



COURT OF APPEAL FOR ONTARIO

CITATION: W&W Fiberglass Tank Co. Profit Sharing Plan v.
    Bartholomew,

2017 ONCA 4

DATE: 20170105

DOCKET: C62259

Gillese, MacFarland and Pepall JJ.A.

BETWEEN

Wayne Wilson, Trustee of the W&W Fiberglass
    Tank Co. Profit Sharing Plan

Plaintiff (Appellant)

and

Gary
    Bartholomew and Trevor Michael

Defendants (Respondents)

Ronald G. Chapman, for the appellant

John M. Picone, for the respondents

Heard:  December 15, 2016

On appeal from the order of Justice Edward M. Morgan of
    the Superior Court of Justice, dated May 27, 2016.

ENDORSEMENT

[1]

It is undisputed on this record that the money paid by the appellant,
    earmarked for a specific fund, and no other, was in fact otherwise invested by
    the individual respondents and, to date, has not been repaid. The funds were
    diverted to third-party companies connected to the respondents. When the
    appellants money was not returned following his lawyers demand letter dated
    October 8, 2015, the Statement of Claim was issued October 30, 2015, and a
    summary judgment motion was promptly set down. That motion was adjourned at the
    respondents request, pending settlement discussions. The respondents do not
    dispute the facts  there is no Statement of Defence, no affidavit evidence
    filed by either respondent, or on their behalf, and they did not seek to
    cross-examine the appellants affiants.

[2]

The respondents entered into Minutes of Settlement with the appellant. That
    said, they argue that because the Minutes provided that the settlement was not
    agreed or effective, unless certain stipulated payments were made, they may
    not be relied upon. On this appeal, there is no need to decide whether the
    Minutes of Settlement are enforceable or otherwise admissible into evidence. We
    do not rely upon them. The case turns on whether the respondents breached their
    fiduciary duties, misappropriated funds belonging to the appellant, and are
    obliged to account.

[3]

The sole ground of defence raised in opposition to the appellants
    summary judgment motion was that, although both respondents were served and
    live in Ontario, the action had to be stayed  and the motion for summary
    judgment dismissed  because of the choice of forum clause contained in the
    Subscription Agreement (the Agreement).

[4]

The motion judge accepted this argument and, by order dated May 27, 2016
    (the Order), dismissed the appellants motion for summary judgment and stayed
    the action.

[5]

In our view, the appeal must be allowed. The motion judge erred in
    misconstruing the nature of the appellants claim.

[6]

The choice of forum clause found in the Agreement reads:

(xx) The Subscriber and the Fund agree that any action or
    proceeding arising, directly, indirectly, or otherwise, in connection with, out
    of, related to, or from, this Application Form for Subscription or the purchase
    of the Participating Shares, or any transaction covered hereby, shall be
    resolved, whether by arbitration or otherwise, exclusively within the Cayman
    Islands. Accordingly, the parties consent and submit to the exclusive
    jurisdiction of the courts located within the Cayman Islands. The parties
    further agree that any such action or proceeding brought by either such party
    to enforce any right, assert any claim, or obtain any relief whatsoever in
    connection with this Agreement shall be commenced by such party exclusively in
    the Cayman Islands.

[7]

In our view, the appellants action as pleaded does not arise directly,
    indirectly, or otherwise, in connection with, out of, related to, or from, this
    Application Form for Subscription or the purchase of the Participating Shares

[8]

While the Statement of Claim is perhaps not a model pleading and does
    reference breach of contract, it is clear when read generously that the claim
    advanced is, in its essence, one for misappropriation of funds by the
    respondents. It is not a claim against Global Innovation SPV 1, Ltd. (Global
    SPV), the other party to the Agreement. The action is framed as one for breach
    of fiduciary duty and for an accounting from the respondents  who are, on the
    evidence, responsible for, and who facilitated, the movement of the appellants
    money, from Global SPV elsewhere, without authority. The Statement of Claim
    alleges that the respondents breached their fiduciary duty to the appellant, by
    causing the appellants monies to be advanced to third parties connected to the
    respondents.

[9]

In July 2014, the respondent Gary Bartholomew wrote to the appellant
    that, as the only authorized investment had not been made, the appellants investment
    in Global SVP had been liquidated. The monies were to have been returned to the
    appellant at that point, but were not. The Statement of Claim pleads, at para.
    10, that the respondents  allegedly the fiduciaries of the appellant, in
    breach of their duties  were the directors and principals of Global SVP and
    responsible for the repayment of those monies to the appellant.

[10]

On October 16, 2015, Mr. Bartholomew, in response to the appellants
    demand through counsel, for payment, e-mailed the appellants counsel,
    attaching three documents from March 2014. Assuming, without deciding, that this
    covering e-mail is settlement privileged, the three attachments are not. The
    documents, dated one and a half years before the appellants formal demand for
    payment, are not communications written for the purpose of attempting to effect
    a settlement:
Sable Offshore Energy Inc. v. Ameron International Corp.
,
    2013 SCC 37, [2013] 2 S.C.R. 623, at para. 14; S.N. Lederman, A.W. Bryant &
    M.K. Fuerst,
The Law of Evidence in Canada
, 4th ed. (Markham:
    LexisNexis Canada, 2014), at p. 1041. Rather, they are the underlying contracts
    through which, in March 2014, the respondents misappropriated the appellants
    funds by diverting them to third-party companies connected to the respondents.

[11]

The respondents purportedly authorized the transfer of the monies 
    first as a loan from Global SPV to Global Innovation Fund, Ltd., and then, as
    consideration for convertible promissory notes, to XRM Global Inc., an Ontario
    company, and Pinpoint Integrity Inc., a Cayman Islands company. Mr. Bartholomew
    signed as Director to Global SPV for the loan agreement. The respondent Trevor
    Michael signed as Managing Partner of Global Innovation Fund, Ltd., for the
    loan agreement, and Director of both Pinpoint Integrity Inc. and XRM Global
    Inc., for the convertible promissory notes. Although there is no evidence in
    the record that Mr. Bartholomew was also an operating mind of the borrowers,
    the respondents did not contest the appellants assertion that the respondents
    worked in concert to misappropriate the monies. The self-dealing aspects of the
    transactions are readily apparent.

[12]

The claim as indicated earlier, is for breach of fiduciary duty and an
    accounting and, in its essence, is one for the return of misappropriated funds.

[13]

Factually, this case has some similarities to the unreported decision of
    Spence J. in
Leggat v. Direct Leverage Limited et al
(21 January 2015),
    Toronto, CV-12-455116 (Ont. S.C.).  Unlike
Leggat
, fraud was not
    specifically pleaded. However, as mentioned, the claim turns on the
    respondents misappropriation of the funds. Moreover, they have filed no
    materials challenging the appellants claim.

DISPOSITION

[14]

For these reasons, the appeal is allowed, the Order set aside, and
    summary judgment granted. The respondents shall pay the appellant the sum of
    US$ 1,052,706.31, together with appropriate interest to date. Costs of the
    appeal to the appellant are fixed in the sum of $5,000, in addition to costs of
    the summary judgment motion in the sum of $12,500, as agreed by counsel. Both
    figures are inclusive of disbursements and HST.

E.E.
    Gillese J.A.

J. MacFarland
    J.A.

S.E.
    Pepall J.A.


