Pirani v. Esmail et al., (2014) 320 O.A.C. 356 (CA)

• Judge: Weiler, Rouleau and Pepall, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: September 10, 2013
• Jurisdiction: Ontario
• Citations: (2014), 320 O.A.C. 356 (CA);2014 ONCA 145

Pirani v. Esmail (2014), 320 O.A.C. 356 (CA)

MLB headnote and full text

Temp. Cite: [2014] O.A.C. TBEd. MR.002

Barkatali Nazarali Pirani (respondent/plaintiff) v. Yasmin Esmail, Tajdin Esmail and Alnaz Ismail Jiwa (appellants/defendants)

(C55218; 2014 ONCA 145)

Indexed As: Pirani v. Esmail et al.

Ontario Court of Appeal

Weiler, Rouleau and Pepall, JJ.A.

February 26, 2014.

Summary:

Pirani and Esmail executed a declaration of trust. The trust agreement provided that Esmail was to hold a rental property in trust for himself as a two-thirds beneficiary, and for Pirani as a one-third beneficiary. Esmail later transferred title to the property to his wife. The property was sold. The net proceeds were distributed two-thirds to Esmail and one-third to Pirani. Pirani requested a full and proper accounting regarding the administration of the rental property. Having received no satisfactory response to his request, Pirani issued a statement of claim against Mr. and Mrs. Esmail and against Jiwa, the solicitor who acted for the Esmails on the sale of the property. The claim was for damages for breach of contract, breach of trust and breach of fiduciary duty. Due to a lack of accounting records, the parties' experts attempted to reconstruct the accounts for the rental property's administration. The Esmails' expert concluded that the rental property operated at a net loss. Pirani's expert concluded that the rental property earned a profit and that Pirani was owed money.

The Ontario Superior Court, in a decision reported at [2012] O.T.C. Uned. 992, found the Esmails liable for breach of trust and breach of fiduciary duty, and awarded damages to Pirani in the amount of $67,815.67 based on the calculations of Pirani's expert. The trial judge also awarded Pirani aggravated damages of $15,000 and substantial indemnity costs. The trial judge also found Jiwa liable to Pirani for damages for breach of trust, breach of fiduciary duty and negligence. The Esmails appealed. They principally challenged Pirani's expert's report that the trial judge used to assess damages. Jiwa cross-appealed on the basis that he was retained only by Mrs. Esmail to carry out a real estate transaction and he never owed Pirani a duty of care, either in negligence or as a fiduciary.

The Ontario Court of Appeal, Pepall, J.A., dissenting, allowed the Esmails' appeal in part and substituted an award of damages against them of $49,527.07. The court did not interfere with the award of aggravated damages. The court did not interfere with the trial judge's award of costs to Pirani on a substantial indemnity basis, but reduced the amount awarded. Pepall, J.A., would have dismissed the Esmails' appeal in its entirety. The court unanimously allowed Jiwa's cross-appeal and set aside the judgment against him.

Barristers and Solicitors - Topic 4441

Relations with third parties (incl. opposite parties) - Duty to third or opposite party - General - [See Barristers and Solicitors - Topic 4446 ].

Barristers and Solicitors - Topic 4446

Relations with third parties (incl. opposite parties) - Duty to third parties - Fiduciary duty - Pirani and Esmail executed a declaration of trust - The trust agreement provided that Esmail was to hold a rental property in trust for himself as a two-thirds beneficiary, and for Pirani as a one-third beneficiary - Esmail later transferred title to the property to his wife - The property was sold - The net proceeds were distributed two-thirds to Esmail and one-third to Pirani - Pirani requested a full and proper accounting regarding the administration of the rental property - Having received no satisfactory response, Pirani sued Mr. and Mrs. Esmail as well as Jiwa, the solicitor who acted for the Esmails on the sale of the rental property - The trial judge found the Esmails liable for breach of trust and breach of fiduciary duty - The trial judge also found Jiwa liable to Pirani for damages for breach of trust, breach of fiduciary duty and negligence - The Ontario Court of Appeal allowed Jiwa's appeal and set aside the judgment against him - Jiwa was retained by the owner, Mrs. Esmail, and took instructions from her - Jiwa was never told that Mrs. Esmail was not authorized to sell the property nor that either Mr. or Mrs. Esmail was in breach of their trust obligations - One third of the proceeds of sale of the property were forwarded to Pirani - Several months following the sale of the property, Pirani's counsel wrote to Jiwa and requested a full and proper accounting for the period the property was administered as a "partnership" property - At that stage Jiwa had no retainer from either Mr. or Mrs. Esmail - Nonetheless, Jiwa wrote to Mrs. Esmail and forwarded the letter - His actions did not give rise to any duty to Pirani, nor to any breach thereof - See paragraphs 81 to 87.

Courts - Topic 2181

Jurisdiction - Loss or termination of jurisdiction upon fulfilling function (functus officio) - General - The defendants/appellants argued that after issuing her initial judgment, the trial judge should not have sought further submissions on the issue of aggravated and exemplary damages - By the time the submissions on aggravated and exemplary damages were received by the trial judge, the plaintiff's lawyer had already had the initial judgment issued and entered - The Esmails argued the trial judge was functus - The Ontario Court of Appeal disagreed - The trial judge did not purport to alter or revisit her initial judgment - No additional evidence was called - The trial judge simply sought and received additional submissions on the issue of aggravated and exemplary damages, an issue that she had explicitly held open in her initial reasons - Her supplementary reasons dealt only with that outstanding issue and did not disturb the finality of the initial judgment - The court stated that in rejecting this ground of appeal, it should not be taken as encouraging such practices by trial judges - Issuing more than one judgment in a matter could place the parties in difficult situations and could give rise to additional costs - Dividing judgment in this way should therefore be avoided - If doing so gave rise to real prejudice to a party, it might well constitute reversible error - In this case, the defendants suffered no real prejudice as a result of the trial judge's decision to seek supplementary submissions after issuing her initial judgment - See paragraphs 60 to 65.

Damage Awards - Topic 2414

Aggravated damages - Breach of fiduciary duty - [See Damage Awards - Topic 2414.1 ].

Damage Awards - Topic 2414.1

Aggravated damages - Breach of trust - Pirani and Esmail executed a declaration of trust - The trust agreement provided that Esmail was to hold a rental property in trust for himself as a two-thirds beneficiary, and for Pirani as a one-third beneficiary - Esmail later transferred title to the property to his wife - The property was sold - The net proceeds were distributed two-thirds to Esmail and one-third to Pirani - Pirani requested a full and proper accounting regarding the administration of the rental property - Having received no satisfactory response, Pirani sued Mr. and Mrs. Esmail - The trial judge found the Esmails liable for breach of trust and breach of fiduciary duty, and awarded damages to Pirani based on the calculations of Pirani's expert - The trial judge also awarded aggravated damages of $15,000 and substantial indemnity costs - On appeal, the Ontario Court of Appeal did not interfere with the award of aggravated damages - The trial judge found the Esmails responsible for delaying and extending the length of the trial - Further, the trial judge viewed their conduct in administering the trust to be highhanded and egregious - They transferred the trust property without consent, ignored their duty to properly administer the trust and did not keep proper accounts - Those findings were open to the trial judge and fully supported the award of aggravated damages - See paragraphs 66 to 67.

Equity - Topic 3606

Fiduciary or confidential relationships - General principles - What constitutes a fiduciary relationship - Pirani and Esmail executed a declaration of trust - The trust agreement provided that Esmail was to hold a rental property in trust for himself as a two-thirds beneficiary, and for Pirani as a one-third beneficiary - Esmail later transferred title to the property to his wife - The property was sold - The net proceeds were distributed two-thirds to Esmail and one-third to Pirani - Pirani requested a full and proper accounting regarding the administration of the rental property - Having received no satisfactory response, Pirani sued Mr. and Mrs. Esmail - The trial judge found the Esmails liable for breach of trust and breach of fiduciary duty, and awarded damages to Pirani - On appeal, the Esmails argued that Mrs. Esmail should not be liable for any damages as she had nothing to do with the trust arrangements between Mr. Esmail and Pirani - They also maintained that Pirani never asked Mrs. Esmail for an accounting and never considered her to be in a fiduciary relationship with him - The Ontario Court of Appeal disagreed - The record supported the trial judge's finding that when she received title to the property, Mrs. Esmail would have become aware of the declaration of trust and that the property was trust property - Her knowledge of the trust, her acceptance of title to the trust property and her administration of the property for eight years justified the trial judge's conclusion that Mrs. Esmail owed a fiduciary duty to Pirani - Mrs. Esmail's failure to maintain proper records and her failure to account to Pirani for her administration of the trust property constituted breaches of her trust obligations - See paragraphs 68 to 71.

Evidence - Topic 7012

Opinion evidence - Expert evidence - Basis for opinion - A dispute arose out of the management and sale of a rental property that was subject to a trust - The defendants, Mr. and Mrs. Esmail, and the plaintiff, Pirani, called competing experts - Due to a lack of accounting records, both experts attempted to reconstruct the accounts for the rental property's administration - The trial judge found the Esmails liable for breach of trust and breach of fiduciary duty, and awarded damages to Pirani based on the calculations of Pirani's expert - The Ontario Court of Appeal allowed the Esmails' appeal in part - The trial judge erred in accepting and relying on the report of Pirani's expert (Zafar) - Zafar's conclusions with respect to rental income did not withstand scrutiny when tested against the evidence led at trial - The amount of rental revenue derived from the property was a critical factor in determining whether the property generated a profit - It was apparent from the record that Zafar's estimate of the rental income from the property was grossly overstated - As an expert's report was only as good as the underlying data and assumptions, Zafar's report was virtually valueless - See paragraphs 49 to 59.

Practice - Topic 1335

Pleadings - The issues - Issues to be raised must be pleaded - [See Practice - Topic 7454 ].

Practice - Topic 5465

Judgments and orders - Finality of judgments and orders - Where judge functus officio - [See Courts - Topic 2181 ].

Practice - Topic 7421

Costs - Solicitor and client costs - Measure of - General - The trial judge found the defendants (the Esmails) liable for breach of trust and breach of fiduciary duty, and awarded damages to the plaintiff (Pirani) - The trial judge also awarded aggravated damages and substantial indemnity costs - On appeal, the Esmails argued that the trial judge erred in awarding substantial indemnity costs, and that the costs award was excessive and well beyond the reasonable expectations of the parties - The Ontario Court of Appeal did not interfere with the trial judge's determination that substantial indemnity costs should be awarded - However, because the court reduced the amount of the damages award to Pirani, the basis on which the trial judge fixed the amount of costs had changed - It was appropriate, therefore, to revisit the quantum of costs - The court did not interfere with the trial judge's award of costs on a substantial indemnity basis, but reduced the amount awarded - See paragraphs 75 to 78.

Practice - Topic 7454

Costs - Solicitor and client costs - Entitlement to solicitor and client costs - Improper, irresponsible or unconscionable conduct - The trial judge found the defendants (the Esmails) liable for breach of trust and breach of fiduciary duty, and awarded damages to the plaintiff (Pirani) - The trial judge also awarded aggravated damages and substantial indemnity costs - On appeal, the Esmails argued that the trial judge erred in awarding substantial indemnity costs, and that the costs award was excessive and well beyond the reasonable expectations of the parties - The Ontario Court of Appeal disagreed - The trial judge was entitled to rely on what she considered to be highhanded and egregious conduct on the part of the Esmails as the basis for both the award of aggravated damages and for the award of costs on a substantial indemnity basis - The trial judge also properly considered the principles of fairness, reasonableness and proportionality - The Esmails' complaint that Pirani did not claim costs on a substantial indemnity basis in his statement of claim was also of no moment - In his written submissions on costs Pirani claimed substantial indemnity costs, giving the Esmails ample opportunity to argue against such an award, which they did - In their written submissions on costs, the Esmails did not appear to have raised Pirani's failure to plead substantial indemnity costs in his statement of claim - It was raised for the first time on appeal - It was not a ground that the court should entertain on appeal - In any event, the trial judge received comprehensive submissions on costs and properly considered and weighed the reasonable expectations of the parties - See paragraphs 72 to 74.

Practice - Topic 7470.11

Costs - Solicitor and client costs - Entitlement to solicitor and client costs - Breach of fiduciary duty - [See Practice - Topic 7454 ].

Practice - Topic 9012

Appeals - Restrictions on argument on appeal - Issues or points not previously raised - [See Practice - Topic 7454 ].

Practice - Topic 9017

Appeals - Restrictions on argument on appeal - Failure to object at trial - [See Practice - Topic 7454 ].

Practice - Topic 9220

Appeals - New trials - General - A dispute arose out of the management and sale of a rental property that was subject to a trust - The defendants, Mr. and Mrs. Esmail, and the plaintiff, Pirani, called competing experts - Due to a lack of accounting records, both experts attempted to reconstruct the accounts for the rental property's administration - The trial judge found the Esmails liable for breach of trust and breach of fiduciary duty, and awarded damages to Pirani based on the calculations of Pirani's expert - The Ontario Court of Appeal allowed the Esmails' appeal in part - The trial judge erred in accepting and relying on the report of Pirani's expert (Zafar) - The court stated that little was to be gained by ordering a new trial - The only issue remaining was the determination of the proper amount of damages to be awarded given that the court had rejected the Zafar report - If a new trial was ordered, there was no reason to expect that additional records of the administration of the trust would be available - There was no solid basis upon which a new expert could build an accurate accounting should a new trial be ordered - Further, the amounts involved were relatively small and did not warrant the very significant costs that a new trial would involve - It was in the interest of justice that the court set the amount of damages based on the record before it and the largely unchallenged findings of the trial judge - See paragraphs 88 to 89.

Trusts - Topic 6084

The trustee - Accounting - Liability of trustee for failure to account - [See Equity - Topic 3606 ].

Trusts - Topic 6141

The trustee - Breach of trust - General - [See Equity - Topic 3606 ].

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. [paras. 55, 135].

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; 2005 SCC 25, refd to. [paras. 55, 135].

Di Martino v. DeLisio, [2008] O.T.C. Uned. E52; 168 A.C.W.S.(3d) 870 (Sup. Ct.), refd to. [para. 59].

Director of Investigation and Research, Competition Act v. Southam Inc. et al., [1997] 1 S.C.R. 748; 209 N.R. 20, refd to. [para. 59].

Doucet-Boudreau et al. v. Nova Scotia (Minister of Education) et al., [2003] 3 S.C.R. 3; 312 N.R. 1; 218 N.S.R.(2d) 311; 687 A.P.R. 311; 2003 SCC 62, refd to. [para. 62].

Vorvis v. Insurance Corp. of British Columbia, [1989] 1 S.C.R. 1085; 94 N.R. 321, refd to. [para. 66].

Leenen v. Canadian Broadcasting Corp. et al. (2001), 147 O.A.C. 317; 54 O.R.(3d) 612 (C.A.), refd to. [para. 73].

Hughes v. Gemini Food Corp. (1997), 97 O.A.C. 147; 27 C.C.E.L.(2d) 204 (C.A.), refd to. [para. 73].

767269 Ontario Ltd. v. Ontario Energy Savings L.P. et al., [2008] O.A.C. Uned. 234; 2008 ONCA 350, refd to. [para. 74].

Ross v. Ross (1999), 181 N.S.R.(2d) 22; 560 A.P.R. 22; 1999 NSCA 162, refd to. [para. 74].

1505986 Ontario Inc. v. Surma et al., [2010] O.T.C. Uned. 6956; 2010 ONSC 6956, refd to. [para. 76].

Prinzo v. Baycrest Centre for Geriatric Care (2002), 161 O.A.C. 302; 60 O.R.(3d) 474 (C.A.), refd to. [para. 76].

Hague v. Liberty Mutual Insurance Co., 138 A.C.W.S.(3d) 804, refd to. [para. 77].

Alfano v. Piersanti et al. (2012), 291 O.A.C. 62; 2012 ONCA 297, refd to. [para. 125].

D.M. Drugs v. Bywater et al. (2013), 307 O.A.C. 71; 2013 ONCA 356, refd to. [para. 125].

Bedford et al. v. Canada (Attorney General) (2013), 452 N.R. 1; 312 O.A.C. 53; 2013 SCC 72, refd to. [para. 134].

N.V. Bocimar S.A. v. Century Insurance Co. of Canada, [1987] 1 S.C.R. 1247; 76 N.R. 212, refd to. [para. 135].

Authors and Works Noticed:

Kerans, Roger P., Standards of Review Employed by Appellate Courts (1994), generally [para. 59].

Sopinka, John, and Gelowitz, Mark A., The Conduct of an Appeal (3rd. Ed. 2012), p. 70 [para. 134].

Waddams, Stephen M., The Law of Damages (2nd Ed. 1983), p. 562 [para. 66].

Counsel:

Morris Cooper and Sabrina A. Bandali, for the appellants;

John Philpott, for the respondent;

Alnaz Ismail Jiwa, acting in person.

This appeal and cross-appeal were heard on September 10, 2013, before Weiler, Rouleau and Pepall, JJ.A., of the Ontario Court of Appeal. The judgment of the Court of Appeal was released on February 26, 2014, including the following opinions:

Rouleau, J.A. (Weiler, J.A., concurring) - see paragraphs 1 to 112;

Pepall, J.A., dissenting - see paragraphs 113 to 136.