COURT OF APPEAL FOR ONTARIO

2016 ONCA 405

DATE: 20160530

DOCKET: C58356

Cronk, Pepall and Lauwers JJ.A.

In the Matter of the Bankruptcy of Summit Glen Waterloo/2000 Developments Inc., of the City of Toronto, in the Province of Ontario

Patrick Shea and Brent Arnold, for the appellant/respondent by way of cross-appeal, A. Farber & Partners Inc., as Trustee in Bankruptcy of Annopol Holdings Ltd. and Summit Glen Group of Companies Inc.

Maurice J. Neirinck and Michael McQuade, for the respondents Morris Goldfinger and 1830994 Ontario Ltd. and for the appellant by way of cross-appeal, 1830994 Ontario Ltd.

Heard: October 14 and 15, 2015

On appeal from the judgment of Justice David M. Brown of the Superior Court of Justice, dated February 3, 2014, with reasons reported at 2014 ONSC 756, 9 C.B.R. (6th) 86.

Pepall J.A.:

Introduction

[1] This is the third of three companion appeals, the other appeals bearing file numbers C57879 and C57898. This court’s decisions in the three appeals are being released contemporaneously. The background to the three appeals is described in detail in this court’s reasons in C57879.

[2] On December 1, 2008, Summit Glen Waterloo/2000 Developments Inc. (“SG Waterloo”) was placed under receivership and on June 28, 2010, it was adjudged bankrupt. A. Farber & Partners Inc. (“Farber”), in its capacity as Trustee in bankruptcy of both Annopol Holdings Ltd. (“Annopol”) and Summit Glen Group of Companies Inc. (“SG Group”), asserted claims against SG Waterloo, as did Montor Business Corporation (“Montor”), Dr. Morris Goldfinger, and 1830994 Ontario Ltd. (“183”), a company controlled by Goldfinger. These claims were to be heard by the Registrar in Bankruptcy but the trial judge decided that they should be heard in a hybrid trial, together with the subject matter of Court File Nos. C57898 and C57879. Farber now appeals from the trial judge’s disallowance of certain claims it advanced in SG Waterloo’s bankruptcy. 183 cross-appeals from the trial judge’s disallowance of its claim in SG Waterloo’s bankruptcy.

[3] For the reasons that follow, I would allow Farber’s appeal in part and would dismiss 183’s cross-appeal.

A. Annopol’s Claim in SG Waterloo’s Bankruptcy

(i) Background

[4] The first part of this appeal concerns the trial judge’s partial disallowance of certain claims advanced by Farber in its capacity as Annopol’s Trustee in bankruptcy in the SG Waterloo bankruptcy.

[5] Annopol had lent money to SG Waterloo and filed a proof of claim in SG Waterloo’s bankruptcy proceedings. Accordingly, the trial judge had to determine what amount SG Waterloo owed to Annopol as of June 28, 2010, the date of SG Waterloo’s bankruptcy.

[6] Annopol originally filed its proof of claim for $519,600, which had been paid in small instalments from June 2000 to December 2008, rather than in a lump sum. Farber was later able to retrieve documents that conclusively established that the amount advanced was actually $557,600. It also filed a report to that effect. $100,000 of this amount was secured and the remaining $457,600 was unsecured.

[7] The trial judge described Annopol as having filed a proof of claim for an unsecured amount of $420,000 and a secured amount of $100,000, for a total of $520,000. Accordingly, he allowed the unsecured claim in the amount of $420,000, rather than $457,600. He also awarded interest calculated at 5% per annum from December 4, 2008, which was the date of the final recorded advance from Annopol to SG Waterloo.

(ii) Farber’s Submissions on Appeal

[8] Farber opposes the trial judge’s decision on two grounds. First, it submits that the trial judge erred in awarding Annopol $420,000 instead of $457,600. Farber argues that there is no explanation as to why Annopol’s claim for $457,600 was not allowed given the trial judge’s finding that it had loaned $457,600 to SG Waterloo.

[9] Second, Farber submits that the trial judge erred in ordering interest on the entire sum from December 4, 2008 – the date of Annopol’s last proven advance. It submits that interest should run from the dates of the individual advances. Farber acknowledges that the trial judge’s decision was discretionary, but argues that he had to exercise his discretion with regard to the evidence and proper considerations. On this point, Farber asserts that the trial judge gave no explanation for his selection of December 4, 2008 as the interest commencement date and the only available evidence on the issue of interest did not support his decision.

(iii) Analysis

[10] The record clearly supports Farber’s position that the correct quantum of the unsecured debt is $457,600. Moreover, Goldfinger does not seriously object to the fact that the $420,000 finding was in error.

[11] I would therefore allow this portion of Farber’s appeal, in its capacity as Annopol’s Trustee in bankruptcy, and vary the February 3, 2014 judgment to allow Annopol’s unsecured claim against SG Waterloo at $457,600.

[12] Turning to the ground of appeal relating to the calculation of interest on the unsecured claim, the evidence on interest payable was limited. Unlike the secured claim, there was no documentary evidence governing the calculation of interest with respect to the unsecured claim. That said, Annopol did make multiple advances between 2000 and 2008 to SG Waterloo.

[13] Interest compensates for the use or retention by one person of a sum of money belonging to another which accrues day by day: see Garland v. Consumers’ Gas Co., 1998 CanLII 766 (SCC), [1998] 3 S.C.R. 112, at para. 27. It follows that in the absence of evidence to the contrary, interest should accrue from the date of each individual advance, not from the date of the last advance.

[14] I would therefore also allow Farber’s appeal with respect to interest and vary the February 3, 2014 judgment so that interest is calculated by the parties from the date of each advance by Annopol to SG Waterloo.

B. SG Group’s Claims in SG Waterloo’s Bankruptcy

(i) Background

[15] The second part of Farber’s appeal is made in its capacity as Trustee in bankruptcy of SG Group in the SG Waterloo bankruptcy. Farber appeals the trial judge’s partial disallowance of certain claims advanced by Farber and his interest award.

[16] SG Waterloo owned development property located at 105 University Avenue in Waterloo, Ontario. Farber claimed that SG Group had made payments to a number of third parties on behalf of SG Waterloo and that therefore SG Waterloo was unjustly enriched to SG Group’s detriment.

[17] First, Farber asserted that SG Group had paid $346,029.13 to Joe Somfay Architects on behalf of SG Waterloo and filed a proof of claim including that amount. In support of that portion of its claim, Farber simply filed a summary of invoices, credit notes and payments that had been prepared by Somfay. In his reasons dated October 28, 2013, the trial judge concluded that Farber had filed insufficient particulars of these alleged payments. He accordingly provided Farber with an opportunity to file additional evidence of payment.

[18] In his reasons dated February 3, 2014, having received and reviewed Farber’s additional evidence, the trial judge allowed $236,249 of SG Group’s claim, but disallowed the remaining $109,780.13 due to inadequate evidence.

[19] He also rejected the interpretation, urged upon him by Farber, of an August 7, 2002 letter from Somfay, allegedly reflecting a payment of $108,531. He concluded that the letter did not reflect confirmation of receipt of the amount of $108,531. Rather, it represented an offer of a discount in that amount. In addition, the trial judge reasoned that if Somfay had received payment of $108,531 prior to the August 7, 2002 letter, it was difficult to understand why invoices from 2000 would continue to be outstanding at that time. The trial judge also observed that Farber had been given more time to file additional evidence and that it could have filed an affidavit from Somfay but failed to do so.

[20] Second, Farber asserted that SG Group paid operating expenses of $104,855 for SG Waterloo’s 105 University Avenue property and, as a result, SG Waterloo was unjustly enriched to the detriment of SG Group.

[21] Before the trial judge, Farber successfully established that SG Group had paid some of SG Waterloo’s operating costs. However, while it produced invoices totalling $104,855 rendered for work done at 105 University Avenue, it could not locate any evidence establishing that these amounts had been paid. Farber urged the trial judge to draw an inference that these additional amounts had been paid, but the trial judge declined to do so. He was not satisfied with the sufficiency of the evidence and explained that SG Waterloo went into bankruptcy in part because of its inability to pay all its obligations. In rejecting the claim, he acknowledged that Farber found the Summit Glen companies’ books and records in a state of disarray and noted that Farber was not responsible for the absence of the required evidence. However he rejected Farber’s additional claim of $104,855.

[22] Third, Farber claimed interest on the total amount of $625,368.88, which is the sum that the trial judge ordered in SG Group’s favour.

[23] The trial judge held that, because Farber’s claim on behalf of SG Group sounded in unjust enrichment and was not based on a loan agreement, s. 3 of the Interest Act, R.S.C. 1985, c. I-15, did not apply. He therefore awarded interest on the sum of $625,368.88 in accordance with the prejudgment interest provisions of the Courts of Justice Act, R.S.O. 1990, c. C.43.

[24] He ordered the interest to be payable from June 28, 2010 – the date of SG Waterloo’s bankruptcy. The trial judge reasoned that interest should be calculated from the date of bankruptcy, which was the date upon which the deprivation underpinning the cause of action for unjust enrichment occurred.

(ii) Farber’s Submissions on Appeal

[25] Farber submits that the trial judge erred in law in requiring that it establish with certainty that SG Group paid the sum of $109,780.13 to Somfay and $104,855 to SG Waterloo’s other suppliers. It submits that this was too high a threshold. It argues that the trial judge ignored concessions made by Goldfinger, failed to properly consider the lack of documentary evidence available to Farber, including records outside of Farber’s control, and failed to give proper weight to the evidence. In particular, it submits that the trial judge erred by misinterpreting the August 2002 letter from Somfay and by concluding that invoices from 2000 continued to be outstanding in 2002.

[26] Farber also argues that the trial judge erred in calculating interest on the basis of the Courts of Justice Act, rather than the Interest Act. However, Farber concedes that the trial judge erred in concluding that interest ran from the date of SG Waterloo’s bankruptcy. Indeed, Farber did not seek such interest. Although it initially submitted that interest should be awarded from December 1, 2008 (the date SG Waterloo’s receiver was appointed) to June 28, 2010 (the date of SG Waterloo’s bankruptcy), in oral argument, Farber did not press this point.

(iii) Analysis

[27] I do not accept Farber’s submissions relating to the Somfay and operating cost claims. First, the trial judge did not apply a standard of certainty. Starting at para. 35 of his October 28, 2013 reasons, he reviewed the law applicable to proof of claims.

[28] The trial judge cited South Beach Homes Ltd. (Re), 2010 SKQB 182, 357 Sask.R. 82 – the same decision Farber relies on as establishing the test to admit a claim. At para. 46 of South Beach, the court expressly noted that certainty is not the test. Then, in the trial judge’s February 3, 2014 reasons, he applied the test he had already articulated in his earlier reasons.

[29] The trial judge applied the correct test, but he was not persuaded that it was met either with respect to the sum of $109,780.13 or the sum of $104,855. He expressly considered Goldfinger’s position, the state of the documentary record and, in the case of the Somfay payments, the terms of the August 2002 letter. His findings of fact, which supported his conclusion, are both within the province of a trial judge and, based on the record, reasonable.

[30] I see no error in the trial judge’s denial of these two claims advanced by SG Group. Accordingly, I would also dismiss this part of Farber’s appeal.

[31] As for Farber’s submission that the trial judge erred in concluding that the Interest Act was inapplicable, I see no basis on which to disturb the trial judge’s conclusion. Farber had advanced a claim for unjust enrichment and, in any event, the trial judge rejected its contention that the amount paid by SG Group for SG Waterloo’s benefit constituted a contingent loan. The trial judge’s determination that interest was properly payable under the provisions of the Courts of Justice Act rather than the Interest Act was reasonable. I would dismiss this part of the appeal.

[32] Lastly, I agree with Farber’s concession that interest does not run after the date of bankruptcy. As I have already said, Farber did not press the argument that interest ran from the date of the receivership.

[33] In the circumstances, I would therefore allow the appeal in part so as to allow interest up to December 1, 2008, the date of SG Waterloo’s receivership.

C. Cross-Appeal: 183’s Claim in SG Waterloo’s Bankruptcy

[34] In the companion appeal (C57898), I concluded that the release signed in 2009 was designed to result in finality and to release any future claim Goldfinger, and by extension 183, had against SG Waterloo. Accordingly, I further concluded that 183 had given up any claim to the proceeds from the sale of 105 University Avenue. That includes both the principal claim, dealt with in the companion appeal, as well as the expenses associated with the principal claim, the subject of this cross-appeal.

[35] Accordingly, I would dismiss the cross-appeal.

Disposition

[36] In summary, I would:

(1) allow Farber’s appeal in its capacity as Trustee in bankruptcy of Annopol and amend paragraph 1 of the February 3, 2014 judgment to replace the sum of $420,000 with the sum of $457,600 with interest calculated from the date of each individual advance;

(2) dismiss Farber’s appeal in its capacity as Trustee in bankruptcy of SG Group with respect to the $109,780.13 Somfay expense claim and the $104,855 operating expense claim;

(3) allow Farber’s appeal in its capacity as Trustee in bankruptcy of SG Group and amend paragraph 2 of the February 3, 2014 judgment to replace the words “from June 28, 2010” with the words “to the date of December 1, 2008”; and

(4) dismiss the cross-appeal of 183.

[37] As agreed by the parties, I would order Farber to pay Goldfinger $3,000 in respect of the costs of the appeal, and 183 to pay Farber $5,000 in costs concerning the cross-appeal, both inclusive of disbursements and applicable taxes.

Released:

“MAY 30 2016” “S.E. Pepall J.A.”

“EAC” “I agree E.A. Cronk J.A.”

“I agree P. Lauwers J.A.”