Martin v. Goldfarb et al. [Indexed as: Martin v. Goldfarb]
68 O.R. (3d) 70
[2003] O.J. No. 4372
Docket No. C37885
Court of Appeal for Ontario
Morden, Gillese, and Armstrong JJ.A.
November 20, 2003
Damages -- Breach of fiduciary duty -- Assessment of damages -- Plaintiff failing to provide adequate evidence of losses -- Plaintiff failing to prove direct losses -- Plaintiff failing to prove causation -- Plaintiff's claims for damages for breach of fiduciary duty dismissed.
In a prior trial, M was awarded damages as against G and F & G for losses suffered due to a breach of fiduciary duty. The Court of Appeal, however, ordered a new trial limited to an assessment of damages arising out of M's personal losses. On the retrial, the trial judge dismissed each of M's claims on one or more of the following bases: inadequate evidence was called to establish the loss; (b) the damages suffered were not a direct personal loss; or (c) M failed to establish a causal connection between his loss and the breach of fiduciary duty. On the retrial, costs were awarded against M. He appealed.
Held, the appeal should be allowed in part. [page71]
With the exception of the costs award against M, there was no error in the trial judge's analysis or conclusions. The trial judge, however, erred in awarding the defendants costs of the damages trial. Although M failed to establish his damages claim, there was an undisturbed finding of liability for an extremely serious breach of fiduciary duty. The proper disposition was to order no costs.
APPEAL from a trial judgment assessing damages for breach of fiduciary duty.
Statutes referred to Trustee Act, R.S.O. 1990, c. T.23, s. 38
William G. Dingwall, for plaintiff/appellant. Geoffrey D.E. Adair, for respondent.
[1] Endorsement BY THE COURT: -- This matter arises from a series of commercial transactions between the appellant, the corporations that he controlled and Nigel Stephen Axton. Axton, a disbarred lawyer, was a client of the respondent law firm, Farano, Green. Goldfarb is a practising lawyer with Farano, Green. Goldfarb and other members of Farano, Green knew that Axton had been convicted of, and incarcerated for, numerous counts of fraud. Axton referred the appellant, as a client, to Goldfarb. Goldfarb acted for the appellant in numerous transactions involving Axton and his associates in the period beginning July 28, 1988, and ending in the fall of 1989.
[2] In a prior trial in this matter, the appellant was awarded damages as against the respondents Goldfarb and Farano, Green (the "respondents") for losses suffered due to a breach of fiduciary duty owed to him by the respondents. The trial judge concluded that the respondents were responsible for Axton's conduct because they had concealed Axton's identity and background from the appellant. The appellant was awarded $5.95 million in damages, plus pre-judgment interest.
[3] The respondents appealed the damages portion of the judgment. This court decided three issues in the appeal. The first related to establishing a causal connection between Goldfarb's breach of fiduciary duty and damages suffered because of frauds perpetrated by Axton and his associates. The second addressed the failure of the trial judge to distinguish losses suffered by the appellant personally from those suffered by the corporations that he controlled. The third related to the lack of cogent evidence on the record to support the damages award.
[4] In the result, this court directed that a new trial be held limited to an assessment of the damages arising out of the personal losses sustained by the appellant following a breach of fiduciary [page72 ]duty owed to him by the respondents. Specifically, para. 2 of the order of August 26, 1998 directed:
THIS COURT FURTHER DOTH ORDER that the assessment of damages to the Respondent personally be remitted back to the Trial Judge to determine the proper award for damages.
[5] The new trial was conducted over four days. For written reasons given, the trial judge dismissed each of the appellant's damage claims on one or more of the following bases: inadequate evidence was called to establish the loss; the damages suffered were not a direct personal loss; or, the appellant had failed to establish a causal connection between his loss and the breach of fiduciary duty. Costs were awarded against the appellant.
[6] The appellant's primary ground of appeal is that the trial judge erred in requiring that the personal losses be direct. This ground is addressed below. The other errors alleged in this appeal are all based on the notion that the trial judge failed in his obligation to assess damages because he either misunderstood that obligation or failed to appreciate the difficulties that the appellant had in proving his case. There is no substance to this submission. The trial judge was fully aware of the task he faced and of the circumstances that surrounded the production of evidence to support and quantify the appellant's damage claims. We observe, in this regard, that the appellant made no attempt before us to quantify the damages sought or even to suggest a range within which they could be assessed, nor did he identify any particular pieces of evidence that would enable this court to determine the losses.
[7] With the exception of the costs award against the appellant, we see no error in the trial judge's analysis or conclusions.
[8] In relation to the appellant's personally owned properties, The Birches and the Andover condominium, the trial judge [at para. 10] was fully justified in concluding, in respect to the former:
No evidence was adduced on this assessment as to the disposition of the matter or the ultimate distribution of the proceeds. No evidence was called as to what happened to the equity that had been paid into court and without evidence that it was, in fact, paid out to Tonafin, Martin is unable to establish a loss in respect of this property that is causally connected to the breach by Goldfarb.
In respect of the latter, the trial judge [at para. 11] was justified in concluding that "[b]ecause no causal connection has been established between Martin's bankruptcy and Goldfarb's breach of duty, this claim must fail as well." Damages cannot be awarded absent evidence of a causal connection. [page73 ]
[9] In relation to the properties that had belonged to the appellant's late mother, the trial judge correctly concluded that such losses are not recoverable by the appellant. If losses were suffered on such properties and they could be proven to be causally connected to the breach of duty, the resulting damages would be those of the appellant's mother. Arguably, the appellant could claim such damages as sole heir to his mother's estate although the prior direction of this court limiting recovery to personal losses may preclude such a claim. That matter, however, need not be decided as damages are not recoverable in any event. Section 38(1) of the Trustee Act, R.S.O. 1990, c. T.23 provides that a right of action is reposed only in the executor or administrator of an estate and s. 38(3) operates to bar such an action if it is brought more than two years after the death of the deceased. The fact that the within action was commenced in 1990 and therefore within the two-year period is of no assistance because this action was not brought by the executor or administrator of the appellant's mother's estate.
[10] In relation to the Perkins mortgage claim, the trial judge was fully justified in finding that the appellant suffered no personal loss. The appellant has never been called upon to repay the money or to reduce the indebtedness of the Royal Bank to whom the money should have gone in the first place. As the trial judge noted, if anyone suffered a loss in this respect, it was either Perkins as the person who had advanced the funds or Newmarket Golf & Country Club Ltd., on whose property the mortgage had been placed to secure the loan from Perkins.
[11] The trial judge also correctly concluded that the appellant was not entitled to damages for loss of salary by the appellant's wife. Losses to one's spouse cannot be said to be personal. For the same reason, the appellant is not entitled to reimbursement for business expenses that had no personal component to them.
[12] The appellant also claimed damages for loss of management fee to Martinvale Estates Limited. As the trial judge ruled, "If anything, this claim is in the nature of a derivative claim, much like a shareholder, who is claiming an indirect loss as a result of a wrong done to Martinvale Estates Limited." The appellant's income loss claims in this regard are derivative in nature; they are not personal losses. Allowing a claim for income loss in such circumstances would lead to problems of double recovery and, in any event, is precluded by the terms of the order of this court that restricts damages to those suffered by the appellant personally.
[13] At the hearing of this appeal, the appellant abandoned his claim in relation to TLC St. Petersberg Inc. [page74 ]
[14] With respect to the general damages claim, although the evidence demonstrates that the appellant suffered loss of reputation, humiliation and disgrace that would justify an award for general damages, on the evidence before him, the trial judge was fully justified in concluding that the appellant failed to prove that the bankruptcy was attributable to Goldfarb's breach of duty and Axton transactions post-July 28, 1988.
[15] In arriving at our conclusion, we are conscious of the fact that this court, in ordering the new trial on the nature and quantum of personal damages, expressed the opinion that "evidence to support a personal claim is available". Unfortunately, in the course of the new trial, the appellant was unable to establish his claims. In our view, the trial judge rightly concluded that the evidence was insufficient to support the appellant's claims.
[16] While a trial judge is to be afforded much deference in the matter of costs awards, we are of the view that he erred in principle in awarding the respondents costs of the damages trial. Although the appellant failed to establish his damages claims, there remains an undisturbed finding of liability on the part of the respondents for an extremely serious breach of fiduciary duty by professionals. In light of that finding and the direction of this court that there be a new trial on the matter of damages, we are of the view that he should not suffer costs as a result of so doing. In the circumstances, we think that the proper disposition is to order that there be no costs below.
The Cross-Appeal
[17] At the hearing of this matter, the appellants by cross- appeal, Goldfarb and Farano, Green, abandoned their cross- appeal in respect of the costs award below.
Conclusion
[18] Accordingly, leave to appeal costs is granted, this appeal is allowed in part and para. 2 of the Order of January 3, 2002, is set aside. The cross-appeal is dismissed. Because success on the appeal is divided, there shall be no order respecting costs of the appeal.
Order accordingly. [page75]