Murano et al. v. Bank of Montreal et al., (1998) 111 O.A.C. 242 (CA)

• Judge: Morden, A.C.J.O., Austin and Borins, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: Tuesday July 14, 1998
• Jurisdiction: Ontario
• Citations: (1998), 111 O.A.C. 242 (CA);1998 CanLII 5633 (ON CA);1998 CanLII 5633 (NS CA);41 OR (3d) 222;163 DLR (4th) 21;41 BLR (2d) 10;5 CBR (4th) 57;[1998] OJ No 2897 (QL);111 OAC 242;22 CPC (4th) 235;81 ACWS (3d) 319

Murano v. Bk. of Mtrl. (1998), 111 O.A.C. 242 (CA)

MLB headnote and full text

Temp. Cite: [1998] O.A.C. TBEd. JL.055

Joe Murano, Hilton Video Ltd., 828555 Ontario Limited, 828556 Ontario Limited, 828557 Ontario Limited and 873047 Ontario Limited (plaintiffs/respondents) v. Bank of Montreal and Peat Marwick Thorne Inc. (defendants/appellants)

(C21621)

Indexed As: Murano et al. v. Bank of Montreal et al.

Ontario Court of Appeal

Morden, A.C.J.O., Austin and Borins, JJ.A.

July 14, 1998.

Summary:

Murano, through corporate holdings, owned and operated four video stores. Murano's bank caused a receiver manager to go into possession of three of the stores. The bank disclosed information concerning Murano and the stores to other creditors and lenders, business associates and suppliers. Murano and the stores sued the bank and receiver manager for damages.

The trial judge, in a decision reported 20 B.L.R.(2d) 61; 31 C.B.R.(3d) 1, allowed the action, holding that the bank had violated its obligation of confidentiality, failed to give reasonable notice before taking possession of the properties and was liable for trespass and conversion. The trial judge assessed damages accordingly and awarded Murano and the stores solicitor and client costs. The trial judge awarded prejudgment interest at a rate below that prescribed by s. 128 of the Courts of Justice Act. The bank and receiver man­ager appealed the decision and sought leave to appeal the costs order. Murano and the stores cross-appealed the trial judge's refusal to award punitive damages and from the decision to award prejudgment interest at a rate below the prescribed rate.

The Ontario Court of Appeal dismissed the cross-appeal and, subject to a reduction in the award of damages for "other losses", dismissed the appeal, including the appeal from the costs award.

Banks and Banking - Topic 705

Duties of banks - General - Duty of con­fidentiality - A bank placed a debtor into receivership - The debtor told his creditors to call the bank for information - There­after, the debtor sued the bank, alleging that the bank breached its duty of con­fidentiality by disclosing information to the creditors - The bank asserted that the debtor had consented to the disclosures - The trial judge held that the bank had breached the duty, stating that there was no justification for the bank having done anything other than confirming that it had imposed the receivership - The Ontario Court of Appeal held that the trial judge's view of the exception from the duty of confidentiality was too restrictive and alot of the information disclosed was covered by the consent - However, the bank breached its duty where it made unsub­stantiated disclosures which indicated that the debtor was dishonest - See paragraphs 14 to 25.

Banks and Banking - Topic 1445

Liability of banks to customers - Duties of banks - Duty of confidentiality - [See Banks and Banking - Topic 705 ].

Creditors and Debtors - Topic 1065

Debtors' rights - Before payment - Rea­sonable notice of requirement to pay - A bank advised a store owner by letter that existing loans would have to be increased subject to terms or liquidated in six weeks - The owner accepted the terms - There­after, the bank delivered demand letters for immediate repayment - Two hours later a receiver manager took possession of the owner's stores - The owner sued, asserting that the bank failed to give reasonable notice - The bank asserted that it had given adequate notice in the first letter, the own­er's agreement with the terms "sus­pended" that notice, the terms were not met and further notice was unnecessary - The On­tario Court of Appeal affirmed that the bank could not rely on the letter because it did not contain an unequivocal demand - The court rejected the bank's alternative assertion that the owner was unable to make payment, therefore notice was ir­relevant - See paragraphs 9 to 13.

Damages - Topic 106

General principles - Evidence and proof - Onus of proof - Plaintiffs sought damages respecting the forced sale of business properties - The trial judge stated that he was not satisfied with the properties' fair market value estimates, the back-up docu­mentation for the assessments was not provided and the properties would likely have been sold in any event - Neverthe­less, the trial judge assessed the plaintiff's real estate losses as the difference between the total mortgage balance outstanding and the gross disposal price - To this he added an amount to assess the total extent of loss due to the properties' untimely dispo­sition - The Ontario Court of Appeal set aside the award where it was not supported by the trial judge's fact findings - The plain­tiffs failed to establish the losses and the prin­ciple that every reasonable as­sumption should be made in their favour was of no assistance - See paragraphs 69 to 72.

Damages - Topic 224

When available - Requirement of proof of basis of claim - [See Damages - Topic 106 ].

Damages - Topic 528

Limits of compensatory damages - Remoteness - Torts - Foreseeability - A bank caused a receiver to take possession of a debtor's stores - The trial judge held that the bank breached its obligation of confidentiality, failed to give reasonable notice before taking possession and was liable for trespass and conversion - The bank raised the issue of remoteness of damages, asserting that entering into pos­session was a breach of contract and re­coverable damages were those reasonably foreseeable at the time the debtor became the bank's customer - The Ontario Court of Appeal rejected the assertion - The trespass and conversion caused the debtor's losses - The contract breach disentitled the bank from relying on the contract to shield it from a trespass claim - The relevant time for foreseeability was when the tort was committed - However, foreseeability had little relevance to the measure of damages where damages were direct and flowed from the intentional tort of trespass - See paragraphs 42 to 49.

Damages - Topic 540

Limits of compensatory damages - Remoteness - Torts - Intentional tort - [See Damages - Topic 528 ].

Damages - Topic 1297

Exemplary or punitive damages - Condi­tions precedent or when awarded - A bank caused a receiver to take possession of a debtor's stores and made disclosures to third parties - The debtor and its busi­­nesses sued for damages - The trial judge held that the bank breached its obligation of confidentiality, failed to give reasonable notice before taking possession and was liable for trespass and conversion - In assessing damages, the trial judge denied the plaintiffs' request for punitive damages - The Ontario Court of Appeal affirmed the denial, where it was open to the trial judge to conclude that the plaintiffs' con­duct was a cause of the bank's conduct in the sense that if their conduct had been more reasonable the bank would not have acted as it did - See paragraphs 111 to 114.

Damages - Topic 1323

Exemplary or punitive damages - Bar - Conduct of claimant - [See Damages - Topic 1297 ].

Damages - Topic 1814

Torts affecting goods - Conversion - Basis for calculation - Defendants were found liable for trespass and conversion respect­ing a start-up business - In apply­ing the discounted cash flow method in assessing business loss, the trial judge held that it was necessary to establish the relia­bility of the cash flow projections and generally accepted the evidence of the plaintiffs' expert - The expert based pro­jections on the earning history of a differ­ent business under the same company and management as the start-up business - The trial judge gave effect to shortcomings in the expert's evidence by reducing three claims - The defendants appealed, assert­ing that the trial judge should have applied the earnings or asset based method to calculate loss - The Ontario Court of Appeal affirmed the trial judge's method of assessment - See para­graphs 56 to 68.

Damages - Topic 1816

Torts affecting goods - Conversion - Wrongful seizure - Business assets - [See Damages - Topic 1814 ].

Damages - Topic 1820

Torts affecting goods - Conversion - Loss of profits - [See Damages - Topic 1814 ].

Interest - Topic 5004

Interest as damages (prejudgment interest) - General principles - Discretion of judge - An unsuccessful litigant asserted on ap­peal that the trial judge erred in award­ing pre­judgment interest at the average rate of seven percent per annum rather than at the rate of 10 percent prescribed by s. 127(1) of the Courts of Justice Act - The Ontario Court of Appeal rejected the as­sertion, stating that the components of a prejudg­ment interest award were, to some extent, a matter for the trial judge's discre­tion - While the court would not probably have interfered with an award at the statu­tory rate, it could not say that it was a proper case to interfere with the trial judge's exercise of discretion - The court referred to the requirement for courts to take changes in interest rates into account pur­suant to s. 130(2)(a) of the Act - See paragraphs 115, 116.

Practice - Topic 6923

Costs - General principles - Power to award or fix costs - The Ontario Court of Appeal set out considerations to help deter­mine when and how a trial judge should exercise the discretion to fix costs pursuant to the power conferred by s. 131(1) of the Courts of Justice Act and rule 57.01(3) of the Rules of Civil Pro­cedure - See para­graphs 86 to 90.

Practice - Topic 6931

Costs - General principles - Discretion of court - [See Practice - Topic 6923 ].

Practice - Topic 7401

Costs - Solicitor and client costs - Gen­eral principles - The Ontario Court of Appeal discussed the approaches and tests to be applied in fixing costs on a solicitor and client basis - See paragraphs 94 to 106.

Practice - Topic 7421

Costs - Solicitor and client costs - Measure of - General - In awarding a successful litigant solicitor and client costs, the trial judge stated that the fees and disburse­ments were not "grossly excessive" - On appeal, the Ontario Court of Appeal stated that the expression "grossly excess­ive" should be avoided - See paragraph 107.

Practice - Topic 7452

Costs - Solicitor and client costs - Entitlement to - Neglect or misconduct - A bank caused a receiver manager to take possession of the plaintiff's businesses - The bank disclosed to third parties infor­mation concerning, inter alia, the plaintiff's dishonesty - The plaintiff sued the bank and the receiver manager for, inter alia, breach­ing its obligation of confidentiality - The defendants pleaded that the plaintiff had acted surreptitiously and dishonestly and pursued the allegations at trial - The trial judge allowed the action and awarded the plaintiff solicitor and client costs, holding that the bank's disclosures were unsubstan­tiated and the misconduct essen­tially destroyed the plaintiff's business and likely impaired his reputation in the busi­ness community on an ongoing basis - The Ontario Court of Appeal affirmed the award of costs - See paragraphs 81 to 83.

Practice - Topic 7454

Costs - Solicitor and client costs - Entitlement to - Improper, irresponsible or unconscionable conduct - [See Practice - Topic 7452 ].

Practice - Topic 7521

Costs - Solicitor and client costs - Dis­bursements - General - [See Practice - Topic 7421 ].

Practice - Topic 8298

Costs - Appeals - Appeals from order for costs - Requirement of leave to appeal - A plaintiff obtained judgment and an award of solicitor and client costs against defen­dants - The defendants appealed the judg­ment and sought leave to appeal the costs order, but asserted that leave to appeal was unnecessary because the costs appeal was part of the larger appeal and, accordingly, was not an "appeal ... only as to costs" within the meaning of s. 133(b) of the Courts of Justice Act - The Ontario Court of Appeal rejected the assertion - See paragraphs 73 to 80.

Practice - Topic 8298

Costs - Appeals - Appeals from order for costs - Requirement of leave to appeal - An unsuccessful litigant appealed from a trial judge's order fixing costs - The On­tario Court of Appeal discussed the liti­gant's right to appeal, stating that the order in question was a final one and accord­ingly, the right to appeal from it was con­ferred by s. 6(1)(b) of the Courts of Justice Act - If the appeal was only as to costs, leave was required under s. 133(b) of the Act - See paragraph 84.

Cases Noticed:

Tournier v. National Provincial and Union Bank of England, [1924] 1 K.B. 461 (C.A.), refd to. [para. 14].

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. 30].

Monarch Steamship Co. v. A/B Karlshamns Oljefabriker, [1949] 1 All E.R. 1 (H.L.), refd to. [para. 36].

Lister (Ronald Elwyn) Ltd. et al. v. Dunlop Canada Ltd., [1982] 1 S.C.R. 726; 42 N.R. 181; 41 C.B.R.(N.S.) 272; 135 D.L.R.(3d) 1; 18 B.L.R. 1; 65 C.P.R.(2d) 1, refd to. [para. 44].

Lister (Ronald Elwyn) Ltd. et al. v. Day­ton Tire Canada Ltd. (1985), 9 O.A.C. 39; 52 O.R.(2d) 88 (C.A.), refd to. [para. 44].

Smith v. Commonwealth Trust Co. (1969), 10 D.L.R.(3d) 181 (B.C.S.C.), refd to. [para. 49].

Buchan v. Ortho Pharmaceutical (Canada) Ltd. (1986), 12 O.A.C. 361; 54 O.R.(2d) 92 (C.A.), refd to. [para. 56].

Cameron v. Julien, [1957] O.W.N. 430 (C.A.), consd. [para. 74].

131843 Canada Inc. v. Double R (Toronto) Ltd. (1992), 7 C.P.C.(3d) 15 (Ont. Gen. Div.), refd to. [para. 82].

Rex v. Royal De Versailles Jewellers Inc., [1995] O.J. No. 2941 (Gen. Div.), refd to. [para. 84].

Andrews v. Andrews (1980), 32 O.R.(2d) 29 (C.A.), refd to. [para. 84].

Jamieson v. Hagar (1919), 17 O.W.N. 104, refd to. [para. 85].

Apotex Inc. v. Egis Pharmaceuticals and Novopharm Ltd. (1991), 4 O.R.(3d) 321 (Gen. Div.), consd. [para. 88].

Coughlin v. Mutual of Omaha Insurance Co. (1992), 10 O.R.(3d) 787 (Gen. Div.), refd to. [para. 89].

Skinner v. Royal Victoria Hospital (1995), 35 C.P.C.(3d) 290 (Ont. Gen. Div.), refd to. [para. 89].

Tri-S Investments v. Vong, [1991] O.J. No. 2292 (Gen. Div.), refd to. [para. 91].

Worsley v. Lichong, [1994] O.J. No. 614 (Gen. Div.), agreed with [para. 96].

McKinlay Transport Ltd. v. Motor Trans­port Industrial Relations Bureau of On­tario Inc. et al. (1997), 27 O.T.C. 391 (Gen. Div.), refd to. [para. 98].

Willmott v. Barber (1881), 17 Ch. D. 772 (C.A.), consd. [para. 102].

Ligate v. Abick (1991), 5 O.R.(3d) 332 (Gen. Div.), consd. [para. 103].

In-Med Laboratories Ltd. et al. v. Director of Laboratory Services (Ont.) et al. (1991), 45 O.A.C. 241 (Div. Ct.), refd to. [para. 106].

Moase Produce Ltd. et al. v. Royal Bank of Canada (1987), 66 Nfld. & P.E.I.R. 196; 204 A.P.R. 196; 64 C.B.R.(N.S.) 191 (P.E.I.S.C.), refd to. [para. 111].

Graham et al. v. Rourke (1990), 40 O.A.C. 301; 75 O.R.(2d) 622 (C.A.), refd to. [para. 116].

Spencer v. Rosati, Brim Concrete and Spencer (1985), 9 O.A.C. 119; 50 O.R.(2d) 661 (C.A.), refd to. [para. 116].

Data General (Canada) Ltd. et al. v. Molnar Systems Group Inc. et al. (1991), 52 O.A.C. 212; 3 C.P.C.(3d) 180 (C.A.), refd to. [para. 116].

Statutes Noticed:

Courts of Justice Act, R.S.O. 1990, c. C-43, sect. 127(1) [para. 115]; sect 131(1) [para. 86]; sect. 133(b) [para. 78].

Rules of Civil Procedure (Ont.), rule 57.01(3) [para. 86].

Authors and Works Noticed:

Burrows, A.S., Remedies for Torts and Breach of Contract (2nd Ed. 1994), p. 280 [para. 113].

Crawford and Falconbridge, Banking and Bills of Exchange (8th Ed. 1986), p. 802 [para. 14].

Fridman, G.H.L., The Law of Contract in Canada (3rd Ed. 1994), p. 729 [para. 49].

Holmestead, G.S., and Gale, G.A., The Ontario Judicature Act and Rules of Practice, vol. 3, p. 2803 [para. 85].

Malen, Robert D., To Assess or to Fix Costs: That is the Question (1998), 20 Adv. Q. 85, p. 94 [para. 104].

Prosser and Keeton, The Law of Torts (5th Ed. 1984), pp. 76, 77 [para. 46].

Reiter, Barry J., and Swan, John, Studies in Contract Law (1980), p. 61 [para. 49].

Second Restatement of the Law - Torts, s. 435(b), p. 456 [para. 46].

Swinton, Katherine, Foreseeability: Where Should the Award of Contract Damages Cease? in Studies in Contract Law (Barry J. Reiter and John Swan, eds.) (1980), pp. 82, 83 [para. 49].

Waddams, Stephen M., The Law of Dam­ages (2nd Ed.), para. 11.450 [para. 113].

Counsel:

I.V.B. Nordheimer, for the appellants;

A. Irvin Schein and Melissa M. Muskat, for the respondents.

This appeal was heard on October 14 and 15, 1997, before Morden, A.C.J.O., Austin and Borins, JJ.A., of the Ontario Court of Appeal.

Morden, A.C.J.O., released the following judgment for the Court of Appeal on July 14, 1998.