] or persons acting under his direction;

ii) many of these nominees companies were major Suppliers of BVI standing timber;

iii) the Suppliers and AIs were not bona fide arm's length sellers and purchasers of BVI standing timber;

iv) the BVI standing timber transactions were paper transactions. [SFC] employees under the direction of [the appellant] and his cadre of Inside Management created the contracts, the supporting documents and the so-called evidence of directed payments made between the AIs and Suppliers. No consideration in fact passed between these entities;

v) [SFC] subsidiaries did not hold title to BVI standing timber plantations;

vi) the value of [SFC's] BVI standing timber, represented at $2.99 billion in 2011, did not exist. Because [SFC] did not own these assets, this value was nil; and

vii) the defendant and members of Inside Management exploited weaknesses and ambiguities in the PRC forestry regulatory regime to perpetrate this fraud and to conceal it from scrutiny by [SFC], external auditors, other professional advisors, independent members of the Board and the public.

(b) The WFOE standing timber fraud

[23] A second fraud found by the trial judge arose within a method of doing business referred to as the WFOE standing timber model. That model was used because in 2004 the PRC gave permission for foreign investors to invest in PRC-incorporated trading companies, known as wholly foreign owned enterprises ("WFOEs"), which could acquire actual plantation land use rights, harvest timber, sell logs and standing timber directly to end users, and open PRC bank accounts. WFOEs were also permitted to plant standing timber plantations due to their land use rights.

[24] Assets were acquired and activities undertaken by SFC subsidiaries which were WFOEs. These included planting forests and holding them until harvest ("planted plantations") and, in addition, ostensibly acquiring and trading in existing standing timber ("purchased plantations").

[25] The trial judge found that the hallmarks of the BVI standing timber fraud were present in the purchased plantations aspect of the WFOE standing timber model. Many of the WFOE purchased plantation transactions were conducted through Suppliers controlled by the appellant and his management team. Plantation rights certificates were lacking for most of the purchased plantations. The trial judge concluded that "like the BVI standing timber, the majority of the WFOE purchased plantations were never actually owned by [SFC] and had no value": at para. 562.

(c) The wood log trading cash gap fraud

[26] The third fraud found by the trial judge was in wood log trading activities. From 2005 to 2010, revenue from wood log trading ranged from 15 per cent to 25 per cent of SFC's total consolidated revenues, and a smaller percentage of SFC's consolidated profits. Under SFC's wood log trading model, an SFC BVI subsidiary would purchase logs from a Supplier outside of the PRC and pay for the logs using a letter of credit guaranteed by SFC. It would then resell the logs to a customer. However, typically only about 70 per cent of the wood log sales accounts receivable were paid in cash by the customer. The remaining 30 per cent was directed to BVI standing timber Suppliers, which had the effect of diverting "new" money into the BVI standing timber model.

[27] The diversion of 30 per cent of the wood-log-trading receivables to BVI standing timber Suppliers, for assets the trial judge determined did not really exist, created a "cash gap" -- $239.8 million more was paid out to purchase wood logs than was received on their sale. And, after the Muddy Waters Report, substantial amounts of accounts receivable associated with the wood log trading business were not paid -- the customers vanished. Many of SFC's wood log customers were found not to have been at arm's-length from the appellant.

[27] The trial judge found "the preponderance of probabilities, having regard to all of the evidence, is that the wood log cash gap was a fraud orchestrated by [the appellant] with the assistance of [his management team] at [the appellant's] direction": at para. 633.

(d) The wood log deposit fraud

[29] The fourth fraud found by the trial judge arose from the practice of placing deposits for the purchase of the logs. The appellant caused SFC subsidiaries to enter into wood log trading agreements requiring payment of substantial unsecured "deposits" and "advance payments" for the purchase of logs, which exceeded the value of any logs actually delivered. After the Muddy Waters Report, log deliveries ceased and, with one exception, none of the deposits or advance payments were repaid, resulting in a loss of $167.4 million. The appellant's relationship with many of the wood log suppliers was not at arm's-length.

[30] The trial judge found the preponderance of evidence established that the wood log deposit transactions were a fraudulent mechanism for diversion of funds out of SFC to entities controlled by the appellant or acting under his direction.

(e) The Greenheart transaction

[31] The further transaction in which the trial judge found a breach of fiduciary duty by the appellant was referred to as the Greenheart transaction. Between July 2007 and July 2010, the appellant caused SFC to acquire a majority interest in Greenheart Resources Holdings Limited and its majority shareholder, Greenheart Group Limited (collectively, "Greenheart"), by purchasing shares from shareholders of Greenheart, including several in which the appellant had undisclosed interests. At the time of the acquisitions, the appellant knew but did not disclose that Greenheart was in serious financial difficulties. SFC ultimately invested $202.2 million, which was more than the amount realized when the Greenheart interest was later sold.

[32] The trial judge found that the appellant had committed a clear violation of his fiduciary duties through his nondisclosure. In addition to causing a loss to SFC, he made an undisclosed personal profit of approximately $38 million on the transaction.

(2) The collapse of SFC, the fate of the funds raised, the CCAA process and realizations on assets

[33] The events following the Muddy Waters Report and the inability of SFC to rebut its allegations had a profound impact on the company.

[34] In August 2011, the OSC issued a cease-trading order over SFC's securities, alleging that SFC had engaged in significant non-arm's-length transactions, its assets and revenues had been exaggerated, and that the appellant and others appeared to be involved in the fraud.

[35] SFC became unable to issue further financial statements. In December 2011, it advised it could give no assurance it would ever be able to do so. In January 2012, SFC issued a press release which stated that its "historic financial statements and related audit reports should not be relied upon".

[36] By early 2012 SFC, the appellant and others had been named in at least four class actions alleging that SFC's financial statements were materially false and misleading and claiming, on behalf of classes of debt and equity holders, damages for amounts that they overpaid when they purchased securities in reliance on the false financial statements, among other relief.

[37] SFC defaulted on its debt obligations. In March of 2012, it entered into a restructuring support agreement with its noteholders, who held first priority security interests over the shares of SFC's subsidiaries, which contemplated the transfer of SFC's business to those noteholders unless a sales process revealed that the value of SFC's assets exceeded its debt. The sales process revealed that potential purchasers were only willing to pay a fraction of the quantum of the debt for the company's assets. Consequently, the sales process terminated in June 2012.

[38] SFC filed for insolvency protection under the CCAA on March 30, 2012, and the Superior Court sanctioned its Plan on December 10, 2012. Under the Plan, SFC's assets were transferred to creditor-controlled entities and SFC's causes of action were transferred to the Litigation Trust. The Plan provided for releases of SFC and specified others. The precise terms of the Plan bearing on the issues in this appeal are more fully described in the "Analysis" section below.

[39] The trial judge found that by the time the fraud was uncovered and "the dust settled", more than half of the almost $3 billion that had been raised by SFC on the capital markets was gone. He also found that what was left in cash by June of 2011 was largely consumed in propping up and managing the enterprise during the extended crisis brought on by the disclosure of the fraud and its investigation (including dealing with ongoing concealment by the appellant and his management team). He found that, to the extent that the funds raised on the capital markets had actually been invested in assets, the value of those assets was represented by the amounts realized on their sales, effected under and after implementation of the Plan.

[40] Under the Plan, effective January 30, 2013, all of SFC's assets, including its interests in wholly owned subsidiaries, were transferred to Emerald Plantation Holdings Limited ("EPHL") and then by EPHL to Emerald Plantation Group Limited ("EPGL"), a wholly owned subsidiary of EPHL. These entities were formed for the purpose of holding SFC's assets and realizing on them to achieve recoveries for SFC's creditors, who became EPHL's shareholders.

[41] Commencing in October 2014, EPGL caused the sale of the Greenheart business and then of miscellaneous assets to third parties. In 2016, EPGL caused the sale of the remaining assets to New Plantations, a third-party purchaser. The sale to New Plantations had special provisions for further payments if New Plantations was able to make any recovery on assets that were ascribed zero value in the sale, including the BVI standing timber, the BVI standing timber receivables, the wood log receivables and the wood log deposits. The trial judge found that, at the time of trial, there had been no recoveries on, or any further payments in respect of, those assets: at paras. 89-96.

[42] The total net recoveries from the sale of assets of SFC's subsidiaries was $438.5 million.

(3) The trial judge's damages award

(a) Causation

[43] The trial judge approached causation on the basis that the "but for" causation test was to be applied in a common sense, robust fashion; that causation could be inferred from evidence that connected the wrongdoing to the injury; and that inferences could be drawn against a defendant found liable for fraud or breach of fiduciary duty who did not provide credible alternative causes for the loss.

[44] The trial judge's factual findings about causation can be summarized as follows. Between 2004 and 2010, SFC raised in excess of $2.9 billion in Canada's debt and equity markets, based on the appellant's fraudulent misrepresentations of the existence and value of assets. But for the appellant's deceit, SFC would never have undertaken obligations of this magnitude to lenders and shareholders, nor would it have entrusted the money it raised to the appellant and his management team. The appellant directed much of the money raised towards fictitious or over-valued lines of business, engaged in undisclosed related-party transactions and funneled funds into entities he secretly controlled. This conduct, and the consequences of its discovery, ultimately caused the collapse of SFC. The trial judge found that SFC had suffered losses directly related to the appellant's fraud and breach of fiduciary duty.

(b) Measurement of damages

[45] The trial judge referred to the measure of tort damages for deceit and to the principles of equitable compensation. He accepted that the proper approach to measuring SFC's loss was the primary approach put forward by the respondent's expert, Peter Steger.

[46] Steger's primary approach began with the $2.9 billion SFC raised in the debt and equity markets between 2004 and 2010. Subtracting the share and debt issue costs and principal debt repayments made by SFC, he calculated the net cash available to SFC from these capital raises as $2.588 billion. To this, Steger added a proxy for the minimum return that SFC should have made by investing the cash. This led to an available cash figure of $3.065 billion.

[47] On the basis that SFC would have had $3.065 billion in cash available for investment in profit-generating assets, Steger considered the effect of the appellant's conduct, which saw those funds invested in subsidiaries engaged in largely fraudulent businesses. To the extent there was value in the businesses that were invested in, it was represented by the $438.5 million amount that was actually recovered by EPGL from the sales of the assets acquired from SFC under the Plan. The difference between these two figures -- $2.627 billion -- represented SFC's loss attributable to appellant's conduct.

[48] The trial judge rejected the appellant's argument that damages could only be calculated on a "transaction by transaction" basis, both as a matter of law and because the appellant's damages expert, who criticized Steger for not conducting that analysis, did not do it himself or "hint at a methodology" to do so.

[49] The trial judge considered two other damages calculations, in case Steger's primary approach was found to be incorrect. The first was an alternative approach set out by Steger, which calculated damages of $3.2 billion based on a write-down of assets methodology. He then considered a specific loss approach, based on calculating the losses resulting from specific proven acts of fraud or breach of fiduciary duty, including the wood log cash gap fraud, the wood log deposit fraud, the Greenheart transaction, the appellant's profits on the Greenheart transaction, the cost of SFC's investigation following the Muddy Waters Report and the appellant's remuneration. These amounts totalled $812.43 million. Deducting the net realization of $438.5 million from post-Plan sales produced an alternative specific loss compensation award of $373.9 million. However, the trial judge concluded that the primary Steger approach, rather than either of these other approaches, should be accepted.

[50] The trial judge awarded punitive damages of $5 million Canadian on the basis of his finding that the appellant had abused his fiduciary position to orchestrate a large and complex fraud, resulting in billions of dollars of losses.

(4) The trial judge's rejection of specific defences

(a) Duplication with class actions

[51] The trial judge rejected the argument that the respondent could not recover any amounts because there was duplication between the claims made in this action and claims made in certain class actions (the "Class Actions", as defined in the Plan) that had named both SFC and the appellant, among others, as defendants. He noted that the Class Actions alleged some of the same facts as were alleged in this action and that those Class Actions had been brought on behalf of persons who acquired SFC securities (defined as common shares, notes and other securities) from 2007 to 2011.

[52] The trial judge held that the claims advanced in this action were transferred to the Litigation Trust and properly advanced by the respondent because they were claims against the appellant that, prior to their transfer, could have been asserted by SFC; were not released by the Plan (under which the appellant received no release); and were not "Excluded Litigation Trust Claims" as defined in the Plan, which were not transferred to the Litigation Trust. He noted the Plan's language that claims advanced in the Class Actions were not transferred to the Litigation Trust, but held that the claims in the Class Actions were different than those in this action. The claims in the Class Actions were not for wrongs done to SFC but were claims for wrongs done to individual noteholders or shareholders; thus, they were different causes of action held by different persons. Nor was there a risk of double recovery. The courts in the Class Actions could prevent that from occurring when those actions reached judgment (the Class Actions were still at the pleadings stage).

(b) No affirmation

[53] The trial judge also rejected the argument that SFC had elected to affirm the validity of all of the assets, contracts and transactions that the respondent complained of when it transferred the shares of its subsidiaries to EPGL under the Plan, such that the respondent could not sue and recover damages for them on the basis that they were fraudulent. He found the principle of affirmation had no application to the case.

III. Analysis

(1) Is the respondent precluded by the Plan from advancing the claims in this action?

(a) Introduction

[54] The appellant makes three arguments that the Plan did not transfer, to the Litigation Trust, the causes of action that are asserted against him by the respondent and that therefore the Plan precludes those claims from being advanced: (1) the claims are the same as, or overlap with, the claims asserted in the "Class Actions" which were not transferred to the Litigation Trust; (2) the claims constitute "Excluded Litigation Trust Claims" which were excepted from the transfer of claims to the Litigation Trust; and (3) the claims constitute "SFC Intercompany Claims" that were assigned under the Plan by SFC to EPGL and not to the Litigation Trust. (Each of the quoted terms is a defined term in the Plan.)

[55] The appellant's argument that the claims advanced in this action were not transferred to the Litigation Trust is an argument about the meaning of the Plan. It was common ground before the trial judge and in this court that the respondent's ability to bring these claims had to derive from the provisions of the Plan, the Litigation Trust Agreement made thereunder and the terms of the sanction order which approved the Plan. These defined what causes of action were transferred to the Litigation Trust and which were not. It was not suggested that the terms or effect of these three documents differed on the issues material here, and accordingly argument was chiefly directed to the terms of the Plan itself.

[56] I first address the principles of interpretation to be applied to the Plan and the standard of review to be applied by this court in assessing the interpretation arrived at by the trial judge. I then address the factors bearing on the interpretation of the Plan and the precise terms of the Plan. Finally, I consider whether the appellant's arguments disclose any reversible errors in the trial judge's interpretation of the Plan.

(b) The principles of interpretation

[57] A CCAA plan of compromise and arrangement has been held to be "in substance a contract, sanctioned by the Court", to be interpreted in light of the purposes of the CCAA, the overall purpose and intention of the plan in question, and the principles of contractual interpretation: Canadian Red Cross Society (Re), [2002] O.J. No. 2567, 35 C.B.R. (4th) 43 (S.C.J.), at paras. 12-13, affd , [2003] O.J. No. 3727, 46 C.B.R. (4th) 239 (C.A.), leave to appeal to S.C.C. refused [2003] S.C.C.A. No. 539; see, also, Catalyst Capital Group Inc. v. VimpelCom Ltd., [2018] O.J. No. 2075, 2018 ONSC 2471 (S.C.J.), at para. 109, affd on other grounds [2019] O.J. No. 2286, 2019 ONCA 354, applying these principles to a corporate plan of arrangement.

[58] The principles of contractual interpretation include reading the words of the document as a whole, giving meaning to all its terms; determining the parties' intentions in accordance with the words used; considering the factual matrix (the objective facts known at the time of contracting) to aid in understanding the words used; and adopting an interpretation which avoids commercial absurdity: Ventas, Inc. v. Sunrise Senior Living Real Estate Investment Trust (2007), 85 O.R. (3d) 254, [2007] O.J. No. 1083, 2007 ONCA 205, at para. 24; Sattva Capital Corp. v. Creston Moly Corp., [2014] 2 S.C.R. 633, [2014] S.C.J. No. 53, 2014 SCC 53, at paras. 47-48, 57-58.

(c) The standard of review

[59] This court has given deference to the interpretation of a plan by a judge who had familiarity with the plan's development through supervision of the debtor's restructuring: Red Cross (Ont. C.A.), at para. 2. The respondent argues that the same approach of deference should apply here as the trial judge, an experienced Commercial List judge, had the opportunity to consider the Plan in light of its purpose, terms and the factual matrix explored in a lengthy trial. This deferential approach would be consistent with viewing the Plan as "in substance a contract": Red Cross (Ont. S.C.J.), at para. 13. A trial judge's contractual interpretation is, absent extricable legal error, generally subject to appellate deference: Sattva, at paras. 52-55.

[60] The appellant asks this court to replace the trial judge's interpretation of the Plan with its own, arguing that a correctness standard should apply. A correctness standard of appellate review applies to contractual interpretation where consistency of meaning is a primary concern and where there is no meaningful factual matrix to consider. Certain standard form contracts of adhesion are examples: Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., [2016] 2 S.C.R. 23, [2016] S.C.J. No. 37, 2016 SCC 37.

[61] Although a CCAA plan is not a standard form contract, plans often use language borrowed from other plans, giving rise to consistency concerns. Moreover, a plan is different from an ordinary contract in that it takes its force not only from the consent of parties who have been involved in its negotiation, but also from the provisions of the CCAA which render a plan binding on those who have not agreed to or voted for it, if the requisite majorities of creditors have done so and court approval has been obtained: CCAA, s. 6(1). In this respect, a plan has aspects of a contract of adhesion.

[62] Nonetheless, in my view a deferential standard of review should apply. CCAA plans are developed to fit the unique circumstances of each restructuring. The overall purpose and intention of the individual plan are important determinants of its interpretation, to be considered against the backdrop of the factual aspects of the restructuring and the events that led up to it. The types of considerations that will go into a plan's interpretation will usually be fact and context-specific and the factual matrix will accordingly be important. The questions which arise in the interpretation of a plan will almost always be mixed questions of law and fact. All of this supports a deferential standard of appellate review, one that accords with the standard applicable generally to a trial judge's interpretation of a contract.

[63] Accordingly, absent an extricable error of law, an interpretation that involves palpable and overriding errors of fact, or one that is clearly unreasonable, the trial judge's interpretation should not be interfered with.

(d) The factual matrix

[64] The trial judge did not expressly identify which facts he considered to be the factual matrix relevant to the Plan's interpretation. But he did make significant findings about how and why the Plan came about. It is the "facts giving rise to the plan" that are important to determine its scope and meaning: Catalyst (Ont. S.C.J.), at para. 110. Here, those facts include that SFC had been forced to file for CCAA protection because of the fraud and the consequences of its discovery; the appellant had been identified, including by the OSC, as allegedly having been involved in that fraud; it had already been determined that the assets SFC offered in the sales process were worth substantially less than the amount of its debt so that additional sources of recovery by SFC, including recoveries through litigation, would be important; and class actions by SFC stakeholders were already pending against the appellant, amongst others, in which SFC stakeholders, but not SFC itself, were advancing claims.

(e) The purposes of the CCAA and of the Plan

[65] The full title of the CCAA states that it is "An Act to facilitate compromises and arrangements between companies and their creditors". "The CCAA has the simultaneous objectives of maximizing creditor recovery, preservation of going-concern value where possible, preservation of jobs and communities affected by the firm's financial distress, rehabilitation of honest but unfortunate debtors, and enhancement of the credit system generally" (emphasis added): Janis P. Sarra, Rescue!: The Companies Creditors Arrangement Act, 2nd ed. (Toronto: Carswell, 2013), at p. 14.

[66] Creditors are a key constituency under the CCAA, as the approval of specified majorities of creditors is required for a plan of compromise and arrangement to be effective: CCAA, s. 6(1). Given the objectives of the CCAA and the need for creditor approval, it is reasonable to expect that the goal of a plan will be to maximize the value to be obtained from the insolvent corporation's assets, including its intangible rights such as litigation claims, so as to enhance ultimate distributions to creditors. A key barometer of a plan's acceptability is how it proposes to achieve that goal compared to what would be available through alternative insolvency processes, such as liquidation or bankruptcy.

[67] The SFC Plan addressed those objectives. It provided in s. 2.1 that it was "put forward with the expectation that the Persons with an economic interest in SFC . . . will derive greater benefit from the implementation of the Plan and the continuation of the SFC Business as a going concern than would result from a bankruptcy or liquidation of SFC".

[68] And in keeping with this expectation, the Plan described its purpose: to release SFC from the claims of "Affected Creditors"; to transfer ownership of the business of SFC to creditor-controlled entities free and clear of all claims against SFC and its subsidiaries, so as to enable the business to continue on a going-concern basis; and "to allow Affected Creditors and Noteholder Class Action Claimants to benefit from contingent value that may be derived from litigation claims to be advanced by the Litigation Trustee": s. 2.1.

[69] The Superior Court sanctioned the Plan, finding this purpose and its implementation in the Plan to be in compliance with the CCAA and its objectives: Sino-Forest Corp. (Re), [2012] O.J. No. 5958, 2012 ONSC 7050 (S.C.J.), at para. 79.

(f) The Plan's operative terms

[70] The Plan provided two avenues for assets of SFC to be realized upon and the proceeds distributed to creditors: (1) by the transfer of SFC causes of action to the Litigation Trust; and (2) by the transfer of the shares of SFC's subsidiaries to creditor-controlled entities, EPHL and EPGL: s. 6.4(h). The provisions of the Plan implementing these transfers, as well as the release provisions of the Plan, are key to assessing the appellant's arguments.

[71] The Plan provided, in s. 6.4(o), that SFC would establish the Litigation Trust. SFC and the trustees for SFC's noteholders would then convey to it the "Litigation Trust Claims", defined by the Plan as

[A]ny Causes of Action that have been or may be asserted by or on behalf of: (a) SFC against any and all third parties; or (b) the Trustees (on behalf of the Noteholders) against any and all Persons in connection with the Notes issued by SFC; provided, however, that in no event shall the Litigation Trust Claims include any (i) claim, right or cause of action against any Person that is released pursuant to Article 7 hereof or (ii) any Excluded Litigation Trust Claim. For greater certainty: (x) the claims being advanced or that are subsequently advanced in the Class Actions are not being transferred to the Litigation Trust; and (y) the claims transferred to the Litigation Trust shall not be advanced in the Class Actions.

[72] "Causes of Action", used in the definition of Litigation Trust Claims, was given a very broad meaning, which included any claims or entitlements in law, equity or otherwise for damages or other relief.

[73] However, the definition of "Litigation Trust Claims" narrowed the transfer of claims to the Litigation Trust (i) by excepting claims against certain individuals and entities who were released by the Plan, and (ii) by excepting "Excluded Litigation Trust Claims" from the claims that would otherwise have been transferred to the Litigation Trust: art. 7. "Excluded Litigation Trust Claims" were defined as Causes of Action agreed, as between SFC and a subgroup of Noteholders, to be excluded from the Litigation Trust Claims: s. 4.12. Section 4.12(b) of the Plan specified that certain claims against SFC's underwriters fell within this category, except if they were claims for fraud or criminal conduct.

[74] The definition of "Litigation Trust Claims" contained "greater certainty" language specifying that claims in the "Class Actions" were not transferred to the Litigation Trust. The "Class Actions" referred to in the "greater certainty" clause were defined to mean four specific actions in Ontario, Quebec, Saskatchewan and New York, brought on behalf of persons who, during defined class periods, had purchased SFC notes or shares. The Class Actions include claims against the appellant based on allegations that he made false representations that SFC's financial statements were accurate when they in fact were materially misleading and grossly overstated SFC's assets; that the appellant's misrepresentations induced class members to buy equity or debt at inflated prices; and that he thus caused them losses. The plaintiff classes seek damages, among other things, to recover the amounts they paid or overpaid to acquire those securities.

[75] Section 4.11 of the Plan set out who would benefit from any recoveries on claims transferred to the Litigation Trust. Beneficial interests in the Litigation Trust were to be held 75 per cent by Affected Creditors and 25 per cent by Noteholder Class Action Claimants.

[76] In addition to their interests in the Litigation Trust, Affected Creditors also received interests in EPHL, a holding company which held the shares of EPGL, to which SFC transferred the shares of its subsidiaries (and indirectly the assets they held and businesses they carried on): ss. 4.1, 6.4 and 6.6. Included among the assets transferred to EPGL were "SFC Intercompany Claims" defined to include amounts owing to SFC by any of its subsidiaries: s. 4.10. The Plan provides that all obligations and agreements to which EPHL or EPGL became parties as a result of the transfer to them "shall be and remain in full force and effect, unamended": s. 8.2(j).

[77] All equity holders in SFC released their claims against SFC: s. 4.5. Noteholder Class Action claims against SFC were released: s. 4.4. Affected Creditors -- comprised mainly of SFC's noteholders, whose claims had been secured by first-priority security interests over the shares of SFC's subsidiaries -- released SFC from their claims for payment of principal and interest on the notes: s. 4.1. Article 7 specified individuals and entities also released by the Plan. The appellant was not one of the specified individuals.

(g) Analysis of the appellant's Plan preclusion arguments

[78] In light of the principles of interpretation, the factual matrix, the purposes of the CCAA and the Plan, and the Plan's language, I turn now to the analysis of the appellant's plan preclusion arguments.

(i) No right to advance claims advanced in the class actions

[79] The appellant argues that the claims made in the action are not Causes of Action that were transferred to the Litigation Trust because they are the same as, or overlap with, the claims made in the Class Actions. He asserts that the claims in this action on the one hand, and those in the Class Actions on the other, rely on the same or similar allegations of wrongdoing by the appellant and claim the same or similar amounts, based on the amounts that SFC raised, as debt or equity, in the capital markets. He also argues that there is an overlap in who will benefit from the claims, in that certain creditors are beneficiaries of the Litigation Trust and class members in the Class Actions. The "greater certainty" language of the Plan makes it clear, he maintains, that these claims were not transferred.

[80] I would not give effect to this argument.

[81] The Plan, by the combination of s. 6.4(o) and the definition of Litigation Trust Claims, transferred to the Litigation Trust two types of Causes of Action held by two different persons. First, it transferred Causes of Action of SFC against any and all third parties. Second, it transferred Causes of Action of the Trustees on behalf of Noteholders against any and all persons for certain matters. The respondent relies upon the first transfer only, that is, the transfer of Causes of Action that SFC had against the appellant. The trial judge did not err in concluding that the causes of action the respondent advanced in this action are Causes of Action that SFC had against the appellant. This differentiates them from causes of action of SFC stakeholders, which are being advanced in the Class Actions.

[82] A wrong (such as a tort) done to a corporation is actionable by the corporation, which is entitled to recover the loss it suffered. The shareholders and creditors of a corporation cannot sue for damage to the corporation, even though they are indirectly affected by it: Hercules Managements Ltd. v. Ernst and Young, [1997] 2 S.C.R. 165, [1997] S.C.J. No. 51, at para. 59; Meditrust Healthcare Inc. v. Shoppers Drug Mart (2002), 61 O.R. (3d) 786, [2002] O.J. No. 3891 (C.A.), at paras. 11-16. Similarly, an action for breach of a corporate director's or officer's fiduciary duty is an action of the corporation, whether it seeks damages or an accounting of profits: BCE Inc. v. 1976 Debentureholders, [2008] 3 S.C.R. 560, [2008] S.C.J. No. 37, 2008 SCC 69, at para. 41; Midland Resources Holding Ltd. v. Shtaif (2017), 135 O.R. (3d) 481, [2017] O.J. No. 1978, 2017 ONCA 320, at paras. 148-149 and 156, leave to appeal to S.C.C. refused [2018] S.C.C.A. No. 541.

[83] On the trial judge's findings, the appellant was a fiduciary of SFC and he breached his fiduciary duty to it. SFC was the victim of the appellant's tort -- his fraud -- in that it was SFC that was caused to record fictitious or overstated assets and revenues on its financial statements, SFC that was caused to raise money from the public and incur obligations to lenders and others that it would not otherwise have incurred, and SFC's funds, received through these activities, that were invested and lost in illegitimate businesses or consumed by the consequence of the discovery of the fraud. Leaving aside the question of how damages for these matters are assessed, the causes of action to sue for them were Causes of Action of SFC.

[84] The Plan transferred to the Litigation Trust Causes of Action "that have been or may be asserted by or on behalf of . . . SFC against any and all third parties . . .", a term which would include the appellant: s. 1.1. The appellant's contention could only be correct if there were something in the Plan that restricted the meaning that would otherwise be given to that transfer language. The provision of the Plan relied upon by the appellant for this effect is the "greater certainty" clause in the definition of Litigation Trust Claims, which reads as follows: "For greater certainty: (x) the claims being advanced or that are subsequently advanced in the Class Actions are not being transferred to the Litigation Trust; and (y) the claims being transferred to the Litigation Trust shall not be advanced in the Class Actions." Like the trial judge, I do not read that phrase to have the meaning for which the appellant argues.

[85] First, as the trial judge correctly noted, the claims made in the Class Actions are claims made on behalf of noteholders and equity holders for their causes of action arising from damages they suffered. SFC did not make claims in the Class Actions asserting SFC Causes of Action or seeking damages SFC suffered. The distinction is important and is not undermined by either the factual overlap in the claims or the fact that certain creditors are or may be both beneficiaries of the Litigation Trust and members of the plaintiff classes.

[86] On the point of factual overlap, the same or similar facts may give rise to a cause of action by a shareholder and one by the corporation. The law recognizes that ". . . where a shareholder has been directly and individually harmed, that shareholder may have a personal cause of action even though the corporation may also have a separate and distinct cause of action" (emphasis added): Hercules, at para. 62. Shareholders and noteholders may have causes of action arising from misrepresentations made to them when acquiring securities, based on common law doctrines or under securities legislation. And where they do, they may have rights to sue for damages they personally have suffered. But the existence of those causes of action does not detract from the existence of a separate and distinct cause of action of the corporation, based on wrongdoing against or breach of duties owed to it, to sue for damages it has suffered.

[87] As for the argument that, because creditors of SFC are Litigation Trust beneficiaries, the causes of action asserted by the Litigation Trust are or become indistinguishable from their personal rights of action, in my view this court's decision in Livent Inc. (Special Receiver and Manager of) v. Deloitte & Touche (2016), 128 O.R. (3d) 225, [2016] O.J. No. 51, 2016 ONCA 11, revd in part on other grounds [2017] 2 S.C.R. 855, [2017] S.C.J. No. 63, 2017 SCC 63, stands as a complete answer to that proposition.

[88] In Livent, it was held that the distinction between the corporation's cause of action arising from wrongs done to it to recover damages it has suffered and the separate cause of action of a corporate stakeholder to assert a personal cause of action for a wrong done to her for damages she has suffered, does not cease to apply when the corporation is insolvent and intends to distribute any recovery to its stakeholders. In other words, the separate and distinct cause of action of the corporation does not become one and the same as the stakeholders' cause of action even if the corporation's intention is to benefit its stakeholders with any recovery. Blair J.A. explained why an argument to the contrary must be rejected, observing, at para. 57, that

[i]t impermissibly conflates damages sustained by the corporation with the distribution of those damages, once recovered, to creditors and other stakeholders, as part of the assets of the corporation, in the course of the proceeding under the [CCAA]. . . . To conflate them is to disregard the long-recognized principle of corporate law that a corporation is a legal entity separate apart from its shareholders and stakeholders, and that the corporation alone has the right to sue for wrongs done to it.

(Citations omitted)

[89] The Litigation Trust is the CCAA vehicle for the pursuit of SFC's corporate causes of action and the distribution of its damages, once recovered, to creditors. Thus, the statement from Livent is equally applicable here. The Plan's stated purpose of benefiting creditors by recoveries achieved by the Litigation Trust does not affect the distinction between SFC's causes of action (pursued through the Litigation Trust) and any personal causes of action that creditors or others may pursue, including in the Class Actions. That distinction continues.

[90] In addition to conflicting with well-established corporate law principles, the appellant's attempt to divorce the concept of a cause of action from the person or corporation that holds it conflicts with the language of the Plan. In defining the Litigation Trust Claims transferred to the Litigation Trust, the Plan refers to Causes of Action that have been or may be asserted on behalf of SFC and those that have been or may be asserted on behalf of the Trustees for the Noteholders. It links the Causes of Action transferred to the entity that held them. The "greater certainty" language in this definition must be read in the same way. The fact that the causes of action of shareholders' and noteholders' advanced in the Class Actions were not transferred to the Litigation Trust under the Plan has no bearing on the transfer of SFC's separate and distinct Causes of Action to the Litigation Trust, even if arising from the same or similar facts and even though creditors are beneficiaries of the Litigation Trust. SFC's Causes of Action were not being advanced in the Class Actions. The "greater certainty" language consequently does not have the effect for which the appellant contends.

[91] Stepping back from the precise wording of the Plan, the appellant argues more generally that it represented a bargain that his wrongs would be pursued in the Class Actions only. I do not accept this argument, which does not find support in the text of the Plan, read in light of the factual matrix and the purposes of the Plan and the CCAA.

[92] The Class Actions pre-dated the Plan. If they were intended to be the sole vehicle for recovery from the appellant, it is unclear why the appellant did not receive a release from SFC or the Litigation Trust under the Plan. Moreover, when the Plan was put forward and approved, the failed sales process had already established that recoveries from assets in SFC subsidiaries would be insufficient to allow SFC to satisfy creditor claims, making other sources of recovery, including enforcement of SFC's litigation rights, important. There is no reason why rights of action of SFC against the appellant, which would continue to exist in a bankruptcy or liquidation of SFC, would be given up in this CCAA Plan, where the object was to maximize recoveries in a manner more advantageous than bankruptcy or liquidation. Moreover, the stated purpose of the Plan includes allowing creditors to benefit from the pursuit of contingent claims by the Litigation Trust. Morawetz J., in granting the sanction order approving the Plan, noted that it provided the opportunity "through the Litigation Trust, to pursue (in litigation or settlement) those parties that are alleged to share some or all of the responsibility for the problems that led SFC to file for CCAA protection": Sino-Forest Corp. (Re), at para. 64. When the Plan was approved, the appellant was already alleged to be one of those persons, but on the appellant's argument the opportunity Morawetz J. identified would not exist.

[93] The purposes of the CCAA and the Plan, and the Plan's precise provisions read in light of the factual matrix, all rebut the appellant's characterization of the Plan as preventing the Litigation Trust from pursuing a claim that SFC could have pursued against the appellant for his misconduct.

[94] Accordingly, the trial judge did not err in interpreting the Plan as allowing the respondent to advance the claims made in this action against the appellant notwithstanding the claims by noteholders and shareholders advanced in the Class Actions.

(ii) Excluded litigation trust claims

[95] The appellant's second argument is that the claims advanced in the action are Excluded Litigation Trust Claims. As noted above, that exclusion applies where there is an agreement between SFC and a category of its creditors that a particular claim is excluded from those transferred to the Litigation Trust. The Plan specifies one category of excluded claim, encompassing certain claims against SFC's underwriters. There is no similar particularization of claim(s) of SFC against the appellant which are excluded.

[96] The only agreement to exclude a claim of SFC against the appellant that the appellant points to is the "greater certainty" language providing that claims advanced in the Class Actions are not transferred to the Litigation Trust. The argument is therefore just a repackaging of the appellant's first argument, as it depends for its validity on the Plan having exempted claims arising from facts asserted in the Class Actions from those Causes of Action of SFC transferred to the Litigation Trust. As previously discussed, the Plan does not have that effect.

[97] I would therefore not give effect to this argument.

(iii) SFC intercompany claims

[98] The appellant's third argument is that the claims for which he was found liable are SFC Intercompany Claims. He argues that these were assigned under the Plan by SFC to EPHL and EPGL, rather than to the Litigation Trust.

[99] I agree with the appellant that SFC Intercompany Claims were not assigned to the Litigation Trust, but I disagree that the claims for which the appellant was found liable in this action are SFC Intercompany Claims.

[100] SFC Intercompany Claim is defined in the Plan as "any amount owing to SFC by any Subsidiary or Greenheart and any claim by SFC against any Subsidiary or Greenheart". SFC's shares in each Subsidiary and in Greenheart were transferred under the Plan to EPHL and by EPHL to EPGL. The SFC Intercompany Claims followed the same route: s. 4.10.

[101] Essentially, the appellant's argument is that the respondent is claiming money raised by SFC in the capital markets that was invested in its subsidiaries and lost. In his submission, a claim about funds invested in SFC's subsidiaries and not returned is an SFC Intercompany Claim, regardless of against whom it is made.

[102] I disagree. In my view, reading the Plan in accordance with the interpretive principles noted above yields the conclusion that what was transferred to EPHL and then to EPGL were the debt obligations of subsidiaries or Greenheart to SFC and the rights SFC had to claim against those entities. This makes commercial sense in light of the words used in the definition of SFC Intercompany Claim -- "any amount owing to SFC by any Subsidiary or Greenheart and any claim by SFC against [them]". It also makes sense in light of the fact that the shares of the Subsidiaries and Greenheart were being similarly transferred. It would not make commercial sense for EPHL and EPGL to acquire the shares in SFC's subsidiaries but to leave the subsidiaries exposed to SFC's claims against them. The concluding words of s. 4.10 of the Plan make this clear: "[T]he applicable Subsidiaries and Greenheart shall be liable to [EPGL] for such SFC Intercompany Claims from and after the Plan Implementation Date."

[103] SFC Intercompany Claims does not refer to claims against the appellant arising from his conduct, even though that conduct involved investing SFC's funds in the company's subsidiaries. The transfer to EPGL of SFC's claims against its subsidiaries and Greenheart did not include the transfer of SFC's causes of action against the appellant.

[104] I would accordingly reject this argument.

(iv) Conclusion on appellant's Plan preclusion arguments

[105] I would not give effect to the appellant's arguments that the trial judge erred in concluding that the Plan transferred the claims advanced in this action to the Litigation Trust and did not preclude them from being advanced against the appellant by the respondent.

(2) Causation and damages

(a) The appellant's arguments

[106] The appellant argues that, even if the claims made in the action were SFC's Causes of Action, that only takes the respondent so far. As transferee of Causes of Action of SFC, the respondent can only claim amounts that would have been properly claimable by SFC. Thus, the only damages that could be claimed were damages of SFC proved to have been caused by the appellant's wrongdoing. In interrelated arguments, the appellant submits that the damages that were awarded by the trial judge are not damages of SFC, nor was it appropriate to consider them as caused by the appellant's wrongdoing.

[107] The appellant submits that the core of the claim is for losses incurred by debt and equity holders and that the amounts raised from them, if acquired by fraud as the respondent alleges, never belonged to SFC and therefore could not form part of SFC's loss. He argues that allowing such a claim improperly creates the risk of double recovery.

[108] The appellant goes on to submit that the trial judge simply presumed the appellant to have caused everything that led to SFC's ultimate collapse. He argues that the trial judge should have: required proof that each transaction that occurred would not have occurred without the appellant's deceit; calculated, for each transaction so found, the loss resulting from it and; accounted for transactions on which there was no loss.

[109] Finally, he argues that the trial judge applied incorrect principles of damages assessment. The Steger primary approach should have been completely rejected in favour of a transaction-by-transaction analysis. Even the specific loss analysis that the trial judge performed is flawed as it would, in part, award SFC damages which could only have been suffered by its subsidiaries.

[110] For the reasons that follow, I would not give effect to the appellant's principal causation and damages arguments or disturb the trial judge's award of damages. Accordingly, it is unnecessary to address the appellant's arguments about whether and how the trial judge's alternative damages calculation should be adjusted.

(b) The standard of review

[111] Causation is a question of fact, and is reviewed on a deferential standard. Absent palpable and overriding error, appellate intervention is not warranted: Ediger v. Johnston, [2013] 2 S.C.R. 98, [2013] S.C.J. No. 18, 2013 SCC 18, at para. 29.

[112] A trial judge's assessment of damages attracts considerable deference. It will not be interfered with absent an error of principle or law, a misapprehension of evidence, a showing that there was no evidence on which the trial judge could have reached his or her conclusion, a failure to consider relevant factors or consideration of irrelevant factors, or a palpably incorrect or wholly erroneous assessment of damages: Naylor Group Inc. v. Ellis-Don Construction Ltd., [2001] 2 S.C.R. 943, [2001] S.C.J. No. 56, 2001 SCC 58, at para. 80; Rougemount Capital Inc. v. Computer Associates International Inc., [2016] O.J. No. 5786, 2016 ONCA 847, 410 D.L.R. (4th) 509, at para. 41.

(c) Analysis of the appellant's causation and damages arguments

(i) The trial judge's factual findings appropriately underpin his causation conclusion and damages assessment

[113] The trial judge's causation conclusion and his assessment of damages are conceptually linked. They both are premised on five core factual findings that he made.

[114] The first was that SFC's raising of money in the debt and equity markets was something which was caused by the appellant's wrongdoing, including his misrepresentation of BVI standing timber as a valuable asset. The second was that "but for Mr. Chan's deceit, [SFC] would never have undertaken obligations of this magnitude to lenders and shareholders". The third was that but for the appellant's wrongdoing, SFC would not have "entrusted this money [the funds raised on the capital markets] to [the appellant] and Inside Management". Fourth was his finding that the appellant, "rather than directing [SFC's] spending on legitimate business operations, poured hundreds of millions of dollars into fictitious or over-valued lines of business where he engaged in undisclosed related-party transactions and funnelled funds to entities that he secretly controlled": at para. 1022. Fifth was the finding, at para. 1020, regarding the impact of the fraud and its discovery:

When the fraud was uncovered, and the dust settled, more than half of the money was gone. To the extent those funds went into the acquisition of assets, the value of those assets was realized through the EPHL sales process. What was left in cash on June 2, 2011 was largely consumed in propping up and managing the enterprise during the extended crisis brought on by the disclosure of the fraud and its ongoing investigation (including the ongoing concealment by [the appellant] and Inside Management).

[115] These five findings underlie the trial judge's conclusion that what occurred was a chain of events all flowing from the appellant's fraud and breach of duty, which resulted in the loss of the funds that had been raised. As he put it, "[t]he loss of these funds to [SFC] was directly related to Mr. Chan's fraud and breach of fiduciary duty": at para. 1022.

[116] In my view, these findings were available to the trial judge on the record. The argument that the trial judge simply presumed the appellant to be responsible for everything that led up to SFC's ultimate collapse is without foundation.

(ii) There is no legal error in the trial judge's causation analysis

[117] The trial judge applied the appropriate legal principles to his causation analysis. He approached the "but for" causation test on the robust common sense approach the law contemplates: Clements v. Clements, [2012] 2 S.C.R. 181, [2012] S.C.J. No. 32, 2012 SCC 32, at para. 46; Snell v. Farell, [1990] 2 S.C.R. 311, [1990] S.C.J. No. 73, at para. 34. Moreover, he was alive to the need to be satisfied that the loss was caused by the chain of events flowing from the wrongdoing after considering whether there were intervening causes that broke the chain of causation: Canson Enterprises Ltd. v. Boughton & Co., [1991] 3 S.C.R. 534, [1991] S.C.J. No. 91, at paras. 9, 47, 52 and 54-57.

[118] The appellant argues that the trial judge did not take into account other causes for the discrepancy between the value of SFC's assets, held by its subsidiaries and the value of the funds invested in them. Not all of the subsidiaries activities were found by the trial judge to be fictitious. Therefore, external factors, such as climate, industry pricing, etc., may have caused the losses, rather than the appellant's fraud.

[119] In my view, the trial judge was entitled to reject this argument. He did not ignore the fact that not all of the businesses were fictitious. He found that a loss was caused by the appellant notwithstanding that finding. His approach credited the value actually existing in the subsidiaries. And, since once a loss arising from a fraud or breach of duty is established, it is the defendant who bears the onus of showing that the plaintiff would have suffered the same loss absent the defendant's wrongdoing, the trial judge was not required to give effect to unproven alternative causes: Rainbow Industrial Caterers Ltd. v. Canadian National Railway, [1991] 3 S.C.R. 3, [1991] S.C.J. No. 67, 1991 SCC 27, at pp. 15-16 S.C.R.: Hodgkinson v. Simms, [1994] 3 S.C.R. 377, [1994] S.C.J. No. 84, at pp. 441-42 S.C.R.

(iii) The trial judge did not award compensation for amounts that could not be legally considered losses of SFC

[120] The appellant submits that the trial judge's analysis contains a fundamental flaw because the trial judge proceeded as though the money that SFC raised on the debt and equity markets "belong[ed] to the corporation" and its loss was a loss to SFC. This could not be, the appellant argues, since if the funds were raised "[b]ased on fraudulent misrepresentations about the nature and value of the BVI standing timber assets", as the trial judge found, the funds would have been impressed with a trust in favour of the shareholders and noteholders who advanced the funds. Only they, not SFC, would have a right to claim for the loss of these funds. Moreover, allowing a claim for these funds would involve SFC in inconsistent positions -- complaining that funds were obtained on its behalf through fraud while trying to obtain the benefit of those very funds.

[121] In making the latter argument, the appellant relies on the Supreme Court of Canada's decision in Corporation Agencies Ltd. v. Home Bank of Canada, [1925] S.C.R. 706, [1925] S.C.J. No. 49. In that case, an individual engaged in a fraudulent cheque kiting scheme, making unauthorized deposits into Corporation Agencies' bank account followed by equally unauthorized withdrawals. Corporation Agencies sued the bank alleging it should not have honoured the unauthorized withdrawals. Success on that claim would have given it the benefit of the unauthorized deposits.

[122] In rejecting the claim, the majority of Supreme Court held, at p. 726 S.C.R., that the plaintiff could not accept part of the fraudulent scheme -- the part that saw money deposited to its account -- while relying on the fraud to dispute withdrawals that had been made pursuant to the same fraudulent scheme.

[123] In my view, this case does not assist the appellant because it is distinguishable on two fundamental points. Corporation Agencies was suing a party who was not the perpetrator of the fraud and was seeking to benefit from part of the fraud at that party's expense. Here, the claim is not against an innocent party, but against the perpetrator, for damages caused by the fraudulent scheme. Nothing in the Supreme Court's decision precludes that type of claim. Moreover, in Corporation Agencies, the plaintiff did not establish that the moneys deposited into its account were funds for which it would have to account to others: at p. 726 S.C.R. Here, SFC had obligations in respect of the funds raised on the capital markets, which the appellant's fraud deprived it of the ability to meet.

[124] I do not have to decide if the appellant's trust characterization is correct, as it does not support his position. The trial judge found that SFC had suffered damage because it raised money on the capital markets, incurred obligations to its shareholders and noteholders by doing so, and then lost the money raised, none of which would have occurred but for the appellant's misconduct. The result was to leave SFC with the obligations it took on when it raised the funds while depriving it of the means to honour those obligations.

[125] This analysis would not change if the moneys raised were, as the appellant argues, "impressed with a trust in favour of the shareholders and noteholders who advanced the funds". By reason of the appellant's fraud, SFC would still have been left with obligations to its shareholders and noteholders -- though trust obligations -- while having been deprived of the means of honouring them. It would still have suffered damage, and accrued a cause of action to recover for that damage.

[126] The trial judge did not commit a legal error by considering the loss of the funds raised to have been a loss suffered by SFC in these circumstances. Where directors cause a corporation to incur liabilities and misapply money which should have been paid to answer those liabilities, leaving the company with large liabilities and no means of paying them, the directors cause the corporation to suffer a recognizable form of loss: Bilta (U.K.) Ltd. v. Nazir (No. 2), 2015 UKSC 23, [2015] 2 W.L.R. 1168, at paras. 176-178. That proposition was accepted by this court in Livent (C.A.): at para. 349.

[127] Nor is the result changed because, as the appellant argues, SFC was ultimately released by the Plan from its obligations to equity holders and creditors. The appellant submits that the release undercuts the argument that SFC was left with obligations it could not honour by reason of the appellant's conduct. I disagree. The fact that the Plan ultimately released SFC from its obligations to creditors and equity holders from whom funds were raised does not undermine the causation or damages conclusions of the trial judge.

[128] The release of SFC by creditors does not result in a windfall gain. Absent the Plan, if SFC had itself pursued its claims against the appellant, it could have used any damages it recovered towards satisfying its creditors. The Plan transferred the right to pursue SFC's claims to the Litigation Trust together with the obligation to distribute damages, once recovered, to the creditors who are the beneficiaries of the Litigation Trust. Effectively, the Litigation Trust assumes and replaces SFC's obligations to creditors through its obligation under the Plan to distribute damages it recovers to beneficiary creditors. Releasing SFC's obligations to creditors and requiring the Litigation Trust to distribute damages it recovers to beneficiary creditors ensures that the obligations to creditors rests with the person that will recover the damages.

[129] Similarly, the release of SFC by equity holders does not result in any windfall. Under s. 6(8) of the CCAA, unless all creditor claims are to be paid in full, a plan may not provide for payment of equity claims. "[I]n enacting s. 6(8) of the CCAA, Parliament intended that a monetary loss suffered by a shareholder (or other holder of an equity interest) in respect of his or her equity interest not diminish the assets of the debtor available to general creditors in a restructuring": Sino-Forest Corp. (Re) (2012), 114 O.R. (3d) 304, [2012] O.J. No. 5500, 2012 ONCA 816, at para. 56 [emphasis in original]. The fact that the Plan does not provide for equity holders to benefit from the Litigation Trust thus follows the priorities set by the CCAA for the distribution of recoveries from the enforcement of an SFC asset.

[130] It would be contrary to the purpose of the Plan, and the Litigation Trust it provided for, to give the release of SFC under the Plan the effect for which the appellant contends. The Litigation Trust was a vehicle to allow recoveries from persons whose conduct caused damage to SFC. The appellant's argument would treat the Plan as effectively having released him from being pursued for causing that damage, something the Plan did not do.

(iv) The double recovery doctrine does not apply

[131] The appellant argues that the trial judge's assessment of damages creates the risk of double recovery from him. He argues that a judgment against him should not issue because "a defendant cannot be liable twice for the same alleged loss". Reduced to its bare essentials, the appellant's position is that the funds raised by SFC on the debt and capital markets are at the core of both the claims in the Class Actions and the award of damages in this action. Even if separate causes of action and rights to damages exist, the damages award in this action will undoubtedly overlap with what may be awarded against him in the Class Actions.

[132] I would not give effect to this argument. Since SFC has a separate and distinct cause of action and suffered a recognizable form of loss, neither the cause of action nor recovery for it can be defeated by an argument that the appellant's conduct also gave rise to causes of action in others who may seek to claim their own damages from him, even if in similar amounts.

[133] The appellant invokes the rule against double recovery, but his position does not attract the rule, properly understood. The rule does not prevent a party with a claim from obtaining a judgment for 100 per cent of its losses. The rule only prevents a party who has made a recovery on a judgment from recovering, through other actions, more than 100 per cent of those losses. "It is not the damage award that amounts to satisfaction and bars a second action but the recovery by the plaintiff in the first action": Treaty Group Inc. (c.o.b. Leather Treaty) v. Drake International Inc. (2007), 86 O.R. (3d) 366, [2007] O.J. No. 2468, 2007 ONCA 450, at para. 13 (emphasis in original). The rule has no application here, where it is raised to avoid judgment against the appellant. There is no suggestion that the Litigation Trust has already recovered 100 per cent of the losses it is entitled to claim.

[134] To the extent that the appellant raises the spectre of beneficiaries of the Litigation Trust achieving double recovery in the future if they receive benefits from the Litigation Trust's collection of the judgment against him and then are successful in the Class Actions against him, this is not an objection to the judgment in this action for the reasons set out above.

[135] As the trial judge noted, it is in the recovery stage of the Class Actions that any issue of double recovery would have to be raised to the extent that members of the class attempt to recover damages already recovered through the Litigation Trust. For that issue to even emerge, the appellant would first have to pay the judgment granted against him in this action and then the plaintiffs in the Class Actions would have to fail to appropriately credit any distributions they receive. Neither precondition has occurred. Speculating on whether they will is inappropriate here. The point is that the rule against double recovery does not assist the appellant in resisting the granting of the judgment under appeal.

[136] As an alternative basis to his finding that the prospect of double recovery did not stand as a bar to the respondent's action, the trial judge interpreted the Plan to limit Class Action recoveries against the appellant to $150 million; thus, the overlap of claims would only be to the extent of $150 million, and not to the entirety of the respondent's claim. The appellant argues that the trial judge misinterpreted the Plan, which does not limit the Class Action claims against him.

[137] Any error in the trial judge's interpretation of the Plan in this respect was immaterial. He advanced the point as an alternative only to the main point that the prospect of later recoveries in the Class Actions could not stand as a bar to the appellant's liability to pay damages in this action.

[138] I would therefore not give effect to this ground of appeal.

(v) The trial judge applied the correct principles of damages assessment

[139] Given that the trial judge properly found causation of a recognizable form of loss to SFC, the measurement of that loss fell squarely within the trial judge's broad powers to assess damages. I see no reason to interfere with that assessment, which was based on his findings of fact and acceptance of expert evidence consistent with the chain of causation he found to exist.

[140] The trial judge referred to the measure of damages for deceit. He correctly described it as the difference between the financial position of the plaintiff as a result of the fraud, including losses flowing from it even if not foreseeable at the time of its commission, and the financial position of the plaintiff as it would have been if the tort had not occurred: para. 928, citing Rainbow Industrial Caterers Ltd. v. Canadian National Railway, [1990] B.C.J. No. 3044, 67 D.L.R. (4th) 348 (C.A.), at p. 359 D.L.R., affd (S.C.C.), supra. Elsewhere in his reasons he referred to the principles of equitable compensation citing, among other authorities, this court's decision in Whitefish Lake Band of Indians v. Canada (Attorney General) (2007), 87 O.R. (3d) 321, [2007] O.J. No. 4173, 2007 ONCA 744. He noted that "[e]quity is concerned with restoration of the actual value of the thing lost through the breach of duty, in this case [SFC's] funds raised on the capital markets" and that compensation is assessed at the date of trial and with the presumption that trust funds will be invested in the most profitable way: at paras. 1007-1011.

[141] The appellant says the trial judge erred by awarding damages based on the full equitable measure of compensation, which is only appropriate where property is owned by a beneficiary but is controlled by the fiduciary as trustee. He relies on the distinction between cases of breach of trust and those of breach of a non-trust fiduciary duty made in Whitefish Lake Band of Indians, at para. 54; and Canson Enterprises, at p. 578 S.C.R. In Canson Enterprises, the Supreme Court stated that in cases of breach of trust, "the concern of equity is that [the trust property] be restored . . . or, where that cannot be done, to afford compensation for what the object would be worth", whereas in cases of breach of duty, "the concern of equity is to ascertain the loss resulting from the breach of the particular duty": at p. 578 S.C.R. The court went on to observe that, in determining the loss resulting from breach of a particular fiduciary duty, equity may borrow common law concepts like remoteness, intervening cause and mitigation to avoid undue harshness: at pp. 579-80, 585-86 and 588 S.C.R. The appellant argues that since the claim against him did not involve a breach of duty in respect of funds of SFC that he controlled, the trial judge should have assessed damages based on these common law principles.

[142] I would not give effect to that complaint for a number of reasons. First, on the trial judge's findings, the appellant had control over the funds raised by SFC, which the trial judge found to have been "entrusted" to the appellant and "directed" by him into various entities to which he was related or which he secretly controlled. The trial judge properly concluded on the basis of these findings that the appellant "owed fiduciary duties towards [SFC] akin to those of a trustee": at para. 923.

[143] Second, even if the principles of equitable compensation applicable where trust property is involved were not available, the trial judge's damage assessment can be justified based on the principles in Canson Enterprises. As I have discussed above, the trial judge properly considered causation and potential intervening acts in coming to his damages award, and remoteness does not appear to be an issue.

[144] In any event, in my view the trial judge's assessment of damages was in fact primarily based on the tort measure of damages. His reference to equitable compensation principles was made primarily in relation to a point the appellant's expert made, namely, that when credit was given for asset realizations, the Greenheart realization should have been adjusted to take into account what Greenheart was worth when SFC made its investment, not what it ultimately was sold for. The trial judge rejected that argument. He said: "The fact that the discovery of [the appellant's] fraud had a negative effect on the market value of the Greenheart asset is not a market risk [SFC] has to bear . . . It is sufficient that [SFC] suffered a loss in fact, provided the realization was not improvident": at para. 1101.

[145] The trial judge's treatment of the Greenheart transaction is fully justified under the equitable principles of compensation applicable to a case where trust property is not involved. In Hodgkinson, the Supreme Court clarified that its observations in Canson Enterprises did not "signal a retreat from the principle of full [equitable] restitution" in all cases of breach of duty, as the appellant contends: at p. 443 S.C.R. The majority rejected the defendant investment advisor's argument that the plaintiff's loss was caused by the market rather than his breach of duty, holding that it was appropriate to place the risk of market exigencies on the defaulting fiduciary: at pp. 442, 452-53 S.C.R. It observed that breach of fiduciary duty can take a variety of forms, and consequently different approaches may be appropriate to remedy the harm caused by different breaches: Hodgkinson, at pp. 443-44 S.C.R. Here, as in Hodgkinson, there was a strong nexus between the wrong complained of, the fiduciary relationship, and the risk of market volatility that contributed to SFC's loss. The appellant's wrongdoing involved abuse of his fiduciary role and breach of the duty of loyalty to the corporation that lay at its core: at pp. 445, 452-53 S.C.R. This is exactly the type of case that justifies placing the risk of market fluctuations on the appellant.

[146] The trial judge's reasons for rejecting the appellant's expert's proposed adjustment of the realization amount for Greenheart were also justified under a deceit measure of damages. As the trial judge found, the appellant knew or could be deemed to have known that the discovery of his fraud would send SFC "into a tailspin": at para. 1012. The effect that had on the timing and distressed circumstances in which assets were realized can be seen as part of the chain of events flowing from the appellant's fraud: Rainbow (C.A.), at p. 359 D.L.R.; Canson Enterprises, at p. 565 S.C.R.; Hodgkinson, at pp. 445-46 S.C.R. This conclusion reflects the reality that as courts strive to treat similar wrongs similarly, equitable and common law paths often produce the same result: Hodgkinson, at pp. 444-45 S.C.R.; Canson Enterprises, at pp. 585-86 S.C.R.

(3) The doctrine of election

[147] The appellant argues that the equitable doctrine of election, also known as the rule against approbation and reprobation, prohibits a party from asserting that a transaction is valid to obtain some advantage and then turning around to assert that it is invalid to secure some other advantage. The transfer, under the Plan, of SFC's assets to EPGL (and the subsequent transfers to third-party purchasers) constituted an election to treat the assets as valid and subsisting, since the Plan deemed obligations and agreements to which EPGL became a party "in full force". The equitable doctrine of election, which he contends the trial judge erred in failing to consider, should prevent the respondent from making the inconsistent argument that the assets were fictitious, fraudulent, tainted or overvalued as a product of his fraud.

[148] I would not give effect to this argument. First, the cases relied upon by the appellant deal with markedly different situations to the one at bar. As one example, in Kin Tye Loong v. Seth (1920), 1 C.B.R. 349 (P.C. Hong Kong), the plaintiff filed a claim in the defendant's bankruptcy for the price of goods sold and delivered, received a dividend on that claim, and compromised and released it. This conduct -- consistent only with the position that a valid sale had taken place -- barred a subsequent action by the plaintiff claiming that no sale in fact had taken place, that property in the goods had never been transferred, and that damages should be paid for conversion of what the plaintiff alleged were still its goods. Nothing analogous is present here.

[149] Second, the language of the Plan cannot be read as elevating the nature or value of what was transferred under the Plan above what actually existed. For example, at the time of the Plan, the standing timber assets had not been located or verified and the trial judge found they were and had been fictitious. SFC's insolvency, which gave rise to the Plan, arose from, among other things, that very circumstance. In the sale to New Plantations effected by EPGL, the standing timber assets were ascribed no value unless recoveries on them were made, but none occurred. Nothing in the Plan or the steps taken under it can be read to treat the non-existent as existing, or the valueless as valuable, preventing the Litigation Trust from maintaining that the fraud alleged had occurred.

[150] This court has recently explained the doctrine of election in both its common law and equitable aspects. At common law, the doctrine addresses the consequences of a party choosing between inconsistent alternatives; the choice of one alternative, for example, to affirm a contract, forecloses later choice of an inconsistent alternative, for example, to rescind the same contract. The equitable doctrine of election precludes a party who has accepted benefits under a particular instrument, for example, a will, from refusing to accept the balance of the provisions of that instrument: see Charter Building Co. v. 1540957 Ontario Inc. (2011), 107 O.R. (3d) 133, [2011] O.J. No. 3006, 2011 ONCA 487, at paras. 18-22.

[151] The trial judge correctly held that there had been no election between inconsistent rights here. The transfer of SFC's assets to EPGL and the transfer of its claims against the appellant for fraud and breach of fiduciary duty to the Litigation Trust were not inconsistent. The Plan contemplated that the benefit of both would be preserved and pursued. This conclusion, reached by the trial judge upon consideration of the common law doctrine of election (the parties before us disagreed as to whether the equitable doctrine was argued before the trial judge), is equally applicable to the equitable doctrine. The Litigation Trust's acceptance of benefits under the Plan, namely, the transfer of SFC's Causes of Action for fraud and breach of fiduciary duty, are not accompanied by any refusal to accept the burden of giving effect to other dispositions under the Plan, such as the obligation to distribute damages, once recovered, to the creditors who are the beneficiaries of the Litigation Trust, and the transfers of SFC's assets to EPGL, enabling the sales to subsequent purchasers. Indeed, the damages awarded by the trial judge deducted the value implied by the recovery from those sales.

[152] As the trial judge noted, even where a party has elected to affirm a contract, its right to damages is not precluded. The same principle would apply here to the argument about the equitable doctrine of election. Nothing suggests that a party is foreclosed from pursuing damages when, as a result of being defrauded, its loss is mitigated by the disposition of whatever property was acquired in transactions affected by the fraud. Indeed, the measure of damages available to a party induced by fraud to enter into a transaction involves the calculation of the loss the plaintiff suffered, which usually requires a credit to be given for the actual value of the property that was acquired: Lewis N. Klar and Cameron Jefferies, Tort Law, 6th ed. (Toronto: Carswell, 2017), at p. 815.

[153] In my view, the doctrine of election is of no assistance to the appellant.

(4) Errors in factual findings

[154] The appellant argues that the trial judge made two fundamental errors in his treatment of the evidence, which undermine his factual conclusions. First, the appellant argues that the trial judge drew the inference that the BVI standing timber model was a fraud based on one sample transaction for which the documentation had been translated into English. He goes on to argue that the inference that all of the 525 transactions conducted under the BVI standing timber model were the same as the sample transaction was impermissible for two reasons: first, fraud in numerous transactions cannot be proven by reference to one example; and, second, that proceeding as the trial judge did required the conclusion that the other transactions, comprised of documents which had not been translated into English, were substantially similar to the sample when those non-translated documents were inadmissible under the Courts of Justice Act, R.S.O. 1990, c. C.43, s. 125(2).

[155] The trial judge considered the argument that one sample was not sufficient and rejected it. He stated that all of the purchase and sale contract documentation for all the transactions was in evidence and available to both parties and that trial and judicial economy dictated that unless absolutely necessary, time should not be devoted to the proof of every piece of documentation for all 525 transactions. Rather, if the defendant had wanted to quarrel with the assertion that the sample transaction was essentially the same as the rest of them, he had the raw material necessary to do that. He did not attempt to do so.

[156] For the reasons given by the trial judge, and the following additional reasons, I would not give effect to the appellant's argument:

(a) The requirement that fraud be proven by clear and cogent evidence does not mean, as a matter of law, that it can never be proven by inference drawn from a sample. It depends on the circumstances. Here, there was evidence from which the conclusion could be drawn that the sample was representative, beyond the evidence of the respondent himself. The appellant gave evidence that the content of certain documents was identical in each transaction and a defence witness testified as to how contracts and documents for each transaction were prepared from a "template". Additionally, the appellant did not assert that any fraud evident in the sample transaction was an isolated incident. His position was that there was no fraud, a position that appears consistent with evaluating the matter on the basis of the sample. Finally, the trial judge described the protocol the parties had followed whereby documents could be translated when required. The appellant and various experts and witnesses were fluent in the language of the documents and it was open to them to require translations of any documents that they could use to show the non-representative nature of the sample. There was evidence about some other transactions and, to the extent that it was before the trial judge, it was for him to assess in terms of the sample's representativeness.

(b) The trial judge's finding of fraud was not solely based on an inference from the sample. The trial judge devoted over 200 paragraphs of his reasons to an analysis of the BVI standing timber model and why it was fraudulent, referring to evidence well beyond the sample. This included the lack of objective evidence to support the existence of cash flows between the AIs and the Suppliers; the drop in collection of accounts receivable owing by the AIs to nil after the Muddy Waters Report; the failure to locate the BVI standing timber after the Muddy Waters Report and even until trial; the expert evidence about critical documents that were missing or deficient such as plantation certificates, maps, Forestry Bureau confirmations, sales contracts and harvesting permits; the inability of the Independent Committee to confirm the existence and operations of Suppliers and AIs; and the appellant's control over supposedly arms-length counterparties. The trial judge made numerous findings of credibility in assessing all of that evidence, which he clearly viewed as a whole.

(c) A factual finding of fraud by a trial judge who has weighed large quantities of complex evidence is entitled to deference, absent palpable and overriding error. Such an error must go to the very outcome of the case: Benhaim v. St-Germain, [2016] 2 S.C.R. 352, [2016] S.C.J. No. 48, 2016 SCC 48, at paras. 36-38. In light of the findings of the trial judge on the record before him, the alleged errors concerning the sample would not, in any event, rise to the level that would warrant appellate interference.

[157] The appellant also argues that the trial judge erred in allowing the evidence of the respondent, given by affidavit, to remain in the record where it contained opinions that could only be given by an expert. The trial judge was alive to this issue; he ruled in a pre-trial admissibility motion that the respondent's affidavit, where it deposed to matters outside his personal knowledge and contained opinions, would not be relied on as evidence but simply as a description of positions that had to be proven by admissible evidence. The trial judge did not rely on any opinions of the respondent that could only be given by an expert. The appellant's objection that the trial judge should have gone on to "redline" out offending portions of the respondent's affidavit elevates form over substance in these circumstances.

[158] I would not give effect to the appellant's arguments about the trial judge's fact-finding.

IV. Conclusion

[159] I would dismiss the appeal. In accordance with the parties' agreement, I would award costs of the appeal to the respondent in the amount of $100,000, inclusive of disbursements and applicable taxes.

Appeal dismissed.

Notes

1 All references to currency are in USD, unless otherwise noted.

2 Affected Creditors were defined by the Plan as including persons with Noteholder Claims. A Noteholder Claim included a claim for principal and accrued interest under Notes (debt instruments issued by SFC when it raised financing on the public markets) by the owner or holder of such Note or their trustee.

3 Noteholder Class Action Claimants were persons with Noteholder Class Action Claims. These were defined as claims as Noteholders in class actions against SFC and its directors, officers, auditors or underwriters, relating to the purchase, sale or ownership of the Notes, but did not include Noteholder Claims, i.e., did not include claims for principal and accrued interest payable under the Note.

4 See note 2.

5 See note 3.

6 There is an overlap between this argument, and the appellant's argument that in assessing damages the trial judge awarded the respondent amounts that could only be claimed in the Class Actions or were duplicative of those amounts. However, I have addressed the points as distinct. One argument is essentially about the respondent's standing to assert certain claims. The other is about whether, even if he has standing, the damages actually awarded were appropriate.

7 The appellant clarified in oral argument that double recovery was raised to avoid judgment against the appellant, not to reduce any damage award made against him. Indeed, the appellant did not point to any recoveries that had been made against him.