



COURT OF APPEAL FOR ONTARIO

CITATION: Extreme Venture Partners Fund LLP v. Varma, 2019
    ONCA 446

DATE: 20190528

DOCKET: C66181

Sharpe, Trotter and Harvison Young JJ.A.

BETWEEN

Extreme Venture Partners
    Fund LLP, EVP GP Inc., Ravinder Kumar Sharma, Imran Bashir, and Kenneth Teslia

Plaintiffs / Defendants by Counterclaim

(Appellants)

and

Amar
    Varma, Sundeep Madra, Varma Holdco Inc., Madra Holdco Inc.,

Chamath Palihapitiya, El
    Investco I Inc., Extreme Venture Partners Annex Fund LLP, EVP GP Annex Fund I
    Inc., Cassels Brock & Blackwell LLP, and

Seven Hills Group
    LLC

Defendants / Plaintiffs by Counterclaim

(
Respondent
)

Won J. Kim and Gigi van Leeuwen, for the appellant

C. Haddon Murray, for the respondent

Heard and released orally: May 27, 2019

On
    appeal from the order of Justice Penny of the Superior Court of Justice, dated October
    15, 2018.

REASONS FOR DECISION

[1]

The appellants appeal the dismissal of their claim against the
    respondent by way of summary judgment. The appellants claim arises from a
    management buyout of Xtreme Labs. The appellants were directors and
    shareholders of Xtreme Labs. The respondent was engaged to provide a valuation
    of Xrteme Labs. The appellants allege that the valuation significantly
    undervalued Xtreme Labs and that they suffered a loss as a result of the
    management buyout.

[2]

On the motion for summary judgment, the moving party respondent relied
    on the terms of their engagement letter for the valuation in support of their
    position that they owed no duty of care to the appellants. The appellants did
    not put forth any evidence in support of their claim.

[3]

The motion judge ruled that the terms of the letter of engagement were
    inconsistent with the respondent owing the appellants a duty of care and he
    granted summary judgment on that basis.

[4]

The appellants argue that the motion judge erred by (1) finding no duty
    of care; (2) failing to apply the proper evidentiary burden; and (3) failing to
    give adequate weight to the lack of credibility of the respondents deponent.
    The appellants also argue (4) that this was not a proper case for partial
    summary judgment.

Duty of Care

[5]

We do not agree that the motion judge erred with respect to the duty of
    care. The only evidence before the motion judge on this issue was the
    engagement letter. The engagement letter makes it clear that the respondent is
    not providing a fairness opinion in relation to any transaction. The engagement
    letter also makes it clear that the respondent is only providing advice to
    Xtreme Labs and that the opinion is not to be shown to, relied upon or
    discussed with any other party. It explicitly stated that the opinion may not
    be disclosed to any third party or referred to publically, nor used for any
    purpose not related to the Board of Directors review. The engagement letter
    excludes any duty arising from non-contractual or fiduciary duties. It made
    clear that the respondent would be relying upon information provided by Xtreme
    Labs and that the respondent would not be independently verifying any of that
    information. Xtreme Labs undertook to provide the respondent with complete and
    accurate information.

[6]

The appellants were directors of Xtreme Labs but their claim for damages
    arises from their interest as shareholders. The letter of engagement makes it
    clear that the opinion is for the Board of Directors, not the shareholders or
    to Board members in their personal capacity. In our view the motion judge made
    no error in concluding that, by its terms, the letter of engagement excluded
    any duty of care owed by the respondent to the appellants in their capacity as
    shareholders.

Evidentiary burden

[7]

The respondents motion for summary judgment rested entirely on the
    letter of engagement. The appellants failed to advance any evidence in support
    of their claim that the respondent owed them a duty of care.  In these
    circumstances, we fail to see how the motion judge could be criticized on the
    basis that he failed to apply the proper evidentiary burden. The respondent put
    forth evidence, namely the letter of engagement, sufficient to support their
    case that the claim should be dismissed. The appellants failed to answer that
    with competing evidence. They cannot now complain that the motion judge
    misapplied the evidentiary burden for summary judgment.

Credibility of the respondents deponent

[8]

The appellants argue that the motion judge erred by failing to give any
    weight to the fact that the respondents deponent was unable to answer many
    questions when he was cross-examined. As we have noted, the respondents case
    rested on the letter of engagement. We fail to see how inadequacies in the
    knowledge of the respondents deponent had any bearing on the specific issue
    the motion judge was asked to decide.

Partial summary judgment

[9]

The appellants argue that this was not a proper case for partial summary
    judgment. This was not a partial summary judgment as the claim against the
    respondent was dismissed in its entirety. The appellants claims against the
    other defendants did proceed to trial but, as the claim against the respondent
    could be determined on a discrete legal issue pertinent only to the liability
    of the respondent, the motion judge did not err in dismissing the claim on that
    basis.

[10]

We
    note as well that the appellants claims against the other defendants have now
    proceeded to trial and the appellants achieved what counsel described as
    complete success and the award of all damages, including punitive damages. In
    these circumstances, it is not apparent to us that it would be appropriate to
    make an order that would require another trial.

Conclusion

[11]

Accordingly,
    the appeal is dismissed, with costs to the respondent in the amount of $10,000,
    inclusive of disbursements and taxes.

Robert J. Sharpe J.A.


G.T. Trotter J.A.

A. Harvison Young J.A.


