



COURT OF APPEAL FOR
    ONTARIO

CITATION:
    OLA Staffing Inc. v. D'Angelo Brands (2156775 Ontario Inc.), 2018 ONCA 922

DATE: 20181119

DOCKET: C64856

Watt, Miller and Nordheimer JJ.A.

BETWEEN

OLA Staffing Inc.

Plaintiff (Respondent)

and

2156775 Ontario Inc. o/a DAngelo Brands

Defendant (Appellant)

Gregory
    Hemsworth, for the appellant

Kathryn Bird and
    Edward ODwyer, for the respondent

Heard and
    released orally:  November 16, 2018

On
    appeal from the judgment of Justice Freya Kristjanson of the Superior Court of
    Justice, dated December 11, 2017 with reasons reported at 2017 ONSC 7318.

REASONS FOR DECISION

[1]

The defendant appeals from the summary judgment awarded by the motion
    judge for payment of outstanding invoices rendered by the plaintiff.

[2]

The appellant contracted with the respondent for the provision of
    temporary employees to staff its manufacturing plant.  There was a master
    contract between the parties governing their relationship and then there were
    individual requests for the provision of temporary employees.  These
    arrangements began in 2008.  The issue between the parties arose in 2013.

[3]

The practice was that, when the appellant needed employees, one of its
    employees would contact the respondent and make that request.  The respondent
    would then provide the employees requested.  The appellant would assign these
    employees to their duties and would advise the respondent of the hours worked. 
    The respondent would pay the temporary employees for the work done and would
    then invoice the appellant for the costs of providing the employees.

[4]

Unbeknownst to either of the parties, the appellants representative
    engaged in a fraudulent scheme whereby he would request three specific
    temporary employees to work at the appellants plant.  However, those temporary
    employees did not actually work at the plant.  Instead, the appellants
    representative would certify to the respondent that the employees had worked
    and the employees would receive the payments.  The appellant would then get
    invoiced by the respondent for these employees.

[5]

The appellant eventually discovered this fraudulent scheme and advised
    the police.  The appellant continued to use the services of the respondent.  At
    a later point, the appellant refused to pay certain invoices due to the
    respondent on the basis that it was recouping the monies paid to the respondent
    for the employees involved in the fraudulent scheme who had not actually
    worked.

[6]

The respondent commenced this action to recover payment for the unpaid
    invoices.  The appellant defended on the basis that it was entitled to a
    set-off for the earlier monies paid to the respondent for the employees who had
    not worked together with the costs of investigating the fraud.  The appellant
    did not counterclaim for the amounts so paid.

[7]

In granting summary judgment, the motion judge made three essential
    findings.  The first was that much of the evidence that the appellant filed on
    the summary judgment motion was hearsay (or double hearsay) and was not
    entitled to any weight.  We agree.  The appellants reliance on r. 39.01(2) of
    the
Rules of Civil Procedure
, R.R.O. 1990, Reg. 194 for the
    admissibility of this evidence falters on the fact that the deponent did not
    attest to his belief in the information provided.

[8]

The second was that the appellant could not rely on the defence of legal
    set-off because the amount claimed by way of set-off was a claim for
    unliquidated damages and thus was not a debt.  We agree with the motion judges
    analysis on this issue.

[9]

The third was that the defence of equitable set-off was not available
    because the transactions were not sufficiently closely linked for equitable
    set-off to apply (para. 45).  We do not agree with the motion judges
    reasoning in this respect.  In our view, the transactions were closely linked. 
    They were all part and parcel of the same contractual relationship.  That
    relationship had been ongoing for many years and was governed by an overriding
    master contract.

[10]

That
    said, we nonetheless agree with the conclusion reached by the motion judge that
    equitable set-off was not available in this case.  Our reason for that
    conclusion rests on the first requirement for the application of equitable
    set-off, that is, that the party relying on a set-off must show some equitable
    ground for being protected against the adversary's demands:
Algoma Steel
    Inc. v. Union Gas Limited
(2003), 63 O.R. (3d) 78 (C.A.) at para. 26.  In
    this case, there is no equitable ground favouring the appellant.  It was the
    appellants representative who orchestrated the fraud, including certifying to
    the respondent that the employees had worked which the respondent relied on for
    its invoices.  In those circumstances, it is the appellant who should bear any
    loss that resulted.  The appellant was also in the best position to discover
    and prevent the fraud since it knew, or ought to have known, whether the
    employees actually worked in its plant.  This factor also argues in favour of
    the appellant bearing the resulting loss.

[11]

Consequently,
    we agree with the motion judge that summary judgment was properly granted in
    favour of the respondent for the amounts due on the unpaid invoices.

DISPOSITION

[12]

The
    appeal is dismissed.  The appellant will pay to the respondent the costs of the
    appeal fixed in the agreed amount of $10,000 inclusive of disbursements and
    HST.

David
    Watt J.A.

B.W.
    Miller J.A.

I.V.B.
    Nordheimer J.A.


