COURT OF APPEAL FOR ONTARIO

CITATION: Norton McMullen Consulting Inc. v. Boreham, 2016 ONCA 778 DATE: 20161024

DOCKET: C61089

Hoy A.C.J.O., Benotto and Huscroft JJ.A.

BETWEEN

Norton McMullen Consulting Inc., and Paul Simpson

Plaintiffs (Respondents)

and

Paul Boreham, 401 Energy Ltd., MFOP Wind Power Ltd. and Last Chance Wind Power Corp.

Defendants (Appellants)

and

Attorney General of Ontario

Intervener

AND BETWEEN

Paul Boreham, 401 Energy Ltd., MFOP Wind Power Ltd. and Gateway Wind Farms Development Inc.

Plaintiffs (Appellants)

and

Norton McMullen & Co. LLP, Paul Simpson and Rob Gilroy

Defendants (Respondents)

H. Scott Fairley and N. Joan Kasozi, for the appellants, Paul Boreham, 401 Energy Ltd., MFOP Wind Power Ltd.

Lisa C. Munro, for the respondents, Norton McMuller Consulting Inc., Paul Simpson and Rob Gilroy

Karen Phung and Michael Shell for the respondents, Norton McMuller Consulting Inc. and Paul Simpson

Heard: October 7, 2016

On appeal from the judgment of Justice Edward M. Morgan of the Superior Court of Justice, dated October 16, 2015.

ENDORSEMENT

[1] This appeal was dismissed, with reasons to follow. These are those reasons.

[2] The appellants were involved in two separate actions. They were plaintiffs in one and defendants in the other. They sought to consolidate the two actions. However, the respondents successfully moved for summary judgment against the appellants in the action they were defending. The motions judge then declined to consolidate the actions since there was only one action left. The appellants seek to have the two actions remitted to trial and consolidated.

[3] The respondent Norton McCullen Consulting Inc (NMC) sued the appellant Paul Boreham and his associated companies (collectively, “Boreham”) for amounts owing under two agreements between the parties: a Consulting Agreement and a Letter of Credit Agreement. In a separate action, Boreham sued Norton McMullen & Co. LLP (“NMA”), an accounting firm of which NMC is an offshoot, for negligence and breach of fiduciary duty.

[4] The events that gave rise to these actions concerned a business venture (the “Project”) in which Boreham sought to exploit the Ontario provincial government’s Feed-in Tariff (“FIT”) program for wind power, more specifically a “bonus” component of the FIT program called the “Community Price Adder”. The Project involved several companies, the corporate and shareholding structures of which he designed to comply with what he believed to be the requirements for access to the Community Price Adder. At the time of his corporate planning, Boreham believed that the only requirement was to have majority shareholding by local investors. Therefore, he incorporated ten “project companies”, selling 51% of the shares of each to local investors and retaining the remaining 49% of the shares, as well as the revenue from the share sales, in his controlled holding company, 401 Energy Ltd. (“401”). However, he later learned that the Community Price Adder required not only that the local investors own the majority of the shares, but also that they have 50% of the “real economic interest”. The Project did not qualify because the local investors’ real economic interest was limited to the aggregate of $4.3 million they paid for their shares and the total development cost for the Project was $200-250 million.

[5] In 2009, while still operating under a mistaken understanding of the Project’s regulatory architecture, Boreham retained Paul Simpson, a partner at NMA, with a mandate to obtain investors for the Project. Boreham had previously retained NMA for tax accounting services. In March 2010 the Consulting Agreement in issue was signed. It provided that Simpson, through NMC would seek to find potential investors. A scale of fees was included that depended upon the selling price secured.

[6] Boreham then required $500,000 to post as performance security for his FIT contract with the provincial government. Simpson agreed to post a letter of credit personally and the Letter of Credit Agreement at issue was signed.

[7] Boreham received legal advice with respect to both the Consulting Agreement and the Letter of Credit Agreement.

[8] Eventually, with Boreham’s involvement, Simpson and Boreham’s lawyer negotiated a sale of the equity in the Project.

[9] NMC and Simpson sued Boreham for amounts owing on the Letter of Credit and the Consulting Agreement and moved for summary judgment. Boreham argued that the agreements were unenforceable. The motion judge disagreed, granted summary judgment and dismissed the motion to consolidate. Boreham’s action against MN and Simpson remains outstanding.

[10] The appellants submit that the motion judge erred in granting summary judgment because:

(1) This was not an appropriate case for summary judgment;

(2) The Consulting Agreement and the Letter of Credit Agreement are unenforceable because they are in substance loan agreements and impose interest contrary to s. 347 of the Criminal Code and were procured in violation of the fiduciary duty that Simpson owed to Boreham and other equitable principles;; and

(3) Boreham was not personally liable to NMC.

[11] We do not accept these submissions.

[12] We agree with the motions judge when he described the action as “a document-driven case.” The parties communicated with each other by email; they documented all of their agreements through lawyers; and there were no real credibility issues. The transactions between the parties involved “the enforcement of carefully negotiated, thoroughly lawyered, and unambiguously drafted contracts” (Reasons, at para. 77). This was precisely the type of case that should be determined by way of summary judgment.

[13] The motions judge found that the Letter of Credit Agreement was an investment agreement and not a loan agreement and that no circumstances giving rise to a fiduciary duty existed. He also found that Boreham was a party to both agreements in a personal capacity. There is no basis to interfere with these findings.

[14] The appellants did not plead or argue below that the Consulting Agreement was in substance a loan agreement and that the effect of the success fee that it provided for was to impose interest contrary to s. 347 of the Criminal Code. This is a sufficient basis to reject this argument on appeal. In any event, the Consulting Agreement is, as it is entitled, an agreement for the provision of services and is not, in substance, a loan agreement. The fact that, in face of Boreham’s cash-flow problems, Simpson agreed to defer hourly fees and accept a success fee did not convert the Consulting Agreement into a loan agreement.

[15] The appellants also argue that: through the arrangement created by the Consulting Agreement, Simpson became Boreham’s agent; as a result, Simpson owed Boreham a fiduciary duty or other equitable principles were triggered; and Simpson breached that duty or those equitable principles when he negotiated the Letter of Credit Agreement, which, Boreham argues, is overly favourable to Simpson. The appellants did not plead that Simpson acted as Boreham’s agent, and it is not clear that this was argued below. But the argument in any event fails in face of the motion judge’s finding as to the nature of Simpson and Boreham’s working relationship. He wrote, at para. 38, that “ the documentation shows Boreham to have been involved in instructing Simpson and approving or rejecting various proposals at every step.” As the motion judge concluded, there was no basis to impose a fiduciary duty on Simpson.

[16] The appeal is dismissed with costs payable to NMC and Simpson fixed at $25,000; and to NMA with costs fixed at $8,000. All costs are inclusive of disbursements and HST.

“Alexandra Hoy A.C.J.O”

“M.L. Benotto J.A.”

“Grant Huscroft J.A.”