



COURT OF APPEAL FOR ONTARIO

CITATION: York University v. Markicevic, 2018 ONCA 893

DATE: 20181108

DOCKET: C62351

Feldman, Pepall and Pardu JJ.A.

BETWEEN

York University

Plaintiff (Respondent)

and

Michael Markicevic
, Janet Fleming, Mima
    Veronica Markicevic, Aleeyah Apparel Inc., operating as A-Tech Construction and
    Design Inc., Alleyah Inc., AFC Inc. operating as Arsenal Facility Consulting
    Inc., Toronto Engineering Company, Gugas International, Canadian &
    American Concrete Renovation &  
    Drain-Layer Ltd., Roman Ritacca, Luigi Lato, Phil Brown, Riaz Jadavji, Helen
    Saoulli Georgiou, Vasos Georgiou, George Saoulli, Georgia Saoulli, Guram
    Sekhniashvili, Gia Sekhniashvili, John Doe #1, John Doe #2, John Doe #3, Jane
    Doe #1, Jane Doe #2, Jane Doe #3

Defendants (
Appellant
)

Jamie Spotswood and Daniel
    Zacks, for the appellant

William C. McDowell, Brian
    Kolenda and Laurel Hogg, for the respondent

Heard: October 16, 2018

On appeal from the judgment of Justice Barbara A. Conway
    of the Superior Court of Justice, dated June 6, 2016, with reasons reported at 2016
    ONSC 3718, 33 C.C.E.L. (4th) 26.

Pardu J.A.:

A.

Background

[1]

The appellant, Michael Markicevic, misappropriated
    nearly a million dollars from York University (York). At the time, he was the
    Assistant Vice President of Campus Services and Building Operations.

[2]

Between 2007 and 2009, he devised a scheme to
    falsely invoice the university for work that was not actually done at the
    university. York paid $374,983.50 for these invoices and the appellant and his
    co-conspirators pocketed the cash.

[3]

In 2009 the appellant inflated a quote for drain
    repair. The excess was applied to personal home improvements for the appellant
    and cash was also distributed to the appellant and his co-conspirators. York
    lost $515,461 as a result of this scheme.

[4]

The appellant also had York employees perform
    work at his personal residences in 2008 and 2009. York paid these employees
    $23,000 for their time on these jobs.

[5]

Finally, the appellant charged York for $61,241
    worth of materials that he purchased for his own use.

[6]

On February 1, 2010, before York was aware of
    the extent of the appellants dishonesty, it terminated the appellants
    employment without cause and negotiated and finalized a severance agreement
    with him that contained mutual releases. During those negotiations, the
    appellant vehemently denied any wrongdoing. York agreed to pay him 36 months
    gross salary, amounting to $696,166. The appellants continued employment had
    become untenable because York had to conduct an investigation into the rumours
    circulating about his financial impropriety and because of the complaints concerning
    his bullying behavior.

[7]

As a result of the investigations undertaken
    after the appellants departure, York learned of the full extent of the
    appellants misconduct and sued to set aside the releases, recover the money
    stolen and for repayment of the severance package.

[8]

Following a 25-day trial, the trial judge found
    in favour of York and rescinded the severance agreement including the releases. 
    She held that, as a fiduciary, the appellant had a positive obligation to
    disclose his fraudulent activity before he entered into the severance agreement.
    She also found that the releases and the severance agreement were obtained by
    fraudulent misrepresentation. The appellant had materially misrepresented his
    innocence to York and if York had known of the fraud, they would not have
    terminated him without cause, paid him, and given him a release. In addition,
    the trial judge made a factual finding that January 29, 2010 was the earliest
    date York could have discovered its potential claim and, accordingly, its claim
    was not barred by the provisions of the
Limitations Act, 2002
, S.O. 2002, c. 24, Schedule B.

B.

Arguments on appeal

[9]

The appellant argues that the trial judge erred
    in concluding that his misrepresentations of innocence induced York to enter
    into the severance agreement and to release the appellant from any claims York
    might have against him.

[10]

The appellant also argues that Yorks claim was
    barred by the
Limitations Act,

2002
.
    York issued the statement of claim on January 26, 2012. The appellant argues
    that York knew of the allegations of theft and fraud by the appellant as of
    January 19, 2010 and that, accordingly, the claim was issued after the expiry
    of the two-year limitations period.

C.

Trial judges findings

(1)

Fraudulent misrepresentation

[11]

The trial judge found at paras. 145-147 that the
    appellant had intentionally misled York when, just before the severance
    agreement was signed, he said he was innocent of any wrongdoing:

[W]hen one party has induced
    another party to enter into an agreement by making a material
    misrepresentation, the principal remedy is rescission. A misrepresentation, to
    be material, must relate to a matter that would be considered by a reasonable
    person to be relevant to the decision to enter the agreement in question. It is
    not necessary for a plaintiff to establish that the misrepresentation was the
    sole inducement for acting and it does not matter if the misrepresentation was
    only one of several factors contributing to the plaintiffs decision.

Mr. Markicevic made a material misrepresentation
    to both Mr. Brewer and Ms. Lewis when he denied any wrongdoing.  There is no
    question that if Mr. Brewer had known of any [of] Mr. Markicevics fraudulent
    activities, York would not have terminated him without cause, would not have
    paid him a large severance (or any severance at all), and would not have
    granted him the Release.

The Severance
    Agreement, including the Release, must therefore be set aside.

(2)

Limitations period

[12]

The trial judge addressed the limitations issue in
    her reasons at paras. 148-151:

Mr. Markicevic submits that Yorks action is
    barred pursuant to the
Limitations Act, 2002
,
    S.O. 2002, c. 24.  The action was commenced on January 26, 2012.  Mr.
    Markicevic argues that York cannot meet its burden of proving that it did not
    know, or could not have known with reasonable diligence, of the facts giving
    rise to the claim against Mr. Markicevic prior to January 26, 2010.

Mr. Markicevic relies on the notes of Noel
    Badiou, Yorks Director of Human Resources. Those notes reveal that by
    mid-December 2009, various York employees had approached Mr. Badiou to complain
    about Mr. Markicevics bullying management style.  Some of those complaints
    also included allegations of financial impropriety. However, none of the
    potential witnesses were willing to come forward and go on the record at that
    point. Mr. Badiou continued to speak to potential witnesses and gather
    information through the end of December and into the first three weeks of
    January.

It was not until January 29, 2010 that the
    Whistleblower went on the record, met with Ms. Lewis and brought some documents
    to support the allegations of financial impropriety.

In my view, that was
    the earliest date that York can be held to have discovered a potential claim
    against Mr. Markicevic, as defined in s. 5(1)(a) of the
Limitations
    Act
.  Accordingly, the claim is not statute barred.

D.

Analysis

(1)

Fraudulent
misrepresentation

[13]

By January 27, 2010 the appellant had heard of
    the circulation of rumours that he was having work done on his personal
    residences by York employees. He attributed these suggestions to animus on the
    part of the union for York tradespersons and in a letter copied to Brewer, his
    supervisor, described the allegations as unfounded, libelous, slanderous and
    completely in line with previous unfounded accusations emanating from the
    union. The appellant met with Brewer on January 27, 2010 and reacted with an attitude
    of absolute denial and almost outrage.

[14]

On January 28, 2010, the appellant wrote to
    Brewer, Yorks counsel and  Yorks President, responding vigorously to the rumours:

I will bring to your attention that it appears
    slander and libel seem to be common practice at York. General community
    sentiment is that the University is inclined to act upon such rumour and
    innuendo as it does not possess the courage to confront such issues in an open,
    objective and impartial manner.

While to date I do not share this view, I am
    left with being accused, my reputation and integrity questioned and my career
    jeopardized at all levels of both Yorks organizational structure and the
    community at large.

I would ask you to consider the organizational
    environment such unsubstantiated claims create and the negative impact they are
    having on myself on both a personal and occupational level.



As for the misallocation of University
    resources, I will remind you that one of my first management initiatives at
    York was to work with Procurement to vastly improve and tighten Procurement
    policy and procedures within CSBO.

The establishment of a separate and objective
    financial control process within CSBO has received numerous accolades from our
    Audit department.

My willingness to effectively steward and
    manage University resources in a consistent and prudent manner with the upmost
    of integrity, I suggest to you, is unquestionable.

While I
    understand, given the sense of entitlement that many members of the York community
    feel they may have relative to what they deem to be their rights, I am prepared
    to respectfully suggest to you that these rights do not include the systematic
    unsubstantiated assassination of both my character and livelihood.

[15]

The appellant does not argue that these were not
    fraudulent misrepresentations. Rather, he argues that York could not have
    reasonably relied on these to enter into the severance agreement.

[16]

The allegations came to light when several
    employees spoke to Badiou, Yorks Director of Human Rights
[1]
. This was a position akin to
    an ombudsman. There was an expectation that confidentiality would be preserved
    unless the individual speaking to him agreed to waive that confidentiality.

[17]

Badiou met with the President to discuss the allegations
    on December 17, 2009. He summarized them in his notes from that meeting:

Dec 17/09

Mtg w/ Pres re Internal/Informal investigation

-

Now
    met w/spoke to about dozen people

-

some union

-

some managers

-

some former employees



3) Allegation of Theft/Fraud

-

One
    person has indicated that Mike has had staff purchase security and other
    electronic equipment by the University to be installed at his house or other
    properties.

-

Another
    person has said that Mike has ordered pain [sic] and other supplies paid by the
    University that a staff member was sent to his home to paint entire house  the
    invoices were noted as work at Glendon.

-

Three
    people allege that in March 08 a bill was approved by Mike for rekeying of Ross
    Bldng  say this never done  one says was for work done in his home  another
    says company at the address is a Kitchen Cabinetry place. One person was not
    prepared to sign off as it was single source because emergency. All say not
    done and suspicious that either this is Mikes con company or it was for work
    done in his home.

-

Search
    reveals

1)

no registered company
    at that address.

2)

Physical address has a Kitchen Cabinet business and 411 reverse address
    lookup reveals owner as C Adam and V. Georgvou.

[18]

Badiou
    left the meeting with a plan to see if further information or details could be
    provided to better assess and determine  what might be going on. Badiou met again
    with Yorks President on January 17, 2010 and with both Yorks President and
    Brewer on January 19, 2010, but no additional details or additional
    substantiation were available by that time.

[19]

On
    January 29, 2010, Lewis, counsel for York, met with one of the individuals, the
    whistleblower who had made allegations against the appellant. The
    whistleblower was now prepared to come forward with a signed statement and also
    provided documents to support the allegations of financial misfeasance by the
    appellant. Lewis reviewed the allegations with the appellant and he angrily
    denied them.

[20]

On
    February 1, 2010, Brewer told the appellant he did not believe any of the
    allegations against him. He testified that as of February 1 he still firmly
    believed in the integrity of the appellant. He testified that he would not
    have approached the severance negotiations in the same way had he known of the
    dishonesty.

[21]

A
    contracting party who is induced to enter into a contract as a result of a
    fraudulent misrepresentation is entitled to rescission, and restoration of the
    benefits conferred on the other party to the contract: S.M.
Waddams,
The Law of Contracts
, 7th ed. (Toronto:
    Thomson Reuters, 2017), at para. 421.

The
    question of whether a contracting party did in fact rely on the
    misrepresentation, at least in part, to enter into the contract is a question
    of fact to be inferred from all the circumstances of the case and evidence at
    the trial:
G.H.L. Fridman,
The Law of Contract in
    Canada
, 6th ed. (Toronto: Carswell, 2011), at p. 291.

[22]

The
    trial judges finding that York was induced to enter into the severance
    agreement by the appellants fraudulent misrepresentation that he was innocent
    of any financial dishonesty is supported by the evidence and no palpable or
    overriding error has been shown. It is difficult to imagine circumstances in
    which an employer acting responsibly would pay three years severance pay to an
    employee it knew had misappropriated large sums of money from it.

(2)

Limitations period

[23]

Section
    5(1) of the
Limitations Act,

2002
provides:

A claim is discovered on the earlier
    of,

(a) the day on which the person with the
    claim first knew,

(i) that the injury, loss or damage had occurred,

(ii) that the injury, loss or damage was caused by or contributed to by
    an act or omission,

(iii) that the act or omission was that of the person against whom the
    claim is made, and

(iv) that, having regard to the nature of the injury, loss or damage, a
    proceeding would be an appropriate means to seek to remedy it; and

(b) the day on which
    a reasonable person with the abilities and in the circumstances of the person
    with the claim first ought to have known of the matters referred to in clause
    (a).

[24]

The
    appellant argues that the trial judge focused only on the date on which York
    knew that the loss had occurred, and that she did not consider that s. 5(1) required
    her to consider the earliest of two dates: the date York knew the loss had
    occurred, and the date on which a reasonable person with the abilities and in
    the circumstances of the person with the claim first ought to have known of
    the loss.

[25]

I
    do not agree. Consideration of both branches of this test is implicit in the
    trial judges articulation of the appellants argument at trial that York
    cannot meet its burden of proving that it did not know, or
could not have known with reasonable diligence
, of the
    facts giving rise to the claim (emphasis added).

[26]

The
    appellant further argues that York knew it had a claim against the appellant as
    early as December 17, 2009 when Badiou informed Yorks President of the
    allegations by several employees, and at the latest when Badiou went to the President
    on January 19, 2010 to report in general terms the allegations reported to him
    about financial misfeasance by the appellant. However at that stage, neither
    Badiou nor the President knew York had suffered a loss or that the appellant
    was the person responsible. It had only allegations by persons unwilling to
    come forward publicly, which were firmly denied by the appellant. These
    allegations, as noted by the trial judge, were limited to the use of door
    locks, hardwood flooring and paint in [the appellants] house, valued at $23,320.
    The other fraudulent schemes were separate frauds only uncovered much later.

[27]

The
    question of whether a claim was discovered and the limitations period triggered
    is a question of mixed fact and law entitled to deference absent palpable and
    overriding error:
Longo v. MacLaren Art Centre
, 2014 ONCA 526, 323 O.A.C.
    246, at para. 38. As indicated in
Longo
, at para. 44, certainty of a
    potential defendants responsibility for an act that caused the loss is not
    required. Rather, what is required are
prima facie
grounds to infer
    that the defendant did the act that caused the loss. I agree with the trial
    judge that York did not have those
prima facie
grounds before January 29,
    2010. The trial judges conclusion that the claim was not discovered before two
    years preceding the date the statement of claim was issued was reasonably
    available to her on the evidence and is not affected by palpable and overriding
    error.

(3)

Other arguments

[28]

Given that these two bases are sufficient to sustain the
    trial judges decision, it is not necessary to consider the appellants other
    argument that the trial judge erred in concluding that a fiduciary, like the
    appellant, was bound to look after Yorks interests while negotiating the
    severance agreement and secondly, his argument that the language of the release
    was broad enough to release the appellant from responsibility for the
    misappropriations. Here, even if the release was broad enough to bar any claim
    by York for recovery of the money misappropriated, the release was an integral
    part of the agreement induced by the misrepresentations as to his honesty. 
    Once that agreement and release were rescinded, York was no longer barred from
    recovery. This result does not depend on whether or not the appellant was a
    fiduciary.

[29]

For
    these reasons I would dismiss the appeal.

E.

Costs

[30]

The
    trial judge awarded costs of the trial to York on a full indemnity basis. In
    light of the appellants dishonesty I would award costs of the appeal to York
    on the same basis. I would award costs of the appeal to York in the sum of
    $105,527.

Released: K.F. Nov 8 2018


G. Pardu J.A.

I agree.
K. Feldman J.A.


I agree. S.E. Pepall J.A.






[1]

The trial judge misdescribed the position as Director of Human
    Resources.


