Barber et al. v. Vrozos et al., 2010 ONCA 570

• Judge: Gillese, Juriansz and LaForme, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: March 05, 2010
• Jurisdiction: Ontario
• Citations: 2010 ONCA 570;(2010), 269 O.A.C. 108 (CA)

Barber v. Vrozos (2010), 269 O.A.C. 108 (CA)

MLB headnote and full text

Temp. Cite: [2010] O.A.C. TBEd. SE.022

Stephen Barber and Wahta Natural Spring Water (plaintiffs/respondents) v. Johnathan Vrozos, Molson Sport & Entertainment Inc. and Great Moments in Catering (defendants/appellant)

(C49191)

Stephen Barber and Wahta Natural Spring Water (plaintiffs/respondents) v. Jonathan Vrozos, Molson Sport & Entertainment Inc. and Great Moments in Catering (defendants/appellant)

(C49195; 2010 ONCA 570)

Indexed As: Barber et al. v. Vrozos et al.

Ontario Court of Appeal

Gillese, Juriansz and LaForme, JJ.A.

September 3, 2010.

Summary:

By way of an assignment from Barber, Wahta Natural Spring Water (Wahta) obtained exclusive contractual rights from Vrozos to sell bottled water at a Rolling Stones concert produced by Molson Sport and Entertainment (Molson). Vrozos had originally acquired the rights from Molson. Molson also had a management contract with Vrozos. However, by the time of the concert, Vrozos had given other vendors, including Pizza Pizza and Paragon Blu, the right to sell their own water at the concert. In addition, Molson had granted GMIC the right to sell water in certain locations at the concert and to buy water from suppliers other than Wahta. Also, Vrozos sold Wahta water to other parties without informing Wahta and without giving it the proceeds. Vrozos also sold 350,000 bottles of Wahta water to Molson so that Molson could meet the public health requirements. Molson distributed those bottles free of charge and distributed an additional 300,000 bottles of Wahta water free of charge for public health requirement purposes. Finally, Vrozos took Wahta's money from the sale of its water, failed to rent a promised hangar to Wahta so it could house its employees, used Wahta's rented trailers personally, and had Wahta rent gators for use at the concert only to rent them himself to Molson and keep the rental proceeds. The concert was a "financial disaster" for Wahta. It supplied 3,027,744 bottles of water but sold only approximately 250,000. Barber and Wahta (together now referred to as "Wahta") sued Molson, Vrozos and GMIC. Against Molson, Wahta pleaded (1) negligent misrepresentation, and (2) intentional interference with economic relations. Against Vrozos, Wahta pleaded breach of contract, misrepresentation, and intentional interference with economic relations. Wahta also sought aggravated and punitive damages against both Molson and Vrozos. Vrozos counterclaimed against Wahta. He argued that he was owed a royalty fee of 50% of total gross sales. Vrozos cross-claimed against Molson for $80,000 pursuant to the management contract he had with Molson. Molson cross-claimed against Vrozos for contribution and indemnity for damages that it might pay to Wahta. The action against GMIC was settled.

The Ontario Superior Court, in a decision reported [2008] O.T.C. Uned. D09, dismissed Wahta's claim against Molson for misrepresentation but allowed its claim for intentional interference with economic relations. The court ordered Molson to pay Wahta damages in the amount of $632,000. Wahta's claim against Vrozos was allowed. Vrozos was to pay Wahta damages of $711,616, plus punitive damages of $50,000. Vrozos' counterclaim against Wahta for a royalty fee of 50% of gross sales was dismissed. Vrozos' cross-claim against Molson was allowed. Molson was to pay Vrozos $80,000. The court did not decide Molson's cross-claim against Vrozos. Molson and Vrozos appealed.

The Ontario Court of Appeal allowed Molson's appeal in part, only to dismiss Vrozos' cross-claim against Molson. The court ordered that Molson's cross-claim against Vrozos be dismissed. The remainder of Molson's appeal was dismissed. Vrozos' appeal was dismissed but the non-punitive damage award was increased to $765,366.

Contracts - Topic 7401

Interpretation - General principles - Intention of parties (incl. reasonable expectations) - [See Contracts - Topic 7416 ].

Contracts - Topic 7416

Interpretation - General principles - Most commercially reasonable interpretation - Wahta held exclusive contractual rights from Vrozos to sell bottled water at a Rolling Stones concert - The contract called for Wahta to pay Vrozos a flat fee of $100,000 - In addition, clause 4 required Wahta to pay Vrozos an escalating royalty based on the number of bottles sold beginning at 600,000 - The last entry in clause 4 called for a royalty of $150,000 for over 950,000 bottles sold - Clause 5 required Wahta to "also" pay Vrozos 50% of total gross profits - Wahta sold less than 500,000 bottles - Vrozos invoked clause 5 and sued for the 50% of gross profits from the sales actually made by Wahta - The trial judge held that Vrozos was entitled to the $100,000 flat fee and to a royalty fee if sales exceeded 1,000,000 bottles - Since the sales did not exceed 500,000 bottles, Vrozos was not entitled to any royalty - The Ontario Court of Appeal upheld the decision - The trial judge's interpretation of the contract was consistent with the true intention of the parties and was more commercially reasonable - See paragraphs 112 to 127.

Courts - Topic 583

Judges - Duties - Re reasons for decisions (incl. notes) - In interpreting the royalty fee provision of a contract between Vrozos and Wahta, which had granted Wahta the right to sell bottled water at a Rolling Stones concert, the trial judge stated as follows: "... I find that Vrozos was entitled to a royalty fee after the retail sale of bottles of water exceeded one million bottles. At best, Wahta's retail sales of bottled water did not exceed 500,000 bottles. There is, therefore, no royalty fee payable by Barber to Vrozos under the contract" - The Ontario Court of Appeal ruled that the trial judge's reasons were inadequate, as they were conclusory and did not admit of appellate review - See paragraph 119.

Damages - Topic 510

Limits of compensatory damages - General - Prohibition against double recovery - Wahta held exclusive contractual rights from Vrozos to sell bottled water at a Rolling Stones concert produced by Molson Sport and Entertainment (Molson) - Vrozos had originally acquired the rights from Molson - However, by concert time, Molson had permitted other vendors to sell non-Wahta water at the site and distributed, free of charge and without purchasing them from Wahta, 650,000 bottles of Wahta water to satisfy public health requirements - After the concert, Wahta was left with a considerable quantity of unsold water - It sued Vrozos for breach of contract and Molson for intentional interference with economic relations - The trial judge allowed the action and ordered both defendants to pay damages - Molson appealed, arguing that the trial judge erred in allowing Wahta to double-recover against Molson and Vrozos, since Wahta would make a net profit after it got damages from Vrozos - The Ontario Court of Appeal dismissed the appeal - The argument appeared to confuse damages awarded for breach of contract with damages awarded for torts - Recovering damages for breach of contract from Vrozos did not preclude Wahta from recovering damages for a tort committed by Molson - See paragraphs 78 to 81.

Damages - Topic 1022

Mitigation - In tort - What constitutes reasonable remedial measures - Wahta held exclusive contractual rights to sell bottled water at a Rolling Stones concert produced by Molson Sport and Entertainment Inc. (Molson) - After the concert, Wahta was left with a considerable quantity of unsold water after Molson (a) permitted GMIC to sell non-Wahta bottled water at the concert site, and (b) distributed free of charge, for public health reasons, 650,000 bottles of Wahta water that it had not purchased from Wahta - The trial judge found Molson liable for intentional interference with Wahta's economic relations - At issue was damages - Wahta sold its unsold water immediately after the concert, at a low price, on the basis that an immediate sale was preferable to incurring the costs of holding the water and hoping that it might be sold later at a higher price - Molson argued that Wahta had failed to mitigate its damages - Molson said that Wahta could have relabelled the water and then resold it for more - The Ontario Court of Appeal held that Wahta did mitigate its damages, albeit at discounted rates - Molson did not discharge its burden of demonstrating that there were reasonable steps that Wahta could have taken to fetch more for its water - See paragraphs 92 to 98.

Damages - Topic 1305

Exemplary or punitive damages - Breach of contract (incl. breach of duty of good faith) - Wahta held exclusive contractual rights from Vrozos to sell bottled water at a Rolling Stones concert produced by Molson Sport and Entertainment Inc. (Molson) - After the concert, Wahta was left with a considerable quantity of unsold water after Vrozos had granted other vendors, including Pizza Pizza and Paragon Blu, the right to sell their own water at the concert - Also, Vrozos sold Wahta water to other parties without informing Wahta and without giving it the proceeds - Vrozos also sold 350,000 bottles of Wahta water to Molson so that Molson could meet the public health requirements - Molson distributed those bottles (and another 300,000 bottles) free of charge - Finally, Vrozos took Wahta's money from the sale of its water, failed to rent a promised hangar to Wahta so it could house its employees, used Wahta's rented trailers personally, and had Wahta rent gators for use at the concert only to rent them himself to Molson and keep the rental proceeds - The concert was a "financial disaster" for Wahta - Wahta sued Vrozos for breach of contract, misprepresentation, and intentional interference with economic relations - The trial judge allowed the action and, along with compensatory damages, awarded Wahta punitive damages - The trial judge also found that Vrozos had committed fraud - Vrozos appealed, arguing that imposing punitive damages in the circumstances of a commercial contract was rare and that Wahta had been made whole through the other damages awarded - The Ontario Court of Appeal dismissed the appeal - Wahta satisfied the two requirements for the awarding of punitive damages in a breach of contract action - Firstly, Wahta established that Vrozos had commited an independently actionable wrong, i.e., fraud - Secondly, Wahta established that Vrozos' conduct was sufficiently egregious to offend the court's sense of decency - See paragraphs 150 to 159.

Damages - Topic 3962

Interference with economic relations - Loss of profits - Expectation interest - Wahta held exclusive contractual rights to sell bottled water at a Rolling Stones concert produced by Molson Sport and Entertainment Inc. (Molson) - After the concert, Wahta was left with a considerable quantity of unsold water after Molson (a) permitted GMIC to sell non-Wahta bottled water at the concert site, and (b) distributed free of charge, for public health reasons, 650,000 bottles of Wahta water that it had not purchased from Wahta - The trial judge found Molson liable for intentional interference with Wahta's economic relations - At issue was damages - The Ontario Court of Appeal held that the principle of restitutio in integrum applied - Wahta was entitled to the revenue it would have made had it been able to sell the water - See paragraphs 82 to 91.

Damages - Topic 5710

Contracts - Breach of contract - Damages - Breach of contract compared with tort - Wahta held exclusive contractual rights from Vrozos to sell bottled water at a Rolling Stones concert - After the concert, Wahta was left with a considerable quantity of unsold water after Vrozos had granted other vendors, including Pizza Pizza and Paragon Blu, the right to sell their own water at the concert - At issue was Wahta's damages resulting from the Pizza Pizza and Paragon Blu deals - The Ontario Court of Appeal held that the damages should be quantified on contractual principles as they amounted to a breach of the exclusivity clause in the Wahta contract - The parties agreed on an amount in respect of Pizza Pizza - As for Paragon Blu, the court ordered Vrozos to pay Wahta $93,750, which represented Paragon Blu's wholesale price at the concert - See paragraphs 136 to 149.

Damages - Topic 5721

Contracts - Breach of contract - Measure of damages - General (incl. considerations) - Molson Sport and Entertainment Inc. (Molson) executed a management contract with Vrozos in respect of a Rolling Stones concert that it was producing - If the concert made a net profit, Molson was to pay Vrozos a management fee of the lesser of (a) the net profit, and (b) $200,000 - Molson lost $940,000 on the concert - However, Molson had given away 60,000 tickets having a face value of $1,200,000 - The trial judge took this face value into account and ordered Molson to pay Vrozos $80,000 pursuant to the management contract - The Ontario Court of Appeal quashed this award where the management contract had given Molson all promotional rights in respect of the concert, "without limitation" - Thus, Molson was entitled to give away the tickets as part of its promotional strategy and the value of the tickets could not be treated as revenue for the purposes of calculating net profits - See paragraphs 100, and 102 to 106.

Fraud and Misrepresentation - Topic 7

Fraudulent misrepresentation (deceit) - General principles - What constitutes fraud - Wahta held exclusive contractual rights from Vrozos to sell bottled water at a Rolling Stones concert - It also paid Vrozos $20,000 for a rental hangar that it could use to house its employees the night before the concert - The hangar was never provided - The employees slept in the field - In addition, after the concert, Vrozos went into Wahta's money counting trailer and took the sale proceeds - The trial judge found that Vrozos had committed fraud - The Ontario Court of Appeal upheld the decision - See paragraphs 128 to 135.

Torts - Topic 5023

Interference with economic relations - Elements of liability - Use of unlawful means - [See Torts - Topic 5024 ].

Torts - Topic 5024

Interference with economic relations - Elements of liability - Malice or intent to injure - Wahta held exclusive contractual rights from Vrozos to sell bottled water at a Rolling Stones concert produced by Molson Sport and Entertainment Inc. (Molson) - Vrozos had originally acquired the rights from Molson - After the concert, Wahta was left with a considerable quantity of unsold water after Molson (a) contractually permitted GMIC to sell non-Wahta bottled water at the concert site, and (b) distributed free of charge, for public health reasons, 650,000 bottles of Wahta water that it had not purchased from Wahta - The trial judge found Molson liable for intentional interference with Wahta's economic relations with Vrozos - The Ontario Court of Appeal affirmed the decision where: (1) Molson knew that (a) Vrozos had sold the water rights to Wahta, and (b) permitting GMIC to sell water would interfere with Wahta's exclusive water rights and profits; (2) Molson's deal with GMIC was unlawful as being in breach of Molson's water rights contract with Vrozos; and (3) with respect to the public health requirements, Molson was not at liberty to act in the way that it did: its only lawful course of action was to negotiate in good faith with its supplier for the purchase of the water - See paragraphs 47 to 63.

Cases Noticed:

Reach M.D. Inc. v. Pharmaceutical Manufacturers Association of Canada et al. (2003), 172 O.A.C. 202; 65 O.R.(3d) 30 (C.A.), refd to. [para. 47].

900567 Ontario Ltd. v. Welsby & Associates Taxation Inc. et al., [2003] O.T.C. Uned. 144; 2003 CarswellOnt 738 (Sup. Ct.), consd. [para. 84].

Michaels et al. v. Red Deer College, [1976] 2 S.C.R. 324; 5 N.R. 99, consd. [para. 94].

Belton et al. v. Liberty Insurance Co. of Canada (2004), 189 O.A.C. 173; 72 O.R.(3d) 81 (C.A.), refd to. [para. 95].

Consolidated-Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co., [1980] 1 S.C.R. 888; 32 N.R. 488, consd. [para. 124].

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, consd. [para. 152].

Hill v. Church of Scientology of Toronto and Manning, [1995] 2 S.C.R. 1130; 184 N.R. 1; 84 O.A.C. 1, refd to. [para. 155].

Norberg v. Wynrib, [1992] 2 S.C.R. 226; 138 N.R. 81; 9 B.C.A.C. 1; 19 W.A.C. 1, refd to. [para. 155].

McIntyre v. Grigg et al. (2006), 217 O.A.C. 217; 83 O.R.(3d) 161 (C.A.), consd. [para. 155].

Keays v. Honda Canada Inc., [2008] 2 S.C.R. 362; 376 N.R. 196; 239 O.A.C. 299; 2008 SCC 39, consd. [para. 156].

Authors and Works Noticed:

Cheshire, Geoffrey Chevalier, Fifoot, Cecil Herbert Stuart, and Furmston, Michael P., The Law of Contract (8th Ed. 1972), p. 599 [para. 94].

Counsel:

Lawrence E. Thacker and Dena N. Varah, for the appellant, Molson Sport & Entertainment Inc;

Gary M. Caplan, for the appellant, Johnathan Vrozos;

Brian Duxbury and Amanda Jordan McInnis, for the respondents, Stephen Barber and Wahta Natural Spring Water.

This appeal was heard on March 5, 2010, by Gillese, Juriansz and LaForme, JJ.A., of the Ontario Court of Appeal. The following decision of the Court of Appeal was delivered by Gillese and LaForme, JJ.A., and released on September 3, 2010.