CITATION: Rubner. v Waddington McLean & Co. Limited, 2020 ONSC 692
DIVISIONAL COURT FILE NO.: 345/19
DATE: 20200131
ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT
B E T W E E N:
NATHANIEL RUBNER
Cross-Appellant (Plaintiff)
Nathaniel Rubner, in person
- and -
WADDINGTON McLEAN & CO. LIMITED cob as WADDINGTON’S cob as WADDINGTON’S AUCTIONEERS & APPRAISERS
Respondent by Cross-Appeal (Defendant)
D.M. Goodman, for the Respondent
Heard at Toronto: January 30, 2020
REASONS FOR DECISION
F.L. Myers J.:
The Appeal
[1] Mr. Rubner succeeded at trial in the Small Claims Court and obtained a monetary award in the amount of $10,710. In her decision, the trial judge made no mention of prejudgment interest although Mr. Rubner sought it in both his claim and in his closing written submissions.
[2] The defendant initially appealed the trial decision but subsequently abandoned the appeal. Mr. Rubner cross-appeals and asks for prejudgment interest in the amount of $6,000 to be added to his judgment. The quantum is not in dispute.
[3] For the reasons that follow, I agree with Mr. Rubner and vary the judgment below to add prejudgment interest in the amount of $6,000 as requested.
The Facts
[4] As Waddington’s has abandoned its appeal, the facts as found by the trial judge are incontestable. I recite key holdings for context.
[5] Waddington’s carries on business in Toronto as a high-end auction house among other things. On November 6, 2006, Mr. Rubner purchased a statue at an auction held by Waddington’s.
[6] Both in its catalogue and then again expressly after the auction, Waddington’s assured Mr. Rubner that the statue was an original work of art by renown Inuit artist Andy Miki. Mr. Rubner paid $10,710 for the original work including buyer’s premium and import duty required for him to take the statue home to England.
[7] Before he picked up the statue, Mr. Rubner heard that prior to the auction someone had alerted Waddington’s to concerns about the authenticity of the statue. Waddington’s assured Mr. Rubner that the work was authentic and it impugned the motives of those who might say otherwise. Mr. Rubner accepted Waddington’s expertise and its assurances that the statue was a “superb” and authentic work of Andy Miki.
[8] The judge found expressly that when Mr. Rubner took possession of the statue, he had no lingering doubts as to its authenticity.
[9] In 2018, Mr. Rubner sought an appraisal of the value of the Miki statue. The appraiser doubted that the statue was an authentic Miki. A leading auctioneer in London, England refused to accept the statue for sale based on those same doubts. Mr. Rubner declined to offer the statue for sale otherwise as he could not do so in good conscience as a serious art collector.
[10] Mr. Rubner also discovered in early 2018, that prior to his purchase a credible art expert had warned Waddington that he had doubts about the authenticity of the statue. The concerns had not been raised by some malicious or self-interested individual as Waddington’s had told Mr. Rubner at the time of the purchase.
[11] Waddington’s presented no evidence at the trial to try to establish the authenticity of the statue or to establish support for a reasonable belief in its authenticity.
[12] The trial judge found that Waddington’s representations to Mr. Rubner had been “negligent, misleading and made in bad faith and intended to be relied on by Mr. Rubner.” She found Waddington’s liable for breach of the contractual obligation of honest performance as discussed by the Supreme Court of Canada in Bhasin v Hrynew, 2014 SCC 71. The judge also held that Waddington’s knowingly misled Mr. Rubner both by omission and commission.
[13] She therefore held Waddington’s liable for both breach of contract and the tort of deceit or fraudulent misrepresentation.
[14] Mr. Rubner asked for a refund of the cost of the statue and offered to give the statue back to Waddington’s so that he would not have to sell it. The judge agreed and ordered that upon Waddington’s repaying him $10,710, Mr. Rubner was required to return the statue. The judge’s reasons provide little analysis of the assessment of damages and simply held that she found this to be the “appropriate” measure of Mr. Rubner’s damages.
[15] The judge did not mention prejudgment interest and did not include any prejudgment interest in the damages that she awarded.
[16] Some time after the judgment was released, the parties made the exchange as ordered. Waddington’s paid post-judgment interest that accrued on the judgment amount until the date of payment.
Analysis
[17] Mr. Rubner seeks compensation for the 13 years during which he was unjustly deprived of the use of his funds. He argues that the judge erred by failing to deal with his claim for prejudgment interest and asks this court to vary the order to grant him the amount of prejudgment interest calculated under s.128 of the Courts of Justice Act, RSO 1990, c C.43:
Prejudgment interest
128 (1) A person who is entitled to an order for the payment of money is entitled to claim and have included in the order an award of interest thereon at the prejudgment interest rate, calculated from the date the cause of action arose to the date of the order.
[18] Waddington’s argues that the judge did not award Mr. Rubner normal contract damages. Rather, her judgment rescinded the contract of sale and returned the parties to their 2006 status. However, Mr. Rubner had use of the statue for the period from 2006 until he retuned it in 2019. Therefore, the judge should be taken to have denied prejudgment interest as a quid pro quo or setoff.
[19] In Somers v. Fournier, 2002 45001 (ON CA), the Court of Appeal set out the basic principles applicable to prejudgment interest. At para. 23 of the decision, the Court explained:
Modern theories of pre-judgment interest relate it to compensatory, rather than punitive, goals. Awards of pre-judgment interest are designed to recognize the impact of inflation and to provide relief to a successful litigant against the declining value of money between the date of entitlement to damages and the time when damages are awarded. (See M.A. Waldron, The Law of Interest in Canada (Scarborough: Carswell, 1992) at p. 127.) In Pagliarella v. DiBiase Brothers Inc. (1989), 1989 4092 (ON CA), 68 O.R. (2d) 597, 58 D.L.R. (4th) 691 (C.A.), leave to appeal to S.C.C. refused S.C.C. File No. 21500, S.C.C. Bulletin 1989, p. 2316, Finlayson J.A. commented (at p. 607 O.R.):
It must be remembered that interest is merely the value of money and when we are speaking of prejudgment interest we are talking about compensation [page235] for the victim with respect to the delay necessitated by the time interval from the date on which the right to a money award arises and the date on which it is awarded. It is, in the words of Chouinard J. in Travelers Ins. Co. of Canada v. Corriveau, 1982 222 (SCC), [1982] 2 S.C.R. 866 at p. 875, [1983] I.L.R. [para.] 1-1601 sub nom. La Compagnie d'Assurance Travelers du Canada v. Corriveau (S.C.C.), merely "damages due to delay".
[20] Section 128 provides for prejudgment interested to commence running when the cause of action accrued. Mr. Rubner’s cause of action for misrepresentation was complete upon the purchase of the statue in 2006. In Hamilton (City) v. Metcalfe & Mansfield Capital Corporation, 2012 ONCA 156, the Court of Appeal explained:
[32] As I will explain, for the purpose of negligent misrepresentation claims, damage is the condition of being worse off than if the defendant had not made the misrepresentation. In cases where a plaintiff is induced to enter into a transaction in reliance on a misrepresentation and fails to get what he was entitled to (the context relevant to the City’s case), the plaintiff suffers damage sufficient to complete the cause of action when he enters into the transaction, not when the loss is monetized into a specific amount.
[21] Although the limitation period did not commence until Mr. Rubner learned that he had been misled in 2018, his loss occurred when he received a worthless fake statue in 2006 and was deprived of his funds. Accordingly, under s.128, Mr. Rubner is entitled to prejudgment interest as compensation for the lost use of his money from the time the cause arose in 2006 until the date of the judgment below.
[22] Somer recognizes that under the Courts of Justice Act, the trial judge has a discretion to deny prejudgment interest in appropriate cases. In para. 30 of the decision, the Court ruled that the discretionary decision is quite constrained:
The entitlement to claim pre-judgment interest is established in Ontario not by the Rules of Civil Procedure, as suggested by the motions judge, but by the Act. Section 128(1) of the statute confers a substantive right to claim pre-judgment interest on a person who is entitled to an order for the payment of money. That right may be displaced, varied or reduced, in the discretion of the court, where the conduct of the claimant has adversely affected the speedy progress of the litigation. The discretion of the court concerning pre-judgment interest relates to the denial or reduction, as distinct from the granting, of a right. Accordingly, [page237] in my view, the character of the court's discretion in connection with pre-judgment interest is qualitatively different from the nature of the wide discretion afforded the court under s. 131(1) of the Act to grant, or deny, costs. The legislature, through the Act, has established a specific policy with respect to pre-judgment interest. That policy does not include an unfettered discretion for Ontario courts on whether to award pre-judgment interest.
[23] I take three points from this decision. First the statute provides a successful plaintiff with a presumptive right to prejudgment interest. Second, the trial judge’s discretion is not the decision to grant interest, but, rather, a decision to limit or deny the plaintiff’s substantive entitlement to prejudgment interest. And third, the trial judge’s discretion is not unlimited or at large, but is guided by the statutory policy.
[24] Section 130 of the Courts of Justice Act provides the factors to be considered by the court in exercising its discretion as to interest:
Discretion of court
130 (1) The court may, where it considers it just to do so, in respect of the whole or any part of the amount on which interest is payable under section 128 or 129,
(a) disallow interest under either section;
(b) allow interest at a rate higher or lower than that provided in either section;
(c) allow interest for a period other than that provided in either section.
Same
(2) For the purpose of subsection (1), the court shall take into account,
(a) changes in market interest rates;
(b) the circumstances of the case;
(c) the fact that an advance payment was made;
(d) the circumstances of medical disclosure by the plaintiff;
(e) the amount claimed and the amount recovered in the proceeding;
(f) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding; and
(g) any other relevant consideration.
[25] I cannot accept Waddington’s submission that I ought to or can take the judge’s silence on the issue of prejudgment interest as a positive decision to exercise the discretion to deprive Mr. Rubner of his right to prejudgment interest. To deny interest the trial judge was required to exercise her discretion based on factors that are specifically delineated. If she were making such a decision, the trial judge would be required to say so and to say how or why she had reached that decision. If silence is deemed to be an exercise of the trial judge’s discretion, then her silent reasons would be inadequate to allow meaningful appellate review. That, in itself, would be grounds to overrule the decision.
[26] Accordingly, the failure to award interest was either an oversight or a reversible error. In either case, s.134(1)(a) and (6) of the Courts of Justice Act authorize and direct me to make the decision that the trial judge ought to have made.
[27] I do not accept that rescission or restitution damages do not benefit from prejudgment interest under the express wording of s.128 of the Courts of Justice Act as submitted on behalf of Waddington’s. No case law was submitted to support that proposition. There is a list of exclusions contained in s.128(4) of the statute and rescission or restitution are not among them.
[28] I see no indication that Waddington’s pleaded an entitlement to compensation or to receive some form of occupation payment for the statue. There is no setoff claimed as far as I am aware. Moreover, Waddington’s offered no evidence of the value of the use of a fake statue to set up as a limit on the ability of the trial judge to return the parties to the status quo ante (the position that they were in immediately before Waddington’s committed its wrongdoing). Accordingly, while in an appropriate case it may be that there are competing accounts to consider, this is not such a case.
[29] Waddington’s asks me to consider exercising my discretion under s.130(1) of the Courts of Justice Act to limit the prejudgment interest otherwise payable under s. 128. The interest rate that applies to 2006 causes of action is 4.5%. The applicable prejudgment interest rates have fallen since that time to a low of 0.8% in 2013 and 1.3% in the first quarter of 2018 when Mr. Rubner discovered his cause of action.
[30] A change in the market interest rates is a criterion for consideration in altering the prejudgment interest rate under s. 130(2) of the Courts of Justice Act. However, so too are the general circumstances of the case. I agree with Mr. Rubner that the circumstances of this case, as found below, include that Waddington’s victimized him by serious and intentional misconduct. He is entitled to compensation to make him as whole as the law allows.
[31] Prejudgment interest rates are not generally full compensation for the cost of delayed payment. Prejudgment interest rates are simple interest rates rather than compound interest rates as used in the world of commerce. Moreover, they are set in relation to the cost paid by banks to borrow funds from the Bank of Canada. I can take judicial notice of the fact that by definition, the rates charged by banks to consumers are greater than the cost they pay to obtain funds. The cost to obtain replacement funds or the opportunity cost of using one’s own funds is certainly greater that the prescribed prejudgment interest rate.
[32] Mr. Rubner argued that in asking the court to exercise discretion in its favour, Waddington’s does not come to the court with “clean hands.” I would say instead that it has failed to abide by the aphorism that “[t]hose who seek equity must do equity.” Mr. Rubner was denied the use of his funds for a long period of time due to Waddington’s intentional misconduct. As this case arises from the Small Claims Court, I am also guided by that Court’s statutory mandate set out in s. 25 of the Courts of Justice Act to “make such order as is considered just and agreeable to good conscience.” I do not find that reducing the prejudgment interest rate in the circumstances of this case provides appropriate compensation. Nor would an exercise of discretion in favour of Waddington’s to save it a very modest amount of money be just or agreeable to the court’s conscience.
[33] Accordingly, the appeal is allowed and the judgment below is varied to include an order requiring Waddington’s to pay the plaintiff prejudgment interest in the amount of $6,000.
[34] Mr. Rubner seeks indemnity for his costs including disbursements of $1,348 in prosecuting this appeal, travel to get here from London, England, and compensation for his time spent working on the appeal. The basic disbursements are not disputed.
[35] In my view, Mr. Rubner is entitled to his reasonable travel disbursements under the applicable tariff. Mr. Rubner’s claim of $1,538 for travel and minimal per diems is therefore allowed. Moreover, Mr. Rubner’s factum and oral submissions were indistinguishable from the quality expected of counsel. I found Mr. Rubner’s written and oral submissions very helpful. I recognize that he is not entitled to compensation for time spent as a client. But he is entitled to compensation for time that would otherwise have been spent by a lawyer. Using a rate of $100 per hour (See: McMurter v McMurter, 2017 ONSC 725, and the cases cited in that case at para. 20) I fix costs to Mr. Rubner for his time at $2,500.
[36] In all, I order Waddington’s to pay costs of the cross-appeal to Mr. Rubner forthwith of $5,386 all-inclusive.
F.L. Myers J.
Release Date: January 31, 2020
CITATION: Rubner. v Waddington McLean & Co. Limited, 2020 ONSC 692
DIVISIONAL COURT FILE NO.: 345/19
DATE: 20200131
ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT
BETWEEN:
NATHANIEL RUBNER
Cross-Appellant (Plaintiff)
- and -
WADDINGTON McLEAN & CO. LIMITED cob as WADDINGTON’S cob as WADDINGTON’S AUCTIONEERS & APPRAISERS
Respondent by Cross-Appeal (Defendant)
REASONS FOR DECISION
F.L. Myers J.
Released: January 31, 2020