Court of Appeal for Ontario

Date: 2001-11-05 Docket: C33680

Re: Capital Community Credit Union Limited (Plaintiff (Respondent)) – and – BDO Dunwoody (Defendant (Appellant))

Before: Abella, Goudge and Simmons JJ.A.

Counsel: Gregory P. Kelly, Q.C. and James R. Lane For the appellant

David W. Scott, Q.C. and Jane M. Bachynski For the respondent

Heard: October 25, 2001

On appeal from the judgment of Justice Colin McKinnon dated January 12, 2000.

ENDORSEMENT

[1] This is an appeal from the judgment of McKinnon J. dated January 12, 2000. His reasons for judgment are thorough and comprehensive. In our view, his findings of fact are well founded on the evidence and his conclusions of law are correct.

[2] On the issue of liability, the appellant first challenges as too broad his finding as to the scope of the duty resting on the appellant. In our view, given the relationship between the parties in this case, the appellant’s professional obligation clearly included those factors referred to at paragraph 235 of the judgment and, in particular, the duty to warn the respondent of the significant weaknesses within its Loans Department. This ground of appeal fails.

[3] Second, the appellant challenges the finding of causation made by the trial judge. In our view, determination of the consequences flowing from the appellant’s breach of duty is a finding of fact and there was ample evidence upon which the trial judge could reach the conclusion which he did.

[4] As to contributory negligence, the appellant’s complaint is that the trial judge understated the adverse consequences flowing from the respondent’s own conduct. Again, in our view, this is a matter of fact and we can find no palpable error in the conclusion the trial judge reached.

[5] The appellant argues three points as to damages.

[6] First, it says that the trial judge erred in selecting a reaction time of eleven months in making his damage calculation. We disagree that this is an error. The trial judge found that the effective response of the respondent to the Seguin Report took 11 months. He applied the same time line as the likely response time to the advice the respondent should have received in February 1986. In our view, this is an entirely reasonable finding.

[7] Second, the appellant challenges the use of 1.5% in calculating the inevitable losses that the respondent would have suffered. Again, in our view, this is a finding of fact, which on the record is entirely defensible.

[8] Finally, the appellant says that the trial judge ignored any tax benefit to the respondent when he fixed damages. This argument is at best faintly outlined in the appellant’s material. We agree with Mr. Scott that there is simply no sufficient evidentiary basis on which the trial judge could have determined the tax consequences to the respondent of the appellant’s negligence. He did not err in declining to do so. We would dismiss this ground of appeal.

[9] As to the cross-appeal, the respondent first raises the question of dividends. In our view, it was open to the trial judge to decline to include an amount for dividends wrongly paid on the basis that these dividends were effectively saved by the respondent in subsequent years when it was unable to pay the dividends which it would have had to pay absent the appellant’s negligence.

[10] Secondly, as to prejudgment interest, in our view, the award made was entirely within the trial judge’s discretion and we would not interfere with it.

[11] Third, as to inevitable losses, it is our view that the trial judge did not err. Given the evidence about the respondent’s lending practices, it was open to the trial judge to apply a factor of 1.5% even though the industry standard may have been less.

[12] In the result, the appeal and the cross-appeal must both be dismissed with costs.

“R.S. Abella J.A.”

“S.T. Goudge J.A.”

“J. Simmons J.A.”