



COURT OF APPEAL FOR ONTARIO

CITATION:
Enbridge
    Gas Distribution Inc. v. Marinaccio, 2012 ONCA 650

DATE: 20121001

DOCKET: C53671 & C53759

Laskin and Blair JJ.A. and Brown R.S.J. (
Ad
    Hoc
)

BETWEEN

Enbridge Gas Distribution Inc.

Plaintiff (Respondent)

and

Michael Marinaccio, also known as Mike
    Marinaccio, also known as Miguel Marinaccio, also known as Micahel Marinaccio, Maria
    Lettizia Marinaccio, also known as Maria Mariniccio, also known as Maria
    Messina,
Angelo Piro
, Angelica Piro,
Italo Tony Montaldi, also known as Tony Montaldi, also known as
    Italo Montaldi
, Nancy Nunziatina Montaldi also known as Nancy Montaldi, also
    known as Nunziatina Montaldi, 1639374 Ontario Ltd., 1316679 Ontario Limited,
    Maverick & Associates (1991) Limited, also known as Maverick & Associates,
    2132329 Ontario Ltd., 2132264 Ontario Ltd., Tera X Technologies Inc., Tarrco Construction,
    also known as Tarrco, Tek-Con, Mike Marinaccio Services, Tekka-Ent, Provac and
    2138337 Ontario Inc.

Defendants (
Appellants
)

Ross Morrison and Natalie Schernitzki, for the
    appellant, Italo Tony Montaldi

Bryan Fromstein, for the appellant, Angelo Piro

Reid Lester and Matthew Morden, for the respondent

Heard: February 15, 2012

On appeal from the judgments of Justice Frank J.C. Newbould
    of the Superior Court of Justice, dated April 14, 2011 and August 22, 2011,
    with reasons reported at 2011 ONSC 2313 and 2011 ONSC 4962, 206 A.C.W.S. (3d)
    685.

Laskin
    J.A.

A.

overview

[1]

Piro and Montaldi appeal the summary judgment granted to Enbridge.

[2]

Piro was a labourer.  Montaldi was an accountant.  The primary defendant,
    Marinaccio, was an operations supervisor for Enbridge.  Enbridge, a regulated
    utility, frequently had to repair property it had damaged during its regular
    maintenance.  In 2001, Marinaccio, Piro and Montaldi devised a scheme to do
    this repair work.

[3]

According to the appellants, the scheme was to operate as follows.  Piro
    alone would register business entities to do the work.  Marinaccios
    involvement would be concealed from his employer, Enbridge.  However, Marinaccio
    would hire contractors to do the work.  Montaldi would prepare the invoices to
    be given to Enbridge.  Marinaccio would approve the invoices.  Marinaccio, Piro
    and Montaldi would share the payments from Enbridge in predetermined
    percentages.

[4]

The appellants and Marinaccio carried out the venture for over six years. 
    Enbridge paid out over $6.5 million.  Marinaccio has now admitted that the
    entire scheme was a fraud.  No work was ever done.  All the invoices were
    phoney.  Marinaccio also claims that Piro and Montaldi were aware of the
    fraud.  After the lawsuit began, Marinaccio settled Enbridges claim against
    him for $1.9 million.

[5]

Enbridge then moved for summary judgment against Piro and Montaldi.  The
    motion judge, Newbould J., found that Marinaccio owed a fiduciary duty to
    Enbridge and that he breached his fiduciary duty by secretly profiting at the
    expense of his employer.  The motion judge granted summary judgment against
    Piro and Montaldi on three separate bases: knowing assistance to Marinaccio in
    breaching his fiduciary duty; bribery; and unjust enrichment.

[6]

On Enbridges main claim for knowing assistance, the motion judge found
    Piro and Montaldi jointly and severally liable for $5,723,339.60, which was the
    entire amount received from Enbridge less the net settlement amount paid by
    Marinaccio (after deducting the costs of collection).

[7]

On their appeal, Piro and Montaldi make four main arguments:

(1)

Piro alone argues that the motion judge erred in finding that Marinaccio
    owed a fiduciary duty to Enbridge.

(2)

Even if Marinaccio owed a fiduciary duty to Enbridge and he breached
    that duty, the motion judge erred in finding Piro and Montaldi liable for
    knowing assistance.  They submit that to be liable for knowing assistance, they
    had to know that the scheme was a fraud.  They contend that whether they knew
    at the time it was a fraud raises a genuine issue for trial.

(3)

The motion judge erred in finding them liable for the tort of bribery
    because Enbridge did not plead bribery and did not prove the payment of a secret
    commission.

(4)

The motion judge erred in finding them liable for unjust enrichment. 
    They submit that as they did some work and did not know the scheme was a fraud
    they are entitled to keep their share of the profits.

[8]

Montaldi argues two additional grounds of appeal:

(5)

The motion judge erred in his calculation of the amount of the judgment.

(6)

The motion judge erred in awarding compound interest.

[9]

For the reasons that follow, I would dismiss both appeals in their
    entirety.

B.

relevant factual background

[10]

Although
    the record before the motion judge was lengthy, the material facts are largely
    not disputed.  Piros and Montaldis discovery evidence was filed, but neither
    filed an affidavit in response to Enbridges motion.  I am satisfied that the
    motion judge was entitled to dispose of this case by a summary judgment.

[11]

The
    motion judge concisely summarized the factual background of this litigation. 
    His summary is sufficient to put the issues on appeal in context.  I therefore
    simply reproduce his summary taken from paras. 2, 3 and 5-10 of his
    endorsement:

[2]      This action arises from a business arrangement made by
    Piro and Montaldi with the defendant Michael Marinaccio who at the time was an
    employee of Enbridge.  Marinaccio was an operations supervisor with Enbridge
    with authority to retain third party contractors on behalf of Enbridge and to
    approve payment of invoices. Piro was a labourer who worked for various
    companies that did business with Enbridge and he got to know Marinaccio. 
    Montaldi is an accountant and financial planner and sole shareholder and
    principal of the defendant Maverick.

[3]
Enbridge often required repair work to
    be done on properties where Enbridge technicians had done the maintenance work
    such as repairing damaged landscaping.  The business engaged in by
    Marinaccio, Piro and Montaldi that has given rise to this action was a venture
    under which Enbridge paid approximately $6.7 million from 2001 to 2007 for work
    and equipment allegedly supplied to Enbridge by four entities set up by
    Piro.  Marinaccio and Piro each received at least 31.5% or 32.5% of this
    money, depending upon the year.  Maverick received either 5% or 7% of the
    money, depending upon the year.  There is a difference between the parties
    as to what happened to the remaining 30%.  Piro and Montaldi say that it
    was given in cash to Marinaccio to be used to pay subcontractors and suppliers
    who were to do the work for the four entities set up by Piro.  Marinaccio
    denies ever receiving the cash.

[5
]  
    The four entities set up by Piro were unincorporated. The first was Tarrco,
    followed by Tek-Con, Tekka-Ent and Provac. Invoices were sent out by each
    entity at different times. Tarrco invoices were submitted to Enbridge for a
    period of about 18 months from July, 2001 to January, 2003.  Tek-Con submitted
    invoices from June, 2003 to January, 2004. Tekka-Ent submitted invoices from
    February to December, 2004. Provac submitted invoices from February, 2005 to
    October, 2007.

[
6
]    Piro and
    Montaldi were aware that Marinaccio worked at Enbridge.  Piros evidence
    is that the businesses were registered in his name alone without Marinaccios
    name appearing because he knew that Marinaccio had a conflict of interest
    because of his involvement with Enbridge and that Marinaccios name was not to
    appear anywhere on the record.  Montaldis evidence was that the business
    was to be in Piros and Marinaccios name but that Marinaccio told him that his
    name could not appear on the ownership of the company because it would be a
    conflict of interest with Enbridge.  Marinaccio made clear that he would
    ensure that Enbridge did not learn about his involvement in the venture.

[
7
]    Montaldi
    was the accountant for the Piro entities.  He also prepared all of the
    invoices to Enbridge from information supplied by Piro or Marinaccio.  The
    invoices gave Maverick as the address for the entity supplying the
    invoice.  These invoices were not sent to Enbridge.  Rather they were
    hand delivered to Marinaccio by either Montaldi or Piro. Both Piro and Montaldi
    knew that it was Marinaccio who approved these invoices on behalf of Enbridge.

[
8
]   The total paid
    by Enbridge was $6,665,853.51.  Montaldi received the Enbridge checks for
    the invoices either at the Maverick office or at a post box controlled by
    Montaldi, and these checks were deposited into the bank account for the entity
    that had invoiced Enbridge.  The bank accounts for the four Piro entities
    were controlled by Piro and Montaldi who had the signing authority for the
    accounts.

[
9
]     From
    these bank accounts, 5% and later 7% of the Enbridge payments were paid to
    Montaldi.  His evidence is that these payments were for his fees for
    providing accounting services.  That amounted to approximately $408,000.
    30% of the Enbridge payments was taken out in cash and according to Piro and Montaldi
    was paid to Marinaccio for the purpose of paying the sub-contractors who
    allegedly did the work.  Their evidence is that the cash was put in brown
    envelopes and given to Marinaccio from time to time along with the
    invoices.  Marinaccio denies ever receiving this cash.  The balance,
    being 63%, and later 61% after Montaldis percentage was increased from 5 to
    7%, was paid out equally to Marinaccio and Piro.

[
10
]  
     Marinaccios evidence was that no work was done by the Piro entities that
    had invoiced Enbridge and that the work had been done by other contractors to
    Enbridge.  His evidence is that the invoices were phony to the knowledge
    of both Piro and Montaldi.  Piro and Montaldi both assert that they were
    told by Marinaccio that the work was being done by subcontractors arranged by
    Marinaccio and that the 30% of the Enbridge payments made in cash to Marinaccio
    was for the purpose of paying those subcontractors.  Their evidence is
    that they do not know who those subcontractors or persons were and it is admitted
    that Montaldi, purportedly the accountant for the Piro entities, kept no record
    of any of such subcontractors or persons or of amounts allegedly paid to them.

C.

analysis

(1)

Did the motion judge err in finding that Marinaccio
    owed a fiduciary duty to Enbridge?

[12]

Marinaccio began working for Enbridge in 1979.  He was promoted over
    the years.  By 2001 he was an operations supervisor.  He had authority to hire
    outside contractors to do work for Enbridge and to approve payment of their
    invoices.  At first, he could only approve invoices of up to $2,000, but by late
    2003 he could approve invoices of up to $5,000.  The motion judge found at
    para. 20, in this case there can be no question but that Marinaccio owed a
    fiduciary duty to Enbridge.

[13]

Montaldi does not challenge the motion judges finding.  However, Piro
    does.  He argues that Marinaccio was not a key Enbridge employee, but merely a
    mid-level manager with limited authority.  Like any employee, Marinaccio owed a
    duty of loyalty to his employer. However, his role within Enbridge did not make
    him a fiduciary.  At the very least, whether he owed a fiduciary duty is an
    issue that requires a trial.  Piro attempts to buttress his argument by
    pointing out that the motion judges finding of a fiduciary duty is unsupported
    by any analysis.

[14]

I would not give effect to Piros argument.  As a starting point, the
    motion judge cannot be faulted for his brief treatment of the question whether
    Marinaccio owed a fiduciary duty to Enbridge because that question did not
    appear to have been a live issue before him.  As the motion judge noted,
    Montaldi implicitly conceded that Marinaccio owed a fiduciary duty.  And Piro,
    who now alone challenges the motion judges finding, expressly conceded that Marinaccio
    owed a fiduciary duty.  That express concession is evident from para. 19 of
    Piros factum on the motion for summary judgment where he accepted that it is
    established that Marinaccio owed a fiduciary duty to Enbridge and that his
    action amounted to a breach of fiduciary duty vis-
à
-vis
    Enbridge.

[15]

Although
    we no doubt have authority to revisit an issue that was conceded before a
    motion judge, we should be reluctant to do so.  Moreover, even if we do revisit
    this issue, the question whether a person owes a fiduciary duty is largely a
    factual inquiry.  Accordingly, a trial judges or a motion judges finding of a
    fiduciary duty is entitled to significant deference from an appellate court:
    see
Hodgkinson v. Simms
, [1994] 3 S.C.R. 377, at pp. 425-426;
Shafron
    v. KRG Insurance Brokers (Western) Inc.,
2009 SCC 6, [2009] 1 S.C.R. 157,
    at para. 13;
GasTOPS Ltd. v. Forsyth
, 2012 ONCA 134, at para. 81.

[16]

In
    this case, the motion judges finding of a fiduciary duty deserves deference
    because there is evidence to support it.  A fiduciary relationship may exist
    where the fiduciary undertakes to act in the best interests of the beneficiary,
    the fiduciary has the power to affect the legal or substantial interests of the
    beneficiary, and, as a result, the beneficiary is vulnerable to the fiduciary: see
Galambos v. Perez
, 2009 SCC 48, [2009] 3 S.C.R. 247 at paras. 68-70;
Alberta
    v. Elder Advocates of Alberta Society
, 2011 SCC 24, [2011] 2 S.C.R. 261 at
    paras. 30-34. In the employment context, an employee may therefore be said to
    owe a fiduciary duty to his or her employer where the employee has
    discretionary power to affect adversely the employers interests and the
    employer is vulnerable to the exercise of that power.

[17]

Here, Marinaccio had discretionary power both to hire outside
    contractors for Enbridge and to approve the payment of invoices they
    submitted.  Enbridge was undoubtedly vulnerable to the exercise of that power
    because Marinaccio used his power to defraud his employer of over $6.5 million
    over the course of six and a half years.

[18]

I recognize the admonition of my colleague Gillese J.A. in
Hunt
    v. TD Securities Inc.
(2003)
, 66 O.R. (3d) 481, leave to
    appeal to S.C.C. refused, [2003] S.C.C.A. No. 473, at para. 46:

[O]ne cannot reason backwards from the fact that
    an individual is harmed by the unauthorized act of their broker, to the
    conclusion that they are vulnerable.  Rather, the individuals and the nature of
    the relationship must be examined.

[19]

Nonetheless, that Marinaccio had the authority, opportunity and ability
    to perpetrate such a large-scale fraud on his employer over such a prolonged
    period of time is some evidence that he possessed the hallmarks of a fiduciary
    duty: discretionary power over a correspondently vulnerable employer.

[20]

For these reasons, I would not interfere with the motion judges
    finding that during the period of the fraud, Marinaccio owed a fiduciary duty
    to Enbridge.  In upholding this finding I should not be taken to signify that
    many mid-level employees of large corporations will owe a fiduciary duty to
    their employer.  The finding in this case not only rests on its particulars
    facts but was largely uncontested.  If the question whether Marinaccio owed a
    fiduciary duty to Enbridge had been more vigorously challenged, the motion
    judge may have taken a different view.

(2)

Did the motion judge err in finding that Piro and
    Montaldi knowingly assisted Marinaccio in breaching his fiduciary duty?

[21]

If
    Marinaccio had a fiduciary duty to Enbridge, unquestionably he breached that
    duty.  He participated in an undisclosed scheme by which he induced Enbridge to
    unknowingly make payments to business entities in which he had an interest.  He
    personally profited from those payments.  These were acts of dishonesty, inconsistent
    with Marinaccios fiduciary duty.

[22]

If
    Marinaccio owed a fiduciary duty to Enbridge, neither Piro nor Montaldi contest
    that he breached this duty.  However, both dispute their liability for
    knowingly assisting in the breach.

[23]

In
    the recent case of
Harris v. Leikin Group Inc.
, 2011 ONCA 790, at
    para. 8, this court set out the components of a claim for knowingly assisting
    in a breach of a fiduciary duty:

There is no dispute concerning the constituent elements of the
    tort of knowing assistance in breach of fiduciary duty: (1) there must be a
    fiduciary duty; (2) the fiduciary must have breached that duty fraudulently and
    dishonestly;
(3) the stranger to the fiduciary relationship must have had
    actual knowledge of both the fiduciary relationship and the fiduciarys
    fraudulent and dishonest conduct
; and (4) the stranger must have
    participated in or assisted the fiduciarys fraudulent and dishonest conduct. The
    knowledge requirement for liability based on this tort is actual knowledge,
    which, as the Supreme Court confirmed in
Air Canada
[
Air Canada v.
    M & L Travel Ltd.,
1993] 3 S.C.R. 787], at para. 38, includes
    recklessness and wilful blindness.  As this court observed in
Keeton v. The
    Bank of Nova Scotia
, 2009 ONCA 662, 254 O.A.C. 251, at para. 82, to found
    liability [on knowing assistance in a breach of fiduciary duty], the stranger
    to the trust must have actual (as opposed to constructive) knowledge of the
    misconduct, or be wilfully blind to the breach or reckless in his failure to
    realize that there was a breach. [Emphasis added; internal citations omitted.]

[24]

This
    ground of appeal turns on the third component, the knowledge requirement.  Piro
    and Montaldi submit that to be liable for knowing assistance they had to know both
    that Marinaccios conduct was dishonest
and
that the scheme was a
    fraud.  And although the motion judge found that they both knew Marinaccio
    acted dishonestly, and indeed they participated in that dishonesty, they did
    not know at the time that the entire scheme was a fraud. They claim they
    believed work was being done, and that Marinaccio was hiring and paying
    sub-contractors out of the money received from Enbridge.

[25]

And
    yet Marinaccio says that they knew. And by the time of discovery, Piro
    acknowledged that the scheme was fraudulent.  However, he says that he did not
    know that it was fraudulent at the time.  Montaldi says that he never knew that
    the scheme was fraudulent.  In the face of this conflicting evidence I accept,
    and Enbridge has accepted, that whether Piro or Montaldi knew at the time that the
    scheme was a fraud raises a genuine issue requiring a trial.  Thus, if Enbridge
    were required to show the appellants knowledge of the fraud, it would not be entitled
    to summary judgment on the basis of knowing assistance.

[26]

Enbridge,
    however, submits that it is required to show only that Piro and Montaldi had
    knowledge of Marinaccios dishonesty. It is not necessary to prove they knew that
    a fraud was committed, Enbridge argues, so long as they were aware that
    Marinaccio was dishonestly breaching his fiduciary duty by participating in the
    scheme. The motion judge agreed with Enbridges position.  He wrote at paras.
    24-25 of his endorsement:

[24]    In this case both Piro and Montaldi
    knowingly assisted in the breach of Marinaccio's fiduciary obligations to
    Enbridge.  They were aware that Marinaccio had a conflict and assisted him
    in taking steps to hide Marinaccio's role in the venture.  They knew as
    well that Marinaccio was making sure that Enbridge was not aware of the
    venture.  Montaldi was far more than an accountant for the Piro
    entities.  He prepared the invoices, which he and Piro hand delivered to
    Marinaccio rather than sending them to Enbridge. The invoices directed payment
    to a Maverick address. He along with Piro opened bank accounts in which the
    Enbridge money was deposited and he arranged for wire transfers to Marinaccio
    as well, on his evidence, of taking cash and giving it to Marinaccio.

[
25
]    The fact that Piro
    and Montaldi assert that they were not aware that work was not being done for
    which invoices were sent does not assist them. It was a breach of Marinaccio's
    fiduciary obligations to Enbridge to be involved in a venture that resulted in
    him being the recipient of money, regardless of whether the work was
    done.  Piro and Montaldi were quite aware of that breach and took steps in
    furtherance of it.


[27]

I
    agree with the motion judge.  In the context of a claim for knowing assistance
    in the breach of a fiduciary duty, dishonest and fraudulent conduct signify a
    level of misconduct or impropriety that is morally reprehensible but does not
    necessarily amount to criminal behaviour.  The term fraudulent does not signify
    that an additional degree of corruption is necessary to make out the tort; it
    simply emphasizes the required dishonest quality of the fiduciarys act. As Buckley
    L.J. stated in
Belmont Finance Corp. v. Williams Furniture Ltd. (No. 1)
,
    [1979] 1 All E.R. 118, at p.130, cited with approval in
Air Canada
, at
    p. 815:

I do not myself see that any distinction is to be drawn
    between the words fraudulent and dishonest; I think they mean the same
    thing, and to use the two of them together does not add to the extent of
    dishonesty required.

In
Air Canada
, at p. 826, Iacobucci J.
    described the type of conduct captured by the two terms used together as the
    taking of a knowingly wrongful risk resulting in prejudice to the
    beneficiary.  By extension, liability for knowing assistance requires only
    that the assister knew of the dishonest nature of the fiduciarys conduct.

[28]

Here,
    both Piro and Montaldi knew that Marinaccio took a wrongful risk that prejudiced
    Enbridge.  They knew that Marinaccio worked for Enbridge.  Piro knew and the
    motion judge found that Montaldi knew that Marinaccio had authority to retain
    outside contractors and to approve invoices for payment by Enbridge.  Piro and
    Montaldi also knew that Marinaccio had a conflict of interest by participating
    in the scheme.  They knew that he wanted to conceal his involvement in the
    scheme from Enbridge and they assisted him in doing so.  And they knew that he
    secretly profited from the scheme at the expense of Enbridge.

[29]

In
    short, Piro and Montaldi knew that Marinaccios conduct was dishonest, and
    indeed morally reprehensible, and that his conduct harmed Enbridge. They cannot
    escape liability by their assertion that they did not know at the time that
    they were participating in a fraud.

[30]

I
    would not give effect to this ground of appeal.

[31]

Piro
    and Montaldi accept that if they are liable for knowing assistance then the
    motion judge was correct to hold them jointly and severally responsible for the
    full amount advanced by Enbridge.  As I would uphold the motion judges finding
    of liability for knowing assistance, strictly speaking, it is not necessary to
    deal with the two other bases of the appellants liability.  For completeness,
    however, I will address them briefly.

(3)

Did the motion judge err in finding Piro and
    Montaldi liable for bribery?

[32]

The
    motion judge found Piro and Montaldi liable for bribery because of the payments
    they made to Marinaccio out of the money received from Enbridge.

[33]

The
    civil tort of bribery is the payment of a secret commission.  In
Ruiter
    Engineering & Construction Ltd. v. 430216 Ontario Ltd.
(1989), 67 O.R.
    (2d) 587 (C.A.), at p. 591, Morden J.A. set out the three elements of a cause
    of action in bribery:

The term "bribe" has, for the purposes
    of the civil law, received a wide interpretation. In
Industries
    & General Mortgage Co. v. Lewis
,
[1949] 2 All E.R. 573 (K.B.D.), Slade J. said
    at p. 575:

For the purposes of the civil law a bribe
    means the payment of a secret commission, which only means (i) that the person
    making the payment makes it to the agent of the other person with whom he is
    dealing; (ii) that he makes it to that person knowing that that person is
    acting as the agent of the other person with whom he is dealing; and (iii) that
    he fails to disclose to the other person with whom he is dealing that he has
    made that payment to the person whom he knows to be the other person's agent.
    Those three are the only elements necessary to constitute the payment of a
    secret commission or bribe for civil purposes.

[34]

Once
    all the elements of bribery are established, the court will presume in favour
    of the principal and against the briber and the agent bribed, that the agent
    was influenced by the bribe.  The presumption is irrebuttable: see
Optech
    Inc. v. Sharma,
2011 ONSC 680, at para. 23.  Moreover, the motive of the person
    making the bribe is irrelevant: see
Ruiter Engineering,
at p. 591-592;
Barry v. Stoney Point Canning Co.,
[1917] 55 S.C.R. 51, at p. 74.

[35]

The
    motion judge found that Enbridge had established the three elements of bribery:

[31]    The three elements cited by Morden J.A.
    as constituting the only elements necessary to constitute the payment of a
    secret commission or bribe clearly are applicable to this case.  The
    dealings were clearly surreptitious and in the language of James L.J.
    constituted a fraud on Enbridge entitling Enbridge to adequate relief as the
    court may think right to give.

[32]    Piro and Montaldi controlled the bank
    accounts and they together arranged for payment to Marinaccio of approximately
    $2.086 million pursuant to his 32.5% interest in two of the entities and his
    31.5% interest in the other two entities.  They also say they acted in
    paying approximate $2 million in cash to Marinaccio, representing 30% of the
    proceeds received from Enbridge, although Marinaccio denies receiving this
    money or telling them that he was paying any subcontractors.  If in fact
    they paid this cash to Marinaccio, I find that none of this was paid by
    Marinaccio to any subcontractors. That was Marinaccio's evidence and neither
    Piro nor Montaldi have provided any evidence of any payments to any
    subcontractors or indeed of the existence of any subcontractors.  If they
    did not pay the cash to Marinaccio, they have retained it for their own
    purposes.

[33]    In the circumstances, the appropriate
    remedy under the claim for bribery is to require Piro and Montaldi to pay
    Enbridge the $2.086 million paid to Marinaccio and a further $2 million either
    paid to Marinaccio or kept by them.  Thus under this heading Piro and
    Montaldi are jointly and severally responsible to pay Enbridge $4.086 million.

[36]

Piro and Montaldi challenge the motion judges finding on three
    grounds.  First, they say that Enbridge did not plead a cause of action in
    bribery.  The motion judge, therefore, was wrong to grant judgment on a claim
    that was not pleaded.  Second, they say that bribery was not made out because
    the payments to Marinaccio were not made to him as an agent of Enbridge, but as
    a principal of the Piro entities.  Third, Piro says that the motion judge ought
    to have limited his damages award to $2 million, which was the amount of Piros
    profit.  I do not agree with any of these grounds advanced by the appellants.

[37]

On the first ground, although Enbridge did not use the word bribery
    in its amended claim, it did plead all of the material facts required to
    establish a cause of action in bribery.  More important, in its notice of
    motion, Enbridge expressly moved for summary judgment for bribery.  Its motion
    was served on the appellants 14 months before it was heard, and the issue of
    bribery was fully argued before the motion judge.  Therefore, neither Piro nor
    Montaldi can seriously claim that he was prejudiced by the omission of the word
    bribery from Enbridges pleading.

[38]

On the second ground, Piro and Montaldi admitted that they acted in
    concert to make secret payments to Marinaccio of approximately $2.086 million,
    which represented his percentage interest in the Piro entities.  They have also
    asserted that they acted in concert in paying Marinaccio in cash a further $2
    million, representing 30 per cent of the total proceeds of the fraud.

[39]

Accepting their admission and their assertion, Piro and Montaldi
    secretly paid to Marinaccio approximately $4.086 million from the amounts
    invoiced to Enbridge and paid by Enbridge to the Piro entities.  In other
    words, they paid bribes to Marinaccio amounting to $4.086 million and they kept
    these payments secret from Enbridge.  Their motive in making these payments is
    irrelevant.  Thus, Piro cannot escape liability by claiming that the payments
    were made to Marinaccio as a principal of the Piro entities and not as an agent
    of Enbridge.

[40]

And Montaldi cannot escape liability by claiming that he did not know
    of the fraud or deal directly with Enbridge. Neither his reasons for
    transferring funds to Marinaccio nor his awareness of the fraudulent nature of
    the scheme has any bearing on his liability. His knowledge that Marinaccio was
    acting as an employee of Enbridge and his failure to disclose the payments to
    Enbridge are sufficient. Further, he dealt with Enbridge extensively: he
    prepared all of the invoices addressed to Enbridge on behalf of the Piro
    entities; he received Enbridges checks at either the Maverick office or a post
    box he controlled; he deposited Enbridges checks into bank accounts he
    controlled. The tort of bribery does not require that dealing be direct.

[41]

In his article Remedies for the Victims of a Bribe (1999-2000) 22
    Advoc. Q. 198, at para. 198, Paul M. Perell describes the expansive nature of
    liability for bribery:

The payment may be made to induce the recipient to exercise his
    influence in a way that favours the briber, but the motive is not determinative
    and
the essential factor is the secrecy
; if the payment is secret then
    a corrupt motive and the success of the inducement will be assumed. The secret
    payment is a bribe
even if the person making the payment did not intend a
    bribe and believed or expected that the recipient would properly disclose the
    payment.
[Emphasis added; footnotes omitted.]

[42]

In my view, this passage is a complete response to
    Montaldis claim.

[43]

On the third ground, the measure of damages for bribery is generally
    the amount of the bribe or secret commission paid to the agent  in this case
    Marinaccio.  Both Piro and Montaldi said that they made secret payments to
    Marinaccio of $4.086 million.  Therefore, the motion judge did not err in
    awarding damages for this amount.  I would not give effect to this ground of
    appeal.

(4)

Did the motion judge err in finding Piro and
    Montaldi liable for unjust enrichment?

[44]

Liability for unjust enrichment has three components:

·

The defendant obtains an enrichment.

·

The plaintiff incurs a corresponding deprivation.

·

There is no juristic reason for the defendants enrichment:
Garland v. Consumers Gas Co.,
2004 SCC 25,

[2004] 1 S.C.R. 629,
    at para. 30.

[45]

The motion judge held that Enbridge had established these three
    components:

[35]    This cause of action has undoubtedly been
    established.  Piro and Montaldi were enriched by the amounts received by
    them and Enbridge is out the money.  Piro admits that there was a
    fraud.  Montaldi can point to no evidence that any work was done or
    equipment supplied by the four Piro entities.  In the circumstances I find
    that no work was done and that there was no juristic reason whatsoever for the
    payments made by Enbridge.

[46]

Piro and Montaldi submit that the motion judge erred in holding that
    the third component had been established because the Piro entities did some work
    and neither appellant knew at the time that the scheme was a fraud.  Retaining
    the money paid by Enbridge was, therefore, not unjust.  I do not accept this
    submission.

[47]

On the first branch of the argument, Piro essentially conceded when he
    acknowledged the scheme was a fraud that the four entities registered in his
    name never provided anything of value to Enbridge.  Therefore, all of the
    payments Enbridge made to the Piro entities represented a loss.  Although
    Montaldi claims that the Piro entities did some work, he has no direct evidence
    that they did. He also failed to make any further inquiries into which
    sub-contractors were doing the work he alleges was done, and whether they were
    in fact paid by Marinaccio out of the funds allegedly earmarked for that
    purpose. The motion judge, thus, reasonably held that the appellants could not credibly
    claim a juristic reason for their enrichment on the basis some work had been
    done.

[48]

On the second branch of the argument, the appellants contend that because
    they did not have knowledge of the fraud at the time, or at the very least
    whether they had knowledge raises a genuine issue for trial, they cannot by a
    summary judgment be required to disgorge the money they received from
    Enbridge.  I do not agree with this contention.

[49]

The entire scheme was a fraud, as Marinaccio claimed and Piro later
    admitted.  That neither Piro nor Montaldi may have known it rose to the level
    of fraud at the time does not make out a juristic reason for their enrichment
    at the expense of Enbridge.  Had either Piro or Montaldi been an innocent
    stranger to the scheme who could claim to have received the money from Enbridge
    lawfully, his position may have been different: see
Citadel General
    Assurance Co. v. Lloyds Bank Canada
, [1997] 3 S.C.R. 805, at
    para. 51.  But neither Piro nor Montaldi was an innocent stranger to the
    scheme.  Both fully participated and assisted Marinaccio in arranging what was
    shown to be a fraud on Enbridge.  In these circumstances, Piro and Montaldi can
    have no juristic reason to retain Enbridges money.  I would not give effect to
    this ground of appeal.

(5)

Did the motion judge err in calculating the amount of the judgment?

[50]

As I have said, each appellant acknowledges that if he is liable for
    knowingly assisting in Marinaccios breach of fiduciary duty then he is liable
    to account for the full amount paid by Enbridge and not just his share of the
    profit.  Montaldi, however, submits that the motion judge erred in calculating
    the amount of the judgment for knowing assistance.

[51]

In assessing Piros and Montaldis liability, the motion judge properly
    reduced the total loss incurred by Enbridge by the sum from the Marinaccio
    settlement. Instead of deducting the gross amount of the settlement, however,
    the motion judge took account of the fees and disbursements Enbridge incurred
    in collecting the settlement funds. Therefore, in fixing the amount of the
    judgment against Piro and Montaldi, he reduced the appellants liability by the
    amount of Enbridges
net
recovery from Marinaccio
    after legal costs.  Montaldi contends that the motion judge should have instead
    deducted the gross amount of the settlement.

[52]

Enbridge paid the four Piro entities $6,542,928.63. The Marinaccio
    settlement amounted to $1,948,727.  The cost of collecting the settlement
    amounted to $1,129,138.  Thus, the net recovery on the settlement was $819,589
    ($1,948,727 minus $1,129,138).  The motion judge granted judgment for
    $5,723,339.60 ($6,542,928.63 minus $819,589).  Montaldi submits that he ought
    to have granted judgment for $4,594,201.63 ($6,542,928.63 minus $1,948,727).

[53]

I do not agree with this submission.  The motion judge addressed this
    submission at para. 19 of his supplementary endorsement.  He held that Enbridge
    was entitled to be compensated for its loss.  Its loss had to take account of
    the costs of recovery on the settlement.  The motion judge wrote:

In my reasons for judgment I held that the
    plaintiff was entitled to its loss, being the amount paid by it to the four
    Piro entities, less the net recovery after the costs of collecting resulting
    from the Marinaccio settlement. The loss was $6,542,928.63.

The gross amount
    collected under the Marinaccio settlement was $1,948,727. The total fees and
    disbursements incurred by the plaintiff in collecting that amount was
    $1,129,138, leaving a net recovery under the settlement of $819,589. Mr.
    Morrison contends that the gross amount recovered from the Marinaccio
    settlement should be deducted from the loss rather than the net amount after
    costs as there is no breakdown or calculation of this amount in the evidence. I
    think if Mr. Morrison seriously contended that the amounts were not spent, he
    could have asked for more particulars, assuming they are not contained in the
    two inch thick bundle of invoices provided by the plaintiff. I am prepared to accept
    that the amount was spent. I ordered that the net recovery after costs under
    the Marinaccio settlement should be deducted from the plaintiff's loss in order
    that there not be double recovery. To deprive the plaintiff of the cost of the
    recovery under the Marinaccio settlement would deprive it of a portion of its
    loss. The net recovery of $819,589 is to be used with the result that the loss
    to be paid by Piro and Montaldi is $5,723,339.60. [Footnote omitted.]

[54]

I agree.  I would not give effect to this ground of appeal.

(6)

Did the motion judge err in awarding Enbridge compound interest?

[55]

For pre-judgment interest, the motion judge awarded Enbridge compound
    interest (at 4.3 per cent) compounded monthly.  Montaldi does not dispute the
    rate but submits that the motion judge erred in ordering compound interest.  He
    relies on s. 128(4)(b) of the
Courts of Justice Act
, R.S.O. 1990 c. C-43, which provides that pre-judgment interest shall
    not be awarded on interest accruing under this section. He also submits that unlike
    in
Bank of America v. Mutual Trust Co.,
2002 SCC
    43, [2002] 2 S.C.R. 601, a case the motion judge referenced in support of his
    discretion to award compound interest, there was no loan agreement specifically
    providing for compound interest between the parties.

[56]

At para. 17 of his supplementary endorsement, the motion judge
    explained why he awarded compound interest:

Courts of equity have always exercised the power
    to award compound interest whenever a wrongdoer deprives a company of money
    which it uses in its business. On general principles it should be presumed that
    had the business not been deprived of the money, it would have made the most
    beneficial use of it available to it. Alternatively, it should be presumed that
    the wrongdoer made the most beneficial use of it. [Internal citations omitted.]

[57]

I agree.  I would simply add that this court has consistently approved
    of the trial courts exercise of discretion to award compound interest for
    breach of fiduciary duty or breach of trust: see
Kooner v. Kooner
, 2006 CarswellOnt 5884 (C.A.), at para. 2;
Waxman v. Waxman
, 2008 ONCA 426, at para. 5; and
Brock v. Cole
(1983), 40 O.R. (2d) 97 (Ont. C.A.), at p. 103.

[58]

I would not give effect to this ground of appeal.

D.

conclusion

[59]

I would dismiss both Piros appeal and Montaldis appeal.  Enbridge is
    entitled to the costs of the appeal, which I would fix in the amount of
    $40,000, inclusive of disbursements and applicable taxes.

Released:
Oct. 1, 2012                                 John
    Laskin J.A.

JL                                                           I
    agree R.A. Blair J.A.

I
    agree M.F. Brown R.S.J. (ad hoc)


