



COURT OF APPEAL FOR ONTARIO

CITATION: Hollowcore Incorporated v. Visocchi, 2016 ONCA 600

DATE: 20160729

DOCKET: C59540 and C59541

Weiler, Cronk and Benotto JJ.A.

BETWEEN

Hollowcore Incorporated and Prestressed Systems
    Inc.

Plaintiffs
    (Respondents/

Respondents by way of
    cross-appeal)

and

Michael Visocchi and Visco Engineering Inc.

Defendants
    (Appellants/

Respondents by way of
    cross-appeal)

and

The Royal Insurance Company of Canada, Continental
    Casualty Company and Certain Underwriters at Lloyds Under Contract No. ENC5-98

Third Parties
    (Respondents/

Appellants by way of
    cross-appeal)

Alan J. Lenczner, Q.C., and Ren Bucholz, for the
    appellants/respondents by way of cross-appeal, Michael Visocchi and Visco
    Engineering Inc.

Peter W. Kryworuk, Jasmine T. Akbarali and D. Stephen
    Jovanovic, for the respondents/respondents by way of cross-appeal, Hollowcore
    Incorporated and Prestressed Systems Inc.

Morris A. Chochla and Mark A.D. Coleman, for the
    respondents/appellants by way of cross-appeal, The Royal Insurance Company of
    Canada, Continental Casualty Company and Certain Underwriters at Lloyds Under
    Contract No. ENC5-98

Heard: April 13 and 14, 2016

On appeal from the judgment of Justice Mary Jo M. Nolan
    of the Superior Court of Justice, dated November 4, 2014, with reasons reported
    at 2014 ONSC 6802, 40 C.C.L.I. (5th) 17.

Benotto J.A.:

A.

Overview

[1]

Michael Visocchi and Visco Engineering Inc. (Visco) are the two
    appellants in this appeal. Visocchi is a professional engineer and the
    principal of Visco, a corporation based outside of Windsor. They were retained to
    prepare engineering drawings for an addition to a commercial parking garage in
    the United States by Prestressed Systems Inc. (PSI) and Hollowcore
    Incorporated (Hollowcore). PSI is in the business of designing,
    manufacturing, and installing precast concrete, and Hollowcore is its wholly
    owned subsidiary and sales arm in the United States. The drawings had to be
    corrected and resubmitted multiple times, which delayed the completion of the
    project. Ultimately, the appellants simply withdrew from the project without
    completing their work.

[2]

PSI and Hollowcore brought an action against the appellants for damages
    for breach of contract, negligent performance of a service and negligent
    misrepresentation. The appellants added their insurers as third parties to the
    action. The group of insurance companies (the Insurers) had provided errors
    and omissions insurance to the appellants at the material time. They are the
    remaining respondents and appellants by cross-appeal. The trial judge found
    Visco liable for breach of contract and both appellants liable in negligence,
    assessed the damages, and apportioned liability for the damages between the
    appellants and the Insurers.

[3]

The appellants appeal, among other things, the apportionment of
    liability for the damages. The Insurers cross-appeal the assessment of damages
    and the exchange rate used by the trial judge to convert damages denominated in
    U.S. dollars.

B.

Facts

[4]

Hollowcore was awarded a subcontract by Rudolph Libbe Inc. (Libbe) in
    January 1999. The subcontract was for the design, supply, and installation of
    the precast concrete components of a five-storey addition to an existing
    parking garage in Toledo, Ohio.

[5]

Under the subcontract, Hollowcore was to start on site by October 4,
    1999, and be completed by November 17, 1999. The timeline was critical, as
    Libbe and the owners wanted to minimize interference with the profitable use of
    the existing parking structure. The subcontract specified that time was of the
    essence.

[6]

On March 15, 1999, Visocchi, through Visco, submitted a bid to
    Hollowcore to provide, among other things, engineering drawings for the
    project. In the bid Visco committed to provide approximately 600 drawings and acknowledged
    that all drawings and calculations would have to be sealed by a licensed
    professional engineer registered in the state of Ohio. The total price for
    Viscos work was CDN$67,500 plus GST.

[7]

Four days after submitting the bid, on March 19, 1999, Visocchi wrote to
    Hollowcore saying:

I have not have [
sic
] a chance to put together a
    formal schedule for this project, however I have some people available to start
    erection drawings on April 1, 1999. By the middle of April I will have all of
    my people available to work on the project. I am sure I can meet your
    scheduling requirements.

I would really like this job for PSI and will do whatever it
    takes to get the drawings completed on your timetable.

[8]

On April 12, 1999, PSI issued a purchase order to Visco, and the
    appellants commenced their work on the project.

[9]

There were numerous and persistent problems with the work submitted by
    the appellants. Drawings were submitted late, they were replete with errors,
    and revised drawings did not address many of the errors found in earlier
    versions. Over the summer and fall of 1999, many discussions and meetings took
    place and many demands were made of the appellants.

[10]

On September 2, 1999, Donald Little, then Vice President and General Manager
    of PSI and Hollowcore, wrote to the appellants to confirm the various
    agreements reached at his recent meeting with Visocchi and Loris Collavino, President
    of Hollowcore and PSI at the time. The letter confirmed a timetable: all
    inverted tee drawings and all of the L beam and spandrel drawings were to be
    delivered on September 1, 1999; working drawings for the columns and lite walls
    were to be available for pick up on September 2, 1999; and the drawings for the
    lite walls, columns, stairs, elevators, crossover beams, and shear walls were
    to be submitted by September 7, 1999. The letter also confirmed that, on
    September 1, 1999, Visocchi was to meet with an engineer from Hanna Ghobrial
    and Spencer Ltd. ("Ghobrial"), another engineering firm in Windsor,
    to provide details with respect to the elevator shaft drawings.

[11]

The letter continued as follows:

As discussed at the
meeting
,
    we have no intention of creating a bad relationship with yourself, nor do we
    have any intention of back charging your account. The recent meeting with [Libbe]
    went very well and it appears that we can still satisfy their schedule.
    However, you must meet the above noted deadlines in order for us to keep this
    project on track and avoid any possible future charges against ourselves from
    the owner or [Libbe].

[12]

On September 9, 1999, PSI wrote to the appellants advising that if
    Hollowcore could not meet the projects schedule then Libbe would start
    charging the Hollowcore account.

[13]

On September 17, 1999, Collavino met with Visocchi. Following the
    meeting, Collavino prepared an interoffice memo setting out the discussions
    wherein Visocchi admitted that he was drastically behind with the drawings.

[14]

On September 30, 1999, Libbe wrote to Hollowcore complaining about the
    quality of the work and the delay in its delivery. Libbe demanded that the
    drawings and calculations be finalized and submitted immediately.

[15]

The appellants repeatedly gave assurances that their work would be
    completed on time. However, on October 20, 1999, Visocchi told the Hollowcore
    project manager that he could not proceed and that Hollowcore should get
    someone else to complete the drawings.

[16]

In the end, the erection of the pre-cast concrete was not completed
    until late January 2000.

[17]

On October 25, 1999, PSI wrote a letter to the appellants putting them
    on notice that Hollowcore would be seeking full indemnity from them for any
    costs and expenses incurred by Hollowcore, as well as any possible damage
    claims brought against Hollowcore, as a result of their failure to meet the
    drawings submittal deadlines. The letter also advised that PSI would withhold
    any further payments until PSI had determined the costs, expenses, and possible
    damage claims resulting from the appellants delays.

[18]

On October 27, 1999, PSI retained Ghobrial to assume responsibility for
    the engineering and shop drawings.

[19]

PSI continued to write to the appellants to advise them of problems
    encountered on the job relating to errors and omissions in the drawings. PSI also
    asked the appellants to contact their insurer.

[20]

Libbe back charged significant amounts to Hollowcore because the errors
    and delays in the drawings delayed the project and increased its costs. PSI and
    Hollowcore incurred additional costs as well in order to deliver and install
    the product as required under their subcontract with Libbe.

[21]

Hollowcore and PSI issued their statement of claim on May 12, 2000. The appellants
    filed a statement of defence and counterclaim on July 12, 2000.

[22]

Ten years later, on May 4, 2010, the appellants, with leave of the
    court, issued a third party claim against the Insurers for contribution and
    indemnity for all sums for which the appellants might become liable to the
    plaintiffs and for which there was coverage under their insurance policy. The Insurers
    defended the claim, relying on an exclusion clause for damage resulting from
    the appellants failure to complete their work on time. They also filed a
    defence in the main action.

C.

The Trial Judges Decision

[23]

At trial, Hollowcore and PSI alleged that both appellants were liable
    for breach of contract, negligent performance of a service, and negligent
    misrepresentation.

[24]

The trial judge found Visco liable in contract to PSI and Hollowcore.
    Visco had an express contract with PSI and an implied contract with Hollowcore.
    Both the express and the implied contracts required Visco to provide accurate
    and timely engineering drawings for the parking garage project. Based on what
    she described as overwhelming evidence, the trial judge found that Visco
    breached its contracts.

[25]

Although she found that Visocchi was not liable in contract, the trial
    judge concluded that both appellants were liable in negligence. They both owed
    a duty of care to Hollowcore and PSI. They made untrue, inaccurate, or
    misleading representations which were relied upon. The representations about
    when the work would be completed were made by Visco and by Visocchi personally.
    Visocchi gave his personal assurances to PSI and Hollowcore that the work would
    be done correctly and on time. In view of their history with the appellants 
    they had worked together before  it was reasonable for PSI and Hollowcore to
    rely on the assurances.

[26]

The trial judge also found ample evidence of negligent performance of a
    service by both appellants. She relied on the oral evidence of those involved,
    supported by the exhibits, the numerous revisions of numerous drawings, and a
    number of photographs submitted by the parties, when finding that much of the
    work was performed negligently. In fact, Visocchi admitted that his work on
    this project did not meet his own professional standards.

[27]

The trial judge then assessed the damages. Some of the heads of damages
    claimed were denominated in U.S. dollars, while the rest were in Canadian
    dollars. The trial judge awarded damages as follows:



Libbe back charges for winter costs

US$86,879.00



Libbe back charges for errors in drawings

US$50,607.00



Libbe back charges for the Assemblers

US$13,000.00



Libbe back charges for labour costs

US$150,000.00
[1]



Brint Electric costs

US$11,000.69



Costs related to column covers

US$29,200.69



Extra payment to Assemblers

US$83,325.00



Additional labour and repair costs

US$28,055.00



Supplier costs

US$21,000.00



As built drawings

US$4,770.00



Total for damages denominated in U.S. dollars

US$477,837.38



Cost of production and shipping of column covers

CDN$11,048.48



PSI Inefficiencies

CDN$35,000.00



Total for damages denominated in Canadian dollars

CDN$46,048.48



[28]

After quantifying the damages, the trial judge turned to the Insurers liability
    to indemnify the appellants. Under the relevant contract of insurance, the
    Insurers were liable for any damages arising from the appellants negligence
    but not for any damages arising out of delay.

[29]

The trial judge concluded that the Insurers were liable for all the damages
    for (1) Libbe back charges for errors in drawings, in the amount of US$50,607;
    (2) costs associated with column covers, in the amount of US$29,480.69; and (3)
    the production and shipping of column covers, in the amount of CDN$11,048.48.

[30]

With respect to the balance of the damages, however, the trial judge found
    that it was almost impossible to determine with absolute accuracy the damages
    related to negligence as opposed to delay. She concluded that the Insurers were
    to indemnify the appellants for 55 percent of the damages. The remaining 45
    percent would be paid by the appellants on a joint and several basis.

[31]

Finally, the trial judge determined the exchange rate for converting the
    damages denominated in U.S. dollars into Canadian ones. She exercised her
    discretion pursuant to s. 121(3) of the
Courts of Justice Act
, R.S.O.
    1990, c. C-43, to use the exchange rate as on May 15, 2000, instead of the
    exchange rate on the date of her judgment.

D.

Issues on Appeal and Cross-Appeal

[32]

The several issues raised by the appellants were simplified in oral
    submissions.

[33]

As their first ground of appeal, the appellants submit that the trial
    judge erred in apportioning the damages between them and the Insurers because
    her findings made it clear that all the delay was caused by negligence and
    therefore covered under their insurance policy. If the court accepts this submission,
    the appellants submit that it is unnecessary to address the remaining issues
    raised by them in their appeal.

[34]

Hollowcore and PSI do not take issue with this ground, although the
    Insurers do. The Insurers also submit that the trial judge erred  in
    apportioning the damages between them and the appellants on a 45/55 percent
    split, in her assessment of damages, and by choosing the wrong date for
    determining the exchange rate.

[35]

As will become evident in my analysis, I accept the appellants first submission.
    The issues therefore are the following:

1)

Did the trial
    judge err in allocating responsibility for the damages between the appellants
    and the Insurers?

2)

Did the trial
    judge err in her assessment of damages?

3)

Did the trial
    judge err in her decision as to the date for the exchange rate?

E.

Analysis

(1)

Did the Trial Judge Err in Allocating Responsibility for the Damages Between
    the Appellants and the Insurers?

[36]

The appellants submit that all the damages awarded against them are
    covered under their insurance policy because the damages resulted from their negligence
    in the performance of their professional services. The policy of insurance provides:

THE INSURER will pay on YOUR behalf all sums which YOU become
    liable to pay as DAMAGES arising out of a CLAIM providing YOUR liability is the
    result of an error, omission or negligent act in the performance of professional
    services for others.

[37]

The Insurers acknowledge their obligation to indemnify the appellants
    against losses resulting from negligence. They submit, however, that a portion
    of the damages arise out of the appellants failure to complete the drawings on
    time and that the failure to provide professional services in a timely manner
    is not covered by the policy. They rely on the following exclusion in the
    policy:

THE INSURER will not cover YOU, pay DAMAGES, provide YOU with a
    defence or make supplementary payments for CLAIMS arising out of YOUR failure
    to complete drawings, plans, specifications, reports, or schedules on time or
    YOUR failure to act upon shop drawings on time, unless such failure is the
    result of an error or inaccuracy in the preparation of these documents.

[38]

The Insurers also submit that the trial judge erred in apportioning responsibility
    for the damages between them and the appellants on a 45/55 percent split.

[39]

The appellants submit that all the delay was caused by their negligence
    because the delay resulted from the need to correct and re-correct their work.

[40]

In
Cabell v. Personal Insurance Co.
, 2011 ONCA 105, 104 O.R.
    (3d) 709, at para. 11, this court reiterated the well-established principle
    that:

The general principles of interpretation that apply to
    insurance policies are well established. A clause in the policy providing
    coverage will be broadly interpreted in favour of the insured. An exclusion
    clause limiting coverage will be strictly interpreted.

[41]

The fundamental obligation of the Insurers is to pay damages arising
    from a breach of contract or from negligence in the performance of professional
    services. This is the reason for the policy and should be broadly interpreted
    in favour of the insured. The Insurers had the onus of establishing, on a
    balance of probabilities, that the damages arose out of a lack of timeliness
    and not from delay caused by the appellants having to correct errors or
    omissions in the drawings:
Strategic Associates Incorporated v. Export
    Development Corporation,
2007 ONCA 140, 221 O.A.C. 195, at para. 6.

[42]

I have concluded that the Insurers have not discharged their burden. A
    fair reading of the trial judges findings of fact confirms that there are no
    damages caused by pure delay; rather, on her findings, all the delay (and the
    resulting damages) was caused by the appellants negligence.

[43]

The trial judge found that the drawings had to be resubmitted multiple
    times, that this caused delay, and that the number of corrections needed in
    this case was not acceptable practice. In particular, she made the following
    findings:

·

the contract between Visco and Hollowcore and the implied
    contract between Visco and PSI required that Visco provide accurate and timely
    engineering documents. The evidence is overwhelming that Visco breached its
    contracts with both PSI and Hollowcore (see para. 87);

·

the number of times that drawings had to be revised and corrected
    in this case was not in line with accepted practice (see para. 88);

·

a number of drawings clearly show repeated errors, many of which
    were not properly corrected on the first or even the second time they were
    returned by the engineer of record for revision (see para. 89);

·

Visocchi admitted that the drawings done by him and others under
    his supervision were replete with errors that needed numerous revisions which delayed
    the project (see para. 92); and

·

although revisions were routine, drawings that were returned
    repeatedly do not fall under the delay exclusion (see para. 243).

[44]

The trial judge approached damages for all causes of action  breach of
    contract, negligent misrepresentation, and negligent performance of a service 
    together. She clearly concluded that the delay, which gave rise to the damages
    awarded, was caused by negligence on the part of the appellants. Given that,
    the Insurers are liable for all the damages.

[45]

I have some sympathy for the trial judge. The argument put forth by the
    appellants on appeal does not appear to have been made to her, perhaps because
    her findings on negligence were not known at the time. That said, now that her
    findings are clear, so too is their effect on insurance coverage. It would be
    inconsistent, in light of her findings, to conclude that the delay at issue was
    not caused by negligence.

[46]

Therefore, I agree with the appellants that the Insurers are liable for
    all the damages awarded by the trial judge.

(2)

Did the Trial Judge Err in her Assessment of Damages?

[47]

The Insurers submit that the trial judge erred in her assessment of
    damages by resorting to guesswork. They submit that she erred in her
    methodology and in fixing the quantum for certain heads of damages.

[48]

I have concluded that her methodology followed the jurisprudence of this
    court and her determination of quantum was firmly grounded in the evidence. I
    would, therefore, reject this ground of appeal.

(a)

The Trial Judges Methodology

[49]

The trial judges assessment of damages is entitled to deference. In
TMS
    Lighting Ltd. v. KJS Transport Inc.
, 2014 ONCA 1, 314 O.A.C. 133, at para.
    60, this court said:

A trial judges assessment of damages attracts considerable
    deference from a reviewing court. Appellate interference with a damages award
    at trial, particularly an award made by a trial judge sitting alone, is
    justified only where the trial judge made an error in principle, misapprehended
    the evidence, failed to consider relevant factors, considered irrelevant
    factors, made an award without any evidentiary foundation, or otherwise made a
    wholly erroneous assessment of damages. [Citations omitted.]

[50]

Hollowcore and PSI led significant evidence of damages. The trial judge
    issued lengthy reasons wherein she reviewed in detail the evidence she heard
    over 21 days of trial. Her damages analysis spans 24 pages and 113 paragraphs.

[51]

The trial judge directed herself to the governing principles on the
    assessment of damages. She noted that situations where the damages assessment
    is difficult because of the nature of the damages proved must be distinguished
    from situations where the assessment is difficult due to the absence of
    evidence of loss. She found that this case fell into the first category because
    Hollowcore and PSI had submitted numerous documents and invoices to demonstrate
    loss, and led oral evidence to explain the circumstances under which the
    invoices were sent, received and paid. This was not a situation where the
    difficulty of assessing damages was because there was an absence of evidence.
    As a result, and in accordance with the jurisprudence, she concluded that her
    duty was to assess damages even if the assessment was imprecise.

[52]

The trial judge dealt at length with the admissibility of business
    records, and in particular, the invoices that supported the damages claimed.
    She admitted the invoices into evidence but noted it was still necessary for
    her to determine whether the individual costs incurred could be linked to the
    breaches of contract by Visco or the negligence of Visocchi and Visco.

[53]

The approach adopted by the trial judge is consistent with the decisions
    of this court. In
Martin v. Goldfarb
(1998), 112 O.A.C. 138 (C.A.), Finlayson
    J.A. explained, at para. 75,

[I]t is a well-established principle that
    where damages in a particular case are by their inherent nature difficult to
    assess, the court must do the best it can in the circumstances. That is not to
    say, however, that a litigant is relieved of his or her duty to prove the facts
    upon which the damages are estimated. The distinction drawn in the various
    authorities, as I see it, is that where the assessment is difficult because of
    the nature of the damage proved, the difficulty of assessment is no ground for
    refusing substantial damages even to the point of resorting to guess work.

[54]

These principles were recently reaffirmed in
TMS Lighting Inc.
,
    where the court, at para. 61, explained:

It is also beyond controversy that a plaintiff bears the onus
    of proving his or her claimed loss and the quantum of associated damages on a
    reasonable preponderance of credible evidence. Further, as the trial judge
    recognized in this case, a trial judge is obliged to do his or her best to
    assess the damages suffered by a plaintiff on the available evidence even where
    difficulties in the quantification of damages render a precise mathematical
    calculation of a plaintiffs loss uncertain or impossible. Mathematical
    exactitude in the calculation of damages is neither necessary nor realistic in
    many cases.

[55]

Consequently, the trial judges approach to the assessment of damages
    was correct.

[56]

The Insurers did not call evidence on the issue of damages. On the
    evidence before her, the trial judge found that the engineering drawings were
    replete with errors. The time spent correcting the errors led to delay in the
    preparation of other required drawings, thus delaying the overall project. The
    imprecision in calculating damages here flows from the nature of the losses
    suffered and from the good faith efforts of these respondents to mitigate their
    losses.

[57]

The trial judges assessment of damages was necessarily imprecise
    because of the nature of the damages suffered. However, as the difficulties in
    quantifying damages resulted from the nature of the loss proven rather than the
    absence of evidence of any loss, the trial judge rightly did her best to assess
    the damages.

(b)

The Trial Judges Determination of Quantum of Damages

[58]

The Insurers submit that there was no evidence to support the following
    damages awarded by the trial judge:

1)

US$13,000 awarded
    for Libbe back charges for Assemblers;

2)

US$83,325 awarded
    for the extra payments to Assemblers;

3)

US$8,000 of the
    total of $28,055 awarded for additional labour and repair costs; and

4)

US$4,770 awarded
    for as built drawings.

[59]

I will deal with each item in turn.

(i)

The Back Charges for Assemblers

[60]

Hollowcore subcontracted with Assemblers to install precast concrete in
    the garage. Hollowcore and PSI claimed US$26,000 in respect of work that Libbe
    did that was included in the Assemblers contract. The trial judge reduced the
    award to US$13,000. The Insurers submit that there was no evidence relating the
    back charges to the appellants delay or negligence. However, the evidence of
    Little and Collavino, accepted by the trial judge, was that the costs were
    incurred as a result of the delay and were part of Hollowcores attempt to mitigate
    its damages. The trial judge also accepted the evidence of Gary Haas, the chief
    project manager of Libbe, that his employees did work that should have been
    done by Assemblers. Therefore, it was open to her to award damages in the amount
    of US$13,000.

(ii)

The Extra Payment to Assemblers

[61]

Assemblers sought an additional US$280,000 pursuant to a series of
    additional work orders they deemed necessary to complete the project.
    Hollowcore and PSI settled the claim for US$125,000. Little gave evidence that
    the work orders related to the delays caused by having to repair the product on
    site because some components had been manufactured from erroneous drawings.
    Frank Sample, a principal of Assemblers, confirmed that the extra work was
    necessary because of the erroneous drawings. The trial judge concluded as
    follows at para. 224:

Given the numerous corrections that were required of the
    drawings as shown in Exhibit 14, the nature of the extra work required to be
    done by Assemblers, and the detailed evidence of Mr. Collavino over almost
    eight days with respect to the numerous drawing errors, I conclude that
    two-thirds of the extra work reasonably related to drawing errors and the
    resulting delay. I, therefore, fix the damages for the extra payment to
    Assemblers at $83,325USD.

[62]

I see no error in this determination.

(iii)

Additional Labour and Repair Costs

[63]

The Insurers say that the trial judge erred in awarding US$8,000 for
    costs incurred by Hollowcore for repairing various installations. In fixing
    these damages, at para. 227, the trial judge said the following:

From January 25, 2000 until July 3, 2000, Hollowcore employees
    spent 268 hours at $35 per hour repairing various installations such as double
    tees, patching, cutting rustification groves, and repairing walls. In addition
    to the hourly wages which totalled $9,380, Hollowcore incurred room and board
    costs of $2,690 for a total of $12,070. The third parties argued that few of
    the entries except for $280 which related to the column covers could be proven
    to be the result of problems arising from the drawings. Some of the repairs
    related to production error which was the result of premature production. The
    necessity for some of the repairs could not be explained. As a result, I fix
    damages for repairs at $8,000 USD.

[64]

This conclusion was available on the evidence.

(iv)

Damages for As Built Drawings

[65]

The Insurers submit that the appellants should not be responsible for US$4770
    relating to the owners request for as built drawings. Little testified that
    the replacement engineer, Ghobrial, had to go back to the drawings submitted by
    the appellants and update them to an as built condition. The trial judge
    accepted a purchase order as evidence for this claim when setting the quantum
    of these damages at US$4,770. It was open to her to do so.

[66]

In summary, the trial judges assessment of damages in each of these
    categories was based on the evidence and there is no basis for appellate
    intervention.

(3)

Did the Trial Judge Err in her Decision as to the Date for the Exchange
    Rate?

[67]

Some of the damages awarded had been denominated in U.S. currency. The
    trial judge therefore had to determine the exchange rate for converting those
    damages. She concluded that the exchange rate should be fixed as of May 15,
    2000 (the claim was issued on May 12, 2000). The Insurers submit that the trial
    judge erred and that the date should have been September 30, 2014, when
    judgment was delivered.

[68]

The exchange rate on May 15, 2000, was $0.67. The exchange rate on
    September 30, 2014, was $0.89. This represents a 25% appreciation in the value
    of the Canadian dollar in the interim period.

[69]

Section 121(1) of the
Courts of Justice Act
provides that,
    generally, the exchange rate will be determined as at the date of judgment:

Subject to subsections (3) and (4), where a person obtains an
    order to enforce an obligation in a foreign currency, the order shall require
    payment of an amount in Canadian currency sufficient to purchase the amount of
    the obligation in the foreign currency at a bank in Ontario listed in Schedule
    I to the
Bank Act
(Canada) at the close of business on the first day
    on which the bank quotes a Canadian dollar rate for purchase of the foreign
    currency before the day payment of the obligation is received by the creditor.

[70]

However, s. 121(3) provides an exception to that general rule:

Subject to subsection (4), where, in a proceeding to enforce an
    obligation in a foreign currency, the court is satisfied that conversion of the
    amount of the obligation to Canadian currency as provided in subsection (1)
    would be inequitable to any party, the order may require payment of an amount
    in Canadian currency sufficient to purchase the amount of the obligation in the
    foreign currency at a bank in Ontario on such other day as the court considers
    equitable in the circumstances.

[71]

The Insurers submit that the trial judge erred in departing from the
    general rule that the applicable exchange rate should be the rate in effect as
    at the date of recovery. They submit that the trial judge erred because she
    made no finding of inequity and there were no exceptional circumstances or
    compelling reasons to depart from the general rule.

[72]

The decision to depart from the general rule and apply s. 121(3) of the
Courts
    of Justice Act
is discretionary. In
Zucchetti Rubinetteria S.p.A. v.
    Natphil Inc.
, 2011 ONSC 3845, at para. 9, Perell J. noted that the court
    has the discretion to order the conversion to be effected on other dates if
    conversion on the date of payment would be inequitable to any party. This is
    consistent with the language of the section.

[73]

The trial judge recognized that the onus was on Hollowcore and PSI to
    justify a departure from the general rule. She was aware that a change in
    exchange rates alone could not create an inequity. She also recognized that an
    award of prejudgment interest would compensate Hollowcore and PSI for the fact
    that they did not have access to these funds and, therefore, that lack of
    access was not a reason to depart from the general rule.

[74]

However, in the circumstances before her, the trial judge decided to
    depart from the general rule. In doing so, she adopted the reasoning of Stinson
    J. in
Zesta Engineering v. Cloutier
, 2010 ONSC 5810,
86
    C.C.E.L. (3d) 1, at para. 296, varied on other grounds, 2014 ONCA 762, 20
    C.C.E.L. (4th) 168:

Since the sales to Husky Buffalo were in the US dollars, it is
    necessary to convert that currency to Canadian dollars for purposes of valuing
    the loss suffered by Zesta. Although s. 121 of the [
Courts of Justice Act
]
    provides a mechanism for converting a foreign money obligation for purposes of
    an Ontario judgment, s. 121(3) also permits the court to depart from that
    standard approach where the court considers it equitable. In the present case,
    there has been a dramatic shift in the respective values of the Canadian and US
    dollars over the past decade. To place the innocent party, Zesta, in the
    position it would have been in but for the wrong committed by Cloutier, I
    direct that the conversion of the US$132,209.88 (or the lesser sum, if the
    restitution order has been compiled with) to Canadian dollars be made at the
    Bank of Canada closing rate as at November 30, 1999. This will more properly
    reflect the loss to Zesta at the time the wrong was committed.

[75]

The trial judge found that to place the respondents in the position they
    would have been in but for the wrong committed by the appellants, the damages
    should be converted using the conversion rate as at May 15, 2000. This was her
    call to make. The loss actually suffered by the respondents was a relevant
    consideration. I see no basis for appellate interference with her discretionary
    ruling on this issue.

F.

Disposition

[76]

For the reasons given, I would allow the appeal of Visco and Visocchi
    against the Insurers and hold that the Insurers are responsible for all the
    damages payable to Hollowcore and PSI under the trial judgment.

[77]

I would also dismiss the Insurers cross-appeal with respect to the
    reduction of damages sought and the conversion rate for U.S. funds.

[78]

If the parties do not agree on the costs of these proceedings, the
    appellants costs submissions shall be delivered to the Registrar of this court
    within two weeks from the date of release of these reasons. The remaining
    parties costs submissions shall be delivered to the Registrar within two weeks
    thereafter.

Released: July 29, 2016

M.L. Benotto J.A.

I agree K.M. Weiler J.A.

I agree E.A. Cronk J.A.





[1]
The trial judge mentions two different numbers for this head of damages. In her
    summary of the damages awarded, at para. 235, she says that she is awarding
    US$163,000 for back charges for labour costs; however, at para. 219 she states
    that she was awarding US$150,000.The parties have not raised this discrepancy
    as an issue before us.


