CITATION: Jundi v. Ouaida, 2015 ONSC 2529
COURT FILE NO.: CV-08-357827
DATE: 20150427
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: SAMI OSMAN EL JUNDI, Plaintiff
AND:
BASSAM OUAIDA, ANDREW G. LOUCKS, JAMES CORBETT, DUNNVILLE FOREST PRODUCTS INC. and 447248 ONTARIO LIMITED, Defendants
AND BETWEEN:
BASSAM OUAIDA and 447248 ONTARIO LIMITED, Plaintiffs by Counterclaim
AND:
SAMI OSMAN EL JUNDI and LINA MUSKAWI, Defendants by Counterclaim
BEFORE: D.L. Corbett J.
COUNSEL: Sami Osman El Jundi, self-represented
Bassam Ouaida, self-represented and for 447248 Ontario Limited
Brian Duxbury, for Andrew Loucks
Hans P. Engell, for James Corbett
Lina Muskawi, self-represented
No one appearing for Dunnville Forest Products Ltd.
AMENDED JUDGMENT[^1]
[1] Sami Osman El Jundi (“Jundi”) sues his business partner Bassam Ouaida (“Ouaida”) and Ouaida’s holding company 447248 Ontario Limited (“447”) for claims arising out of their agreement to build and operate a wood-drying kiln. Jundi also sues a lawyer (Andrew Loucks) and a real estate agent (James Corbett[^2]). The defendant Dunnville Forest Products Inc. (“DFP”) is a deadlocked company owned by Jundi and Ouaida and was not separately represented in this proceeding.
[2] There are four sets of claims to be decided:
a. the claims between Jundi and Ouaida (including Ouaida’s counterclaim against Jundi and Jundi’s wife, Lina Muskawi);
b. Jundi’s claims against Loucks;
c. Jundi’s claims against Corbett; and
d. what to do with DFP, the deadlocked corporation.
a. Claims Between Jundi and Ouaida
(i) Liability Issues
[3] Jundi and Ouaida agreed to build and operate the kiln on a 50/50 basis. Each would contribute half the money; each would derive half the benefit. Material decisions would be made jointly.
[4] Jundi has four general complaints against Ouaida:
(1) Ouaida induced Jundi to enter into the agreement by false statements;
(2) Ouaida misrepresented the value of his capital contribution to the business, the land on which the kiln was built;
(3) Ouaida had a duty to account for money Jundi advanced for construction costs and failed to perform this duty; and
(4) Ouaida wrongly transferred the kiln to his own benefit when he and Jundi fell into serious conflict over the business, effectively converting all of the assets of the business to Ouaida’s own benefit.
[5] Ouaida has two general complaints about Jundi:
(1) Jundi had a duty to pay for construction costs and he failed to pay these costs on time and as they were incurred; and
(2) Jundi and Jundi’s wife, Muskawi, agreed with Ouaida to resolve the parties’ differences, and Jundi and Muskawi breached that agreement.
[6] For the reasons that follow, I accept Jundi’s complaints about Ouaida and reject Ouaida’s complaints about Jundi and Muskawi. Ouaida followed a pattern of deception that induced Jundi to enter into the agreement in the first place and then to continue advancing money to the business. But for these false representations, Jundi never would have entered into the agreement. Then Ouaida repudiated the agreement by failing to provide objective evidence of the value of his capital contribution to the project, by failing to account for construction costs, and then by unilaterally converting DFP’s assets to his own benefit.
[7] The liability issues between Jundi and Ouaida turn on findings of fact and credibility. As shall be evident, I largely accept the evidence of Jundi and reject Ouaida’s evidence where it is not corroborated by other evidence.
(ii) Remedies
[8] Jundi seeks a remedy on the basis of contract principles to put him in the position he would have been in had the contract had been performed in accordance with its terms and in the absence of misrepresentations and, in addition, an order transferring the business to himself. On this theory, Jundi argues that he is entitled to an accounting of construction costs (including a proper valuation of the land contributed by Ouaida), completion of any outstanding construction work (including rectification of any deficiencies), and payment of the profit he should have earned from the business since 2007.
[9] I conclude that Jundi is entitled to a restitutionary remedy, to put him in the position that he would have been in if the misrepresentations had not been made. As Jundi was clear in his evidence, but for Ouaida’s misrepresentations, he would not have entered into the agreement in the first place. Thus I conclude that Jundi is entitled to an award that will put him in the position he would have been in if he not entered the contract. This, in turn, leads to an award of damages for the money Jundi advanced to the project, plus interest, in return for surrender by Jundi of his interest in DFP and its assets.
[10] Jundi seeks damages for his lost income going back to February 2007. He says that he was unable to acquire another business because his money was tied up in the project with Ouaida. He also says that he was unable to work at employment while the case was outstanding because he devoted himself to this lawsuit.
[11] Damages for loss of use of capital are addressed by an award of interest. Jundi’s decision to devote himself to the lawsuit, rather than employment, is not reasonable, too remote, and not something for which Ouaida is liable.
[12] Subject to any applicable offers to settle, Jundi is entitled to an award of costs. The parties have filed their bills of costs and are scheduled to make submissions on costs issues on April 30, 2015.
b. Ouaida’s Counterclaim Against Jundi and Muskawi
[13] Ouaida counterclaims against Jundi and Muskawi on the basis of an alleged settlement agreement. Ouaida also claims that Jundi misrepresented his business contacts and his means at the outset of their business relationship to induce Ouaida to enter into business with him. For the reasons given below I do not accept these allegations and the counterclaim is dismissed.
c. Jundi’s Claim Against Loucks
[14] Loucks acted as solicitor for DFP, which was jointly owned by Ouaida and Jundi. While so retained, Loucks accepted instructions from Ouaida to transfer DFP’s assets to 447, to the benefit of Ouaida, without prior notice to Jundi. Loucks could not accept these instructions, as they placed him in a conflict between Ouaida and Jundi.
[15] Fortunately, Loucks told Jundi of the transfer before DFP’s assets were alienated further by 447, and the assets have been protected by a certificate of pending litigation since 2008. As a consequence, Loucks’ conduct has not caused material loss. However it has caused some loss – notably the costs of obtaining the certificate of pending litigation. I will address this issue further after I have heard costs submissions.
d. Jundi’s Claim Against Corbett
[16] Corbett provided a valuation opinion respecting property which was the subject of dealings between Jundi and Ouaida. However, Jundi did not rely upon that opinion in deciding to enter the transaction or in his subsequent decisions to stay in the business to try to protect his investment. Since there was no detrimental reliance upon the opinion, it did not cause Jundi loss. Therefore this claim is dismissed. Corbett’s crossclaims for contribution and indemnity were dismissed without costs on consent at the end of trial.
e. DFP: A Deadlocked Corporation
[17] DFP has been deadlocked throughout these proceedings. Neither party sought interlocutory relief to wind up the business and sell its assets to preserve them for distribution after a trial judgment, or to appoint a receiver either to sell the business or to run it. Both parties took the position until trial that the business should be transferred to their sole ownership. This stand-off has damaged the interests of both parties: the business has mouldered idle since 2007, resulting in a mutual loss of use of capital, likely depreciation of physical plant, and carrying costs such as taxes and utilities.
[18] Since I am granting Jundi a restitutionary remedy, it follows that his interest in DFP will be extinguished once he is paid, at which point Ouaida will become the sole owner of whatever is left of DFP. On the basis of the evidence at trial, it seems unlikely that Ouaida will be able to pay the judgment without liquidating DFP. I would impose a time limit on Ouaida to pay the judgment, failing which Jundi may return to this court for an order for sale of the business or appointment of a receiver to sell the business.
Disposition
[19] Therefore, for the reasons that follow:
(i) Jundi’s action against Loucks is allowed in an amount to be fixed after costs submissions.
(ii) Jundi’s action against Corbett is dismissed.
(iii) Ouaida’s counterclaim is dismissed.
(iv) Jundi’s action against Ouaida is allowed. Jundi shall have judgment for $289,753.31, plus prejudgment interest from December 1, 2007, plus post-judgment interest from the date of this judgment, all calculated on the basis of the rates prescribed in the Courts of Justice Act.
(v) Bills of costs have been delivered already. Costs submissions shall be made orally on April 30, 2015.
(vi) If Ouaida pays the judgment by June 15, 2015, including interest and costs, then Jundi’s shares in DFP shall be surrendered to the company for cancellation.
(vii) If Ouaida does not pay the judgment to Jundi by June 15, 2015, any interested party may return to this court for an order for sale of DFP and/or its assets, on notice to any other interested party.
(viii) The certificate of pending litigation shall remain in place pending either payment of the judgment by Ouaida under subparagraph (vi) or closing of the sale contemplated in subparagraph (vii).
1. Pre-agreement Representations
(a) Ouaida’s Representations to Jundi
[20] In early 2007, Jundi, new to Canada, sought investment opportunities to establish himself in his new country. He was introduced to Ouaida. Both men trace their antecedents to the same city, Tripoli Lebanon.
[21] Jundi was experienced: he had American university training and 25 years’ business experience in Africa and the Middle East.[^3] He had no experience in the lumber industry or in Canada.
[22] Ouaida held himself out as owning and operating several businesses, with three decades of experience in the hardwood lumber business.
[23] Ouaida proposed that they go into business together. He suggested that they build and operate a wood-drying kiln. Both men thought that there could be a market for Canadian hardwood in the Middle East, and that between the two of them that they could gain access to that market through their many personal contacts.
[24] Jundi testified that Ouaida told him[^4] the following things:
a. Ouaida owned and was President of “a number of sawmills and other companies” and had “two multi-million dollar sawmill projects underway” in Saudi Arabia.
b. Ouaida had “hundreds of thousands of acres of [timber] cutting rights” from the government.
c. Ouaida had over thirty years’ experience in the lumber industry;
d. Ouaida produced multiple business cards[^5] which he said were his and showed his involvement in numerous businesses, including:
i. Ouaida Group
ii. Newfoundland and Labrador Forest Product
iii. Brewco Inc. (Jundi testified that Ouaida claimed to be the owner and President of this company)
iv. B.S.A. Investors Ltd. (Jundi testified that Ouaida claimed to be Vice-President of this company)
v. C. Harold Dial Investments Ltd.
vi. General Trading Company (a name Ouaida used for the defendant 447).
vii. Union City Forest Products Inc.
viii. Green Cedar Lumber Co. Ltd.
ix. F.B.M. Wood Products Global Inc.
e. Ouaida had been the President of a local riding association of a major political party, which showed that he was well-connected in the business and political establishment and could “get things done”.
f. Ouaida was connected “worldwide” to buyers and sellers of hardwood lumber.[^6]
I believe Jundi on all of these points. He was not shaken on them in cross-examination and Ouaida, in his evidence, did not so much deny them as try to minimize their import.
[25] Ouaida cautioned Jundi that there would be a conflict of interest if they formed a kiln business: if there was a customer order, should it go to DFP or to one of Ouaida’s many other businesses? Ouaida said that they should have a lawyer address this issue for them.
[26] Jundi had two concerns with all of this. First, he was at a loss to see why Ouaida needed him for this “small” kiln deal, when Ouaida had such large operations and so much experience. Second, Jundi was looking at purchasing a pasta factory, an operating business that would provide him with a stream of income from the outset, something that he needed.[^7] Ouaida responded by saying that “one hand alone cannot clap”, and that he would direct some of his existing transactions through the new business to generate income during the early days of the kiln business. In retrospect, Jundi acknowledges that these answers do not make a lot of sense: the “one hand clapping” is empty rhetoric, and directing existing business through DFP might address Jundi’s cashflow issue, but should have increased concerns about why Ouaida was prepared to do the deal if everything was as described. Jundi was investigating other opportunities, not just the kiln project. But Ouaida was charming, persistent, persuasive. Hindsight always brings clearer focus: Jundi was persuaded to proceed with Ouaida despite the frailties in Ouaida’s logic. Now he sees that he was duped.
[27] Ouaida‘s description of his businesses and experience were a combination of gross exaggerations and outright lies:
a. Ouaida did not own any sawmills.[^8] Likely he has never owned any sawmills. He was not the President of any sawmills. Likely he has never been the President of any sawmills. There is no evidence that Ouaida had any “sawmill projects underway” in Saudi Arabia, or anywhere else.
b. Ouaida did not have “hundreds of thousands of acres” of “timber-cutting rights”. He has never had any timber-cutting rights.[^9] However, as late as April 2012, Ouaida continued to claim in this proceeding that he did have these rights.[^10] Then by email dated October 16, 2013, Ouaida’s counsel advised: “We can advise that our clients do not have the cutting rights license…. To the best of our client’s knowledge, the softwood timber cutting rights were not awarded to anybody… and our clients believe the cutting rights remain available to be awarded even at present.”[^11]
c. Ouaida did not have thirty years’ experience in the lumber industry. He had about five years’ experience, ending in 1985. He testified that he did some minor work for a sawmill in around 2005 to 2006, but there is no evidence to support this claim other than Ouaida’s testimony.[^12]
d. The business cards are either false or misleading:
i. Ouaida did not have a “group” of companies or businesses. In Ouaida’s own words at discovery, “Ouaida Group” was “just a name” and “[t]here was no company. It was only a name.”[^13]
ii. Newfoundland and Labrador Forest Products Ltd. did not exist at the time of the pre-contractual negotiations.[^14] Ouaida subsequently incorporated a company of this name in Newfoundland, through his son-in-law who lives there. That company had no business, assets or prospects.
iii. After this litigation started, Jundi did an internet search of Brewco Ltd.[^15] It appears to be in the sawmill equipment business. The web site lists its personnel; Ouaida is not among them. Ouaida did not own or have a position with Brewco. On discovery, he said that he had an agreement with Brewco to sell that company’s equipment. He testified that “I have the agreement to sole agent if I can sell the sawmill equipment around the Asian community.”[^16] There is no evidence of this agreement aside from Ouaida’s assertion. There is no evidence that Ouaida ever sold Brewco equipment “around the Asian community” or anywhere else.
iv. BSA was incorporated in 1979 and continued in British Columbia in 1991. Its listed directors and officers do not include Ouaida.[^17] Ouaida’s BSA business card lists an alternate name of 1430972 Ontario Inc. This numbered company was incorporated in Ontario and does not list Ouaida as an officer or director. There is no apparent link between this numbered company and BSA. None of this was explained by Ouaida. In his answers to undertakings, Ouaida advised that he does not know who the current or former officers or directors are of the Ontario numbered company or of BSA.[^18]
v. C. Harold Dial Investments Ltd. was “an old company” that Ouaida “used to own”. It was “dormant” but Ouaida claimed to still be its “owner”.[^19]
vi. General Trading Company is a name Ouaida used for the defendant 447. It had existed since 1980 and was owned by Ouaida. It was not involved in the hardwood lumber business. It was “dormant” and “not operating at all” other than holding title to the Dunnville property.[^20]
vii. Union City Forest Products Ltd. did exist but was not an Ouaida company. Ouaida admitted on discovery that this company was owned by John McNabb and/or members of McNabb’s family.[^21] Ouaida was not an officer, shareholder, employee or “member of it at all”.[^22] Ouaida claimed to have done a small piece of work for Union City in around 2005, but did not explain what it was or corroborate this assertion.
viii. Ouaida claimed to have owned and been President of Green Cedar Lumber Co. Ltd., but to have sold this business in 1985. Ouaida said that this company had been in the lumber business on Manitoulin Island for about five years. There is nothing to support Ouaida’s uncoroborrated evidence on this point.
ix. F.B.M. Wood Products Global Inc. was said by Ouaida to have been in Sault Ste. Marie, but to be “closed”.[^23] It ceased operation around the same time that Green Cedar closed down in 1985.[^24] There is no evidence that this was an Ouaida company, and in any event nothing to corroborate Ouaida’s statements to Jundi on this point.
e. Ouaida testified that he worked in the lumber business for about five years during the 1980’s. He did not testify much about the nature of this work, or the expertise he gained as a result. Ouaida did not describe any contacts or knowledge of the lumber business that he had that was sufficiently current to be useful in the proposed venture with Jundi.
[28] In summary, at the time he made the representations to Jundi:
a. Ouaida had no active companies;
b. Ouaida had one “dormant” holding company, 447, which did no more than hold title to the Dunnville property; and
c. Ouaida’s most recent material involvement in the hardwood lumber business ended in 1985.
[29] Ouaida’s purported concerns about conflicts of interest were summarized in an email from their then-lawyer, Ian Wick, to Ouaida and Jundi on February 9, 2007:
[Ouaida] is already involved in a number of forest product businesses, including Union City Forest Products Inc., Green Cedar Lumber Co., Ltd., F.B.M. Wood Products Global Inc. and Newfoundland and Labrador Forest Products. [Ouaida] will be allowed to continue on with these existing relationships, which are composed primarily of receiving commission on lumber sales to clients he has referred to these businesses. Any commission payable as a result of orders placed after February 6, 2007 by customers referred to these businesses by [Ouaida] will be [Ouaida’s] entirely.[^25]
[30] Ouaida had no ongoing work in the hardwood lumber business, and thus no activities that could have posed conflicts of interest with his new venture with Jundi. His claims to have potential conflicts of interest were a ruse designed to persuade Jundi (a) that he really did have involvement in the hardwood lumber business; and (b) that he was concerned about being ethical in his dealings with Jundi.
[31] I accept that Ouaida had some past involvement in and knowledge of the hardwood lumber business. However, I draw an adverse inference against Ouaida for his failure to provide an accurate and thorough summary of his real history and experience. On balance, I find that Ouaida’s past experience was dated and that he had no current involvement in the business.
[32] General claims to be knowledgeable and experienced fall into the category of “trade puffery” – assertions that convey information so imprecise that it cannot be relied upon reasonably. Here, however, Ouaida’s claims went beyond asserting that he was knowledgeable and experienced. He claimed to have rights that he did not have. He claimed to own businesses that he did not own. He claimed to have active business involvement that he did not have. These assertions were precise enough to move beyond mere trade puffery into the realm of factual representation. When these statements are aggregated, they are more than enough to constitute a set of representations of expertise, experience and industry engagement of sufficient specificity to be actionable. I find that the statements were false, and that Ouaida knew that these statements were false. I am satisfied that these statements were all made with the goal of persuading Jundi to believe them and to rely upon them in committing to his agreement with Ouaida, and that Jundi did rely upon them in this way to his detriment.
Jundi’s Representations to Ouaida
[33] Ouaida claims that Jundi told him that:
a. Jundi had strong business connections in the Middle East that could be useful for finding buyers for DFP’s hardwood; and
b. Jundi had $20 million in capital offshore available to invest.
Ouaida claims that these statements were false, that he relied upon them and suffered loss as a result.
[34] Jundi admits to touting his own business connections in the Middle East, specifically a niece, Leina Chedid, and a Qatari prince. Jundi testified that these statements were true and that he did contact both of these people in an effort to develop customers for DFP. I accept Jundi’s evidence on this point: there is evidence of these contacts in the record and no evidence to the contrary.[^26] Ouaida’s response is that these contacts were not strong enough to result in any business for DFP. That argument is without merit: first, DFP never had any product to sell, and so it is impossible to say whether sales would ever have been made through any of Jundi’s contacts. Second, the statements attributed to Jundi were no more than that he had contacts that he would approach. Further and in any event, these statements were not material to the agreement between Ouaida and Jundi: Jundi had no prior involvement in the hardwood lumber business and was not bringing a network of buyers to the table and Ouaida knew this. I find:
a. Jundi’s alleged statements about contacts in the Middle East were made;
b. these statements were true;
c. Ouaida did not rely upon these statements in deciding to enter into the agreement with Jundi.
d. Ouaida suffered no detriment as a result of any reliance he placed on these statements.
[35] Jundi denies telling Ouaida that he had $20 million to invest, or any particular amount of capital. There is no corroborating evidence for this aspect of Ouaida’s claim. I prefer Jundi’s evidence to Ouaida’s evidence on this point. I find that this statement was not made by Jundi.
2. The Initial Agreement
[36] Ouaida and Jundi agreed to proceed with the project. In February 2007, they went to a lawyer, Ian Wick, to document their agreement: Jundi and Ouaida would be 50/50 partners and would hold their interests through a new company to be incorporated. They would be equal shareholders, the two directors and officers of the company. Wick took these instructions from Jundi and Ouaida and on February 8, 2007, incorporated DFP[^27] and prepared a draft shareholders’ agreement.[^28] Ouaida raised his purported conflicts of interest. Wick drafted language for the shareholders’ agreement to address this concern.[^29]
[37] The parties did not sign the draft shareholders’ agreement prepared by Wick. But both testified that they agreed to the Wick agreement: they were 50/50 shareholders, co-directors and co-officers of the company – which is what the Wick shareholders’ agreement stipulated. These terms were agreed from the outset and never changed. Subsequent agreements were all within the framework of this initial agreement.
3. Research on the Cost of Land, Construction and Equipment
[38] Shortly after the initial organizational meetings with Wick, Ouaida was scheduled to leave the country. Jundi and Ouaida discussed moving forward with their plans while Ouaida was away, and Jundi agreed to research the costs of land, construction and equipment. Ouaida would be away for several weeks, and so he offered an “employee” in one of his other businesses to help Jundi while he was away. Jundi and Ouaida went to Michigan to visit Union City Forest Products Ltd. Ouaida said that he was the President and owner of this company. He wanted Jundi to “meet his plant manager,” John McNabb.
[39] Jundi testified that McNabb was “not permitted” to speak, and was “made to” walk behind as Ouaida toured him around the sawmill facility. I accept that Jundi was deliberately given the impression by Ouaida that McNabb was his subordinate. Ouaida asked McNabb to help source the kiln equipment while Ouaida was away. McNabb agreed, reinforcing Jundi’s impression that McNabb worked for Ouaida. I conclude that Ouaida deliberately misled Jundi about his relationship to McNabb and Union City Forest Products Ltd. to buttress his claim to have wide involvement in the lumber business. This was a deception. Ouaida did not own or work for Union City Forest Products Ltd. At most he was a potential customer.
[40] McNabb did not testify at trial. I do not find that McNabb knowingly aided in this deception. It is possible that McNabb thought that he was supporting a potential new customer rather than helping Ouaida fool Jundi.
[41] Jundi, who had no expertise in sourcing kiln equipment, focused instead on identifying suitable premises for the business. As is reflected in documents he received from real estate agents, he searched for land in the Greater Toronto Area.
4. Business Premises
[42] Jundi wanted to locate near the GTA because he lived in Mississauga.[^30] Ouaida wanted to be in Dunnville, because he already owned suitable property there. Jundi eventually agreed to Dunnville because it would facilitate supply of hardwood from Union City Forest Products Ltd. In fact, Ouaida had listed the Dunnville property for sale shortly before he met Jundi: so Ouaida not only had property available, but he had recently and independently decided to sell that property.
[43] On first blush, the timing of the discussions around location does not fit the documents. The location decision was made after Ouaida returned from his trip abroad, likely in late March, 2007. However, back in early February, 2007, Wick incorporated DFP under the name “Dunnville”. The reason shines an interesting light on the case.
[44] During the February meetings with Wick, Ouaida proposed that the company be called “Lake Erie Forest Products”. Jundi rejected this name because it had an inappropriate transliterated meaning in Arabic. Jundi suggested “Toronto Forest Products” but Wick counselled against that name because it might prove too generic. Ouaida then suggested “Dunnville Forest Products”. Jundi did not much care what the company was named, so long as it was not inappropriate. Ouaida wanted it called “Lake Erie” or “Dunnville” because Ouaida was resolved in his own mind to locate the business on his property in Dunnville. I find that this was the central purpose of the deal for Ouaida – not founding an operating kiln business – but selling his vacant industrial land in Dunnville.
[45] Ouaida wanted credit for $375,000 for the Dunnville property, the price at which he was offering it for sale.[^31] Jundi would not accept that price without objective evidence to support it. Jundi understood that Ouaida’s offering price might not reflect the market value of the property. Jundi’s requirement of objective verification never changed: “it was a must”, he testified, and though he was prepared to consider accepting something short of a formal appraisal, his default position was that an appraisal would be required for Ouaida to establish the value of his capital contribution. I accept this evidence from Jundi.
[46] Ouaida suggested that he and Jundi speak with Corbett, Ouaida’s real estate agent, to confirm that $375,000 was reasonable for the property. Ouaida also told Jundi that an adjacent property had been sold to McDonald’s, and that there was an appraisal for the McDonald’s property that would corroborate the $375,000 value.
[47] And that is where matters stood at the end of April 2007: the parties had agreed to locate in Dunnville. Ouaida was claiming credit of $375,000. Jundi was requiring objective evidence for the value of the property. They had not agreed on the form that this evidence would take.
5. Loucks Becomes DFP’s Solicitor
[48] After the initial work with Wick, Ouaida suggested that DFP transfer its legal work to Loucks in Dunnville, who would be less expensive and able to handle matters faster because he had an office in Dunnville. Ouaida and Jundi met with Loucks on May 2, 2007, instructed him to prepare another shareholders’ agreement and transferred the retainer to him.[^32] Loucks thereafter acted for DFP. He delivered a draft agreement by email on May 4, 2007.[^33]
[49] Loucks had a prior professional relationship with Ouaida and 447. Jundi argued that based on this history, Loucks preferred Ouaida’s interests over Jundi’s. I very much doubt that Loucks’ past dealings had much to do with the situation: Wick, too, had previously represented Ouaida. Ouaida’s connection with professionals was part of the expertise that he brought to the venture, and Jundi knew that he was dealing with lawyers who already had a professional relationship with Ouaida. Loucks was retained as DFP’s solicitor, and so, of course, he owed his professional duties to the company. The transfer of retainer was effective May 10, 2007, and is confirmed in a letter from Loucks to Wick of that day. The letter confirms Loucks’ prior representation of Ouaida for several years. I am satisfied that the prior professional relationship was disclosed to Jundi, that he agreed to it, and that there was nothing wrong with Loucks acting as solicitor for the company.
6. Subsequent Shareholders’ Agreements
[50] Loucks prepared a draft shareholders’ agreement dated May 10, 2007, that provided that Ouaida’s capital contribution would be the Dunnville property, for which Ouaida would receive credit for a capital contribution of $300,000.[^34] Paragraph 4 of the draft shareholders’ agreement provides that “[t]he parties agree that the land contribution valuation is reasonable by virtue of the comparable valuations….”[^35] This agreement, roughly two pages long, was signed on May 10, 2007.[^36] No “comparable valuations” had been provided.
[51] Corbett did not provide a valuation opinion to Jundi at this time (the impugned valuation opinion, discussed below, was not delivered until January 2008, long after Jundi had started advancing funds to the project). And neither Corbett nor Ouaida provided any “comparable appraisal” to Jundi. In correspondence following discoveries, counsel for Corbett advised that his client “does not have a ‘McDonald’s appraisal’ and does not know if such an appraisal exists.”[^37]
[52] Jundi testified that his agreement to the amount of $300,000 in the May 10, 2007 shareholders’ agreement was subject to Ouaida providing the promised objective evidence of value. In all of the circumstances of this case, I accept this evidence from Jundi. It is reinforced by continued discussions between Jundi and Ouaida on this issue – with Jundi asking for a formal valuation opinion and Ouaida suggesting an informal letter of opinion supported by “comparable” appraisals. Jundi pressed the point on the basis that any lender they approached for financing would require a formal appraisal.[^38] Ouaida continued to demur.
[53] Loucks prepared a further draft agreement dated June 6, 2007, providing that Jundi and Ouaida would “equalize” their capital contributions after receipt of financing from any lender.[^39] A final version of the agreement – roughly 1.5 pages in length – was prepared by Loucks and signed by the parties on July 24, 2007. It provides that Ouaida will be given $300,000 credit for transfer of the property. On its face, this provision does not require that an appraisal or opinion of value will be provided.[^40]
[54] Jundi indicated that he would not advance funds until the land had been transferred to DFP. He says that he also indicated that a proper appraisal “was a must” since he had no information to give him comfort as to the value attributed to the land. Again, I accept this evidence from Jundi. There was no reason for him to change his position on this issue, and the continued discussions about the nature of the objective evidence that would be required are inconsistent with Ouaida’s position that this issue had been resolved on the basis of a firm price of $300,000, as reflected in the July 24th shareholders’ agreement and Jundi’s decision to advance his funds for construction.
[55] Jundi says that Loucks “promised to do the transfer and the appraisal”. Jundi says that he trusted Loucks, and on the basis of that assurance he started advancing funds to DFP.
[56] Loucks did not testify to contradict Jundi’s evidence that he promised to obtain an appraisal. But there is no evidence to corroborate Jundi’s claim that Loucks promised to provide an appraisal, and the weight of the documentary evidence is against this claim. Jundi does not assert this claim against Loucks in writing prior to the litigation. There is correspondence to Loucks about his failure to effect the transfer of the land from 447 to DFP – the absence of any mention of a related promise to obtain an appraisal in this correspondence persuades me that Loucks never undertook to do this work.
[57] Jundi also complains that Loucks failed to transfer the land in a timely manner. The instructions were given in June or July, and the transfer was not effected until September. However, two points put this complaint in context. First, on the basis of the written record, Loucks was waiting for Ouaida to put him in funds to make the transfer. These funds were not provided until late August. Second, Loucks effected the transfer shortly after he was put in funds, in September, and there was no loss resulting from this delay.
[58] Jundi testified of the circumstances under which he signed the shareholders’ agreements drafted by Loucks. He testified that he was reluctant to sign them, but was persuaded to do so by Loucks – in May on the basis that Ouaida had promised to provide objective evidence of “comparable appraisals”, and in July on the basis of all the “compromises” Ouaida had made to push the transaction towards fruition. Ordinarily, this evidence would sound rather outlandish: it is hardly likely that a professional acting for the company owned equally by both men would be actively intervening in their disagreements, a situation fraught with peril for the professional. However, Loucks did not testify to give an alternative version of events. And in 2008 Loucks did precisely the same thing, siding first with Ouaida in a dispute over whether Jundi had breached the agreement, and then taking a contrary position after Jundi put his side of the story to Loucks. Since Loucks did it the second time, it is entirely credible that he did it to persuade Jundi to sign the shareholders’ agreements as described by Jundi. On balance, I accept that this is exactly what happened to persuade Jundi to trust his business partner and sign the documents.
[59] The land was worth far less than Ouaida claimed. I find that Ouaida did not want to obtain an appraisal, not because of the cost of doing so, but because he knew that an appraisal would show a value much lower than the value he was claiming. As I conclude below, the land was not worth anything like $375,000; it was probably worth $25,000.
[60] Jundi claims against Ouaida for fraudulent or negligent misrepresentation of the value of the property.[^41] This issue poses some legal difficulties. The usual principle – “buyer beware” – recognizes that buyer and seller are adverse in interest and places the burden on buyer to satisfy himself with regards to price. Seller has no obligation to sell at a “reasonable” price. However there are several features of this case that takes this beyond the usual circumstances:
a. Ouaida was familiar with the Dunnville area and Dunnville real estate and Jundi was not;
b. Ouaida had steered Jundi to common legal counsel and Jundi was not independently represented;
c. Ouaida claimed that there was an appraisal for a comparable piece of property that supported the $375,000 figure;
d. Ouaida promised to provide this appraisal and never did so;
e. the buyer of the land was DFP, a company of which Ouaida was a director, and to which he owed a fiduciary duty.
[61] At the outset, Ouaida agreed to provide objective evidence confirming the value of his capital contribution to the business. He never did so. I accept Jundi’s evidence that subsequent agreements fixing the value of the property were subject to Ouaida furnishing objective evidence of value. In so concluding, I accept Jundi’s evidence on these points and reject Ouaida’s evidence. The obligation to provide objective evidence of value was neither performed nor waived, and Ouaida offered no explanation as to why Jundi would agree to fix the price without the objective evidence he had previously agreed to provide.
[62] The shareholders’ agreements prepared by Loucks were manifestly improvident, since on their face they obliged Jundi to credit Ouaida $350,000, and latterly $300,000 for land that was worth $25,000. They were foolish, in that they dispensed with Jundi’s stated requirement for objective evidence to support Ouaida’s claimed value. Jundi was vulnerable, as an investor not familiar with business practices in Canada. In all of these circumstances, including the absence of independent legal advice for Jundi, I conclude that these agreements were unconscionable and are not enforceable against Jundi.
[63] In summary, then, I find:
a. Ouaida’s statements about the value of the land were not representations of fact but statements of his position respecting a selling price he was prepared to accept;
b. Ouaida’s statements about the existence of “comparable valuations” were not true, but were not statements upon which Jundi could reasonably rely;
c. Jundi recognized both (a) and (b) and insisted that Ouaida provide objective evidence to establish the value of the land;
d. the shareholders’ agreements drafted by Loucks included implied terms that Ouaida would furnish objective evidence of the value of the land. Ouaida never did this, and thus these agreements fail, and the only agreement that remains is the initial oral agreement reflected in Wick’s draft shareholders’ agreement, which does not include agreement over the value of the property; and
e. if I had concluded that the shareholders’ agreements drafted by Loucks were otherwise enforceable, I would have concluded that they were unconscionable, that Jundi did not receive independent legal advice in respect to them, and thus that they are not enforceable against him.
7. Construction and Equipment Costs: Estimates Between Jundi and Ouaida
[64] The evidence on construction costs is confusing. This is because:
a. Ouaida did not disclose actual construction costs at trial and produced numerous conflicting and unexplained summaries of the alleged costs, few of which appear to bear any relation to actual costs;
b. the parties had one set of estimates they prepared and used between themselves – these changed, based on changes in approach, consistently moving downwards, to save money, until the parties fell into conflict and Ouaida demanded more than Jundi had agreed to advance;
c. the parties had another set of estimates they prepared to show to potential lenders. These estimates were different from the estimates they were using between themselves and trended upwards to help them borrow larger amounts of money. The explanations for these estimates were inconsistent, largely because they were rationalizations rather than true explanations;
d. the parties were self-represented at trial. Jundi tried to distill this mess into a coherent presentation, with some limited success. Ouaida did not address any of it systematically. Counsel for Loucks and for Corbett avoided these issues, wisely, on the (correct) basis that these issues do not affect their clients.
[65] In about March 2007, McNabb obtained kiln quotations from several manufacturers, ranging from $300,000 to over $400,000 for building construction and supply of two kilns[^42] and a quotation from Nyle Corporation to supply two kilns at a price of $101,000 (not including the cost of building construction).[^43]
[66] One of the quotations became an initial baseline for estimates: $198,000 for construction and supply of one kiln, plus $60,000 for site preparation costs.[^44] Based on the information available at that time, Jundi would advance the $260,000 for equipment and construction costs, Ouaida would advance the land, estimated to be worth $300,000, and they would adjust accounts between them once actual numbers were known.
[67] Ouaida then proposed that they buy one kiln from Nyle and do the construction themselves, using 447 as nominal contractor. The point of this change was to save money. On June 5, 2007, they contracted with Nyle to purchase one kiln for a price of $67,500.[^45] They met on June 27th and discussed revised construction costs. Ouaida estimated costs for the entire project at $170,777, including the cost of the Nyle kiln. If the land was valued at $300,000, this put the total capital cost at about $470,000. Jundi’s 50% share of this cost would be $235,000.[^46]
[68] Jundi agreed to proceed on this basis, and understood that the projected costs were estimates, not fixed amounts. He was prepared to front up to $260,000, but he expected his adjusted costs would be somewhat lower, around $235,000.
[69] Implicit in Jundi’s agreement to pay construction costs was that Ouaida would account for those costs.
[70] The parties did not put their minds to practical performance issues that would arise by doing the work themselves. For example, would 447 be paid a fee, or would it be entitled only to its actual out-of-pocket costs? Would Ouaida be entitled to be paid for the time he spent on managing construction (that is, would compensation for Ouaida be part of 447’s “actual costs” to be billed to DFP and paid by Jundi?). 447 would be entitled to recover its costs to rent equipment to work on the project. But would it be entitled to charge a fee to DFP for use of equipment owned by 447 that was used on the project? How and when would 447 document project costs? How and when would Jundi fund those costs? None of these points was referenced in the documents, and neither Jundi nor Ouaida testified about them.
8. The Phony “$832K Agreement”
[71] At some point the parties decided that they would seek financing for their business. It is not clear to me why they wished to do this: it appears that they had sufficient capital to construct and open the business. There was no evidence as to how they would finance an operating line of credit for the business, but that was not what they decided to seek from lenders. Rather, they prepared materials to support financing for the purchase of land and equipment and construction of the business, as well as an operating line of credit.
[72] The parties crafted the so-called “832 Agreement” which, on its face, is an agreement under which 447, Ouaida’s holding company would construct the building and purchase and install the kiln and sell the entire undertaking to DFP for $832,000. This agreement was intended to provide evidence to lenders that DFP’s acquisition cost of the business was $832,000.
[73] In fact, the acquisition cost of the business was the construction and equipment costs (estimated between $171,000 and $260,000), plus the value of the land. On paper, the parties had attributed a value of $300,000 to the land, putting the acquisition cost at between $471,000 and $560,000 on the basis of a non-arm’s length purchase of the land.
[74] The 832 Agreement was phony. It was not the deal. And both Jundi and Ouaida knew this. Its purpose was solely to assist DFP to raise financing. However, it worried Jundi, and so he obtained written confirmation from Ouaida that the 832 Agreement was not binding on DFP.[^47]
[75] In his testimony, Jundi sought to justify the 832 Agreement on the basis that Ouaida had strongly encouraged it as necessary to obtain financing. Asked why they needed financing, Jundi replied that Ouaida told him that no one in Canada builds entirely with their own money – that it is standard practice to obtain financing for any project. Ouaida did not give evidence on these points. He did not provide some other explanation for the 832 Agreement and he did not gainsay Jundi’s evidence of the conversations between them on this topic.
[76] Jundi testified that the 832 Agreement accurately summarized the start-up costs for the venture. It was based on a quotation for $198,000 for building construction and kilns[^48] plus $60,000 in site preparation (estimated by Ouaida), plus a value of $350,000 for the land (total $608,000, rounded down to $600,000). To this was added estimated costs for raw materials at $232,000, bringing the total required to get everything going at $832,000.[^49] But the document was not styled as a summary of start-up costs, but rather as a turn-key purchase and sale. Jundi was an experienced businessman and understood the difference. Finally, Jundi’s justification of the figure $832,000 is not borne out by his own analysis of the number. In a breakdown sent to Ouaida in September 2007, Jundi attributed $375,000 to the land and $457,000 to civil works, construction and equipment costs.[^50]
[77] The 832 Agreement included a schedule of payments that also did not reflect the agreement between the parties. Under the schedule, DFP was to make an initial payment of $175,000 to 447. This was done by an advance of $175,000 from Jundi to DFP, which then paid 447. Of this, $136,000 was paid back to Jundi by 447. In the net result, the parties had evidence of a payment to 447 of $175,000 that could be used to substantiate the claim that the real agreement was for $832,000. The net payment to 447 was $39,000, which was towards the cost of land preparation (sometimes referred to in the documents as the “civil works” or simply “C.W.”).[^51] This is substantiated by the cheques which attest to this flow of funds[^52] and a written explanation of the flow of funds signed by both Jundi and Ouaida.[^53]
[78] As stated above, Ouaida estimated costs for the entire project of $170,777 plus the value of the land.[^54] This was a far cry from a turn-key cost of acquisition of $832,000.
[79] Finally, the parties agreed in writing on September 12, 2007, that the 832 Agreement was “terminated” on the basis that there were no outstanding liabilities under that agreement.
[80] I find that the 832 Agreement was phony and was intended to be used by Jundi and Ouaida with potential lenders, to make it seem as if the acquisition cost for the business was $832,000 on an arm’s length basis. There was no other point in crafting this document and arranging the circular payments to coincide with it. The 832 Agreement was never a binding obligation of the parties, and the termination agreement in September was intended to make it clear that neither side would assert the 832 Agreement as the true deal between them.
[81] Ouaida and Jundi submitted the 832 Agreement to BDC in support of their loan application. Ouaida went further. By the time of the BDC application, Ouaida had caused Newfoundland and Labrador Forest Products Inc. to be incorporated. It had never carried on business. He had that company prepare a “letter of interest” indicating a desire to purchase lumber from DFP, indeed, an “immediate requirement” for DFP’s kiln-dried hardwood.[^55] He attached this letter to BDC to show that DFP had potential customers for wood products. He did not disclose that Newfoundland and Labrador Forest Products Inc. was not arm’s length and had yet to carry on business.[^56]
[82] Ouaida pleads and relies upon the 832 Agreement in his defence and counterclaim.[^57] This pleading is disingenuous. Ouaida knew the 832 Agreement was phony and that he had executed documents to this effect. I find that Ouaida has asserted this defence having known it to be factually false from the outset.
9. Construction Costs
[83] Jundi repeatedly asked for copies of invoices or other evidence of actual construction costs. Ouaida responded by providing handwritten lists of expenses, without back-up documents.[^58] There are clear examples of gross overstatements in these handwritten lists.[^59] Ouaida went so far as to assemble claimed construction costs of over $1.75 million in documents in his sworn affidavit of documents: these claims are fabrications. I would not place any weight on these handwritten lists, which, on their own, are nothing more than bald assertions by Ouaida.[^60]
[84] Ouaida did not provide any back-up. This stand-off continued until eventually Jundi stopped funding the project and disputes that led to this litigation brought the business relationship to a halt.
[85] This failure to document construction costs continued up to trial. Ouaida had not provided the necessary documents to show what had been spent. Jundi had pursued this issue through motions before the Master and had been advised by Ouaida that everything Ouaida had that existed had been produced.[^61]
[86] At the outset and during the trial, I advised Ouaida that the usual practice is to preclude a party from relying on documents not produced previously in the proceeding. I told him that there was discretion in the court to allow it, but that he should not expect that this discretion would be exercised in his favour unless (a) he provided disclosure as early as possible in advance; and (b) he had a good explanation for his failure to produce the documents earlier. When it became clear that the trial would be adjourned from January to April, I again cautioned Ouaida that he should make disclosure as early as possible of any documents he had not produced previously if he wanted to put them into evidence when the trial resumed.
[87] When the trial resumed, Ouaida sought to introduce documents relating to construction costs, documents that had not been produced previously in the litigation. Ouaida relied on the fact that he was self-represented as a justification for his failure to produce the documents earlier. I refused to permit him to adduce this evidence given his failure to make timely disclosure. And thus at the end of the case there was no direct evidence of the actual construction costs other than equipment costs paid by Jundi.
[88] Ouaida did place into evidence a series of colour photographs showing the work that was done to build the project.[^62] It is not in dispute that the project was built. As indicated below, I am not satisfied there were any material defects in the construction work, or that the work was significantly different than had been contemplated from the outset. The issue is not whether work was done, but what it cost to do the work.
[89] Jundi agreed to fund actual construction costs. Ouaida was the person spending the money. Implicit in these arrangements was a duty on the part of Ouaida to account for construction costs. I find that Ouaida failed to discharge this duty while construction was ongoing, and failed again to do so in the aftermath of construction. While it would be open to the court to direct a reference to establish the construction costs, I conclude that Ouaida has had his chance to show his costs and has deliberately not done so. I decline to prolong this overextended litigation even further because Ouaida has failed in his duty to account for the money he was given by Jundi.
[90] I accept the evidence of Willem Huinick, the expert quantity surveyor called by Jundi. Huinick prepared an estimate of the cost to prepare the site and construct the building. He based his estimate on the architectural drawings and his assessment of what was actually built, based on visits to the site. Cross examinations confirmed the scope of Huinick’s work. There was no contrary opinion at trial, and as noted above, Ouaida did not provide evidence of actual costs inconsistent with Huinick’s estimate of the value of the work done.
[91] Huinick estimated the value of the building at $203,369, including HST, based on construction costs in the 2nd and 3rd quarters of 2007, when most of the work was done.[^63] I accept this figure as being the fair market value of the work done by 447. I apply a discount of 20% to Huinick’s estimate to reflect the profit and overhead portion of the valuation that would not have been part of 447’s costs to do the work. This is a rough approximation, for illustrative purposes, which would tend to favour Ouaida, since the remaining balance would include some construction management costs that should properly be accounted as Ouaida’s sweat capital rather than a cost to DFP. This, then, puts the value of the construction at $203,369, and 447’s actual cost of construction at $162,706.20.
[92] Jundi advanced $215,132.80 to DFP, which in turn paid these funds to 447. This does not include the cost of the equipment acquired from Nyle.[^64] Jundi paid $67,500 to Nyle, plus taxes, duty and transportation/brokerage charges. This brings the total advanced by Jundi to the project to $289,753.31.[^65]
[93] In summary, I find:
a. Jundi paid a total of $289,753.31 towards construction and equipment costs;
b. The market value of construction performed was $203,369;
c. The actual cost of construction to 447 was $162,706.20;
d. The cost of equipment purchased from Nyle was $67,500, plus duty, taxes, shipping and brokerage;
e. Ouaida had a duty to account for construction costs; and
f. Ouaida breached his duty to account for construction costs.
10. Value of the Land
[94] At trial Jundi led expert evidence to establish that the market value of the vacant land was $25,000 as at February 9, 2007, and $30,000 as at January 23, 2013, evidence that was not contradicted at trial.[^66]
[95] Ouaida did not provide expert evidence respecting the value of the land. I was advised that, notwithstanding the CPL, the property (including the building and the kiln) has been listed for sale by Ouaida for $1.695 million. I was also advised that no offers have been received for the property. Ouaida tendered a written “opinion” at trial from a commercial salesperson at Coldwell Banker. This “opinion” is not a valuation opinion but rather advice on how to price the land to sell it. This expert would list the land at $965,000 and try to negotiate a deal with anyone who came forward with a serious offer.
[96] This information – the actual listing price and a suggested optimal listing price – cannot affect my assessment of the value of the property. The listing price of $1.695 million is Ouaida’s price, not the market value. The recommended listing price of $965,000 is not supported by testimony at trial and so is not admissible for the truth of its contents.[^67]
[97] I accept Jundi’s expert evidence and find that the market value of the vacant land was $25,000 at the time it was transferred to DFP and the kiln was constructed and $30,000 at the time of trial.
11. Construction Issues
[98] Jundi complained about performance of the construction work by Ouaida. These complaints are immaterial to the core dispute between Jundi and Ouaida. However, in fairness to Jundi, at the time the litigation commenced, Jundi really had no idea what Ouaida had spent on construction. Indeed, based on Ouaida’s continuing and rising demands for money, Jundi was reasonable in being concerned that Ouaida may have gone well beyond what had been agreed in the work he did on the project. It now is clear that Ouaida built roughly what had been agreed from the outset, at a cost consistent with the parties’ initial estimates.
a. Failure to Obtain Building Permit
[99] Apparently Ouaida began work on the site before a building permit was issued. The building permit was received on November 5, 2007, and work resumed. I understand that the delays arising from the building permit issue were annoying, but they are simply not material to this dispute. This issue, on its own, would not be actionable: 447 was a surrogate for Jundi and Ouaida undertaking the construction work on their own rather than hiring an independent contractor. One of the consequences of this arrangement is that the contractor’s work might be done less professionally than it would have been if DFP had incurred the cost of professional construction management.
b. Partial Second Floor in the Building
[100] The construction plans did not include a second floor in the kiln building. Ouaida built a partial second floor, even though this was not part of the plans. Jundi objected to this on the basis that it was an extra cost he was expected to absorb, telling Ouaida that he “was not a milk cow”. Based on the photographs, the partial second floor appears to be a basic wooden frame structure. There is no evidence that the additional cost was material. I conclude that the significance of this issue, at the time, was that Jundi had not been provided with evidence of Ouaida’s construction costs, the demands for money from Ouaida were escalating, and it appeared to Jundi that Ouaida was making unilateral decisions that cost money without providing full information and without consultation.
[101] Jundi pleads that Ouaida “caused the Kiln Building to be constructed twice the size originally agreed upon, and with specifications that were materially different from the agreed plan”.[^68] These allegations are not proven. First, the building is not “twice the size” of the “agreed plan”. The footprint is the same size, and there is a partial second floor, as already discussed. In fairness to Jundi, since Ouaida had not provided evidence of construction costs, Jundi really did not know the scale of the differences and the costs consequences of those differences. All versions of the draft shareholders’ agreement required joint material decisions, and Ouaida deviated from the “agreed plans” without consultation with Jundi.
[102] On the basis of the parties’ pre-construction estimates and Huinick’s post-construction valuation of construction costs, I find that the building “as built” is not materially different from what the parties contemplated at the outset.
12. Escalating Conflict: Construction Financing and Construction Costs
[103] Ouaida’s claims for construction costs have varied widely. As noted elsewhere, he reported to BDC in January 2008 that construction costs were $615,346.76.[^69] He subsequently provided invoices to BDC that showed a total of $183,749, plus $67,500 for the Nyle equipment yet to be delivered.[^70] BDC noted that $40,000 of the $183,749 appeared to be personal expenses, some of which appear to have been charged twice.
[104] Jundi and Ouaida began to seek financing in the fall of 2007. They approached Bank of Montreal (“BMO”), Roynat, TD Bank and Business Development Corporation (“BDC”). In all applications, Jundi and Ouaida relied upon a business plan they wrote together.[^71] The plan relies upon the 832 Agreement. In the “capital asset budget” it records the land value at $500,000 and the buildings at $332,000 (for a total of $832,000). This is not how the $832,000 was calculated in the 832 Agreement – that document was based on land, construction, equipment, and inventory/working capital. In the business plan the $832,000 is attributed to capital costs, and an additional $100,000 is claimed for “equipment”, and a further $152,400 in inventory (less a loan from a line of credit of $54,925). These figures were make-believe.[^72]
[105] In dealings with Roynat these numbers were inflated further, with the stated working capital in addition to capital costs and equipment rising to nearly $300,000 from a net $100,000, for total capital requirements of $1.23 million. DFP was stated to be looking for $1 million in financing from Roynat instead of roughly $700,000 being contemplated by BDC.[^73]
[106] By January 2008, Jundi’s frustration was at the breaking point. Ouaida was asking for more money for construction costs, but was refusing to account for the costs. Ouaida’s summaries of actual costs appeared to include his own personal expenses, and were different every time Jundi asked him about them. Ouaida, for his part, was frustrated that Jundi would not continue to advance towards construction costs to the limit of the original estimate of $260,000. Then both men became concerned that a half-built building had to be completed to avoid damage to what had been built already.
13. Loucks Transfers the Land from DFP Back to 447
[107] On January 30, 3008, Ouaida instructed Loucks to transfer the land from DFP back to 447. Loucks followed this instruction.[^74] Loucks subsequently said that there were difficulties with title that also formed a basis for this transfer[^75] but this position was not pursued at trial.
[108] Loucks was DFP’s solicitor. He owed a fiduciary duty to DFP. He could not accept instructions from one shareholder of DFP to transfer DFP’s assets, for no consideration, to the benefit of that shareholder.
[109] Jundi claims against Ouaida for wrongful conversion of the land from DFP to 447.[^76] Ouaida gave the instructions for the transfer and swore the land transfer tax affidavit on the transfer deed. I find that Ouaida is responsible in law for the transfer, for which there was no legal basis. I find that the transfer was a wrongful conversion of the property from DFP and a repudiation of the agreement between Jundi and Ouaida.
14. Other Claims Against Loucks
[110] Jundi pleads that Loucks knew or ought to have known that the value of the land was grossly overstated by Ouaida, and that Loucks had a duty to warn Jundi.
[111] Loucks had acted for Ouaida in connection with this land previously. But there was no evidence that Loucks had knowledge of the value of the land. There is no evidence that Loucks’ prior involvement, which pre-dated Ouaida’s work developing the land into three parcels, gave Loucks knowledge of what the parcels were worth individually. The other lots were sold; there was no evidence that Loucks should have known the value of the subject property from the values realized on sale of the other subdivided lots. This aspect of the claim fails.
[112] Jundi pleaded that Loucks wrongfully obtained documents from BDC on the false premise that Loucks was acting for Jundi.[^77] This issue does not rise above a documentary production issue, and that was resolved before trial when the documents were disclosed. This aspect of the claim fails.
15. Corbett Provides A Letter Opinion on Land Value
[113] Corbett was asked by Ouaida to prepare a letter of opinion of value of the property in late 2007 or early 2008. Corbett provided a letter to this effect dated January 4, 2008. From the timing, it is evident that Ouaida wanted this letter to provide it to BDC as some evidence of the value of the property. The letter reads as follows:
This letter of opinion is a brief document in which the appraiser upon a client’s specific request, sets out an approximate value or an approximate value range, based on acquired knowledge of a local real estate market. Under no circumstances is a letter of opinion to be construed as either an appraisal, a preliminary appraisal or an appraisal letter and is made without any responsibility.
Possession of this report, or any part thereof, does not carry with it the right of publication nor may the same be used for anyone but this recipient without the consent of the evaluator.
Based on the information obtained on the real property and my general experience in the real estate field, my opinion of value is Three Hundred and Seventy-Five Thousand Dollars ($375,000).[^78]
[114] The letter was addressed to 447. 447 is the “recipient” entitled to use the letter.
[115] Jundi picked up this letter from Ouaida, likely on January 19, 2008, and delivered it directly to BDC that same day. He claims that he did not read the letter aside from reading the number $375,000. Jundi did not keep a copy of the letter. Jundi now claims that he relied upon this letter to his detriment.[^79]
[116] First, Jundi cannot reasonably rely on only the number in the letter without also being bound by the text of the letter. If Jundi chose not to read the letter, that would not negative the privative language in the letter: reliance on another basis would not be reasonable.
[117] Second, Jundi claimed in his testimony that this letter was important to him and that he relied upon it. He claimed to have been waiting months for this document, and that it was fundamental to his agreement with Ouaida. If this was the case, he would have made a copy of the document before turning it over to BDC.
[118] Third, Jundi did not change his position as a result of this letter. He had already advanced most of the money he invested in this project by the time he received the letter. Before he advanced further funds, he learned from BDC that BDC disagreed with the valuation and believed that the property was worth between $17,000 and $25,000. Any reliance Jundi placed on the Corbett letter after learning about BDC’s views would not have been reasonable.
[119] Accordingly, I find that Jundi did not rely upon the Corbett letter opinion and suffered no damage as a result of it.
16. BDC Rejects Corbett Opinion and Refuses to Lend Money
[120] As noted above, DFP’s application for financing from BDC was supported with the phony 832 Agreement and a deceptive letter from Newfoundland and Labrador Forest Products Ltd. There was a great deal more about the application that was misleading. The pro forma financial statements are fictitious. Of course, a pro forma statement may be dismissed as an optimistic prediction, but the statement of assets bears no relationship to the actual or anticipated assets of the business. And there appears to have been a stream of untrue and unsubstantiated information provided to BDC. For example, in an email from BDC dated January 21, 2008, BDC states that it has previously asked for copies of “all construction project invoices”. None had been forthcoming. However, a revised summary of construction costs to-date had been provided showing costs of $615,346.76 – a number unsupported by any evidence in the record.[^80]
[121] On February 6, 2008, Jundi and Ouaida received BDC’s decision to decline to lend money to DFP.[^81] Ouaida insisted that BDC was wrong about the land value, and there was further communication with BDC asking it to reconsider.[^82] On February 8, 2008, BDC confirmed its decision.[^83]
[122] Jundi pleads that he “wholly and completely relied upon Ouaida’s purported expertise to prepare and submit supporting documentation to the BDC….”[^84] This allegation is not proved. On Jundi’s own evidence, he met with BDC with Ouaida, and was actively involved in the application process. The two men worked on the application materials together, and Jundi did his best to transform Ouaida’s information into a professional format that might be persuasive to BDC. By the time these documents were being prepared, Jundi well understood that Ouaida did not have professional expertise in dealing with lenders, and he understood that Jundi would need to use his own expertise to present DFP’s position in a professional and persuasive manner.
17. Crisis Between Jundi and Ouaida
[123] Shortly after BDC refused financing, Jundi learned from Loucks that the property had been transferred back to 447.[^85] He then received a communication from Nyle advising that the kiln was ready for delivery and final payment was due.[^86] Jundi went home to his family and told them that it seemed he had lost his investment, and that the business had been transferred, and that it looked like he would have to sue Ouaida. Jundi’s wife, Muskawi, urged Jundi to avoid a lawsuit, and she offered to go to “sit with” Ouaida to try to sort out a resolution. When she returned she urged Jundi to speak with Ouaida to try to reach a settlement. The two men then met, with their families, to try to sort things out.
[124] This led to a short-lived rapprochement. Jundi agreed to put a further $50,000 into the project, which was said to be roughly enough to cover the costs to close in the building and finish the construction work. The parties would roll the land into a holding company, to be held separately from the operating company.[^87]
[125] Jundi paid the $50,000.
[126] Ouaida had a company called Niagara Main Corp. incorporated to take title to the property.[^88] Ouaida and Muskawi were listed as the two directors of the company. Prior advances by Jundi were to be treated as having been advances from Muskawi.[^89] This structure seems to have been aimed at facilitating financing from TD Bank, although the details as to why this was so were not made clear in the evidence.[^90]
[127] The rapprochement collapsed on March 3, 2008, when Jundi learned that Ouaida had set things up so that he would be the sole signing authority for the company at the bank. Jundi concluded that this was yet another example of Ouaida trying to organize things in a way where he could take advantage of Jundi. Jundi and Muskawi refused to sign the documents or go any further with the proposed settlement.
[128] Ouaida claims that there was a settlement agreement and that it was breached by Jundi and Muskawi when they refused to sign the documents related to Niagara Main and carry on with the kiln business. I disagree. Jundi performed his part of the bargain by paying $50,000 for costs to finish construction. Ouaida then tried to set up the new holding company in a manner that would have permitted him to act unilaterally, a breach of the underlying agreement he had with Jundi and the premise of the so-called settlement. Jundi and Muskawi were justified in not proceeding.
[129] Matters were now at a breaking point. Jundi had advanced almost $300,000. The land had been transferred back to 447, and so Jundi had nothing to show for a year of his time and all his money. He was ready to sue.
[130] Ouaida refused to reconvey the land to DFP in the wake of the collapse of the parties’ rapprochement. Jundi then moved for and obtained a certificate of pending litigation which was registered on title to the property in June 2008, and which has remained in place ever since.
[131] At the conclusion of the evidence I ordered the property transferred back to DFP. In this regard, it is clear:
(i) Ouaida contributed the land to DFP as his capital contribution to the business;
(ii) The wood kiln and associated construction, located on the land, was paid for with Jundi’s money, and was his capital contribution to the business;
(iii) Title to the land was in the name of DFP;
(iv) Jundi and Ouaida were 50/50 shareholders, directors and operating minds of DFP, and neither Ouaida nor Jundi was entitled to dispose of company property to his own benefit without the consent of the other;
(v) Ouaida instructed Loucks to transfer the property from DFP to 447;
(vi) Loucks was the solicitor for DFP and was not entitled to accept instructions from Ouaida to transfer DFP’s property without Jundi’s consent;
(vii) Loucks knew that Jundi had not consented to the transfer.
[132] In all these circumstances, it was manifestly clear that the property should not have been transferred from DFP to 447 and that title should be restored to DFP.
Legal Principles
[133] As I wrote at the outset, this case turns on its facts. It falls within well understood principles of contract and tort law. However, Jundi and Ouaida were self-represented at trial and did not frame their arguments entirely consistently with these settled principles. I have stated and applied the principles during the course of my judgment. I summarize the principles here, with brief case citations, so that the parties will understand that these principles are firmly rooted in established precedent.
(a) Misrepresentation
[134] The elements of fraudulent misrepresentation are:
(i) the defendant made a false representation of fact;
(ii) the defendant knew the statement of fact was false or was reckless as to its truth;
(iii) the defendant made the representation with the intention that it would be acted upon by the plaintiff;
(iv) the plaintiff relied upon the statement;
(v) the plaintiff suffered damage as a result.[^91]
[135] The elements of negligent misrepresentation or negligent misstatement are:
(i) a duty of care based upon a special relationship between the plaintiff and the defendant;
(ii) a false statement by the defendant;
(iii) negligence on the part of the defendant as to the truth of the statement;
(iv) reasonable reliance by the plaintiff in the truth of the statement;
(v) the plaintiff suffering damages as a result.[^92]
[136] As between Jundi and Ouaida, this is a case of fraudulent misrepresentation. Where, as here, the fraudulent misrepresentations are “substantial” and “material”, the remedy is rescission, as described by the Supreme Court of Canada:
Where one party to a contract expresses by word or act in an unequivocal manner that by reason of fraud or essential error of a material kind inducing him to enter into the contract he has resolved to rescind it, and refuses to be bound by it, the expression of his election, if justified by the facts, terminates the contract, puts the parties in status quo ante and restores things, as between them, to the position in which they stood before the contract was entered into.[^93]
(b) Repudiation or Fundamental Breach of Contract
[137] Not every breach of contract stands as a repudiation of the contract entitling the innocent party to rescission. A fundamental breach is one that deprives the innocent party of substantially the whole benefit of the contract. In assessing whether a breach is “fundamental” the courts typically consider five factors:[^94]
(1) the ratio of the party's obligations not performed to that party's obligations as a whole;
(2) the seriousness of the breach to the innocent party;
(3) the likelihood of repetition of such breach;
(4) the seriousness of the consequences of the breach; and
(5) the relationship of the part of the obligation performed to the whole obligation.
[138] In this case there are three material breaches:
a. failure to provide objective evidence of land value;
b. failure to account for construction costs; and
c. conversion of all joint business assets.
[139] The third breach, in and of itself, is sufficient to establish fundamental breach. The totality of Ouaida’s conduct is such as to repudiate the business agreement. And when seen in the context of the fraudulent misrepresentations that induced Jundi to enter the agreement in the first place, I am satisfied that rescission is available here, and is the only practical remedy available to Jundi.
[140] There is but one complication to this analysis. The remedy of rescission is a matter of election for the innocent party.[^95]
[141] As I noted at the outset, Jundi sought a broad range of remedies in his statement of claim, including expectation interest damages and a transfer of the entire business to himself. By the end of the trial, in response to comments from the bench about the structure of available legal remedies, Jundi elected to terminate the contract rather than to continue on in the business. In the context of this case, “carrying on in the business himself” was not a remedy available to Jundi. “Carrying on in the business” would be to continue in business with Ouaida, with adjustments in the accounts between them. Ouaida evinced some willingness to go down this road; Jundi did not, for obvious reasons.
(c) Conversion
[142] In law, conversion means:
the wrongful taking, using or destroying of goods or the exercise of control over them in a manner that is inconsistent with the title of the owner. It arises when there exists an intentional exercise of control over a chattel which seriously impedes the right of the true owner to control it. What must be shown is a voluntary act in respect of another's goods which amounts to an expropriation of the owner's proprietary or possessory rights in them.[^96]
[143] The usual measure of damages for conversion is the value of the property at the time of the wrongful conversion:
In an action for conversion, the prima facie measure of damages is the goods, valued at the time of the loss. Professor Waddams in his text The Law of Damages states:
In cases of destruction or conversion of goods the prima facie measure of damage is their value at the time and place of the loss ... Justice is done to the plaintiff if a sufficient sum of money is awarded to enable her to replace the goods at the time of their loss, or at the earliest time thereafter that she could reasonably be expected to purchase a substitute ... if she chooses not to replace them she is of course free to do so — in effect deciding not to invest in ownership of such goods — but she cannot hold the defendant liable for the profit she might have made from an investment she chose to forgo.[^97]
[144] The plaintiff may be entitled to more than just the value of the wrongfully converted property in some cases:
In addition to the market value of the converted business, a plaintiff is also entitled to special damages which are not too remote: Lewis N. Klar et al., Remedies in Tort, vol. 1 (Toronto: Carswell, 2001) at 4-30. These damages may include loss of profits: Blue Cove Packing Co. v. Theodore Landry & M.C. Ltée (1981), 1981 CanLII 3639 (NB QB), 35 N.B.R. (2d) 527 (N.B. Q.B.), aff'd (1982), 1982 CanLII 4070 (NB CA), 42 N.B.R. (2d) 337 (N.B. C.A.). In Royal Bank v. W. Got & Associates Electric Ltd., 1994 CanLII 8922 (AB KB), [1994] 5 W.W.R. 337 (Alta. Q.B.), McDonald J. stated at para. 118:
In the context of the remedies for conversion, it is clear that damages for loss of profits consequential upon the wrongful taking are recoverable in addition to the value of the property will be allowed, and will not be regarded as double counting.
These findings were accepted by the majority of the Court of Appeal: 1997 ABCA 136, [1997] 6 W.W.R. 715 (Alta. C.A.). An appeal to the Supreme Court of Canada was dismissed: 1999 CanLII 714 (SCC), [1999] 3 S.C.R. 408 (S.C.C.).[^98]
[145] In this case, the “innocent party” was the owner of the property, DFP. Jundi has not followed the legal formalities to assert this claim on behalf of DFP, but I would permit any necessary amendments to the pleadings and grant any necessary leave to proceed to assert this claim on behalf of the company. It is obvious that the company’s property was taken wrongfully, which is why I summarily ordered it returned at the end of the trial.
[146] I have no evidence of the value of the property “as built” at the time of the conversion (late January 2008), at the time of the certificate of pending litigation (June 2008), or the date of return of the property to DFP (around June 2014). I view the certificate of pending litigation as having interrupted the chain of causation of consequential damages from the conversion: it was open to either side to seek a remedy to realize upon the value of the property thereafter. I would not award damages for loss of use of the property between the date of conversion and the certificate of pending litigation because none have been proved.
(d) Unconscionability
[147] A contract is unconscionable where:
(a) it is the result of unequal bargaining powers;
(b) the resulting bargain is unfair; and
(c) the defendant must have knowingly taken advantage of a vulnerable person.[^99]
[148] There must be a “high degree of unfairness” of the bargain.[^100] And there must be “abuse of the [unequal] bargaining power”.[^101]
[149] Here there is a “high degree of unfairness: the shareholders’ agreements called for Jundi to give Ouaida 12 to 14 times the value of Ouaida’s land as credit for the land. The unequal bargaining power arises not from the relative financial strength of the parties or their inherent strengths and weaknesses of intellect, frailty or human experience, but rather Jundi’s inexperience in Canadian business and law, and his unduly favourable impression of Ouaida as a result of Ouaida’s systematic misrepresentations, and Loucks’ actions to effectively side with Ouaida on this issue, without warning Jundi that he should obtain independent legal advice.
Conclusion
(a) Reconveyance of the property from 447 to DFP
[150] In paragraph 1(b) of the claim, Jundi seeks an order re-vesting title to the property in DFP. In the balance of paragraph 1, Jundi seeks consequential relief to transfer title back to DFP. I granted this relief at the end of the trial, and directed that counsel for Loucks effect the transfer. I understand from subsequent correspondence that there were issues about whether an effective transfer has taken place, but that these issues have been resolved. If there are any remaining issues as to whether effective title has been transferred from 447 back to DFP, these may be raised when the parties attend on April 30, 2015 to address costs.
(b) Remedies Against Ouaida
[151] In paragraph 2 of the claim, Jundi seeks an order that Ouaida transfer his shares in DFP to Jundi (para. 2(a)), or alternatively damages of $500,000 either for breach of contract (para. 2(b)) or alternatively for fraudulent or negligent misrepresentation (para. 2(c)).
[152] There is no legal theory advanced in this case that would entitle Jundi to a conveyance of Ouaida’s shares.
[153] Jundi is entitled to rescission and return of the money he advanced to the project. I fix the amount of that claim at $289,753.31, with interest to run from the dates of advance of the funds. I average those dates and fix the start date for interest at December 1, 2007.
[154] Jundi also seeks damages for the profits he has lost over the past many years that the business has been sitting idle. There is no basis in law for this remedy. First, Jundi is entitled to restitution, not performance as if the agreement had been kept. Second, either he or Ouaida could have taken steps to realize upon the capital value of the business while this litigation was outstanding – whether by seeking an order for sale of the business, or for appointment of a receiver to run the business. Jundi took steps in 2008 to prevent Ouaida from carrying on with the business unilaterally.[^102] Neither Jundi nor Ouaida took further steps to ameliorate the consequences of their business paralysis. Jundi is now restricted to interest for the loss of use of his capital, and Ouaida will be stuck with his carrying costs for this idle property over the past seven years.
(c) Remedies Against Loucks
[155] I directed counsel for Loucks to prepare and register the transfer of the property back to DFP. In this way, Loucks has borne some of the cost of rectifying the damage caused by the wrongful transfer of the land.
[156] The wrongful transfer of the property did cause some specific damage, however: it put Jundi to the expense of obtaining a certificate of pending litigation. Once that was obtained, Loucks’ conduct in transferring the property could cause no further damage. I consider that Loucks should be responsible for the costs of rectifying title, which I will address during costs submissions.
[157] Jundi pleaded that Loucks wrongfully obtained documents from BDC on the false premise that Loucks was acting for Jundi.[^103] This issue does not rise above a documentary production issue, and that was resolved before trial when the documents were disclosed.
(d) The Claim Against Corbett
[158] As noted above, although Corbett’s valuation opinion was so bad that he might not be able to avail himself of the privative clause in it, none of that matters: the opinion was not relied upon by Jundi or DFP and caused no damage to Jundi or DFP. For this reason alone, the claim against Corbett must be dismissed.
[159] Jundi filed a copy of a decision of the Real Estate Council of Ontario which concluded that Corbett “provided a letter of opinion with a valuation for the property in question without proper qualification and/or experience to render same, given its contents.”[^104] As I explained to Jundi at trial, this document is not admissible to show that Corbett fell below a particular standard of care relevant to this proceeding.[^105] It might be admissible for purposes of cross-examining Corbett, however Corbett did not testify.
[160] Since Jundi did not rely to his detriment on Corbett’s opinion, this court need not decide whether Corbett’s opinion fell below an applicable standard of care.[^106] Proving detrimental reliance, and loss arising from detrimental reliance, are fundamental parts of the plaintiff’s burden – the burden to prove that the allegedly wrongful conduct caused loss to the plaintiff.[^107]
(e) Claim Against 447
[161] In paragraph 1 of the claim, Jundi seeks return of the property from 447 to DFP. I granted this relief at the conclusion of the trial. Jundi also claims damages from 447 for conversion of the property and interference with Jundi’s economic interests. As explained above, the chain of causation of damages was broken when the certificate of pending litigation was obtained, and no damages were proved prior to the certificate that are not addressed fully by restoring the property to DFP.
(f) Punitive Damages
[162] There is no basis for punitive damages against any defendant other than Ouaida. He is the one who acted with moral turpitude.
[163] Punitive damages should only be awarded in commercial contexts in exceptional cases. The goal of these damages is not to compensate the plaintiff but to punish the defendant’s misconduct, to deter others from similar conduct, and to denounce and condemn bad behviour.[^108]
[164] I consider that punitive damages are warranted in this case. Ouaida has not been out any significant money over the past seven years: his land has been an inert asset, but it is still there – whether it has appreciated over the past seven years will not be known until it is sold.
[165] In addition, it seems clear that Ouaida converted money to his own benefit paid by Jundi to 447 for construction purposes. There was evidence of his paying family credit card expenses, property tax arrears for which 447 was responsible, and other personal expenses. BDC identified roughly $40,000 in apparently personal expenses in its review of the documents Ouaida provided to them to establish the construction costs. On my findings, DFP paid about $215,000 to 447, and yet 447’s actual construction costs were about $163,000, a difference of about $52,000. I cannot be more precise about money diverted from the project because Ouaida failed to account for the construction costs.
[166] Ouaida has lied to Jundi and misappropriated his money. His behaviour has been atrocious. I award punitive damages of $50,000, payable by Ouaida to Jundi. I recognize that this will be a windfall for Jundi, if he is able to collect it, but it is warranted to punish the misconduct in this case.
(g) What to do with DFP
[167] If Ouaida pays this judgment, then Jundi’s shares will be cancelled and Ouaida will be the sole shareholder of DFP. Jundi remains a shareholder until that happens. Neither party has sought a winding-up order or appointment of a receiver in respect to DFP. It is necessarily the case, however, that either the company should revert to Ouaida after payment of the judgment, or its assets should be sold to satisfy Jundi’s judgment, with any surplus to be payable to Ouaida.
[168] Ouaida raised the issue of his carrying costs for the property over the course of the litigation. If Ouaida and Jundi were staying together in the business, Ouaida would be entitled to credit for what he has paid to carry the business assets while this litigation was ongoing. However, I am granting Jundi a restitutionary remedy permitting him to avoid the contract from the outset. He is entitled to get his money back and will not be responsible for any of the carrying costs. That is the consequence of Ouaida having induced Jundi into the agreement dishonestly. There may be a small silver lining to this result for Ouaida. Ouaida has had the property up for sale for an asking price of $1.695 million.[^109] Ouaida obtained a report from Coldwell Banker suggesting that the property be sold at an asking price of $965,000, with a potential sale being negotiated with any serious offeror. The judgment in favour of Jundi is about $300,000, plus interest, plus $50,000 punitive damages, plus costs. If the property is sold for enough, Ouaida may yet realize some return on this venture. Only time will tell.
Conduct of the Trial
[169] This action was set down in December 2012. In the spring of 2013 the trial was scheduled for two weeks starting January 6, 2014.
[170] On the first day of trial, Ouaida appeared in person, without counsel, and requested an adjournment. He had removed his solicitors of record in mid-December, at their request, and had not been able to locate new counsel to represent him at trial in such a short period, a difficulty exacerbated by his absence from Canada for much of the period between mid-December and the start of trial.
[171] I was very concerned about these circumstances. It is not open to counsel to abandon a case on the eve of trial when it may leave a party unable to defend himself or all parties in the position of having to endure a lengthy adjournment. This case was commenced in 2008 and cried out to be concluded.
[172] I adjourned the case for two days and gave directions that former counsel attend with an explanation for her departure from the case in mid-December. Counsel appeared two days later.
[173] As is so often the case in litigation, it pays to hear from all sides. Counsel had left the case because she had not been paid. This issue had been raised with Ouaida long before December 2013. He promised to pay the outstanding accounts and to provide a retainer for trial. Then he left the country without notice to his lawyer without making the promised payments. Then counsel was removed from the record by Ouaida, at counsel’s request, to avoid the unnecessary cost of a motion from counsel to get off the record.
[174] The disagreement between counsel and Ouaida was solely over these financial issues. Counsel had been on the record throughout the proceeding. There was no reason to suppose that Ouaida would be able to retain alternative counsel less expensively. To the contrary, new counsel would face considerable additional burdens to prepare for trial.
[175] I concluded that Ouaida had failed to conduct himself as a responsible litigant, and refused to adjourn the trial to enable Ouaida to retain new counsel. I adjourned the trial for five days to enable Ouaida to prepare himself, as best he could, to present his own case. The trial then commenced on January 13, 2014. As a result of this rocky start, the trial was not completed as scheduled in January 2014, and was ultimately not completed until April 11, 2014, with costs submissions delivered by May 30, 2014.
Claims by Jundi’s Former Solicitors
[176] In separate proceedings, Jundi challenges the Assessment Officer’s assessment of accounts from his former solicitors, Swanick & Associates. The solicitors seek a charging order over Jundi’s judgment in this case. I adjourned these matters to be addressed upon release of this judgment. The parties to that proceeding should attend on April 30, 2015, not to argue those matters on the merits, but to schedule a return date and to speak to any interim orders that may be required.
[177] I would ask that Mr Loucks’ solicitor prepare a draft judgment because Jundi is self-represented.
[178] Judgment accordingly.
D.L. Corbett J.
Date: April 27, 2015
[^1]: Minor typographical errors have been corrected in paragraphs 16, 131, 145, 155 and 168.
[^2]: No relation of the trial judge.
[^3]: Exhibit 5, tab 79.
[^4]: Many of these statements attributed to Ouaida were also set out by him in a promotional document: see Exhibit 1, tab 14.
[^5]: See Exhibit 1, tab 3.
[^6]: See Exhibit 1, tab 9; Exhibit 19, tab C.
[^7]: Exhibit 1, tab 2.
[^8]: Ouaida transcript, Q. 38, read-in by Jundi.
[^9]: Ouaida continued to claim, in general terms, that he held cutting rights during examinations for discovery. He also took the position in his answers to undertakings that these rights were not relevant to this proceeding (Exhibit 1, tab 102, QQ. 141-142). It was only following Master Muir’s order for specifics of these rights that he acknowledged that he did not have any: see Exhibit 1, tab 36.
[^10]: Exhibit 1, tab 104, first page.
[^11]: Exhibit 1, tab 104, third page. The admission, finally given in 2013, that there are no cutting rights conflates actual hardwood cutting rights with potential softwood cutting rights: all the pine trees in Newfoundland would not add one board-metre of oak or maple to DFP’s inventory.
[^12]: Ouaida transcript, Q. 33, read-in by Jundi.
[^13]: Ouaida transcript, QQ. 53-62, read-in by Jundi.
[^14]: It was incorporated on May 28, 2007: Exhibit 1, tab 4.
[^15]: Exhibit 1, tab 5.
[^16]: Ouaida transcript, Q. 68, read-in by Jundi.
[^17]: Exhibit 1, tab 6.
[^18]: Exhibit 1, tab 102; Ouaida transcript, QQ. 139-140, 143
[^19]: Exhibit 1, tab 8; Ouaida transcript, Q. 67, read-in by Jundi.
[^20]: Exhibit 1, tab 7; Ouaida transcript, Q.52, read-in by Jundi.
[^21]: Ouaida transcript, Q. 66, read-in by Jundi.
[^22]: Ouaida transcript, Q. 90, read-in by Jundi.
[^23]: Ouaida transcript, Q. 68, read-in by Jundi.
[^24]: Ouaida transcript, Q. 109, read-in by Jundi.
[^25]: Exhibit 1, tab 11. Mr Wick was summarizing information provided by Ouaida in the meeting; he was not vouching for the truth of this information.
[^26]: For example, Exhibit 1, tab 35.
[^27]: Exhibit 5, tabs 1 and 2.
[^28]: Exhibit A, tab 5.
[^29]: Exhibit 1, tab 28.
[^30]: Potential sites provided to Jundi by a real estate agent were in the GTA: see Exhibit 1, tab 16.
[^31]: The property was listed by Corbett’s firm on January 9, 2007.
[^32]: Exhibit 1, tab 24; Exhibit 5, tab 16.
[^33]: Exhibit 5, tab 14.
[^34]: The value was typed as $350,000, and reduced in handwriting to $300,000, and initialled by both Ouaida and Jundi: Exhibit 1, tab 27.
[^35]: Exhibit 1, tab 27.
[^36]: Exhibit 2, tab B.
[^37]: Exhibit 1, tab 110.
[^38]: This view was generally correct, as shown at Exhibit 1, tab 49, fourth page, where a requirement is stated for an appraisal from an A.A.C.I. certified appraiser. BDC subsequently requested an appraisal and when one was not received, conducted its own informal appraisal that led it to decline to participate further in the transaction.
[^39]: Exhibit 5, tab 20.
[^40]: Exhibit 5, tab 24.
[^41]: Statement of Claim, para. 34(i) and (ii).
[^42]: Exhibit 5, tabs 4 and 5; Exhibit 1, tab 17.
[^43]: Exhibit 1, tabs 17 and 18; Exhibit 1, tab 18.
[^44]: Exhibit 1, tab 22.
[^45]: Exhibit 1, tab 33; Exhibit 19, tab A.
[^46]: Exhibit 1, tab 38.
[^47]: Exhibit 6, tabs 2 and 4.
[^48]: Based on a quotation from Better Built Dry Kilns: Exhibit 1, tab 22.
[^49]: Exhibit 1, tab 20 contains notes to this effect, which were explained in detail by Jundi during his testimony-in-chief.
[^50]: Exhibit 5, tab 34.
[^51]: See Exhibit 1, tabs 20-25.
[^52]: Exhibit 6, tab 1, p. 277.
[^53]: Exhibit 6, tab 1, pp. 278-280.
[^54]: Exhibit 1, tab 38.
[^55]: Exhibit 19. Tab C, p.11; Exhibit 1, tab 11, third last page.
[^56]: The company information form discloses that the directors are Ouaida, his daughter Nadina Ouaida, and his son-in-law Craig Foley. The letter from the company is signed by Foley, and thus is not obviously not at arm’s length.
[^57]: Statement of Defence and Counterclaim of Ouaida and 447, para. 16 et seq.
[^58]: See for example Exhibit 1, tabs 43 and 51.
[^59]: Exhibit 1, tab 40.
[^60]: See Exhibit 1, tab 41, where Jundi has provided a summary of the problems with one of Ouaida’s lists. This summary was explained in testimony, and is not primary evidence but rather an aide to understanding Jundi’s oral evidence, which it accurately summarizes. See Exhibit 1, tab 116, for Ouaida’s handwritten summaries which purports to show total costs at $1,755,771.29 as of May 2008.
[^61]: Exhibit 1, tab 36,
[^62]: Exhibit 4.
[^63]: Exhibit 7, p.2.
[^64]: Exhibit 6, tab 14.
[^65]: Any minor arithmetical error in calculating this total may be addressed on April 30, 2015.
[^66]: Exhibit 13, p.2.
[^67]: Exhibit “B”. When Ouaida tendered the written “opinion”, I advised him that there were several problems with it. First, as a report, it was delivered well after the deadline for exchange of expert reports. Second, it did not contain an opinion of value, but a strategy for selling the property. Third, although the proposed expert was from a different office from the defendant Corbett, he worked at the same firm, and might not be considered independent of the parties as a result, and therefore might not be accepted as an expert in this case. Ouaida did not seek to call this expert during presentation of his case.
[^68]: Statement of Claim, para. 27.
[^69]: Exhibit 19, tab L.
[^70]: Exhibit 19, tab M.
[^71]: Exhibit 5, tab 43.
[^72]: Exhibit 5, tab 43, p.479.
[^73]: Exhibit 5, tab 49.
[^74]: Exhibit 1, tabs 1 and 61.
[^75]: Exhibit 1, tab 85.
[^76]: Statement of Claim, para. 34(iv).
[^77]: Statement of Claim, para. 36; Exhibit 1, tabs 85 and 86..
[^78]: Exhibit 1, tab 55, p.2.
[^79]: Jundi obtained a copy of the letter opinion from BDC on June 20, 2008, long after any detrimental reliance could have been placed by him on the opinion: Exhibit 1, tab 55.
[^80]: Exhibit 19, tab L.
[^81]: Exhibit 1, tab 63; Exhibit 6, tab 12.
[^82]: Exhibit 1, tab 65; Exhibit 6, tab 13..
[^83]: Exhibit 5, tab 53.
[^84]: Statement of Claim, para. 26.
[^85]: Exhibit 1, tab 66.
[^86]: Exhibit 1, tab 67.
[^87]: It was never clear to me why a separate holding company to hold the land was part of a solution to the conflict between Jundi and Ouaida. Jundi testified that this was Ouaida’s requirement and that he saw nothing wrong with using a holding company, which would enable him to split income with his wife.
[^88]: Exhibit 1, tab 69; Exhibit 19, tab D.
[^89]: Exhibit 5, tab 60.
[^90]: Exhibit 5, tabs 64 and 65.
[^91]: Mariani v. Lemstra (2004), 2004 CanLII 50592 (ON CA), 246 D.L.R. (4th) 489, 27 C.C.L.T. (3d) 261; 39 C.L.R. (3d) 71 (Ont. C.A.), para. 12.
[^92]: Mariani v. Lemstra, supra., para. 19, citing with approval Hedley Byrne & Co. v. Heller & Partners Ltd., [1964] A.C. 465.
[^93]: Guarantee Co. of North America v. Gordon Capital Corp., [1993] 3 S.C.R. 423, para. 45-47, per Iacobucci and Bastarache JJ., quoting with approval from Abram Steamship Co. v. Westville Shipping Co., [1923] A.C. 773 at 781 (H.L.).
[^94]: Place Concorde East Ltd. Partnership v. Shelter Corp. of Canada Ltd. (2006), 2006 CanLII 16346 (ON CA), 211 O.A.C. 141 (Ont. C.A.); Spirent Communications of Ottawa Ltd. v. Quake Technologies (Canada) Inc., 2008 ONCA 92, 291 D.L.R. (4th) 163; leave to appeal to the SCC refused: [2008] SCC No. 151, 2008 CarswellOnt 4317.
[^95]: Guarantee Co. of North America v. Gordon Capital Corp., [1993] 3 S.C.R. 423, para. 40, per Iacobucci and Bastarache JJ.
[^96]: Shibamoto & Co. v. Western Fish Producers Inc. (Trustee of), 1991 CanLII 13562 (FC), [1991] 3 F.C. 214 (T.D.), aff’d. (1992), 145 N.R. 91 (Fed. C.A.) at para. 25. See also Boma Manufacturing Ltd. v. Canadian Imperial Bank of Commerce, 1996 CanLII 149 (SCC), [1996] 3 S.C.R. 727 at para. 31.
[^97]: Tridont Leasing (Canada) Ltd. v. Saskatoon Market Mall Ltd. (1995), 1995 CanLII 3973 (SK CA), 131 Sask. R. 169 at para. 40.
[^98]: Klewchuk v. Switzer, 2003 ABCA 187, [2003] 11 W.W.R. 284 (Alta. C.A.) at para. 59-60, leave to appeal refused (2004 CarswellAlta 426 (S.C.C.)).
[^99]: Gymiah v. Toronto Hydro-Electric System Ltd., 2013 ONSC 2920 (Div. Ct.); Titus v. William F. Cooke Enterprises Inc. (2007), 2007 ONCA 573, 284 D.L.R. (4th) 734 (Ont. C.A.).
[^100]: Birch v. Union of Taxation Employees Local 70030 (2008), 2008 ONCA 809, 93 O.R. (3d) 1, paras. 43, 45, leave to appeal to S.C.C. refused [2009] S.C.C.A. 29, citing with approval Harry v. Kreutziger (1978), 1978 CanLII 393 (BC CA), 95 D.L.R. (3d) 231 at 237 (B.C.C.A.).
[^101]: Birch., ibid., at paras. 44-45, citing with approval Fraser Jewellers (1982) Ltd. v. Dominion Electric Protection Co. (1997), 1997 CanLII 4452 (ON CA), 34 O.R. 1 at 11 (C.A.).
[^102]: Exhibit 19, tabs U and V.
[^103]: Statement of Claim, para. 36; Exhibit 1, tabs 85 and 86.
[^104]: Exhibit 1, tab 100.
[^105]: See, for example, Galambos v. Perez, [2009] S.C.R. 247, para. 29.
[^106]: The opinion was so grossly wrong that perhaps the court would have come to the conclusion that it was demonstrably negligent on its face; if not, this aspect of the claim would likely have foundered because the plaintiff led no evidence on the standard of care: see Krawchuk v. Scherbak (2011), 2011 ONCA 352, 106 O.R. (3d) 598 (C.A.), paras. 130, 135. I want to be clear, however, that I do not decide the case on this basis. The plaintiff mistakenly believed that he could establish negligence with the findings of the Real Estate Council, and I might well have granted an adjournment to the plaintiff to obtain expert evidence on this point rather than dismiss this claim for want of proof: it seems probable that the opinion was grossly negligent, and a meritorious claim should not fail just because a self-represented litigant does not understand evidence law.
[^107]: Roncato v. Caverly (1991), 5 O.R. (3d) 74 (C.A.).
[^108]: Whiten v. Pilot Insurance Co., 2002 SCC 18, [2002] 1 S.C.R. 595 (S.C.C.); Ward v. Manufacturer’s Life Insurance Co. (2007), 2007 ONCA 881, 288 D.L.R. (4th) 733, para. 50 (Ont. C.A.).
[^109]: Exhibit 1, tab 98. Corbett testified on discovery that this offering number was Ouaida’s number: Corbett Transcript, QQ 97-98, read-in at trial by Jundi.