



COURT OF APPEAL FOR ONTARIO

CITATION:

Trentfab
    Inc. v. Kinmond, 2012 ONCA 914

DATE: 20121228

DOCKET: C53367

LaForme and Watt JJ.A. and Lederman J. (
ad
    hoc
)

BETWEEN

Trentfab Inc. and 2202158 Ontario Inc.

Appellants

and

Brian
    Kinmond, 2198430 Ontario Inc., 1745179
    Ontario Inc. and Crawford Acquisitions Corp.

Respondents

Scott C. Hutchison, for the appellants

R. Steven Baldwin, for the respondents

Heard: December 12, 2012

On appeal from the order of Justice Herman Wilton-Siegel of
    the Superior Court of Justice, dated January 31, 2011 reported at 2011 ONSC
    773.

ENDORSEMENT

Introduction

[1]

Wilton-Siegel J.
ordered that
    there will be a trial of the issue concerning whether the activities of Brian
    Kinmond and 219 as alleged by the plaintiffs amounts to a fraudulent structure
    or scheme.  The issue to be tried was later clarified in a consent order as
    [encompassing] causes of action for both fraud and breach of fiduciary duty in
    relation to the structure or scheme as per schedule A attached .  Schedule
    A is an amended statement of claim, which focuses the issue to be tried.

[2]

In a nutshell, the focus of the trial was whether the actions of Brian
    Kinmond (Kinmond) and 2198430 Ontario Inc. (219) constituted fraud or
    breach of fiduciary duty,
by way of
    misappropriation of funds
in relation to Trentfab Inc. (Trentfab).

[3]

After seven and one-half days of trial,
Wilton-Siegel
    J. released lengthy reasons for his decision which he commenced by noting that
    I have used the term fraudulent activity to include activity constituting a
    breach of fiduciary duty, as well as activity constituting civil fraud, in each
    case involving a misappropriation of Trentfab assets.

Issues at trial

[4]

The principal claim of the plaintiffs at trial was that characteristics
    common to civil fraud were present and that an inference should be drawn that
    Kinmond and 219 engaged in fraudulent conduct.  Relying on their expert Cameron
    McCaw, they alleged that Kinmonds conduct resulted in a monetary benefit to
    219 at the plaintiff, Trentfabs expense.

[5]

Alternatively the plaintiffs claimed that Kinmond was in breach of his
    fiduciary obligations to Trentfab.  They argued that an arrangement by
    Kinmond in connection with a decommissioning project was preferential treatment
    resulting in a misappropriation of monies owing to Trentfab.

[6]

The defendants denied that there was any fraud or a breach of fiduciary
    duty.  Their position was that the relationship between the parties was
    intended to be economically neutral to Trentfab.   That is, it was conducted on
    the basis that the financial result to Trentfab was to be the same as if 219
    had not been involved.  As between 219 and Trentfab, it was never the intention
    that Trentfab would be paid on a job-specific basis.

[7]

In his reasons the trial judge conducted an extensive review of the
    evidence and found that Kinmonds actions were not fraudulent and that he had
    not benefitted at Trentfabs expense.  He held that the plaintiffs had failed
    to establish conduct on the defendants part that constitutes fraud or breach
    of fiduciary duties, by way of any misappropriation of monies.  The plaintiffs
    appeal the trial judges decision.

Issues on Appeal

[8]

On appeal the appellants submit that the trial judge erred in two
    respects: first, in finding Kinmonds conduct not fraudulent; and second, in
    finding that the involvement of 219 was financially neutral to Trentfab.  They
    essentially argue that although the trial judge set-out and applied the correct
    law; even on the findings as made by him, had he approached the evidence
    properly, both fraud and breach of fiduciary duty were proven.

[9]

At the core of the appellants arguments is the contention that the
    trial judge did not assess the evidence collectively and as a whole.  Rather,
    they say he relied on parts of the evidence in assessing a specific issue and
    other evidence in connection with another. In approaching his task in this
    fashion, the appellants submit the trial judge committed an error of law.

Analysis

[10]

The issue to be tried was specifically narrowed and defined
    by the parties with the case management guidance of
Wilton-Siegel J. 
    Some of the reasons for this are that there are several other issues in
    Trentfab and 220s action which remain unresolved, including claims for breach
    of statutory duty of care under the OBCA, and interference with contractual
    relations.  In addition, Kinmond has commenced a separate wrongful dismissal
    claim against Trentfab in another jurisdiction.

[11]

It
    is with this background that the parties defined the issue to be tried and how
    it was narrowly presented and argued at trial.  Moreover, the parties submitted
    written closing submissions to the trial judge for his reference.  Thus, the
    trial judge was well aware of the issue to be decided, namely whether Kinmond
    committed fraud or breached his fiduciary duty by misappropriating funds or
    assets of Trentfab through a scheme involving 219. He was also entirely aware,
    through the written submissions of counsel, what evidence was being relied on
    in connection with each issue to be considered.

[12]

Because
    the issue to be tried was intentionally defined narrowly, and given that the
    trial proceeded the way it did through the evidence called and relied upon the
    parties, we do not accept that the trial judge wrongly approached his
    analysis.  Instead, we think his analysis was faithful to what was agreed upon
    and the issue he was asked to decide.

[13]

In
    the end, the appellants arguments essentially amount to disagreements with the
    trial judges findings of fact.  Absent establishing palpable and overriding
    errors that impact the trial judges findings, a reviewing court will not
    interfere. They have failed to do so.

[14]

In
    reaching his decision the trial judge provided extensive reasons that examined
    the law, the issues raised and he undertook a thorough assessment of all the
    evidence.  The trial judge expressly stated that he approached Kinmonds
    evidence with caution. That would include his explanation for the interposition
    of 219 between Trentfab and the equipment purchasers.  Nevertheless, the trial
    judge specifically found that:

a)

there was no evidence
    that Kinmond diverted funds owing to Trentfab from Trentfabs customers to 219
    or himself.  No money has gone missing;

b)

the allegations of
    Trentfab were based on the assumption of a job-by-job accounting.  However, the
    trial judge found that the accounting for the project was always intended and
    was in fact on a global basis with a reconciliation at the end;

c)

there was no evidence
    that 219 retained any money payable to Trentfab for longer than was necessary;

d)

neither 219 nor
    Kinmond obtained any financial gain at Trentfabs expense.  He found that 219s
    involvement was financially neutral to Trentfab;

e)

although the
    principals of Trentfab may not have known of the involvement of 219, Trentfabs
    operational employees did and the October spreadsheet which was created
    before Kinmonds termination clearly disclosed 219s involvement.

[15]

The
    result of his review was his finding that there was no evidence of fraud or
    misappropriation of funds.  He found that that Kinmonds actions were not
    dishonest and there was no benefit to Kinmond and no deprivation to the
    appellants.  These findings are amply supported by the evidence, and should not
    be interfered with on appellate review.

Conclusion

[16]

Here,
    the trial judge convincingly established through his analysis and reasons that
    there was no evidence of fraud or misappropriation of funds.  Each of his
    findings of fact was amply supported by the evidence which, as we said, the
    trial judge thoroughly analysed.  His conclusions, based on the evidence were
    all reasonable and there is no basis upon which this court should interfere. 
    His findings are entitled to deference and the appeal is dismissed.

Cross-Appeal

[17]

In
    their cross appeal the respondents submit that the trial judge erred in failing
    to hold Trentfab and 220 jointly and severally liable for costs.  What they
    assert is that the trial judge was mistaken when he wrote in his costs
    endorsement that, the directed trial was agreed to by, and involved only,
    Trentfab, Kinmond and 219.  220 was a party to the notice of action for the
    purpose of asserting additional claims against the defendants that were not
    subject of the trial.

[18]

The
    trial judge in separate reasons on costs noted that the trial was a significant
    one, lasting seven-and-a-half days.  He took into account that 219 and
    Kinmonds defences were largely the same.  He fixed both Kinmonds and 219s
    costs 219 and awarded 219 its disbursements.  However, t
he trial judge only held Trentfab  currently in receivership  liable for
    costs, and not 220 being its parent shareholder company.

[19]

It
    is true that the plaintiffs in style of cause were Trentfab Inc. and 2202158
    Ontario Inc.  And, we accept that it appears that it was never the plaintiffs
    position at trial that 220 was not a party.  However, when the reasons and
    order of the trial judge are considered fully, it is clear that the shareholder
    of Trentfab, 220, was neither the subject of the trial nor the party asserting
    the claim.

[20]

The
    respondents have not demonstrated that the trial judge either committed an
    error in law or that he was clearly wrong in his costs awards. If the trial
    judge simply made a mistake, the proper approach was to bring this to the
    attention of the trial judge.  Accordingly, we grant the respondents leave to
    appeal costs, but dismiss the cross-appeal.

[21]

Regarding
    costs of the appeal, the parties have agreed on costs whatever the result and
    will file a consent order for this courts approval.

H.S. LaForme
    J.A.

David Watt J.A.

S. Lederman J. (
ad hoc
)


