3Com Corp. et al. v. Zorin International Corp. et al., (2006) 211 O.A.C. 222 (CA)

• Judge: Weiler, Gillese and Blair, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: June 02, 2006
• Jurisdiction: Ontario
• Citations: (2006), 211 O.A.C. 222 (CA)

3Com Corp. v. Zorin Intl. Corp. (2006), 211 O.A.C. 222 (CA)

MLB headnote and full text

Temp. Cite: [2006] O.A.C. TBEd. JN.011

3Com Corporation and 3Com Canada Inc. (plaintiffs/respondents) v. Zorin International Corp., Sam Marotta, Domenic Sicilia and The Learningstation.com LLC (defendants/appellants) and Tech Data Canada Inc. (third party/respondent)

(C41878)

Indexed As: 3Com Corp. et al. v. Zorin International Corp. et al.

Ontario Court of Appeal

Weiler, Gillese and Blair, JJ.A.

June 2, 2006.

Summary:

3Com sold computer equipment in Canada through its distributor (Tech Data). 3Com had a discounted pricing policy based on the identity and location of the end-user. Marotta and Sicilia were the principals of a computer reseller (Zorin). Zorin purchased equipment from Tech Data at a discount, allegedly obtained on the basis of false representations of sales to ministries of education in China and Australia, when in fact the equipment was resold on the "grey market". 3Com sued Zorin and its principals for damages for deceit.

The Ontario Superior Court, in a judgment reported [2004] O.T.C. 360, allowed the action and awarded 3Com $7,832,083 damages, including interest. Zorin and its principals appealed, submitting, inter alia, that: (1) there was no false representation, only a forecast as to future sales; (2) the principals had no knowledge that what they represented was false; (3) 3Com was not materially induced to approve the discounts because it knew the equipment was not being shipped to China; and (4) 3Com paid the rebate to accommodate Tech Data and any lost profit related solely to their internal corporate relationship.

The Ontario Court of Appeal dismissed the appeal. The trial judge did not err in finding that Zorin, with its principals' knowledge, falsely represented sales to China and Australia with the intention that they receive a discounted price that they would not otherwise be entitled to. When 3Com suspected misrepresentation, Zorin provided further false documentation to allay any concerns. 3Com was entitled to damages being the difference between the discounted price and the price that would have been paid had the false information not been provided.

Damages - Topic 1301.5

Exemplary or punitive damages - Deceit or misrepresentation - 3Com sold computer equipment in Canada through its distributor (Tech Data) - 3Com had a discounted pricing policy based on the identity and location of the end-user - Marotta and Sicilia were the principals of a computer reseller (Zorin) - Zorin purchased equipment from Tech Data at a discount, allegedly obtained on the basis of false representations of sales to ministries of education in China and Australia, when in fact the equipment was resold on the "grey market" - 3Com sued Zorin and its principals for damages for deceit - The trial judge allowed the action and awarded 3Com $7,832,083 damages, including interest - Zorin and its principals appealed, submitting, inter alia, that: (1) there was no false representation, only a forecast as to future sales; (2) the principals had no knowledge that what they represented was false; (3) 3Com was not materially induced to approve the discounts because it knew the equipment was not being shipped to China; and (4) 3Com paid the rebate to accommodate Tech Data and any lost profit related solely to their internal corporate relationship - The Ontario Court of Appeal dismissed the appeal - The trial judge did not err in finding that Zorin, with its principals' knowledge, falsely represented sales to China and Australia with the intention that they receive a discounted price that they would not otherwise be entitled to - When 3Com suspected misrepresentation, Zorin provided further false documentation to allay any concerns - 3Com was entitled to damages being the difference between the discounted price and the price that would have been paid had the false information not been provided.

Fraud and Misrepresentation - Topic 6

Fraudulent misrepresentation (deceit) - General principles - What constitutes deceit or fraudulent misrepresentation - [See Damages - Topic 1301.5 ].

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, refd to. [para. 11].

Taylor v. Ankenman and Jaegli Enterprises Ltd., [1981] 2 S.C.R. 2; 40 N.R. 4, refd to. [para. 11].

Amertek Inc. et al. v. Canadian Commercial Corp. et al. (2005), 200 O.A.C. 38; 76 O.R.(3d) 241 (C.A.), refd to. [para. 11].

H.L. v. Canada (Attorney General) et al., [2005] 1 S.C.R. 401; 333 N.R. 1; 262 Sask.R. 1; 347 W.A.C. 1, refd to. [para. 12].

Keljanovic Estate, Re (2000), 132 O.A.C. 19; 186 D.L.R.(4th) 481 (C.A.), refd to. [para. 14].

Enbridge Gas Distribution Inc. v. Ontario Energy Board (2006), 210 O.A.C. 4 (C.A.), refd to. [para. 39].

Goose v. Wilson Sandford & Co. (A Firm), [2000] E.W.J. No. 1299 (C.A.), refd to. [para. 41].

Akerhielm v. De Mare, [1959] A.C. 759, refd to. [para. 41].

Siametis v. Trojan Horse (Burlington) Inc. (1979), 104 D.L.R.(3d) 556 (Ont. H.C.), affd. (1981), 123 D.L.R.(3d) 767 (C.A.), refd to. [para. 47].

Waxman v. Waxman (2004), 186 O.A.C. 201 (C.A.), refd to. [para. 49].

Minister of National Revenue v. Schwartz, [1996] 1 S.C.R. 254; 193 N.R. 241, refd to. [para. 55].

R. v. Sheppard (C.), [2002] 1 S.C.R. 869; 284 N.R. 342; 211 Nfld. & P.E.I.R. 50; 633 A.P.R. 50, refd to. [para. 55].

R. v. Braich (A.) et al., [2002] 1 S.C.R. 903; 285 N.R. 162; 164 B.C.A.C. 1; 268 W.A.C. 1, refd to. [para. 55].

BG Checo International Ltd. v. British Columbia Hydro and Power Authority, [1993] 1 S.C.R. 12; 147 N.R. 81; 20 B.C.A.C. 241; 35 W.A.C. 241, refd to. [para. 57].

British Westinghouse Electric and Manufacturing Co. v. Underground Electric Railways Co. of London Ltd., [1912] A.C. 673 (H.L.), refd to. [para. 59].

James Finlay & Co. v. N.V. Kwik Hoo Tong Handel Maatschappij, [1928] All E.R. Rep. 110 (C.A.), refd to. [para. 61].

Banco de Portugal v. Waterlow & Sons Ltd., [1932] A.C. 452 (H.L.), refd to. [para. 62].

Authors and Works Noticed:

Waddams, Stephen M., The Law of Damages (Rev. 2nd Ed. 1991) (Looseleaf Ed.), p. 15-9 [para. 61].

Counsel:

Alan J. Lenczner, Q.C., and Nicholas Tibollo, for the appellants;

James C. Orr and Michael Osborne, for the respondents, 3Com Corp. and 3Com Canada Inc.;

Mervyn D. Abramowitz, for the respondent, Tech Data Canada Inc.

This appeal was heard on March 6, 2006, before Weiler, Gillese and Blair, JJ.A., of the Ontario Court of Appeal.

The judgment of the Court was delivered by Weiler, J.A., and released on June 2, 2006.