Alfano v. Piersanti,

• Jurisdiction: Ontario
• Judge: Cunningham,LaForme,O'Connor
• Neutral Citation: 2012 ONCA 297
• Court: Court of Appeal (Ontario)
• Date: 09 May 2012
• Citation: (2012), 291 O.A.C. 62 (CA),2012 ONCA 297,[2012] OJ No 2042 (QL),215 ACWS (3d) 637,291 OAC 62,[2012] O.J. No 2042 (QL),(2012), 291 OAC 62 (CA),291 O.A.C. 62

Alfano v. Piersanti (2012), 291 O.A.C. 62 (CA)

MLB headnote and full text

Temp. Cite: [2012] O.A.C. TBEd. MY.011

Bertina Alfano, Trustee of the Carmen Alfano Family Trust, Bertina Alfano, Italo Alfano, Trustee of the Italo Alfano Family Trust, Italo Alfano, Ulti Alfano, Trustee of the Ulti Alfano Family Trust, and Ulti Alfano (plaintiffs/respondents) v. Christian Piersanti, Piersanti and Co. Barristers and Solicitors, Gold Financial Corp., Osler Paving Ltd., 758626 Ontario Limited now known as Diligent Financial Corporation, 1281111 Ontario Limited, 1269906 Ontario Limited, 1281632 Ontario Limited, 1212700 Ontario Limited, Terry Piersanti also known as Terry Scatcherd, 1281038 Ontario Limited, and 3964400 Canada Inc. (defendants/appellants)

Christian Piersanti, Diligent Financial Corporation, and 1212700 Ontario Limited (plaintiffs by counterclaim/appellant) v. Bertina Alfano, Italo Alfano, Ultimino Alfano, Joe Alfano, 815748 Ontario Limited, Power Contracting Limited, Puslinch Investments Inc., and 1026864 Ontario Limited (defendants by counterclaim/respondents)

Gold Financial Corp. (plaintiff/appellant) v. Puslinch Inv. Inc., Invar Building Corporation, Invar Aggregates Limited, 1212700 Ontario Limited, 1026864 Ontario Limited, Peter Lamanna, 2016411 Ontario Limited, Steven Bellissimo Barrister and Solicitor, Ontario Power Contracting Limited, 2012746 Ontario Limited, 2026474 Ontario Limited, Bertina Alfano, Trustee of the Carmen Alfano Family Trust, Bertina Alfano, Italo Alfano, Trustee of the Italo Alfano Family Trust, Italo Alfano, Ulti Alfano, Trustee of the Ulti Alfano Family Trust, and Ulti Alfano (defendants/respondents)

(C52738; 2012 ONCA 297)

Indexed As: Alfano v. Piersanti et al.

Ontario Court of Appeal

O'Connor, A.C.J.O., LaForme, J.A. and Cunningham, A.C.J.(ad hoc)

May 9, 2012.

Summary:

In early 1993, the Alfanos, with the assistance of their lawyer, Piersanti, incorporated Osler Paving and Construction Ltd. Piersanti was made president of Osler and was given a 10 percent ownership interest. In 1993, with Piersanti's assistance, the Alfano brothers established four family trusts, one for each brother's family. Each trust held a 22.5 percent interest in Osler. In 1997, Frank Alfano withdrew from the business and transferred the shares of Osler to the others. As a result, the remaining three family trusts each held 29 percent of the equity in Osler for a total of 87 percent. Piersanti owned the remaining 13 percent. In 2001, the relationship between the Alfano family and Piersanti began to deteriorate. In June 2002, Piersanti claimed that he owned all of the businesses in which he was involved with the Alfano family, including Osler. Piersanti then locked the Alfanos out of the businesses, including Osler. The plaintiffs commenced an action seeking, inter alia, declarations that the Alfano Trusts owned 87 percent of Osler through their interests in another numbered company (758). They also sued Piersanti and his wife for damages. On June 17, 2002, Piersanti assigned Osler into bankruptcy without consulting the Alfano family members. The plaintiffs unsuccessfully moved to set aside the assignment of Osler into bankruptcy. The action proceeded.

The Ontario Superior Court held that: "i. the Alfano Trusts owned 87 percent of 758, which owned 100 percent of Osler; ii. Mr. Piersanti engaged in a fraudulent scheme to deprive the Alfano Trusts of their interests in Osler; iii. as part of the fraudulent scheme, Mr. Piersanti concocted a unanimous shareholders agreement effectively eliminating the Alfanos' interest in 758 and Osler; iv. also as part of the scheme, Mr. Piersanti improperly assigned Osler into bankruptcy; v. prior to the bankruptcy, the Piersantis misappropriated monies from Osler; vi. as a result of the bankruptcy, the [plaintiffs] suffered damages; and vii. Mr. and Ms. Piersanti were liable to the [plaintiffs] for damages resulting from the Osler bankruptcy." The court awarded $20 million in damages and $250,000 in punitive damages. The court ordered 128, a Piersanti controlled company, to pay $2.5 million into court to the credit of the plaintiffs and made a declaration that Ulti Alfano had a claim to the 1995 value of a one-twelfth interest in the MAP properties. The defendants appealed.

The Ontario Court of Appeal allowed the appeal in part as follows: (1) it set aside the judgment against Piersanti's wife; (2) it reduced the damage award to $14,391,807; (3) it set aside the order that 128 pay $2.5 million into court; and (4) it set aside the order relating to Ulti Alfano's interest in the MAP properties. In all other respects, the trial judgment was confirmed.

Bankruptcy - Topic 488

Property of bankrupt - Exemptions or exclusions - Trust property - In early 1993, the Alfanos, with the assistance of their lawyer, Piersanti, incorporated Osler Paving and Construction Ltd. - Piersanti was made president of Osler and was given a 10 percent ownership interest - In 1993, with Piersanti's assistance, the Alfano brothers established four family trusts, one for each brother's family - Each trust held a 22.5 percent interest in Osler - In 1997, Frank Alfano withdrew from the business and transferred the shares of Osler to the others - As a result, the remaining three family trusts each held 29 percent of the equity in Osler for a total of 87 percent - Piersanti owned the remaining 13 percent - In 2001, the relationship between the Alfano family and Piersanti began to deteriorate - In June 2002, Piersanti claimed that he owned all of the businesses in which he was involved with the Alfano family, including Osler - Piersanti then locked the Alfanos out of the businesses, including Osler - The plaintiffs commenced an action seeking, inter alia, declarations that the Alfano Trusts owned 87 percent of Osler through their interests in another numbered company (758) - They also sued Piersanti and his wife for damages - Piersanti assigned Osler into bankruptcy without consulting the Alfano family members - The plaintiffs unsuccessfully moved to set aside the assignment of Osler into bankruptcy - The action proceeded - The trial judge allowed the action - The defendants appealed, asserting that the Alfano brothers lost their interests in 758 and Osler because they failed to disclose those interests to their trustees in bankruptcy when they declared personal bankruptcy in the 1990s - The Ontario Court of Appeal rejected this ground of appeal - First, the argument was not pleaded - Had it been pleaded, the parties might have led evidence and conducted the trial differently - Second, it did not appear that the Alfano brothers, in their personal capacities, had an interest in 758 or Osler at the time of their bankruptcies - Their family trusts did - The brothers were trustees of those trusts - Section 67(1) of the Bankruptcy and Insolvency Act as it was at the time of the Alfanos' personal bankruptcies provided that "[t]he property of a bankrupt divisible among his creditors shall not comprise (a) property held by the bankrupt in trust for any other person" - In any event, it seemed counter-intuitive that if there was a problem, as Piersanti now asserted, that Piersanti should be the beneficiary of that problem - If there was a problem, it was the creditors of the Alfano brothers at the time of their bankruptcies who were affected, not Piersanti - See paragraphs 75 to 86.

Damage Awards - Topic 764

Torts - Fraud and misrepresentation - Fraud - In early 1993, the Alfanos, with the assistance of their lawyer, Piersanti, incorporated Osler Paving and Construction Ltd. - Piersanti was made president of Osler and was given a 10 percent ownership interest - In 1993, with Piersanti's assistance, the Alfano brothers established four family trusts, one for each brother's family - Each trust held a 22.5 percent interest in Osler - In 1997, Frank Alfano withdrew from the business and transferred the shares of Osler to the others - As a result, the remaining three family trusts each held 29 percent of the equity in Osler for a total of 87 percent - Piersanti owned the remaining 13 percent - In 2001, the relationship between the Alfano family and Piersanti began to deteriorate - In June 2002, Piersanti claimed that he owned all of the businesses in which he was involved with the Alfano family, including Osler - Piersanti then locked the Alfanos out of the businesses, including Osler - The plaintiffs commenced an action seeking, inter alia, declarations that the Alfano Trusts owned 87 percent of Osler through their interests in another numbered company (758) - They also sued Piersanti and his wife for damages - Piersanti assigned Osler into bankruptcy without consulting the Alfano family members - The plaintiffs unsuccessfully moved to set aside the assignment of Osler into bankruptcy - The action proceeded - The trial judge held, inter alia, that as part of a fraudulent scheme, Piersanti improperly assigned Osler into bankruptcy - The trial judge awarded $20 million in damages, including $11,180,000 for additional debt resulting from Osler bankruptcy - The defendants appealed, asserting that the trial judge's damage award for additional debts resulting from the Osler bankruptcy were too remote from the bankruptcy and, as such, were not properly recoverable as damages resulting from that bankruptcy - The Ontario Court of Appeal rejected this ground of appeal - It was foreseeable that the plaintiffs would take steps to recover the Osler business and continue operating what they considered to be their family business - There was no basis to interfere with the trial judge's award - See paragraphs 139 to 142.

Damage Awards - Topic 764

Torts - Fraud and misrepresentation - Fraud - In early 1993, the Alfanos, with the assistance of their lawyer, Piersanti, incorporated Osler Paving and Construction Ltd. - Piersanti was made president of Osler and was given a 10 percent ownership interest - In 1993, with Piersanti's assistance, the Alfano brothers established four family trusts, one for each brother's family - Each trust held a 22.5 percent interest in Osler - In 1997, Frank Alfano withdrew from the business and transferred the shares of Osler to the others - As a result, the remaining three family trusts each held 29 percent of the equity in Osler for a total of 87 percent - Piersanti owned the remaining 13 percent - In 2001, the relationship between the Alfano family and Piersanti began to deteriorate - In June 2002, Piersanti claimed that he owned all of the businesses in which he was involved with the Alfano family, including Osler - Piersanti then locked the Alfanos out of the businesses, including Osler - The plaintiffs commenced an action seeking, inter alia, declarations that the Alfano Trusts owned 87 percent of Osler through their interests in another numbered company (758) - They also sued Piersanti and his wife for damages - Piersanti assigned Osler into bankruptcy without consulting the Alfano family members - The plaintiffs unsuccessfully moved to set aside the assignment of Osler into bankruptcy - The action proceeded - The trial judge held, inter alia, that as part of a fraudulent scheme, Piersanti improperly assigned Osler into bankruptcy - The trial judge awarded $20 million in damages - The defendants appealed, asserting that the trial judge erred in not reducing the damage award because the plaintiffs failed to mitigate their damages - The Ontario Court of Appeal rejected this ground of appeal - The defendants made the same entirely fact based argument at trial - The issue was whether the plaintiffs took reasonable steps to mitigate their losses - Implicitly, the trial judge concluded that they did - There was evidence to support the trial judge's conclusion - See paragraphs 143 to 145.

Damage Awards - Topic 764

Torts - Fraud and misrepresentation - Fraud - In early 1993, the Alfanos, with the assistance of their lawyer, Piersanti, incorporated Osler Paving and Construction Ltd. - Piersanti was made president of Osler and was given a 10 percent ownership interest - In 1993, with Piersanti's assistance, the Alfano brothers established four family trusts, one for each brother's family - Each trust held a 22.5 percent interest in Osler - In 1997, Frank Alfano withdrew from the business and transferred the shares of Osler to the others - As a result, the remaining three family trusts each held 29 percent of the equity in Osler for a total of 87 percent - Piersanti owned the remaining 13 percent - In 2001, the relationship between the Alfano family and Piersanti began to deteriorate - In June 2002, Piersanti claimed that he owned all of the businesses in which he was involved with the Alfano family, including Osler - Piersanti then locked the Alfanos out of the businesses, including Osler - The plaintiffs commenced an action seeking, inter alia, declarations that the Alfano Trusts owned 87 percent of Osler through their interests in another numbered company (758) - They also sued Piersanti and his wife for damages - Piersanti assigned Osler into bankruptcy without consulting the Alfano family members - The plaintiffs unsuccessfully moved to set aside the assignment of Osler into bankruptcy - The action proceeded - The trial judge held, inter alia, that as part of a fraudulent scheme, Piersanti improperly assigned Osler into bankruptcy - The trial judge awarded $20 million in damages - The Ontario Court of Appeal made adjustments, reducing the damage award as follows: (1) adjustment to cash flow ($700,000); (2) adjustment for debt repurchase ($3,118,193); and (3) adjustment for gravel pit acquisition ($2,000,000) - The new award was $14,391,807 - See paragraphs 146 to 151.

Damages - Topic 1002

Mitigation - General principles - Duty to mitigate - [See second Damage Awards - Topic 764 ].

Damages - Topic 1330

Exemplary or punitive damages - Pleading - In early 1993, the Alfanos, with the assistance of their lawyer, Piersanti, incorporated Osler Paving and Construction Ltd. - Piersanti was made president of Osler and was given a 10 percent ownership interest - In 1993, with Piersanti's assistance, the Alfano brothers established four family trusts, one for each brother's family - Each trust held a 22.5 percent interest in Osler - In 1997, Frank Alfano withdrew from the business and transferred the shares of Osler to the others - As a result, the remaining three family trusts each held 29 percent of the equity in Osler for a total of 87 percent - Piersanti owned the remaining 13 percent - In 2001, the relationship between the Alfano family and Piersanti began to deteriorate - In June 2002, Piersanti claimed that he owned all of the businesses in which he was involved with the Alfano family, including Osler - Piersanti then locked the Alfanos out of the businesses, including Osler - The plaintiffs commenced an action seeking, inter alia, declarations that the Alfano Trusts owned 87 percent of Osler through their interests in another numbered company (758) - They also sued Piersanti and his wife for damages - Piersanti assigned Osler into bankruptcy without consulting the Alfano family members - The plaintiffs unsuccessfully moved to set aside the assignment of Osler into bankruptcy - The action proceeded - The trial judge held, inter alia, that as part of a fraudulent scheme, Piersanti improperly assigned Osler into bankruptcy - The trial judge awarded punitive damages of $250,000 - The defendants appealed, asserting that they were not pleaded in the fresh as amended statement of claim - They were, however, sought at trial - The Ontario Court of Appeal rejected this ground of appeal - Piersanti had adequate notice of the punitive damage claim - While it would have been preferable if the plaintiffs had sought to amend their pleading to assert the claim when it was raised and argued, the court saw no prejudice - See paragraphs 161 to 164.

Estoppel - Topic 426

Estoppel by record (res judicata) - Matters precluding estoppel - Fraud, dishonesty or new evidence - In early 1993, the Alfanos, with the assistance of their lawyer, Piersanti, incorporated Osler Paving and Construction Ltd. - Piersanti was made president of Osler and was given a 10 percent ownership interest - In 1993, with Piersanti's assistance, the Alfano brothers established four family trusts, one for each brother's family - Each trust held a 22.5 percent interest in Osler - In 1997, Frank Alfano withdrew from the business and transferred the shares of Osler to the others - As a result, the remaining three family trusts each held 29 percent of the equity in Osler for a total of 87 percent - Piersanti owned the remaining 13 percent - In 2001, the relationship between the Alfano family and Piersanti began to deteriorate - In June 2002, Piersanti claimed that he owned all of the businesses in which he was involved with the Alfano family, including Osler - Piersanti then locked the Alfanos out of the businesses, including Osler - The plaintiffs commenced an action seeking, inter alia, declarations that the Alfano Trusts owned 87 percent of Osler through their interests in another numbered company (758) - They also sued Piersanti and his wife for damages - Piersanti assigned Osler into bankruptcy without consulting the Alfano family members - The plaintiffs unsuccessfully moved to set aside the assignment of Osler into bankruptcy - The action proceeded - The trial judge held, inter alia, that as part of a fraudulent scheme, Piersanti improperly assigned Osler into bankruptcy and was liable for damages - The defendants appealed, asserting that the order refusing to set aside the bankruptcy operated as a bar based on res judicata to the trial judge's finding of liability with respect to the bankruptcy - The Ontario Court of Appeal rejected this ground of appeal - The order was based on incomplete and incorrect facts - The court was not aware that the assignment into bankruptcy was part of Piersanti's fraudulent scheme to deprive the Alfanos of their interests in Osler - The order could not operate as a bar to a claim that the bankruptcy was the result of a fraud that had not been exposed at the time - See paragraphs 72 to 74.

Evidence - Topic 7000.2

Opinion evidence - Expert evidence - General - Expert witness - Disqualification - Bias (incl. police expert) - In early 1993, the Alfanos, with the assistance of their lawyer, Piersanti, incorporated Osler Paving and Construction Ltd. - Piersanti was made president of Osler and was given a 10 percent ownership interest - In 1993, with Piersanti's assistance, the Alfano brothers established four family trusts, one for each brother's family - Each trust held a 22.5 percent interest in Osler - In 1997, Frank Alfano withdrew from the business and transferred the shares of Osler to the others - As a result, the remaining three family trusts each held 29 percent of the equity in Osler for a total of 87 percent - Piersanti owned the remaining 13 percent - In 2001, the relationship between the Alfano family and Piersanti began to deteriorate - In June 2002, Piersanti claimed that he owned all of the businesses in which he was involved with the Alfano family, including Osler - Piersanti then locked the Alfanos out of the businesses, including Osler - The plaintiffs commenced an action seeking, inter alia, declarations that the Alfano Trusts owned 87 percent of Osler through their interests in another numbered company (758) - They also sued Piersanti and his wife for damages - Piersanti assigned Osler into bankruptcy without consulting the Alfano family members - The plaintiffs unsuccessfully moved to set aside the assignment of Osler into bankruptcy - The action proceeded - The trial judge allowed the action - The defendants appealed, asserting that the trial judge erred in her mid-trial ruling refusing to admit the evidence of their expert witness on the basis that the expert lacked independence and objectivity - The Ontario Court of Appeal rejected this ground of appeal - The trial judge had regard to the appropriate legal principles and there was ample evidence to support her conclusion that the expert's proposed evidence lacked independence - The experts' reports were repetitious and argumentative in tone - Parts of the reports read like the defendants' counsels' written argument - In places, the reports went beyond the areas in which the expert was qualified to give expert evidence and addressed factual issues that properly fell within the purview of the trial judge - In addition, the reports opined on matters of law - There was ample basis for the trial judge to conclude that the expert's evidence should not be admitted - The trial judge was in the best position to determine the significance of the demonstrated lack of independence and the extent to which the benefit of that evidence was thereby diminished - See paragraphs 96 to 120.

Evidence - Topic 7000.2

Opinion evidence - Expert evidence - General - Expert witness - Disqualification - Bias (incl. police expert) - The Ontario Court of Appeal stated that "[w]hen courts have discussed the need for the independence of expert witnesses, they often have said that experts should not become advocates for the party or the positions of the party by whom they have been retained. It is not helpful to a court to have an expert simply parrot the position of the retaining client. Courts require more. The critical distinction is that the expert opinion should always be the result of the expert's independent analysis and conclusion. While the opinion may support the client's position, it should not be influenced as to form or content by the exigencies of the litigation or by pressure from the client. An expert's report or evidence should not be a platform from which to argue the client's case. As the trial judge in this case pointed out, 'the fundamental principle in cases involving qualifications of experts is that the expert, although retained by the clients, assists the court.'" - See paragraph 108.

Fraud and Misrepresentation - Topic 7

Fraudulent misrepresentation (deceit) - General principles - What constitutes fraud - In early 1993, the Alfanos, with the assistance of their lawyer, Piersanti, incorporated Osler Paving and Construction Ltd. - Piersanti was made president of Osler and was given a 10 percent ownership interest - In 1993, with Piersanti's assistance, the Alfano brothers established four family trusts, one for each brother's family - Each trust held a 22.5 percent interest in Osler - In 1997, Frank Alfano withdrew from the business and transferred the shares of Osler to the others - As a result, the remaining three family trusts each held 29 percent of the equity in Osler for a total of 87 percent - Piersanti owned the remaining 13 percent - In 2001, the relationship between the Alfano family and Piersanti began to deteriorate - In June 2002, Piersanti claimed that he owned all of the businesses in which he was involved with the Alfano family, including Osler - Piersanti then locked the Alfanos out of the businesses, including Osler - The plaintiffs commenced an action seeking, inter alia, declarations that the Alfano Trusts owned 87 percent of Osler through their interests in another numbered company (758) - They also sued Piersanti and his wife for damages - Piersanti assigned Osler into bankruptcy without consulting the Alfano family members - The plaintiffs unsuccessfully moved to set aside the assignment of Osler into bankruptcy - The action proceeded - The trial judge held, inter alia, that as part of a fraudulent scheme, Piersanti improperly assigned Osler into bankruptcy and was liable for damages - The defendants appealed, asserting that the trial judge erred in finding Piersanti liable for damages resulting from the bankruptcy of Osler - The Ontario Court of Appeal rejected this ground of appeal - Throughout her reasons, the trial judge made a number of findings that taken together revealed a series of fraudulent acts by Piersanti designed to appropriate for himself the interests of the Alfano Trusts in Osler - These fraudulent acts culminated in Piersanti voluntarily assigning Osler into bankruptcy without authority or even the knowledge of the Alfano family members - The trial judge recognized that a number of economic factors could affect the profitability of Osler - However, the trial judge's findings of liability and damages were premised on a conclusion that but for the bankruptcy, Osler would have continued as a profitable growing concern - This finding was open to the trial judge on the evidence - There was no basis to interfere - See paragraphs 40 to 63.

Fraud and Misrepresentation - Topic 7

Fraudulent misrepresentation (deceit) - General principles - What constitutes fraud - In early 1993, the Alfanos, with the assistance of their lawyer, Piersanti, incorporated Osler Paving and Construction Ltd. - Piersanti was made president of Osler and was given a 10 percent ownership interest - In 1993, with Piersanti's assistance, the Alfano brothers established four family trusts, one for each brother's family - Each trust held a 22.5 percent interest in Osler - In 1997, Frank Alfano withdrew from the business and transferred the shares of Osler to the others - As a result, the remaining three family trusts each held 29 percent of the equity in Osler for a total of 87 percent - Piersanti owned the remaining 13 percent - In 2001, the relationship between the Alfano family and Piersanti began to deteriorate - In June 2002, Piersanti claimed that he owned all of the businesses in which he was involved with the Alfano family, including Osler - Piersanti then locked the Alfanos out of the businesses, including Osler - The plaintiffs commenced an action seeking, inter alia, declarations that the Alfano Trusts owned 87 percent of Osler through their interests in another numbered company (758) - They also sued Piersanti and his wife for damages - Piersanti assigned Osler into bankruptcy without consulting the Alfano family members - The plaintiffs unsuccessfully moved to set aside the assignment of Osler into bankruptcy - The action proceeded - The trial judge found, inter alia, that prior to the bankruptcy, the Piersantis misappropriated monies from Osler - The Ontario Court of Appeal confirmed the finding - Although the trial judge did not address the impugned transactions individually, it was implicit in her reasons, read as a whole, that she was satisfied that the amount improperly appropriated by Piersanti exceeded $1 million - The court would not interfere with this finding - The trial judge's findings of liability and her damages award were not directed at compensating the plaintiffs for misappropriated funds - Rather, they were directed at Piersanti's fraud in assigning Osler into bankruptcy - Indeed, even if the trial judge had not found misappropriations, there was ample evidence to support the trial judge's finding of liability with respect to the Osler bankruptcy - See paragraphs 64 to 71.

Fraud and Misrepresentation - Topic 402

Fraudulent misrepresentation (deceit) - Remedies - Persons liable - In early 1993, the Alfanos, with the assistance of their lawyer, Piersanti, incorporated Osler Paving and Construction Ltd. - Piersanti was made president of Osler and was given a 10 percent ownership interest - In 1993, with Piersanti's assistance, the Alfano brothers established four family trusts, one for each brother's family - Each trust held a 22.5 percent interest in Osler - In 1997, Frank Alfano withdrew from the business and transferred the shares of Osler to the others - As a result, the remaining three family trusts each held 29 percent of the equity in Osler for a total of 87 percent - Piersanti owned the remaining 13 percent - In 2001, the relationship between the Alfano family and Piersanti began to deteriorate - In June 2002, Piersanti claimed that he owned all of the businesses in which he was involved with the Alfano family, including Osler - Piersanti then locked the Alfanos out of the businesses, including Osler - The plaintiffs commenced an action seeking, inter alia, declarations that the Alfano Trusts owned 87 percent of Osler through their interests in another numbered company (758) - They also sued Piersanti and his wife for damages - Piersanti assigned Osler into bankruptcy without consulting the Alfano family members - The plaintiffs unsuccessfully moved to set aside the assignment of Osler into bankruptcy - The action proceeded - The trial judge held, inter alia, that as part of a fraudulent scheme, Piersanti improperly assigned Osler into bankruptcy - The trial judge awarded $20 million in damages - She also ordered 128, a Piersanti related company to pay $2.5 million into court - The Ontario Court of Appeal set aside the order that 128 put $2.5 million into court - The trial judge's comment that this would not cause any hardship to the Piersanti defendants suggested that in her mind the $2.5 million was part of, not in addition to, the damages award - The purpose for which the trial judge made the $2.5 million award was apparently so that that amount would be paid within 30 days, thereby providing some security for the overall damages award - However, 128, the party ordered to pay the $2.5 million, was not a defendant in the claim for fraud related to the Osler bankruptcy that gave rise to the judgment against Piersanti - The trial judge did not make any findings that would render 128 liable to pay the damage award for the fraud claim - See paragraphs 165 to 173.

Fraud and Misrepresentation - Topic 402

Fraudulent misrepresentation (deceit) - Persons liable - In early 1993, the Alfanos, with the assistance of their lawyer, Piersanti, incorporated Osler Paving and Construction Ltd. - Piersanti was made president of Osler and was given a 10 percent ownership interest - In 1993, with Piersanti's assistance, the Alfano brothers established four family trusts, one for each brother's family - Each trust held a 22.5 percent interest in Osler - In 1997, Frank Alfano withdrew from the business and transferred the shares of Osler to the others - As a result, the remaining three family trusts each held 29 percent of the equity in Osler for a total of 87 percent - Piersanti owned the remaining 13 percent - In 2001, the relationship between the Alfano family and Piersanti began to deteriorate - In June 2002, Piersanti claimed that he owned all of the businesses in which he was involved with the Alfano family, including Osler - Piersanti then locked the Alfanos out of the businesses, including Osler - The plaintiffs commenced an action seeking, inter alia, declarations that the Alfano Trusts owned 87 percent of Osler through their interests in another numbered company (758) - They also sued Piersanti and his wife for damages - Piersanti assigned Osler into bankruptcy without consulting the Alfano family members - The plaintiffs unsuccessfully moved to set aside the assignment of Osler into bankruptcy - The action proceeded - The trial judge held, inter alia, that as part of a fraudulent scheme, Piersanti and his wife improperly assigned Osler into bankruptcy and were liable for damages - The Ontario Court of Appeal set aside the finding of liability against the wife - While the trial judge might have been of the view that the wife was liable to the plaintiffs for certain causes of action, she did not make any findings that would link her actions to the bankruptcy of Osler which was the triggering event for the damages award - See paragraphs 87 to 95.

Fraud and Misrepresentation - Topic 404

Fraudulent misrepresentation (deceit) - Remedies - Damages - In early 1993, the Alfanos, with the assistance of their lawyer, Piersanti, incorporated Osler Paving and Construction Ltd. - Piersanti was made president of Osler and was given a 10 percent ownership interest - In 1993, with Piersanti's assistance, the Alfano brothers established four family trusts, one for each brother's family - Each trust held a 22.5 percent interest in Osler - In 1997, Frank Alfano withdrew from the business and transferred the shares of Osler to the others - As a result, the remaining three family trusts each held 29 percent of the equity in Osler for a total of 87 percent - Piersanti owned the remaining 13 percent - In 2001, the relationship between the Alfano family and Piersanti began to deteriorate - In June 2002, Piersanti claimed that he owned all of the businesses in which he was involved with the Alfano family, including Osler - Piersanti then locked the Alfanos out of the businesses, including Osler - The plaintiffs commenced an action seeking, inter alia, declarations that the Alfano Trusts owned 87 percent of Osler through their interests in another numbered company (758) - They also sued Piersanti and his wife for damages - Piersanti assigned Osler into bankruptcy without consulting the Alfano family members - The plaintiffs unsuccessfully moved to set aside the assignment of Osler into bankruptcy - The action proceeded - The trial judge held, inter alia, that as part of a fraudulent scheme, Piersanti improperly assigned Osler into bankruptcy - The trial judge awarded $20 million in damages, including $6,353,000 for the loss of projected net cash flow in Osler - The defendants appealed, asserting that the loss of projected net cash flow in Osler was a derivative claim and, as such, could only be asserted by Osler - The Ontario Court of Appeal rejected this ground of appeal - The plaintiffs' claims were based in fraud - The damages claim resulted from Piersanti's fraudulent acts in depriving the Alfano Trusts of ownership interests in Osler - The Alfano Trusts were entitled to a damages award that would put them in the financial position they would have been in had the fraud not occurred, in this case had the Osler bankruptcy not occurred - It was open to the trial judge to calculate the loss of value of the Alfano Trusts' interests in Osler by looking to the loss of projected cash flows that Osler would have realized had Piersanti not put it into bankruptcy - Further, if the Alfano Trusts had sought leave to bring a derivative claim in 2002, they would no doubt have encountered exactly the same argument from Piersanti that they did in this litigation - See paragraphs 133 to 138.

Practice - Topic 1335

Pleadings - The issues - Issues to be raised must be pleaded - [See Damages - Topic 1330 ].

Cases Noticed:

Housen v. Nikolaisen et al., [2002] 2 S.C.R. 235; 286 N.R. 1; 219 Sask.R. 1; 272 W.A.C. 1; 2002 SCC 33, refd to. [para. 38].

R. v. Mohan, [1994] 2 S.C.R. 9; 166 N.R. 245; 71 O.A.C. 241, refd to. [para. 103].

Bank of Montreal v. Citak et al., [2001] O.T.C. 192 (Sup. Ct.), refd to. [para. 107].

R. v. Harris, [2005] EWCA Crim 1980 (Eng. Ct. of Crim. App.), refd to. [para. 109].

R. v. Abbey (W.N.) (2009), 254 O.A.C. 9; 97 O.R.(3d) 330; 2009 ONCA 624, refd to. [para. 111].

R. v. Inco Ltd., [2006] O.T.C. 429; 80 O.R.(3d) 594 (Sup. Ct.), refd to. [para. 112].

Whiten v. Pilot Insurance Co. et al., [2002] 1 S.C.R. 595; 283 N.R. 1; 156 O.A.C. 201; 2002 SCC 18, refd to. [para. 163].

Authors and Works Noticed:

Ontario Ministry of the Attorney General, Inquiry into Pediatric Forensic Pathology in Ontario (2008), p. 503 [para. 109].

Counsel:

V. Ross Morrison and Samantha Chapman, for the appellants;

Kevin Sherkin and James F. Diamond, for the respondents.

This appeal was heard on November 8 and 9, 2011, by O'Connor, A.C.J.O., LaForme, J.A. and Cunningham, A.C.J.(ad hoc), of the Ontario Court of Appeal. The following judgment of the Court of Appeal was delivered by O'Connor, A.C.J.O., on May 9, 2012.