



COURT OF APPEAL FOR ONTARIO

CITATION: Grand Financial Management Inc. v. Solemio
    Transportation Inc., 2016 ONCA 175

DATE: 20160302

DOCKET: C58867

Hoy A.C.J.O., Blair and Hourigan JJ.A.

BETWEEN

Grand Financial Management Inc.

Plaintiff

(Respondent/Appellant by
    Cross-Appeal)

and

Solemio Transportation Inc., Sami Ullah
and Arnold Bros. Transport Inc.

Defendants

(
Appellants/Respondents
    by Cross-Appeal
)

Tim Gleason and Matthew Tubie, for the appellants/respondents
    by cross-appeal

Terry Corsianos and George Corsianos, for the
    respondent/appellant by cross-appeal

Heard: November 20, 2015

On appeal from the judgment of Justice Michael K.
    McKelvey of the Superior Court of Justice, dated December 31, 2013, with
    reasons reported at 2013 ONSC 3257, 2 P.P.S.A.C. (4th) 94, and from the costs
    order dated May 1, 2014.

R.A. Blair J.A.:

Overview

[1]

In a factoring agreement, a party assigns its
    accounts receivable to a financing party, the factor, in return for immediate
    payment of the accounts at a discount. The factor collects from the third party
    responsible for payment and assumes the risk of delay and potential loss
    associated with that exercise; hence, the discount.

[2]

Grand Financial Management Inc. provides factoring
    services  amongst other financial services  to companies in the
    transportation industry. This appeal arises in the context of two such
    agreements that are legally distinct, but that were to operate in an
    overlapping factual and commercial context. The first was between Grand
    Financial and Solemio Transportation Inc. (the Solemio Agreement). The second
    was between Grand Financial and Wild Lions Inc. (the Wild Lions Agreement). The
    Solemio Agreement was guaranteed by Solemios principal, Sami Ullah.

The Overlapping Factual and Commercial Nature of the Two
    Agreements

[3]

Arnold Bros. Transport Ltd., a large trucking
    operation, was the source of the commercial link between the two factoring
    agreements. It subcontracted some of its freight delivery obligations to
    Solemio, thus creating accounts receivable in favour of Solemio for those
    services (the Solemio Receivables).  Those accounts receivable were, for a
    short period of time, assigned to Grand Financial pursuant to the Solemio Agreement.
    In turn, however, Solemio subcontracted the Arnold Bros. work to Wild Lions,
    thus creating accounts receivable owing by Solemio to Wild Lions (the Wild Lions
    Receivables). Those accounts receivable were also assigned to Grand Financial,
    but from Wild Lions and pursuant to the Wild Lions Agreement.

[4]

In the factual and commercial context,
    therefore, there was a connection between the two factoring triangles: Grand
    Financial was at the top of each and the payments for the services provided in
    each related to the same truckload deliveries of goods. Conceptually, both Solemio
    and Wild Lions were to be paid immediately for the discounted amounts of their
    respective accounts receivable and, at the end of the day, Arnold Bros. was to
    pay Grand Financial for what it owed Solemio and Solemio was to pay Grand
    Financial for what it owed Wild Lions.

[5]

In reality, the arrangement did not work out so
    simply, however. Mr. Ullah claimed that the Solemio Agreement was terminated
    through a mutual understanding shortly after it had been entered into. He
    resumed Solemios quick pay arrangement with Arnold Bros., whereby Arnold
    Bros. paid Solemio promptly and received a 2.5 per cent discount. Arnold Bros.
    therefore stopped making payments to Grand Financial. At the same time, pursuant
    to the Wild Lions Agreement, Grand Financial continued to pay Wild Lions immediately
    on the Wild Lions invoices, which were, as previously noted, for the same
    deliveries of goods. While it looked to Solemio for payment of those invoices,
    Solemio did not make them on the same timely basis because, pursuant to its payment
    terms with Wild Lions, it took the position that it had 45-90 days for payment.
    Grand Financial thus found itself out of pocket, in its eyes.

[6]

This lawsuit resulted. Grand Financial sued
    Solemio, Mr. Ullah and Arnold Bros. for defaults under the Solemio Agreement. But
    it did not sue Solemio or anyone for default under the Wild Lions Agreement,
    and it did not plead any such default. The action was discontinued against Arnold
    Bros. prior to trial, but Solemio and Mr. Ullah defended and counterclaimed for
    damages for the tort of intentional interference with economic relations.

[7]

Although the trial judge found that the Solemio Agreement
    had been terminated approximately two weeks following its execution, and so awarded
    no damages for its breach, he nonetheless granted judgment against Solemio, but
    not Mr. Ullah, in the amount of $200,000. This amount was arrived at by relying
    on what the trial judge took to be an admission by Mr. Ullah that Solemio was
    liable to Grand Financial for about that amount under the Wild Lions Agreement. 
    At the same time, he awarded Solemio, but not Mr. Ullah, damages at large in
    the amount of $175,000 on the counterclaim. He declined to award punitive
    damages against Grand Financial. He also declined to award costs because, in
    his view, success was divided.

[8]

Both parties appeal from these respective results,
    and Solemio and Mr. Ullah appeal against the trial judges decision not to
    award any costs.

The Transportation Chain and Payment Arrangements

[9]

Because the factual and commercial context
    referred to above is relevant to the narrative underlying Grand Financials
    claim against Solemio and Mr. Ullah, I propose to review it in more detail here.

[10]

The pattern of operations as between the
    trucking companies was that Arnold Bros. would subcontract some of its delivery
    obligations to Solemio, which would, in turn, further subcontract some of that
    work to Wild Lions. Wild Lions would then invoice Solemio for its services on
    45- to 90-day payment terms; Solemio would apply a mark-up and invoice Arnold
    Bros. for the work done.  Arnold Bros. paid Solemio on the basis of the quick pay
    system described above, which was the arrangement in place between Solemio and
    Arnold Bros. prior to the execution of the Solemio Agreement on July 10, 2007.

[11]

That Agreement came about after Wild Lions
    introduced the principal of Grand Financial, Michael Rakhnayev, to Mr. Ullah
    and Mr. Rakhnayev pursued Solemio as a potential Grand Financial client. Mr.
    Ullah testified that he explained to Mr. Rakhnayev that he had a quick pay
    arrangement with Arnold Bros., but he ultimately accepted Mr. Rakhnayevs
    suggestion that Solemio try Grand Financials services, with the proviso that if
    Mr. Ullah was not satisfied, he could go back to his old system of dealing
    directly with Arnold. Bros. On that representation, he said, Solemio entered
    into the Solemio Agreement and he gave his personal guarantee.

[12]

Under the Agreement, Solemio could offer to
    assign accounts receivable to Grand Financial and Grand Financial, if it
    accepted the account, would pay 90 per cent of it to Solemio and take an
    assignment of the receivable. On July 10, 2007, Grand Financial sent a
    direction to Arnold Bros., signed by Mr. Ullah, directing that, [e]ffective
    immediately, all the accounts payable to Solemio Transportation Inc. shall be
    paid directly to Grand Financial Management Inc.

[13]

In addition to Mr. Ullahs guarantee of its
    obligations under the Solemio Agreement, Solemio granted to Grand Financial a
    security interest in the undertakings of its business, which was registered
    pursuant to the
Personal Property Securities Act
, R.S.O. 1990, c. P.10
    (the PPSA Security).

[14]

Meanwhile, pursuant to the Wild Lions Agreement,
    in effect from at least January 2007, Grand Financial took assignments of the
    Wild Lions Receivables. Solemio was accordingly obliged to pay those Receivables
    directly to Grand Financial, but, in Solemios view, on 45- to 90-day payment
    terms, and not necessarily before it received payment from Arnold Bros. under
    the quick pay arrangement.

The Subsequent Events

[15]

For a brief period after the signing of the
    Solemio Agreement, Solemio sent its invoices to Grand Financial for processing,
    but by September 2007, Mr. Ullah had reverted to his original practice of
    dealing directly with Arnold Bros. for payment of the Solemio Receivables on a quick
    pay basis. The parties evidence as to the circumstances leading up to this
    change, and what followed it, diverge.

[16]

Mr. Rakhnayev and Mr. Ullah agree that they had
    a telephone discussion, but they disagree as to what was said.

[17]

According to Mr. Rakhnayev, Mr. Ullah wanted to
    change the structure for the making of payments under the two Agreements. He
    proposed that Grand Financial would pay Wild Lions directly, but that Solemio
    would not be required to pay Grand Financial for the Wild Lions Receivables;
    instead, Grand Financial would recoup those amounts out of the payments it
    received from Arnold Bros. for the Solemio Receivables. Mr. Rakhnayev denied
    there was any discussion about terminating the Solemio Agreement.

[18]

Mr. Ullah had a different version. He said that
    he soon realized that Solemio was losing money on the Solemio Agreement and that
    it was better off dealing directly with Arnold Bros. and taking only a 2.5 per
    cent discount on the Solemio Receivables under the quick pay system. He
    therefore decided that he would take Mr. Rakhnayev up on his representation
    that if he was not satisfied, he could go back to his old system. He said that
    Mr. Rakhnayev agreed during their telephone conversation to terminate the
    Solemio Agreement, and accompanying assignment of the Solemio Receivables.

[19]

Mr. Ullahs testimony that the Agreement had
    been orally terminated was corroborated by the evidence of Helmiene Dueck, who
    was the logistics manager for Arnold Bros. and an independent witness, and who
    confirmed that she had engaged in a three-way call with Mr. Rakhnayev and Mr.
    Ullah, in which Mr. Rakhnayev agreed that Arnold Bros. could go back to paying
    Solemio directly and that payment would not be required to be made by Arnold
    Bros. to Grand Financial thereafter.

[20]

Based on this corroboration and other factors
    supported by the record, the trial judge accepted Mr. Ullahs testimony over
    that of Mr. Rakhnayev and found that the Solemio Agreement had been terminated
    several weeks after it had been signed and that Solemio was free thereafter to
    bill and receive payment from Arnold Bros. directly for any invoices beyond the
    date of the telephone conversations. This finding was amply supported by the
    evidence, and there is no basis for interfering with it.

[21]

As indicated, Arnold Bros. paid Grand Financial
    for the Solemio Receivables up to the date of the foregoing conversations. Ms.
    Dueck confirmed that in a second three-way conversation shortly after the first
    one, Mr. Rakhnayev and Mr. Ullah agreed that Arnold Bros. would pay for those Receivables
    and that it did so. When Mr. Rakhnayev realized sometime in December 2007,
    however, that Grand Financial was paying Wild Lions directly for the Wild Lions
    Receivables, but was not receiving payments from Arnold Bros., and few or
    problematic payments from Solemio, the dispute came to a head.

[22]

Mr. Rakhnayev reacted strongly, if not angrily. Even
    though the Solemio Agreement had been terminated, he caused Grand Financial to
    act on its PPSA Security and to seize the sum of $35,000 from Solemios account
    at RBC. He also threatened to put Solemio out of business. And he contacted
    Arnold Bros. and stated that someone was going to pay the money he was owed 
    he didnt care who  and that he would go after the customers of Arnold
    Bros.  In response, Arnold Bros. stopped doing business with Solemio because it
    did not want to put its customers in jeopardy. It even interrupted deliveries
    that were in process at the time, directing that Solemios trucks were to be
    stopped where they were located and arranging to pick up the loads and complete
    delivery. It is this conduct that forms the basis for Solemios counterclaim
    for intentional interference with economic relations.

[23]

During his cross-examination at trial, Mr. Ullah
    acknowledged that there was an outstanding balance [of] around $200,000 in
    favour of Grand Financial pursuant to the assignment of the Wild Lions
    Receivables under the Wild Lions Agreement. He did not acknowledge, however,
    that Solemio was in default in making those payments at the time of the dispute.
    In fact, Mr. Ullah maintained at all times that Solemio had been paying Grand
    Financial in compliance with the delayed payment terms of the Wild Lions invoices.
    It was on the basis of this admission that the trial judged awarded judgment
    in favour of Grand Financial.

Issues

[24]

For the purposes of the appeal and cross-appeal,
    the issues to be addressed are whether the trial judge erred by:

(a)
awarding Grand Financial the amount of $200,000 based on Mr.
    Ullahs admission that about that amount was owing to it under the Wild Lions Agreement,
    even though that Agreement had not been pleaded as the basis for recovery by
    Grand Financial;

(b)
finding Grand Financial liable for the tort of intentional interference
    with economic relations;

(c)
awarding damages at large in the amount of $175,000;

(d)
refusing to award Solemio punitive damages on the counterclaim; and

(e)
failing to award costs in favour of
    Solemio.

The $200,000 Award

[25]

As noted above, the award of $200,000 to Grand
    Financial was derived from what the trial judge characterized as Mr. Ullahs
    admission during testimony that there was an outstanding balance [of] around
    $200,000 owing by Solemio to Grand Financial with respect to payment of the
    Wild Lions Receivables that were factored to Grand Financial.

[26]

Solemio argues on appeal, however, that Grand
    Financials claim as asserted in the action was based solely on the Solemio
    Agreement, and that Grand Financial did not plead or claim recovery under the
    Wild Lions Agreement.  The trial judge therefore erred in awarding such
    recovery.

[27]

In support of this proposition, Solemio relies
    on the decisions of this Court in:
460635 Ontario Ltd. v. 1002953 Ontario
    Inc.
(1999), 127 O.A.C. 48, at para. 9;
Rodaro v. Royal Bank of Canada
(2002), 59 O.R. (3d) 74 (C.A.), at paras. 60-62; and
Bulut v. Carter
,
    2014 ONCA 424, 322 O.A.C. 58, at para. 12. Those authorities stand generally
    for the tenet that lawsuits are to be decided within the boundaries of the
    pleadings; a finding of liability and damages against a defendant on a basis
    that was not pleaded must be set aside for fairness reasons because it deprives
    the defendant of the opportunity to address the issue in evidence and argument
    at trial. Grand Financial, on the other hand, relies on the principle that
    pleadings are to be given a generous and liberal interpretation in this
    context:
Link v. Venture Steel Inc.
, 2010 ONCA 144, [2010] O.J. No.
    779, at para. 36.

[28]

I accept Solemios submission on this ground of
    appeal.

[29]

In my view, Grand Financial framed its case
    solely on the basis that Solemio was in breach of its obligations under the
    Solemio Agreement, arguing the following: Arnold Bros. had failed to pay Grand
    Financial for the Solemio Receivables as required and therefore Solemio was in
    default under
that
Agreement; Grand Financial was
    accordingly entitled to act on the PPSA Security and to recover the amounts not
    paid by Arnold Bros.; and Mr. Ullah was personally liable on his guarantee.

[30]

The claim asserted by Grand Financial in its
    Statement of Claim was for breach of the Factoring Agreement. No other breach
    was pleaded. The Factoring Agreement is defined as the exclusive full and
    factoring agreement [entered into by Solemio] with the plaintiff [on July 10,
    2007] to obtain financing by selling and assigning to the plaintiff acceptable
    accounts receivable. There is no mention of Wild Lions or of the Wild Lions
    Agreement anywhere in either Grand Financials Statement of Claim or its Reply.

[31]

Equally problematic is the fact that Solemio
    signalled the difficulty that has arisen in its Statement of Defence. In paras.
    19-21, it directly pleaded  correctly, as it turns out  that the amount
    claimed by Grand Financial as damages for breach of the Solemio Agreement was
    based not on invoices submitted by Solemio to Arnold Bros. and assigned to
    Grand Financial, but on invoices issued by Wild Lions and purchased from it by
    Grand Financial under the Wild Lions Agreement. In its Reply and Defence to
    Counterclaim, Grand Financial did not even respond to this allegation, nor did it
    at any time seek an amendment to claim recovery for amounts that Solemio may be
    required to remit to it as a result of the Wild Lions Agreement.

[32]

In argument, Grand Financial submitted that its
    reference in para. 4 of its Reply and Defence to Counterclaim to any other
    indebtedness due to the plaintiff by Solemio was sufficient to put in play Grand
    Financials right to recover for amounts that may be owing under the Wild Lions
    Agreement. I do not accept this submission.

[33]

The para. 4 allegation is in response to the
    allegation in para. 10 of the Statement of Defence and Counterclaim that
    Solemio and Mr. Ullah had approached Grand Financial and informed it that it
    wished to terminate the Solemio Agreement. In that context, Grand Financial
    pleaded that even if the Agreement had been terminated, Solemio remained liable
    for full and prompt payment of accounts purchased by Grand Financial, as well
    as for any other indebtedness due to the plaintiff by Solemio  a clear reference
    to the wording of s. 12.2 of the Solemio Agreement.  Given the context, this
    could only mean that Grand Financial was arguing for Solemios continued
    liability under the terms of the Solemio Agreement. The trial judge properly
    interpreted s. 12.2 in that fashion. I do not think  particularly in view of
    the precise wording in the Statement of Claim, and the absence of a direct
    response by Grand Financial in its Reply to Solemios specific pleading
    flagging the issue  that the reference to any other indebtedness due to the
    plaintiff by Solemio in para. 4 could fairly be taken as signalling a claim by
    Grand Financial for recovery under a different and legally separate agreement,
    the Wild Lions Agreement.

[34]

This is so, in my view, even giving the
    pleadings the kind of generous and liberal interpretation referred to by this
    Court in
Link v. Venture Steel Inc.
In that case, OConnor A.C.J.O.,
    also made it clear, at para. 35, that:

It is well accepted that the parties to an action are entitled to
    have a resolution of their differences based on the pleadings. The trial judge
    cannot make a finding of liability and award damages against a defendant on a basis
    not pleaded in the statement of claim because it deprives the defendant of the opportunity
    to address that issue.

[35]

Grand Financials case at trial was also put to
    the trial judge as a claim for damages for breach of the Solemio Agreement. In
    his opening statement, trial counsel told the trial judge:

This case Your honour
involves a
    factoring agreement that was entered into between the plaintiff, Grand
    Financial Management Inc. and the defendants, Solemio Transportation Inc
.
    The personal defendant, Mr. Ullah, also signed a personal guarantee where he
    guaranteed the obligations of the defendant Solemio.



Youll hear evidence that Solemio
received
    payment from the defendant Arnold Brothers, but it did not remit the payment to
    Grand Financial,
so its holding the money. Whatever they did with the
    money, we dont know. [Emphasis added.]

[36]

Counsel continued by advising the trial judge
    that Solemio had counterclaimed, that it was raising the defence of
non est
    factum
and the excuse that
the factoring agreemen
t
    was terminated, and that Grand Financials response to the latter was that
the factoring agreement
need[ed] to be terminated in
    writing (emphasis added).  He then concluded with the following:

So Your Honour,
the plaintiff is claiming
    $219,500 against both defendants, Solemio under the factoring agreement
and against Mr. Ullah under the personal guarantee and Ill leave the rest in
    chief. [Emphasis added.]

[37]

Nothing in the way the case was framed at trial
    raises even the suggestion that Grand Financial was asserting a claim for the
    recovery of damages for breach of the Wild Lions Agreement.

[38]

I accept that the factual interrelation between
    the Solemio Agreement and the Wild Lions Agreement, and between the commercial
    activities of the parties, was in play before and at the trial. The substance
    of Grand Financials complaint was that the Solemio Receivables and the Wild
    Lions Receivables arose out of the transportation of the same truckloads of
    goods and that it had factoring agreements with respect to both sets of
    receivables, but that  after Solemio and Arnold Bros. reinstated their quick
    pay arrangement  Grand Financial was left to pay Wild Lions for its
    receivables, while receiving nothing further from Arnold Bros., and no or
    unreliable payments from Solemio, to offset the payments for the Wild Lions Receivables.
    Mr. Ullahs response to Grand Financials complaint was that his business model
    involved terminating the Solemio Agreement (as it had been agreed he was
    entitled to do) and thereafter collecting immediate payment directly from
    Arnold Bros. on the quick pay system, while also not paying the Wild Lions
    Receivables until up to 90 days after receipt of the invoices, which was a
    better financial alternative from Solemios perspective.

[39]

But I do not accept Grand Financials argument
    that the issue of whether it could collect on the Wild Lions invoices was
    clearly joined in battle.

[40]

While the trial judge described one of the
    large number of issues to be addressed as [t]he right of Grand Financial to
    judgment against Solemio for the Wild Lions invoices, from my review of the
    pleadings, the opening statements, and the record, I do not think this is an
    accurate description.

[41]

The issue at trial was whether Grand Financial
    was entitled to judgment against Solemio for breach of the Solemio Agreement. To
    the extent there was confusion between the two factoring agreements, it was because
    the invoices listed in the Statement of Claim as the basis for Grand
    Financials claim, and placed in evidence, were all Wild Lions invoices to
    Solemio. Grand Financial had paid Wild Lions under the Wild Lions Agreement and,
    on the theory that the Solemio Agreement remained in effect, would have been
    reimbursed for those amounts through the payments it expected Arnold Bros. to
    pay to it under the Solemio Agreement. This was because of the flow-through
    nature of the invoicing for the delivery services provided  Wild Lions to
    Solemio, Solemio to Arnold Bros., and Arnold Bros. to Grand Financial, which
    had already paid the Wild Lions invoices at the outset of the flow.

[42]

As explained above, however, while the Wild
    Lions invoices were an integral component of the ultimate flow of funds in the
    factual and commercial context, the case was not pleaded or put against Solemio
    at trial, on the basis that it had defaulted in its obligations relating to the
    Wild Lions Agreement. The case was put against Solemio on the basis that it had
    breached the Solemio Agreement, which Grand Financial claimed had not been
    terminated.

[43]

The trial judge resolved this dispute in favour
    of Solemio, concluding that the Solemio Agreement had been terminated as Mr.
    Ullah testified, and finding, at para. 44, that Solemio did not have any
    further obligations to Grand Financial under its factoring agreement. That
    should have been the end of the matter.

[44]

As noted above, Grand Financial did not seek
    leave to amend its pleadings to claim recovery under the Wild Lions Agreement
    prior to trial, at trial, or on appeal.

[45]

I make two further observations before leaving
    the issue of the $200,000 judgment. First, it is not clear to me, from a review
    of the record, that Mr. Ullah necessarily admitted Solemio was obligated to pay
    around that amount to Grand Financial under the Wild Lions Agreement, either at
    the time of the dispute or at the time of trial. Secondly, on the assumption that
    the claim was first asserted at trial, it would be statute barred.

[46]

On the first point, I think it is clear that Mr.
    Ullah did not admit the monies were due and owing at the time of the dispute
    and Mr. Rakhnayevs reaction. His admission came during an exchange in
    cross-examination which appears to have been directed at establishing that Mr.
    Rahkhnayev was not acting unlawfully for purposes of the intentional
    interference with economic relations claim. It was not made in the context of determining
    what amounts were due and owing to Grand Financial for purposes of recovery
    under the Wild Lions Agreement. Had Solemio been receiving funds directly from
    Arnold Bros. improperly, and not paying Grand Financial on the Wild Lions invoices
    in a timely fashion, at least some of Grand Financials conduct during the
    period of the dispute  the RBC seizure, for example  might not have been
    unlawful, thereby taking some of the sting out of Solemios case on the
    counterclaim.

[47]

In that context, Mr. Ullah acknowledged that
    there was an outstanding balance [for] about $200,000 in favour of Grand
    Financial, but steadfastly maintained that Solemio was not obligated to pay the
    Wild Lions receivables at that time, or at the same time as it received payment
    from Arnold Bros. Mr. Ullahs acknowledgement that there was about $200,000 outstanding
    needs to be read in that context.

[48]

In this respect, the exchange with counsel began
    with this suggestion:

Your beef is that my client took  took unlawful action, make
    my guy look like the bad guy and here, here youre holding onto $200,000 of my
    guys money.

[49]

To which Mr. Ullah replied he did not know it was [his] guys
    money because
basically [the Wild Lions receivables werent]
    due yet  [because Solemio] had 45 to 90 days to pay, and he was paying
    [Grand Financial] regularly as per  the [invoices]. This is not an admission
    that Solemio was legally obliged to pay $200,000 under the Wild Lions Agreement
    at the time.

[50]

It may be, as Grand Financial contends, that
    Solemios counsel conceded during argument at trial that about $200,000 was
    owing, but we do not have a copy of the argument transcript and we do not know
    the context of that concession or the purpose for which it was made.

[51]

Addressing the amounts outstanding on the Wild
    Lions invoices, and whether they were due and owing at the relevant time, as
    part of a claim by Grand Financial for recovery under the Wild Lions Agreement is
    not the same setting as addressing those issues in the context of the tort
    claim. What other evidence may have been led, and what other arguments made
    based on that evidence, had the claim for recovery been the issue, may have
    been quite different. Equally compellingly, what defences, if any, may have
    been open to Solemio are unknown.

[52]

Significantly, the trial judge himself observed,
    at para. 45: The evidence led by Grand Financial with respect to the amount
    owed on the Wild Lions invoices [was] unsatisfactory.

[53]

All of these considerations reinforce the
    risks of straying into areas that are not covered by the pleadings, because the
    parties do not address the issues directly and formulate their approaches to
    the evidence and argument accordingly. As this Court stated in
Rodaro
,
    at para. 62:

In addition to fairness concerns
which standing alone would warrant appellate intervention,
the introduction of a new theory of liability in the reasons
    for judgment also raises concerns about the reliability of that theory
. We
    rely on the adversarial process to get at the truth. That process assumes that
    the truth best emerges after a full and vigorous competition amongst the
    various opposing parties.
A theory of liability that
    emerges for the first time in the reasons for judgment is never tested in the
    crucible of the adversarial process
. We simply do not know how [the
    trial judges] lost opportunity theory would have held up had it been subject
    to the rigours of the adversarial process. [Emphasis added.]

[54]

Finally, if Grand Financials claim under the
    Wild Lions Agreement is treated as having been made for the first time at trial
    (as it must be, given my determination above), there is a further impediment to
    recovery: the two-year limitation period provided for under the
Limitations
    Act, 2002,
S.O. 2002, c. 24, Sch. B.

[55]

Solemio raised the limitation defence on appeal,
    arguing that it could not have done so earlier because the issue of Grand
    Financials right to recover under the Wild Lions Agreement was not pleaded at
    trial. Grand Financial disputes this and says that Solemio ought to have argued
    the defence at trial, that no evidence was led at trial on the limitations
    issue, and that Solemio ought not to be permitted to argue a new issue for the
    first time on appeal.

[56]

In this respect, Grand Financial relies on the
    following comments of this Court in
Ontario Energy Savings L.P. v. 767269
    Ontario Ltd.,
2008 ONCA 350, at para. 3:

In
Ross v. Ross
(1999), 181 N.S.R. (2d) 22, the Nova Scotia
    Court of Appeal set out the test concerning receiving arguments for the first time
    on appeal. The court said that such an argument, "should only be entertained
    if the court of appeal is persuaded that all of the facts necessary to address the
    point are before the court as fully as if the issue had been raised at trial.
    The rationale for the principle is that it is unfair to permit a new argument on
    appeal in relation to which evidence might have been led at trial had it been known
    the issue would be raised.

[57]

I shall return to this notion when dealing with
    Grand Financials contention that it is entitled to set-off its claim on the
    Wild Lions Agreement against the damages at large awarded in favour of Solemio
     an argument also raised for the first time on appeal. I am satisfied,
    however, that Solemio ought not to be precluded from raising the defence, in
    this context, for the first time on appeal.

[58]

Having regard to my determination that the issue
    of Grand Financials right to recover under the Wild Lions invoices pursuant to
    the Wild Lions Agreement was not one that was properly before the trial judge,
    and therefore not one on which he could grant judgment, it is technically unnecessary
    to deal with the limitation defence raised by Solemio on appeal. Nonetheless,
    had the trial judge considered the claim under the Wild Lions Agreement to have
    arisen during the course of the trial, it would have been an error for him to
    have granted judgment, since the claim would have been statute barred on any
    interpretation of the record. The evidence was that by the end of January 2008,
    the monies were due and owing. Everyone was aware of that. By the time of
    trial, the two-year limitation period for initiating a claim had long expired.

[59]

In the end, then, while it may have been
    tempting to give effect to what was possibly a partial admission by Solemio
    through Mr. Ullah regarding a $200,000 outstanding balance, in my view, the
    trial judge was not entitled on these pleadings and this record to grant
    judgment in favour of Grand Financial for breach of the Wild Lions Agreement 
    a claim that was neither pleaded nor asserted at trial and which  if treated
    as having arisen at trial  would be statute barred in any event.

[60]

For all of the foregoing reasons, I would give
    effect to this ground of appeal and set aside of the award of $200,000 against
    Solemio.

Intentional Interference with Economic Relations

[61]

Grand Financial argues on the cross-appeal that
    the trial judge erred in law in holding that it was liable for the tort of
    intentional interference with economic relations (or, as it is sometimes called,
    the tort of causing loss by unlawful means). In my view, however, Solemio has succeeded
    in establishing the necessary elements of that tort on the evidence.

[62]

The trial judge properly identified the three
    essential elements of the tort as traditionally understood: first, the
    defendant must have intended to injure the plaintiffs economic interests;
    secondly, the interference must have been by illegal or unlawful means; and
    thirdly, the plaintiff must have suffered economic harm or loss as a result: see
Alleslev-Krofchak v. Valcom Ltd.
, 2010 ONCA 557, 322 D.L.R. (4th) 193,
    and cases cited therein, leave to appeal refused, [2010] S.C.C.A. No. 403.

Intentional Injury

[63]

The trial judge found that the actions of Grand
    Financial were directly intended both to harm Solemio in its business interests
    and to enrich itself. This finding is amply supported by the record. Mr.
    Rakhnayev threatened Mr. Ullah that he would take steps to shut him down if he
    did not make certain payments and give Grand Financial business from other
    clients. He told Arnold Bros. in an angry message that someone was going to pay
    the money owed to Grand Financial, and he didnt care who  supporting the
    trial judges finding that Mr. Rakhnayev would take any steps within his power,
    whether lawful or unlawful, to get the money he thought he was owed. Mr. Rakhnayev
    also threatened to pursue Arnold Bros. customers, causing Arnold Bros. to
    sever its business relationship with Solemio. Finally, the trial judge found,
    at para. 52, that Mr. Rakhnayev was well aware of and intended the natural
    consequences which he knew would flow from his deliberate actions in executing
    on security pursuant to an agreement which he knew was terminated.

Unlawful Means

[64]

Grand Financials main argument on the
    cross-appeal is that the trial judge erred in his application of the unlawful
    means criterion for the establishment of the tort. It points out that the
    trial judge did not have the benefit of the recent decision of the Supreme
    Court of Canada in
A.I. Enterprises Ltd. v. Bram Enterprises Ltd
.,
    2014 SCC 12, [2014] 1 S.C.R. 177  which was still under reserve at the time of
    trial  and suggests that the analysis of the tort in that case leads to the
    conclusion that the trial judge erred in holding Grand Financial liable.

[65]

I disagree. That
A.I. Enterprises
did
    not change the essential elements of the tort is apparent from the following
    succinct description of its parameters by Cromwell J. at para. 23:

The unlawful means tort creates a type of parasitic liability
    in a three-party situation: it allows a plaintiff to sue a defendant for
    economic loss resulting from the defendants unlawful act against a third
    party.  Liability to the plaintiff is based on (or parasitic upon) the
    defendants unlawful act against the third party.
While
    the elements of the tort have been described in a number of ways, its core
    captures the intentional infliction of economic injury on C (the plaintiff) by
    A (the defendant)s use of unlawful means against B (the third party)
.
    [Emphasis added.]

[66]

The primary issue resolved by
A.I.
    Enterprises
, had to do with the scope of liability for [the] tort and, in
    particular, what the unlawfulness requirement means: at para. 4. Although there
    has been no dispute that the unlawful conduct forming the basis for the tort
    must be intentional and must cause the plaintiff injury, there has been considerable
    debate in Canadian and international jurisprudence about the scope of the type
    of conduct that will constitute unlawful means. Should the courts take a
    broad approach or a narrow approach to this question? I need not review that
    jurisprudence here. After doing so at length, the Supreme Court of Canada
    settled firmly on the narrow approach in
A.I. Enterprises
.

[67]

Writing for the Court, Cromwell J. made it clear,
    at para. 5, that the tort should be kept within narrow bounds and, at para.
    35, that it should be viewed as one of narrow scope. In particular, he
    confirmed, at para. 5, that for conduct to constitute unlawful means in this
    context, it must be conduct that would be actionable by the third party or
    would have been actionable if the third party had suffered loss as a result of
    it. In this respect,
A.I. Enterprises
is consistent with this Courts
    analysis in
Alleslev-Krofchak
and
Correia v. Canac Kitchens
(2008), 91 O.R. (3d) 353.

[68]

Grand Financial underscores the now-confirmed
    narrow approach to the interpretation of conduct that constitutes unlawful
    means and submits that the trial judge erred in finding that criterion had
    been met in this case. In this respect, it focusses on the trial judges
    finding that Grand Financials actions in purporting to exercise on its PPSA
    Security when it knew that the Solemio Agreement had been terminated constituted
    the use of unlawful means. Grand Financial provided both RBC and Arnold Bros.
    with copies of the security documentation and claimed entitlement to the funds
    in Solemios RBC account and to any funds owing by Arnold Bros. to Solemio. 
    RBC turned over $35,000. (Grand Financial ultimately backed off from this
    demand from Arnold Bros. and permitted it to pay the sum of $25,000 that Arnold
    Bros. owed to Solemio.)

[69]

Grand Financial argues that the exercise of its
    PPSA Security would not have been actionable by either RBC or Arnold Bros. in
    these circumstances and, accordingly, that the unlawful means element of the
    tort has not been made out.  In particular, it submits that the Bank acted
    voluntarily on the request and that RBC therefore could not claim there was any
    unlawful act giving rise to a civil cause of action against Grand Financial;
    instead, the acts were only unlawful against Solemio, which would have a direct
    cause of action against Grand Financial.

[70]

There are at least two difficulties with this
    submission, in my view.

[71]

First, it is questionable whether it can be said
    that RBC acted voluntarily in responding to the request when it was faced
    with what appeared, on its face, to be a valid security instrument being enforced
    by the creditor. In any event, it is not accurate to say that RBC or Arnold
    Bros. could have had no claim against Grand Financial in the circumstances, or
    at least no claim if they had suffered loss because of the conduct. Solemio
    contends that there are a number of claims that could have been asserted,
    including the torts of deceit, fraudulent misrepresentation, negligent
    misrepresentation, intimidation, and conversion.

[72]

It is not necessary to test all of these
    assertions because I am satisfied that  assuming it had suffered a loss from
    Grand Financials wrongful conduct in claiming to recover on what Grand
    Financial knew to be an ineffective security instrument  RBC would have been
    able to advance a claim for, at the very least, negligent misrepresentation. Grand
    Financial represented to it that the security was enforceable, intending it to
    act upon the representation. It was reasonably foreseeable that the bank would
    do so and such reliance would, in the circumstances, have been reasonable. The
    representation was untrue and misleading, and Grand Financial was negligent in
    making it. And, if RBC had suffered loss as a result, the reliance would have
    been detrimental to it: see
Queen v. Cognos Inc.
, [1993] 1 S.C.R. 87,
    at p. 110; and
Hercules Managements Ltd. v. Ernst & Young
, [1997]
    2 S.C.R. 165, at para. 24.

[73]

Secondly, the trial judge did not rely solely on
    the purported execution on the PPSA security to hold that the unlawful means
    element had been established on the evidence. He relied as well on Mr.
    Rakhnayevs unlawful threat to pursue Arnold Bros. for the money he felt Grand
    Financial was owed and to go after Arnold Bros. customers  a threat that led
    directly to the abrupt termination by Arnold Bros. of its business relationship
    with Solemio, stranding a number of Solemios trucks in various places in the
    process. Had Arnold Bros. suffered a loss as a result of terminating that
    relationship, the loss would have been actionable by it, perhaps based on the
    misrepresentation grounds outlined above, but otherwise based on the tort of
    intimidation. The elements of the latter tort are (i) a threat, (ii) intent to
    injure, (iii) some act taken or forgone as a result of the threat, and (iv) resulting
    damages: see
The Score Television Network Ltd. v. Winner International Inc.
,
    2007 ONCA 424, [2007] O.J. No. 2246, at para. 1, and cases cited therein. There
    is evidence on the record going to all of these elements.

[74]

It is true that the trial judge viewed the wrongful
    acts in question through the lens of determining whether they were not
    actionable by Solemio, the injured party in the unlawful interference scenario.
    That was because the law in Ontario at the time was that to constitute unlawful
    means, the wrongful conduct could not be actionable by the plaintiff: see
Alleslev-Krofchak
,
    at para. 60; and
Correia
, at para. 100. On this point,
A.I.
    Enterprises
changed the law, holding, at paras. 77-82, that liability for
    the unlawful means tort is not limited to situations in which the defendants
    conduct is not otherwise actionable by the plaintiff. I do not think this
    change matters for the purposes of this case, however.

Economic Loss

[75]

The trial judge correctly found that Solemio had
    satisfied the third element of the tort of intentional interference with
    economic relations. The sum of $35,000 was improperly taken from its RBC bank
    account. Its significant business relationship with Arnold Bros. was destroyed.

Conclusion

[76]

For these reasons, the trial judge did not err
    in holding that Solemio had satisfied its onus of establishing the elements
    necessary for a finding that Grand Financial was liable for the tort of intentional
    interference with economic relations.

Damages at Large

[77]

The trial judge concluded on the evidence that
    even though Solemio had failed to prove the quantum of its pecuniary losses
    there [did] appear to be a reasonable basis to make an award of general damages
    for intentional interference with economic relations: at para. 84. He rested
    this decision on three footings: first, that the actions of Grand Financial had
    resulted in significant, but not readily assessable, liquidity problems for
    Solemio; second, that those actions had contributed to a loss of reputation for
    Solemio; and third, that they constituted a serious abuse of the legal process,
    a reference to the unlawful resort to the PPSA Security.

[78]

Solemio submits on the appeal that the trial
    judges award of $175,000 for damages at large is insufficient and was
    apparently based on his misconception that Solemio had significant liquidity
    problems unrelated to the actions of Grand Financial when there was no such
    evidence to support that conclusion: at para. 81. Grand Financial argues on the
    cross-appeal that the trial judge erred in granting damages at large at all, or
    in any amount more than the $35,000 seized from the RBC account.

[79]

Although Solemio argues that its damages
    exceeded $175,000  and seeks the amount of $250,000 in its factum  it points
    to no evidence, or to any error on the part of the trial judge, that would justify
    interfering with his finding that Solemio had failed to prove pecuniary losses
    that could be quantified.

[80]

At trial, Solemio summarized its claim as
    follows:



DATE

DESCRIPTION

AMOUNT



January to June 2008

Loss due to all 3 trucks
          and trailers being reacquired by the lessor

$135,000.00



January to June 2008

Office telephone and
          utilities losses for 6 months

$77,121.00



January to June 2008

Plaintiffs loss in
          business income

$537,879.00





TOTAL

$750,000



[81]

The trial judges findings that these claims were
    not supported by any reliable documentary, accounting, or expert evidence were
    well-founded on the record, and there is no basis for interfering with them. Indeed,
    Solemio does not seriously press its argument with respect to the damages award
    on the appeal. It is left with the assertion that the award of general damages
    at large was simply insufficient and should be increased to the $250,000
    number, which it appears to have picked out of the air.

[82]

Damages at large may be awarded in cases of
    intentional torts, and to corporations in such circumstances where there has
    been injury to the corporations reputation and associated economic loss: see
Uni-Jet
    Industrial Pipe Ltd. v. Canada (A.G.)

(2001), 198 D.L.R. (4th) 577 (Man. C.A.), at paras.
66-72;
Foschia v. Conseil des Écoles Catholique de Langue
    Française du Centre-Est
, 2009 ONCA 499, 266 O.A.C. 17, at para.
37;
PSC Industrial Canada Inc. v. Ontario (Ministry of the
    Environment)
(2005), 48 B.L.R. (3d) 58 (Ont. S.C.), at paras. 60-62, revd
    in part on other grounds (2005), 258 D.L.R. (4th) 320 (Ont. C.A.); and
Alleslev-Krofchak
    v. Valcom Ltd.
, 2009 CanLII 30446 (ON SC), at para. 361, affd 2010 ONCA 557,
    322 D.L.R. (4th) 193.

[83]

Unlike pecuniary damages, such damages are not
    capable of being precisely measured and are more a matter of impression:
Uni-Jet
,
    at para. 72; and
Foschia
, at para. 37.  As Kroft J.A. explained in
Uni-Jet
,
    at para. 72:

[D]amages at large are a matter of impression; they must
    include the consideration of a host of circumstances involving both the
    particular plaintiff and the particular defendant, and they are likely to be
    unique in each case.

[84]

In
Howard v. Madill
, 2010 BCSC 525, at
    para. 89, Bruce J. summarized the principles relating to the assessment of
    damages at large, as canvassed in
Uni-Jet
:

An accurate summary of the law with respect to the assessment
    of damages at large, and the circumstances in which such an award may be made,
    is contained in
Uni-Jet
at paras. 66 to 73. I summarize these
    principles as follows:

1.  Damages other than for
    pecuniary loss are "damages at large" and generally include
    compensation for loss of reputation, injured feelings, bad or good conduct by
    either party, or punishment.

2.  Damages at large are
    compensatory for loss that can be foreseen but cannot be readily quantified.

3.  Damages at large are a
    matter of discretion for the trial judge and are more a "matter of
    impression and not addition."

4.  Where damages at large are
    imposed for intentional torts, the assessment of damages provides an
    opportunity to condemn flagrant abuses of the legal process.

[85]

I too would adopt this summary.

[86]

Damages at large for intentional torts include
    damages for loss of reputation, but are not limited to that type of loss. As
    the authorities above demonstrate, they include as well damages reflecting the
    courts condemnation of flagrant abuses of the legal process. Generally
    speaking, they are compensatory for loss that can be foreseen, but not readily
    quantified. The trial judge applied these factors.

[87]

As a result of Grand Financials unlawful
    conduct, Solemio lost its major client; Arnold Bros., representing 60 per cent
    of its business, abruptly ended its dealings with Solemio. Solemios trucks
    were literally stopped in their tracks and their loads transferred to other trucks.
    Solemio lost the business of other customers as well. In addition, its bank
    account was emptied and frozen, thus creating obvious liquidity problems,
    including the inability to make payments for trucks, utilities, insurance,
    salaries, and other bills. These events amply supported the trial judges
    findings that Grand Financials conduct contributed to Solemios liquidity
    problems, as well as its loss of reputation, and engaged the courts concern
    for abuse of the legal process.

[88]

What of the amount of the damages at large
    award, then?

[89]

It is not readily apparent how the trial judge
    arrived at the amount of $175,000, although at one point Mr. Ullah testified
    that he had received about $200,000 from Arnold Bros. minus an amount of
    $25,000 that he left there, perhaps referring to the same sum of money that
    Grand Financial later allowed Arnold Bros. to pay to Solemio. As noted above,
    however, damages at large are a matter of impression and are not something
    that can be precisely measured.  It is difficult for an appellate court to say
    that the assessment is plainly erroneous in such circumstances: see Stephen M.
    Waddams,
The Law of Damages
, loose-leaf (2015-Rel. 24), 2nd ed.
    (Toronto: Canada Law Book, 2015), at para. 13.470. While I may not have arrived
    at the amount of $175,000, I cannot say that the trial judge erred in principle
    in doing so. He properly took into account all of the relevant factors in
    arriving at his conclusion.

[90]

Before leaving this issue, I need to address,
    briefly, Grand Financials wrongful seizure of the $35,000 from Solemios RBC
    account. I am satisfied on the record that Solemio did not claim the seized
    amount as a separate head of damages.
[1]
That said, the trial judges award of damages at large appears to encompass
    some recognition of the improper seizure, and Grand Financial itself appears to
    have accepted the $35,000 as a component of that award, since its argument on
    appeal was that the damages at large award ought to be set aside or, at least,
    reduced to that amount. As well, one of the three foundations upon which the
    trial judge based his award of damages at large was that Grand Financials
    actions had constituted a serious abuse of the legal process, a reference to
    the unlawful resort to the PPSA Security. I conclude, on these bases, that the
    award of damages at large was intended to incorporate the factors that would
    give rise to the recovery of the $35,000 amount, and I see no error in that
    approach.

[91]

On that basis, I would not interfere with the
    trial judges award of damages at large.

Equitable Set-Off

[92]

On the cross-appeal, Grand Financial advances,
    for the first time, an equitable set-off argument. It submits that it is
    entitled to set-off against the $175,000 damages at large awarded to Solemio on
    its counterclaim any amounts owing to it under the Wild Lions Agreement. And,
    because set-off is a defence and not a claim in itself, Grand Financial contends
    that, as a defendant to a counterclaim, it was able to raise the defence, and
    was entitled to do so despite any limitation defence available to Solemio in
    respect of amounts owing under the Wild Lions Agreement.

[93]

In support of the latter submission, Grand
    Financial relies on the decision of
Canada Trustco Mortgage Co. v. Pierce,
(2005),
    254 D.L.R. (4th) 79, 197 O.A.C. 369 (C.A.), at para. 43, in which this Court
    adopted the following statement of Lord Denning in
Henriksens Rederi AIS v.
    PHZ Rolimpex
, [1973] 3 All E.R. 589 (C.A.), at p. 593:

In point of principle, when
    applying the law of limitation, a distinction must be drawn between a matter which
    is in the nature of a
defence
and one which is in the nature of
cross-claim
.
    When a defendant is sued, he can raise any matter which is properly in the nature
    of a
defence
, without fear of being met by a period of limitation.

[94]

I agree that a limitation period does not
    operate to preclude a defence of equitable set-off. However, it is too late, in
    my view, for Grand Financial to raise this argument for the first time on
    appeal. Recall that Grand Financial itself argues that Solemio is foreclosed
    from raising the limitation period defence for the same reason, taking the
    position that it was incumbent upon Solemio to raise the limitation issue
    through evidence and argument at trial, and having failed to do so, Solemio,
    as a matter of law forfeited [its] right to do so now for the first time on
    appeal: see
Ontario Energy Saving LP
, at para. 3. Although I would
    not give effect to that argument with respect to Solemios limitation period
    defence, as explained above, that rationale does apply to preclude Grand
    Financials attempt to rely on equitable set-off at this stage of the
    proceedings, in my opinion.

[95]

Unlike Solemio with respect to the Wild Lions
    Agreement claim, Grand Financial knew from the outset that it was facing a Solemio
    counterclaim. It could have raised equitable set-off in that context, but did
    not do so. Equitable set-off was not pleaded, was not the subject of any
    evidentiary foundation (or counter-foundation), and was not argued. In short,
    it was not an issue to which either the parties or the trial judge turned their
    minds.

[96]

Grand Financial submits that, even in the
    absence of a plea of set-off and any joinder of issue on that point, the
    evidentiary foundation still exists for this Court to determine that equitable
    set-off applies. I disagree. There may be
some
evidentiary basis upon
    which to propose, or to oppose, the argument, but we do not know what other
    evidence may have been led, or arguments made, had it been known that the issue
    was in play.


[97]

Equitable set-off is a defence that is
    particularly rooted in the circumstances of the individual case. It requires,
    amongst other things, that the set-off claim go directly to impeach the
    plaintiffs demands, the plaintiff in this case being Solemio and the claim
    being an award of damages to compensate it for harm suffered as a result of an
    intentional wrongdoing  the tort of interference with economic relations. To
    put it another way, the defence requires that the set-off claim be so closely
    connected to the plaintiffs demands that it would be manifestly unjust to
    allow the plaintiff (Solemio) to enforce payment without taking into account
    the set-off claim:  see
Holt v. Telford
, [1987] 2 S.C.R. 193, at p.
    212;
Canaccord Genuity Corp. v. Pilot
, 2015 ONCA 716, 340 O.A.C. 359,
    at paras. 55-59;
Ang v. Premium Staffing Ltd.
, 2015 ONCA 821.

[98]

In addition, the application of equitable
    set-off is subject to the equitable doctrine of clean hands. The courts will
    not allow a party to set-off where there [is] an equity to prevent [the party
    from] doing so; that is to say, where the rights, although legally mutual,
    [are] not equitably mutual:
In re Whitehouse & Co.
(1878), 9 Ch.
    D. 595, at p. 597; see also
Stewart v. Bardsley
, 2014 NSCA 106, at
    paras. 54-61;
Saskatchewan Wheat Pool v. Feduk
, 2003 SKCA 46, at para.
    63; and Kelly R. Palmer,
The Law of Set-Off in Canada
(Aurora,
    Ontario: Canada Law Book Inc., 1993), at p. 66. Here, Grand Financial seeks to
    set off against its contractual claim under the Wild Lions Agreement Solemios
    judgment for damages caused by Grand Financials own intentional wrongdoing,
    albeit a wrongdoing that may have some connection with, or arise from, the
    issues regarding the Wild Lions Agreement. Whether equitable set-off would be
    available as a defence in such circumstances is something that would require
viva
    voce
evidence and credibility findings made during an assessment focused
    on that particular issue.

[99]

All of these considerations underscore the need
    for a trial record focused on the set-
off issue to enable
    effective appellate review. It does not exist in this case.

[100]

For these reasons I would not permit Grand Financial to raise the
    issue on appeal.
Given that determination, it is not
    necessary to resolve the question of whether the defence can be made out on the
    merits in this case.

Punitive Damages

[101]

Even though he found that Solemio had made out the tort of intentional
    interference with economic relations, the trial judge declined to grant
    Solemios request for punitive damages in the amount of $250,000. I see no error
    in this determination.

[102]

The trial judge properly summarized the law relating to punitive
    damages at para. 88 of his reasons:

Punitive damages are only awarded in extraordinary situations. In
    general, punitive damages are considered in situations where the defendants
    misconduct is so malicious, oppressive, and high-handed that it would offend
    the courts sense of decency. Punitive damages do not bear any relation to what
    the plaintiff should receive by way of compensation. Their aim is not to compensate
    a party, but rather to punish someone.  It is the means by which a court
    expresses its outrage at what it considers egregious conduct of a party. As
    noted by the Supreme Court of Canada in
Whiten v. Pilot Insurance Co
.,
    [2002] 1 S.C.R. 595, punitive damages are very much the exception rather than
    the rule. [Citations omitted.]

[103]

His application of the law on punitive damages to the circumstances
    of this case was a matter of fact and mixed fact and law, and is therefore
    entitled to deference.

[104]

The trial judge concluded on the evidence that, even though Grand
    Financial had acted in an unlawful manner, its conduct did not rise to a level
    warranting an award of punitive damages. In doing so, he took into account, at
    para. 89, the fact that Solemio [had run] up a very substantial debt in
    connection with the Wild Lions invoices, while at the same time it was receiving
    prompt payment from Arnold Bros. for the Solemio counterpart of those invoices.
    He noted in addition that one component of the award of damages at large was a
    reflection of the courts disapproval of Grand Financials abuse of the legal
    process. The punitive damages concept of expressing societys disapproval of
    the defendants behaviour had accordingly already been taken into account.

[105]

He was entitled to make this call on the evidence, in my view.

The Costs Award

[106]

My conclusion earlier in these reasons that Grand Financial was not
    entitled to recover on the basis of the Wild Lions invoices pursuant to the
    Wild Lions Agreement has overtaken Solemios attack on the costs award below. I
    need not deal with that aspect of the appeal.

Disposition

[107]

For all of the foregoing reasons, I would allow the appeal and set
    aside the judgment for $200,000 granted against Solemio. I would dismiss the
    cross-appeal.

[108]

I observe here that, although Mr. Ullah is an appellant and a
    respondent on the cross-appeal, no submissions were made with respect to the
    trial judges dismissal of the claims made by and against him personally. Nothing
    in this decision is intended to affect the judgment below on those issues.

[109]

Solemio has been substantially successful and is entitled to its
    costs here and below. It was successful on a motion before a panel of this
    Court on November 18, 2014, at which time the costs of the motion were fixed in
    favour of Solemio in the cause in the amount of $6,000. I would fix the costs
    of the appeal in total, including the foregoing amount, in favour of Solemio in
    the amount of $27,000, inclusive of disbursements and HST. I would remit the
    costs of trial to the trial judge for determination, if the parties are unable
    to agree.

Released: C.W.H. March 2, 2016

R.A. Blair J.A.

I agree Alexandra
    Hoy A.C.J.O.

I agree C.W.
    Hourigan J.A.





[1]
Solemio acknowledges in its factum that it did not sue to recover the $35,000,
    and its damage summary, outlined above, does not include a claim to recover
    that amount.


