Editor’s note: Corrigendum released on July 6, 2016. Original judgment has been corrected with text of corrigendum appended.
Court File and Parties
COURT FILE NO.: l83/16 DATE: 20160628
SUPERIOR COURT OF JUSTICE – ONTARIO
RE: Global Royalties Limited and Benchmark Conversion International Limited O/A BCI, Plaintiffs /Respondents
AND:
DAVID BROOK, ANNA BROOK, 2323593 ONTARIO INC., GEOFFREY BLACK aka GEOFF BLACK, GRIFFIN & HIGHBURY INC., DARIO BERIC aka DARIO BERICMASKAREL, DIKRAN KHATCHERIAN aka DIKO KHATCHERIAN aka DANNY MATAR, LESLIE FROHLINGER aka LES FROHLINGER, DIVERSITY WEALTH MANAGEMENT INC., DIVERSITY WEALTH MANAGEMENT HOLDINGS INC. and BDO CANADA LIMITED IN ITS CAPACITY AS TRUSTEE OF THE ESTATE OF THE BANKRUPT DAVID BROOK, Moving Party, Applicant/Defendant
BEFORE: C. Horkins J.
COUNSEL: Harvey Stone, for the Plaintiffs /Respondents Russell Bennett, for the Defendant/Appellant David Brook
HEARD at Toronto: In writing
Endorsement
[1] The defendant David Brook (“Brook”) seeks leave to appeal from the order of Justice Penny (“the motion judge”) dated April 4, 2016. In that order, the motion judge ordered Brook to pay three previous costs orders totaling $40,250 plus interest, as a condition of his order, setting aside a noting of default against Brook and allowing him to file his statement of defence.
[2] Brook was a long time former employee of the plaintiffs who was fired for cause. The relevant allegations in the statement of claim are that Brook breached fiduciary duties owed to the plaintiffs, defrauded the plaintiffs and misappropriated sales, revenue and business opportunities from the plaintiffs and that the other defendants knowingly assisted Brook in his dishonest and fraudulent behavior. It is alleged that Brook falsely represented sales and marketing figures to the plaintiffs and that he wrongfully copied and removed client files from the plaintiffs’ office and fraudulently diverted sales, revenues and clients from the plaintiffs to his new venture.
[3] Brook was deemed bankrupt on February 27, 2015. He is an undischarged bankrupt.
[4] On October 8, 2015, Penny J. ordered that the plaintiffs’ claims for declaratory and injunctive relief claimed against Brook, and the plaintiffs’ claims for monetary damages against Brook that relate to actions and claims that post-date Brook’s February 27, 2015 date of bankruptcy, “are not claims provable in bankruptcy and are not stayed by the operation of s. 69.3 of the Bankruptcy and Insolvency Act.”
[5] The test for granting leave to appeal under Rule 62.02(4) (a) and (b) of the Rules of Civil Procedure is well-settled. It is recognized that leave should not be easily granted and the test to be met is a very strict one. There are two possible branches upon which leave may be granted. Both branches involve a two-part test and, in each case, both aspects of the two-part test must be met before leave may be granted.
[6] Brook only relies on rule 62.02(4)(b). To obtain leave, Brook must establish that there is reason to doubt the correctness of the order in question and that the proposed appeal involves matters of such importance that leave to appeal should be granted. It is not necessary that the judge granting leave be satisfied that the decision in question was actually wrong – that aspect of the test is satisfied if the judge granting leave finds that the correctness of the order is open to “very serious debate”: Nazari v. OTIP/RAEO Insurance Co., [2003] O.J. No. 3442 (S.C.); Ash v. Lloyd’s Corp. (1992), 8 O.R. (3d) 282 (Gen. Div.). In addition, the moving party must demonstrate matters of importance that go beyond the interests of the immediate parties and involve questions of general or public importance relevant to the development of the law and administration of justice: see Rankin v. McLeod, Young, Weir Ltd. (1986), 57 O.R. (2d) 569 (H.C.J.); Greslik v. Ontario Legal Aid Plan (1988), 65 O.R. (2d) 110 (Div. Ct.).
[7] The test for leave to appeal is particularly onerous in the case of an appeal from a costs award, which is a discretionary order, and "the judge of first instance is in the best position to determine the entitlement, scale and quantum of any such award". As Molloy J. stated in Bell Expressvu Limited Partnership v. Pieckenhagen, 2013 ONSC 2690:
An award of costs involves the motion judge's exercise of discretion, which is entitled to a high degree of deference. Leave to appeal costs must be granted sparingly and only in obvious cases where the Court is satisfied that there are "strong grounds" upon which an appellate court could find that the motions judge exercised his discretion on a wrong principle or is plainly wrong: Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, [2004] 1 S.C.R. 303; Adrian v. Napa Valley Plaza Inc., 2011 ONSC 2168.
[8] Brook states that there is good reason to doubt the correctness of the motion judge’s order. This is because the motion judge required him to provide evidence showing that he was impecunious, to avoid the condition that he pay the costs orders, as a term of the order setting aside the noting in default.
[9] Brook states that he was in a financially worse situation than being impecunious, because he is bankrupt. Therefore he argues that it was wrong in law for the motion judge to require evidence of his impecuniosity, when he is an undischarged bankrupt, a condition that is worse than impecuniosity.
[10] There is no reason to doubt the correctness of the motion judge’s order. On the motion the plaintiffs filed evidence that led the motion judge to conclude that a finding of impecuniosity was not possible. Brook relied on the “bald conclusory statement” that he is an undischarged bankrupt and cannot pay costs. The motion judge noted that the plaintiffs filed evidence “to the effect that Brook was not forthright in his disclosure to the Trustee and he has assets that were not disclosed. This includes some income splitting diversions of money to his wife, a condominium in the Philippines and a number of luxury vintage cars in storage in Canada and in the UK.” Brook filed no evidence in response and did not cross-examine the plaintiffs on their affidavit.
[11] Given this unchallenged evidence, I find that the motion judge’s order is not open to “very serious debate”. There is no reason to doubt the correctness of his order.
[12] Both parts of the rule 62.02(4)(b) test must be met to obtain leave. Brook has failed to meet part one. While this alone is reason to dismiss his motion for leave, I add that the proposed appeal does not involve matters of such importance that leave to appeal should be granted.
[13] Brook says that he meets part two of the test because he says the plaintiffs are benefiting from their own wrong-doing, in that they noted him in default pending a stay of proceedings under s. 195 of the BIA. First, there has been no finding of any wrong-doing and in any event this is a private dispute between parties that does not engage part two of the test. The proposed appeal does not involve matters of importance that go beyond the interests of the immediate parties and involve questions of general or public importance relevant to the development of the law and administration of justice.
[14] For the reasons noted, Brook’s motion for leave to appeal the order of Justice Penny dated April 4, 2016 is dismissed.
[15] The plaintiffs are entitled to their costs of this motion as they were successful. I allow costs on a partial indemnity basis fixed at $5000 all inclusive, payable by Brook to the plaintiffs within 30 days.
C. Horkins J.
Date: June 28, 2016
Corrigendum
COURT FILE NO.: l83/16 DATE: 20160706
SUPERIOR COURT OF JUSTICE – ONTARIO
RE: Global Royalties Limited and Benchmark Conversion International Limited O/A BCI, Plaintiffs /Respondents
AND:
DAVID BROOK, ANNA BROOK, 2323593 ONTARIO INC., GEOFFREY BLACK aka GEOFF BLACK, GRIFFIN & HIGHBURY INC., DARIO BERIC aka DARIO BERICMASKAREL, DIKRAN KHATCHERIAN aka DIKO KHATCHERIAN aka DANNY MATAR, LESLIE FROHLINGER aka LES FROHLINGER, DIVERSITY WEALTH MANAGEMENT INC., DIVERSITY WEALTH MANAGEMENT HOLDINGS INC. and BDO CANADA LIMITED IN ITS CAPACITY AS TRUSTEE OF THE ESTATE OF THE BANKRUPT DAVID BROOK, Moving Party, Applicant/Defendant
BEFORE: C. Horkins J.
COUNSEL: Harvey Stone, for the Plaintiffs /Respondents Russell Bennett, for the Defendant/Appellant David Brook
HEARD at Toronto: In writing
ERRATUM OF ENDORSEMENT RELEASED JUNE 28, 2016
[16] The following date replaces the date (DATE: 20160826) appears on the top right hand corner of the first page of the original endorsement issued on June 28, 2016:
DATE: 20160628
[17] All other contents in the endorsement remain unchanged.
C. Horkins J.
Date: July 6, 2016