



COURT OF APPEAL FOR ONTARIO

CITATION: Canadian National Railway Company v. Crosslink
    Bridge Corp., 2019 ONCA 349

DATE: 20190430

DOCKET: C66047

Doherty, Paciocco and Zarnett JJ.A.

BETWEEN

Canadian National
    Railway Company

Plaintiff

and

Crosslink Bridge Corp.,
    Andrew Penuvchev
, Zoran Cocovski, also known as Zoran Cocov and the law
    firm of Thompson Dymond

Defendants (
Appellants
)

Geoff R. Hall and Adam Goldenberg, for the appellants

Michael R. Kestenberg and David S. Lipkus, for the third
    party respondent Philip Thompson

Peter J. Osborne and Jessica Starck, for the third party
    respondent McMillan LLP

Heard: April 17, 2019

On appeal from the order of Justice Dietrich of the
    Superior Court of Justice, dated November 21, 2018, reported at 2018 ONSC 5475.

REASONS FOR DECISION

[1]

In October 2008, the appellant, Crosslink Bridge Corp. (Crosslink),
    purchased a tract of railway land in Niagara Falls from CDN Railway Co. (CN).
    CN took a mortgage back as part of the purchase price. The appellant, Dr.
    Andrew Penuvchev, one of the owners of Crosslink, provided a personal guarantee
    on the mortgage. In November 2012, Crosslink defaulted on the mortgage and CN sued
    on the mortgage and on the guarantees.

[2]

The appellants responded to CNs lawsuit by bringing an
    application for an order under s. 197 of the
Environmental Protection Act
, R.S.O. 1990, c. E-19 (EPA) for an order voiding
    the sale of the railway lands. The appellants claimed that CN had failed, as
    required by s. 197(1) of the
EPA
to provide the appellants, prior to the sale, with a
    copy of the Directors order, issued under s. 18 of the EPA that had been
    registered on title prior to the sale. The application judge found that Crosslink,
    or its solicitors, had received a copy of the Directors order and dismissed
    the application. This court affirmed that decision:
Crosslink
    Bridge Corp. v. Canada National Railway
,
    2013 ONSC 6540, affd 2014 ONCA 247.

[3]

The appellants also
    defended CNs claim and commenced a third party action. In the third party
    claim, the appellants sued McMillan LLP, Philip Thompson and Marssa Giahi (the
    respondents) for solicitors negligence in respect of Crosslinks purchase of
    the railway lands from CN. The respondents successfully moved for summary
    judgment, dismissing the third party claim.

[4]

This is an appeal from
    the dismissal of that claim as against all of the respondents.

[5]

Crosslink retained
    McMillan to provide advice in respect of a draft agreement for the purchase of
    the property prepared by CN in January 2007. Crosslink retained Mr. Thompson
    and Ms. Giahi about 18 months later to close a transaction involving the
    purchase of the same land. The negligence claims against all three respondents relate
    essentially to their failure to properly advise the appellants of the Directors
    order that was registered on title on the land as of December 21, 2006, and the
    failure to advise Crosslink of the ramifications of that order. The analysis of
    the claims, however, requires a separate consideration of the claim against
    McMillan LLP on the one hand, and the claims against Mr. Thompson and Ms. Giahi
    on the other.

[6]

The grounds of appeal
    fall into two categories. First, the appellants submit that the motion judge
    erred in her application of the principles governing rule 20 and in her
    understanding of the fact-finding powers available under that provision.
    Second, the appellant submits that even if the motion judge properly understood
    and applied the rule 20 principles, she erred in finding that there was no
    genuine issue for trial. Counsel contends that the nature and scope of the duty
    owed by the respondents to the appellants in the particular circumstances could
    only be determined at a trial. Counsel further submits that crucial questions
    of fact, such as whether the appellants were made aware of the Directors
    order, required a trial. Finally, counsel contends that various factual issues relating
    to causation also required a trial.

The Applicable Rule 20
    Principles

[7]

The motion judge expressly identified the operative principles (paras.
    45-51). She then engaged in the rule 20 analysis by addressing those principles
    in the context of the case. In doing so, she identified the essential elements
    of the claim (para. 55), the position of the appellants in respect of the claim
    (para. 53), and the appellants ultimate legal burden in respect of the issues
    (para. 57). All of those considerations properly inform a determination of
    whether, as the motion judge said at para. 50:

The third parties [respondents] have met their burden to prove
    there is no genuine issue to be tried on liability.

[8]

We do not accept the appellants argument that the motion judge
    misplaced the burden of proof on a summary judgment motion, when in para. 57
    she referred to the appellants as having not met their burden. That reference
    must be read along with the analysis in the previous seven or eight paragraphs.
    The motion judge was satisfied that the respondents had demonstrated that this
    was an appropriate case to use the fact-finding powers under rule 20.04(2.1)
    and that the evidence demonstrated no genuine issue for trial. The reference in
    para. 57 comes after an overview of the appellants case and is, in our view, a
    finding that the appellants had not rebutted the case for summary judgment put
    forward by the respondents.

[9]

There is no error
in the
    motion judges exercise of her fact-finding powers under rule 20.04(2.1). She
    drew inferences that were crucial to her determination of the motion (see
    paras. 60, 85). She identified the primary facts from which she drew those
    inferences. The inferences were within the range of reasonable inferences
    available. For example, her finding that Mr. Weber, a lawyer at McMillan,
    discussed environmental due diligence concerns with the appellants and was told
    not to do any due diligence himself, is a reasonable inference from the
    documentation presented on the motion and from the evidence of Mr. Cocov, the
    person who was effectively driving the transaction on behalf of Crosslink at
    the time.

[10]

Some motion judges may
    not have drawn the inferences that this motion judge chose to draw. However,
    the fact-finding power in rule 20.04(2.1) describes a range of acceptable fact-finding.
    It is not surprising, nor is it error, that different motion judges may engage in
    that fact-finding power somewhat more or less aggressively in any given
    situation. The question for the appeal court is whether a particular motion
    judge stayed within the range provided by the rule in making his or her factual
    findings. The findings of fact made by this motion judge were well within the
    range contemplated by rule 20.04(2.1).

[11]

The appellants further
    submit that the motion judge went beyond the limits of her fact-finding
    capability when she rejected outright the uncontradicted evidence of the
    appellants expert. That expert had opined that all of the respondents failed
    to meet the standard of care expected of a reasonable solicitor in their
    dealings with the appellants as they related to the CN railway lands.

[12]

The motion judge
    considered the experts evidence (paras. 91-94). She did not, as counsel for
    the appellants argued, declare the evidence inadmissible. Rather, she decided
    that the evidence was not helpful for several reasons. In particular, the
    motion judge observed that the expert had not seen many of the relevant
    documents before advancing his opinion, and was unaware of various factors that
    the motion judge considered to be central to a proper determination of the
    nature of the duty of care owed by the respondents in the circumstances of the
    case. All of the factors identified by the motion judge are properly taken into
    account in assessing the probative value of an experts opinion. Nothing in the
    language of rule 20 prevents resort to those factors on a summary judgment
    motion as long as doing so is consistent with a fair and just determination on
    the merits.

The Case Against McMillan

[13]

The
    appellants were aware that the land was contaminated from the outset of the
    negotiations. Mr. Cocov, who with Mr. Penuvchev controlled Crosslink, was an experienced
    real estate developer. He had prior experience with contaminated railway lands
    and was the driving force behind this negotiation. Mr. Penuvchev, who was a
    dentist, relied on Mr. Cocov throughout the negotiations.

[14]

The appellants complaint is not that McMillan did not
    inform them of possible contamination problems, but that McMillan did not
    inform them that there was a Directors order on title as of December 21, 2006.
The appellants claim that the respondents
    had a duty to bring this fact to the appellants attention and explain its
    potential impact on the proposed purchase of the land.

[15]

Crosslink retained
    McMillan in January 2007 in respect of their first attempt to purchase the
    railway lands. In January and February, Mr. Weber commented on an initial draft
    of a purchase agreement that had been prepared by CN. Mr. Weber proposed
    various changes to the draft. These changes included one which would give
    Crosslink a period of environmental due diligence before the deal closed, and
    another which would not have required Crosslink to take title, subject to a Directors
    order, as that order would not fall within Mr. Webers proposed definition of
    permitted encumbrance.

[16]

Mr. Weber specifically
    cautioned the appellants in a note on the amended draft that matters of
    environmental due diligence required further discussion. Mr. Weber also
    confirmed that he had not conducted any due diligence in connection with the
    property. The motion judge found that:

Mr. Weber discussed
    environmental due diligence, including the related encumbrance on title, with
    the client and that he was instructed to proceed to amend the CN template
    agreement provided to him without conducting any due diligence himself.

[17]

After
    receiving Mr. Webers input in February 2007, Crosslink, and in particular Mr.
    Cocov, continued negotiations with CN. McMillan had no involvement in any of
    these negotiations and no knowledge of the materials being exchanged by
    Crosslink and CN. An agreement between Crosslink and CN finalized in July 2007
    without any input from McMillan.

[18]

The
    documents provided to Crosslink by CN in March 2007 included documents that
    contained or referred to the Directors order. After receiving this material,
    and without any contact with McMillan, Crosslink advised CN in April 2007 that
    it had approved the environmental reports provided by CN. Crosslink received
    similar environmental disclosure in August 2007. Once again, it did not advise
    or consult McMillan about anything arising from this material.

[19]

In
    March 2008, after extensions, the July 2007 agreement between Crosslink and CN
    expired. It never closed. McMillans only involvement in the agreement arose
    out of the comments Mr. Weber had made on a draft agreement about a year
    earlier.

[20]

Crosslink,
    without any input from McMillan, continued to pursue the purchase of the land.
    After receiving advice from a planning consultant retained by Crosslink that
    the environmental status of the land would not foreclose its use for commercial
    purposes, Crosslinks intended purpose, Crosslink once again negotiated with CN
    for the purchase of the land.

[21]

Crosslink,
    without McMillans involvement, pursued a new and different agreement with CN. In
    May 2008, without any involvement by McMillan, Crosslink entered into an
    unconditional agreement to purchase the land. Crosslink had chosen to pursue a
    new and radically different agreement. That agreement did ultimately close.
    That agreement contained the vendor take-back mortgage and the personal
    guarantees, which ultimately provided the basis for CNs lawsuit against the appellants.

[22]

Having
    regard to the motion judges factual findings, she was justified in finding there
    was no issue for trial in respect of the claim against McMillan. Her finding
    that McMillans role in relation to the first agreement did not extend to the
    investigation of any risks flowing from the Directors order effectively
    brought an end to any negligence claim in relation to McMillans involvement. Further,
    the finding that McMillan had absolutely no involvement in the negotiation or
    closing of the very different agreement that actually led to the purchase of
    the property at a point in time well after the appellants had received CNs
    environmental disclosure, compelled the conclusion that there was no causal
    link between anything McMillan did and the closing of the transaction or any
    loss that flowed from it.

The Claim Against Mr. Thompson and Ms. Giahi

[23]

Crosslink
    entered into an unconditional agreement to purchase the property in May 2008. Mr.
    Thompson and Ms. Giahi were not retained until October 2008. They were retained
    to do the work involved in closing the transaction that the parties had agreed
    upon months earlier. Pursuant to that agreement, Crosslink was taking the
    property on a as is basis.

[24]

The
    motion judge found that Ms. Giahi, despite the very limited nature of the
    retainer, performed a more comprehensive title search. That search revealed the
    Directors order on title. The motion judge found that Ms. Giahi raised this
    issue with Crosslink and Crosslink expressly told her not to obtain a copy of
    the order, and to close the transaction. This finding by the motion judge is
    consistent with the evidence that Crosslink had knowledge of the Directors
    order no later than March 2007, had knowledge of the potential contamination
    problems in respect of the property, and had an opinion from their own expert
    that those problems would not interfere with the commercial development of the
    property.

[25]

The
    motion judge was entitled to find that Mr. Thompson and Ms. Giahi were under no
    further duty to warn about the potential effects of the Directors order. Crosslink
    had entered into an agreement to take the property as is several months
    earlier. Ms. Giahi was told not to investigate potential environmental
    concerns, even after she raised the issue of the Directors order. In light of
    the limited nature of the retainer, and the specific instructions given with
    respect to the Directors order, there was no case to be made against Mr.
    Thompson and Ms. Giahi. The motion judge did not err in granting summary
    judgment as regards to Mr. Thompson and Ms. Giahi.

[26]

There
    were other issues raised on the motion, including whether the claims were
    barred by the
Limitations Act, 2002
, S.O. 2002, c. 24, Sched. B, and
    whether any of the respondents acted for anyone other than Crosslink. We need
    not address those issues as we are satisfied that the claims against the
    respondents were properly dismissed for the reasons set out above.

Conclusion

[27]

The
    appeal is dismissed. Counsel have agreed that the successful party should have
    their costs on the appeal. McMillan is entitled to costs in the amount of
    $30,000 all in. Mr. Thompson and Ms. Giahi are entitled to costs of $30,000
    all in.

Doherty J.A.

D.M. Paciocco J.A.

B. Zarnett J.A.




