CITATION: Barrs v. Trapeze Capital Corp., 2019 ONSC 67
DIVISIONAL COURT FILE NOS.: 559/17 and 560/17
DATE: 20190103
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
MORAZETZ R.S.J., LEITCH and MEW JJ
BETWEEN:
JASON RANDALL BARRS
Plaintiff (Respondent)
– and –
TRAPEZE CAPITAL CORP., TRAPEZE ASSET MANAGEMENT LTD., RANDALL ABRAMSON and HERBERT ABRAMSON
Defendants (Appellants)
Harold Rosenberg, for the Respondent
Andrea J. Sanche, for the Appellants
AND BETWEEN:
GARY BARRS (Trustee of the Sharon Lewis Trust)
Plaintiff (Respondent)
– and –
TRAPEZE CAPITAL CORP., TRAPEZE ASSET MANAGEMENT LTD., RANDALL ABRAMSON and HERBERT ABRAMSON
Defendants (Appellants)
Harold Rosenberg, for the Respondent
Andrea J. Sanche, for the Appellants
HEARD at Toronto, 17 October 2018
MEW J.
[1] Randall Barrs and Gary Barrs (in his capacity as trustee of the Sharon Lewis trust) each commenced actions against the appellants on 12 December 2012 and 14 December 2012 respectively. The appellants are involved in the portfolio management business. The actions allege that the appellants breached various duties owed by them to the respondents in their management of the respondents’ investment portfolios, resulting in significant financial loss.
[2] The appellants assert that the actions are statute barred under the Limitations Act, 2002 and, in the case of the Randall Barrs action only, that it is also precluded as a result of a release executed by Mr. Barrs on 28 April 2010.
[3] The appellants unsuccessfully sought summary judgment dismissing the actions on the basis of these defences. They now appeal that decision, with leave, to this court.
[4] Before this court, the appellants argue that there is no triable issue on their Limitation Act and release defences and that the motion judge erred in finding to the contrary. Specifically, they say that the motion judge failed to correctly interpret the release and failed to correctly apply the Limitations Act, 2002 to the facts as he found them.
[5] The parties agree that a motion judge’s decision to grant or to not grant summary judgment is a finding of mixed fact and law, reviewable for palpable and overriding error. The parties also agree that, to the extent that the motion judge erred in his application of the statute, which is a question of law, a correctness standard of review would apply. However, the parties disagree on the standard of review applicable to the motion judge’s interpretation of the release.
[6] The parties also accept that although the motion judge, in declining to grant summary judgment, undertook a legal analysis of the limitation period and release defences in relation to the record before him, it was not clear from his reasons for decision that the motion judge intended his determination to be binding on the parties at trial and hence, they agree that the decision appealed from is interlocutory rather than final in its effect: Skunk v. Ketash, 2016 ONCA 841, at para. 58.
Background Facts
[7] The factual background is comprehensively set out in paragraphs 12 – 27 of the reasons for decision of the motion judge.
[8] A brief summary will suffice for present purposes.
[9] Randall Barrs is a Toronto criminal lawyer. He is also the directing mind of the Sharon Lewis Trust. To all intents and purposes, therefore, he is the party advancing both actions. The appellants provide portfolio management, investment and financial consultant services. Since October 1999, and at all times material to these appeals, the appellants have provided portfolio management and investment services to Mr. Barrs.
[10] On multiple occasions during the course of the relationship between the parties, Mr. Barrs complained about the performance of his portfolios. Those concerns included the allocation in his portfolio between medium and high risk investments, the quality of investments, the overall performance of his accounts, and what he saw as the appellants’ failure to comply with his instructions and degree of risk tolerance.
[11] Notwithstanding his complaints, over the years Mr. Barrs introduced a number of individuals to the appellants who subsequently became the appellants’ clients. One such individual was Mr. Barrs’ then partner, Melissa Carway.
[12] In February 2010, an action was commenced by Ms. Carway alleging failure on the part of the appellants to manage Ms. Carway’s investment portfolio within the scope of her directives to the appellants, resulting in substantial losses. That action was settled in April 2010. One of the terms of the settlement was that, in addition to Ms. Carway, who was the sole plaintiff, Mr. Barrs would also execute a release in favour of the appellants
[13] The release purported to include “all manner of action, causes of actions, claims or demands against the Releasee, the Releasors had or now have”.
[14] The relationship between Mr. Barrs and the appellants continued, notwithstanding the bringing and subsequent settlement of the Carway action.
[15] Mr. Barrs’ complaints also continued. There were some robust exchanges. For example, in a letter written to Mr. Barrs on 18 March 2010, Herb Abramson described six letters written by Mr. Barrs to him over a 16 day period as having comprised “a continuing vitriolic barrage full of missed truths and slanderous accusations”. According to Mr. Barrs, however, he repeatedly accepted assurances from the appellants in response to his many complaints that the investments made by the appellants on his behalf met his level of risk tolerance.
[16] Unbeknown to Mr. Barrs, since July 2009 the conduct of the appellants had been under investigation by the Investment Industry Regulatory Organization of Canada (“IIROC”). That process resulted in the appellants admitting they had contravened a number of applicable rules, guidelines, by-laws, regulations and policies: Re Trapeze Capital, 2012 IIROC 25.
[17] Among the circumstances admitted by the appellants, as described in the reasons for decision approving a settlement agreement, was the inaccurate assessment by the appellants of risk associated with many of the investments purchased on behalf of clients in managed accounts. Higher risk securities had been assigned to client portfolios with medium risk ratings. The appellants also paid sizable fines and costs to the IIROC and the Ontario Securities Commission.
[18] In accordance with the settlement agreement, the appellants wrote to their clients, including Mr. Barrs, informing them of the settlement.
[19] Within weeks the respondents’ accounts with the appellants were liquidated and closed.
[20] Mr. Barrs states that until he learned of the settlement made by the appellants with IIROC he was unaware he might have a claim against the appellants. It was not, he asserts, until then that he discovered that most of his investments were high-risk, not medium risk, and that his portfolio was not suitable for his agreed-upon risk tolerance.
The Motion Judge’s Decision
(a) The Release
[21] The motion judge observed that there was limited evidence as to how Mr. Barrs, who was not a party to the Carway action, had become part of the release. To the extent that there was such evidence, the motion judge accepted that it had not been established that there was any claim against the appellants within Mr. Barr’s contemplation at the time that he signed the release. Nor was there evidence that the appellants had a claim by Mr. Barrs within their contemplation at the time of the release.
[22] Accordingly, the record did not support a finding that the claim subsequently advanced by Mr. Barrs’ action was barred by the release.
(b) Limitation Defence
[23] The motion judge rejected the position implicitly put forward by the appellants that Mr. Barrs should not have accepted their assurances but rather should have disbelieved them and started a lawsuit. Nor was it reasonable to suggest that Mr. Barrs or the trustees should have known about the OSC or IIROC investigations until the appellants notified their clients about them.
[24] The limitation period did not start to run until the respondents knew that, having regard to the nature of their losses, a proceeding would be an appropriate means to seek to remedy it or when, given their circumstances and abilities, they ought reasonably to have known this: Limitations Act, 2002, S.O. 2002, c.24. Sch. B; Presidential MSH Corporation v. Marr Foster & Co. LLP, 2017 ONCA 325, 135 O.R. (3d) 321, at paras. 17-18.
[25] The evidence did not support a finding that the respondents knew, or should have known, of the existence of their claims until they became aware of the investigations involving the appellants.
The Appellants’ Position
[26] On the release issue, the appellants challenge the motion judge’s conclusion that there was limited evidence as to how Mr. Barrs became part of the release that settled the Carway claim. Rather, they say, Mr. Abramson testified that the appellants believed that Mr. Barrs was thinking about litigation and that Mr. Barrs had knowledge of a potential claim against them. They point to a decade-long trail of correspondence from Mr. Barrs to the appellants right up until the time of the release in which he asserted claims against them. They also reference correspondence between counsel at the time which, they say, clearly supports the conclusion that Mr. Barrs knew exactly what he was releasing and why.
[27] The appellants also argue that as a lawyer, Mr. Barrs would have had the necessary acumen to understand the terms and impact of the release. They assert that the motion judge ignored or misapplied this and other important evidence, leading him to come to conclusions of fact and law that were not correct.
[28] In respect of the limitation defence, the appellants point again to the legal expertise of Mr. Barrs and of Eddy Battiston, a lawyer who, until 12 November 2012, was a trustee of the Sharon Lewis Trust. They reason that it would have been enough, to start the clock ticking, for the respondents to be aware of prima facie grounds to infer that the appellants had caused them harm, which they did by no later than April 2010. A reasonable person in the respondents’ position would have had that awareness.
[29] Nor was this a case where the appellants were attempting to ameliorate the respondents’ concerns, thus rendering the commencement of proceedings inappropriate while those efforts continued.
[30] Further, the motions judge failed to explain how Ms. Carway had managed to conquer the discoverability burden, yet the respondents had not.
The Respondents’ Position
[31] The ascertainment of the objective intentions of the parties in entering into the release is an inherently fact specific exercise, attracting a deferential standard of review.
[32] The motion judge’s conclusion that the respondents’ claims did not arise until they became aware of the OSC and IIROC notices was supported by the record.
[33] In the absence of an overriding or palpable error on his part, the motion judge’s application of the summary judgement rule to determine whether there was a genuine issue for trial – a question of mixed fact and law – attracts deference: Mega International Commercial Bank (Canada) v Yung, 2018 ONCA 429, paras. 84-85
Analysis
[34] As the motion judge noted, while the court is entitled to assume that the parties have advanced their best case and that the record contains all of the evidence the parties would present at trial, in certain cases adjudication exclusively on a written record poses a risk of substantive unfairness.
[35] In Nasr Hospitality Services Inc. v Intact Insurance, 2018 ONCA 725, at para. 39, the Court of Appeal reiterated that granting summary judgment dismissing an action as statute-barred, or declaring when a claim was discovered, requires making specific findings of fact. If the record does not enable a motions judge to make such findings with the certainty required by Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, a genuine issue for trial may exist.
[36] And in Skunk, at para. 60, the Court of Appeal stated that in the absence of an express indication by the motion judge that his or her determination is to be binding on the parties at trial, it should be presumed that in expressing a conclusion on a point of law when dismissing a summary judgment motion she is simply explaining why she concluded that there is a genuine issue requiring a trial, and did not intend her determination to be binding on the parties.
[37] Our reading of the reasons of the motions judge leaves us uncertain about whether he intended to make final and binding findings of fact and conclusions on the legal consequences of those facts. The parties evidently see things the same way, having pursued an appeal route applicable to interlocutory rather than final orders.
[38] Given the absence of an express determination of this issue, we are of the view that the motion judge did not intend his conclusions to be binding on the parties.
[39] The decision of the motions judge to refuse summary judgment is grounded on:
a. His conclusion that the actions should not be summarily dismissed as statute-barred because the respondents’s reliance on the appellants’ assurances that their losses were merely reflective of the market and were not the result of their actions was reasonable and, thus, legal action was inappropriate until the respondents became aware of the IIROC and OSC settlements; and
b. His determination that there was a lack of evidence that, at the time Mr. Barrs signed what was a non-standard release in favour of the appellants, any of the parties contemplated a claim being brought by Mr. Barrs against the appellants.
[40] In determining when it would have been appropriate for the respondents to bring a legal proceeding against the appellants, the motions judge was required to take into account what a reasonable person with the abilities and circumstances of the respondents ought to have known. The motions judge was clearly alert to this, as demonstrated by his discussion of the evidence and his conclusion that it was reasonable for the respondents to rely upon the appellants' assurances and that there was no basis for them not to do so, despite the fact that Mr. Barrs and Mr. Battiston are lawyers.
[41] The motions judge correctly stated the legal test. Determination of whether a person has discovered a claim is a fact-based analysis: Masales v. Cole, 2016 ONSC 763 at para. 73.
[42] We apprehend no error in principle in the application of the legal test by the motions judge to the evidentiary record before him.
[43] As to the release, in Atos IT Solutions v. Sapient Canada Inc., 2018 ONCA 374, at paras. 80-82 the court reiterated the caution against applying a correctness standard of review to interpretation of a non-standard form contract: reviewing courts should be slow to identify extricable questions of law in interpretation disputes given that the goal of ascertaining the objective intentions of the parties is inherently fact specific.
[44] The conclusion of the motion judge that there was no evidence of claims within the contemplation of parties is entitled to deference. We see no overriding or palpable error on his part.
Disposition
[45] The appeals should be dismissed.
[46] The parties agreed that the costs of the successful party on the appeal, i.e. the respondents, should be fixed at $7,500 all inclusive.
[47] In the absence of any directions or terms for the ongoing conduct of these actions having been given by the motion judge pursuant to Rule 20.05, we direct the parties to forthwith schedule and attend a case conference in Civil Practice Court in Toronto.
Mew J.
I agree
Morawetz R.S.J.
I agree
Leitch J.
Released: January 3, 2019
Correction made: 16 January 2019
Counsel details on title page corrected.
Barrs v. Trapeze Capital Corp., 2019 ONSC 67
DIVISIONAL COURT FILE NOS.: 559/17 and 560/17
DATE: 20190103
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
MORAZETZ R.S.J., LEITCH and MEW JJ
BETWEEN:
BETWEEN:
JASON RANDALL BARRS
Plaintiff (Respondent)
– and –
TRAPEZE CAPITAL CORP., TRAPEZE ASSET MANAGEMENT LTD., RANDALL ABRAMSON and HERBERT ABRAMSON
Defendants (Appellants)
REASONS FOR JUDGMENT
Released: January 3, 2019