Court File and Parties

Citation: Cameron v. National Bank of Canada, 2009 ONCA 707 Date: 2009-10-08 Docket: C48947 Court of Appeal for Ontario

Before: Simmons, Juriansz and LaForme JJ.A.

Between:

John Cameron, John Johnstone and Cameron & Johnstone Limited Plaintiffs (Appellants)

and

National Bank of Canada and KJS Investments Holdings Inc. Defendants (Respondents)

AND BETWEEN

KJS Investment Holdings Inc. Plaintiff by Counterclaim (Respondent)

and

John Cameron, John Johnstone, Cameron & Johnstone Limited and 725 Coronation Boulevard Ltd. Defendants by Counterclaim (Appellants)

AND BETWEEN

KJS Investment Holdings Inc. Plaintiff (Respondent)

and

Cameron & Johnstone Limited. Defendant (Appellant)

Counsel: John W. McDonald, for the appellants Brett Harrison and Amanda Klein, for the respondent National Bank of Canada David Jackson, for the respondent KJS Investment Holdings Inc.

Heard and released orally: September 30, 2009

On appeal from the judgment of Justice David S. Crane of the Superior Court of Justice dated May 16, 2008.

Endorsement

[1] KJS took an assignment of National Bank's debt and security relating to Hollowcore Limited and 896309 Ontario Limited and realized on the portions of security provided by the appellants. The trial judge concluded that KJS was entitled to take the assignment and rejected the appellants' claims that the debt instruments and security were not enforceable. Accordingly, the trial judge awarded judgment to KJS for the shortfall owing following realization.

[2] As we read his reasons, the trial judge rejected the appellants’ argument that para. 24 of the share purchase agreement establishes a condition precedent to the individual appellants’ obligation because he concluded that para. 24 is merely a clause limiting KJS's claim against the individual appellants in any action to $2,000,000. We are not persuaded that the trial judge erred in this respect.

[3] However, even if the appellants' interpretation of para. 24 were available on the language of the share purchase agreement, they cannot rely on para. 24 because they failed to establish that more than $2,000,000 was required to obtain a release of the KJS security. The evidence at trial indicated that the National Bank was willing to provide a release in April 1991 for about $2,000,000. There was no evidence at trial that the Bank’s position ever changed. On the contrary, the Bank's witness testified at trial that the Bank's position did not change.

[4] In our view, the Counsel agreement does not change the manner in which the proceeds of the realization should be allocated other than to require that the allocation be in accordance with the Bank’s debt instruments adduced as evidence at the trial. Given that the appellants breached their obligations under the share purchase agreement to obtain a release of the KJS security, they cannot claim the benefit of the KJS security. The Mercantile Law Amendment Act is of no assistance to them in this regard.

[5] Concerning the cross-appeal, we are not persuaded that KJS was entitled to mitigate its damages for the breach of the share purchase agreement by taking an assignment of the debt instruments. The Counsel agreement is not an acknowledgment that this was reasonable mitigation. Rather, it was an acknowledgment that the realization was not improvident and that the accounting was accurate.

[6] In the result, the cross-appeal is dismissed and the appeal is allowed in part by varying the damage calculation in accordance with these reasons.

[7] If the parties are unable to agree on the proper allocation of the proceeds of the realization under the Bank’s debt instruments within 14 days, the appellants shall have 7 days thereafter to file written submissions concerning the proper allocation and KJS shall have 7 days to respond.

[8] Costs of the appeal are to KJS on a partial indemnity scale fixed in the amount $18,000 inclusive of G.S.T. and to National Bank on a partial indemnity scale fixed in the amount $7,500 inclusive of G.S.T. There will be no order as to costs of the cross-appeal.

“Janet Simmons J.A.”

“R.G. Juriansz J.A.”

“H.S. LaForme J.A.”