Ramrakha et al. v. Zinner et al., (1994) 157 A.R. 279 (CA)

• Judge: Lieberman, Harradence and Hetherington, JJ.A.
• Court: Court of Appeal (Alberta)
• Case Date: October 28, 1994
• Citations: (1994), 157 A.R. 279 (CA)

Ramrakha v. Zinner (1994), 157 A.R. 279 (CA);

         77 W.A.C. 279

MLB headnote and full text

Ved Vrat Ramrakha, Royal Estates Financial Services Inc. and Bow Bottom Plaza Ltd. (plaintiffs/appellants) and Manhar Verma, Veena Verma and 371562 Alberta Ltd. (plaintiffs/not parties to appeal) v. Gabor I. Zinner, Sabra Financial Corporation, Krishan Vadan, Crownstar Properties Ltd. and Paul Grover (defendants/respondents)

(Appeal No. 14127)

Indexed As: Ramrakha et al. v. Zinner et al.

Alberta Court of Appeal

Lieberman, Harradence and

Hetherington, JJ.A.

October 28, 1994.

Summary:

Grover, a realtor and property investor, made a deal with the Vermas and Ramrakha to purchase a shopping mall. The Vermas were to have a 35% interest, Ramrakha 35% and Grover 30%. Vadan acted as agent for Ramrakha. Grover's solicitor, Zinner, incor­porated a company, Bow Bottom Plaza Ltd., to hold the shopping centre. Zinner also acted on the purchase and knew that a com­pany controlled by Grover was making a secret profit. When the Vermas and Ram­rakha learned of the secret profit, they sued Grover, Zinner and Vadan for damages, alleging fraudulent misrepresentation and breach of fiduciary duty. A number of com­panies owned by the individuals involved were added as parties and Bow Bottom was added as a plaintiff.

The Alberta Court of Queen's Bench, per O'Byrne, J., dis­missed the action. Bow Bottom, Ram­rakha and a company owned by him appealed.

The Alberta Court of Appeal allowed the appeal in part. The court held, inter alia, that Grover breached fiduciary duties and granted judgment against Grover in favour of Bow Bottom in the amount of the secret profit plus prejudgment interest.

Barristers and Solicitors - Topic 1548

Relationship with client - Duty to client - Fiduciary duty - [See Equity - Topic 3649 ].

Equity - Topic 1483

Equitable principles respecting relief - Clean hands doctrine - Prohibition against profiting from own wrong - Grover and Ramrakha et al. agreed to purchase a shopping centre - Grover incorporated a company, Bow Bottom, to hold the shop­ping centre - Grover, however, made a secret profit on the deal - Ramrakha, his company and Bow Bottom (the plaintiffs) sued Grover, alleging breach of fiduciary duty - The Alberta Court of Appeal held that Grover breached fiduciary duties - The court noted that the plaintiffs suffered no losses, but ruled that Grover was liable to Bow Bottom for the amount of the secret profit - The court stated that Grover should not be allowed to profit from his wrongdoing - See paragraphs 32 to 35.

Equity - Topic 3649

Fiduciary relationships - Breach of - Conflict of interest - Grover agreed with Ramrakha et al. to purchase a shopping mall - Grover made a secret profit through a "bump" and "flip" transaction - Grover's solicitor, Zinner, incorporated Bow Bottom to hold the shopping centre, acted on the purchase and knew of the secret profit - Ramrakha, his company and Bow Bottom (the plaintiffs) sued Zinner - The Alberta Court of Appeal held that Zinner acted for all parties, including the plaintiffs, and owed each a fiduciary duty - Zinner breached his fiduciary duty to his clients by continuing to act when he was in a conflict of interest position (i.e., after he knew of the secret profit) - Zinner, how­ever, was not liable to the plaintiffs for the secret profit because he did not benefit from it - See paragraphs 36 to 51.

Equity - Topic 3654

Fiduciary relationships - Breach of - Rem­edies - [See Equity - Topic 1483 and Equity - Topic 3649 ].

Equity - Topic 3714

Fiduciary relationships - Commercial relationships - Duty of disclosure - Gro­ver and Ramrakha et al. agreed to purchase a shopping centre - Grover made a secret profit through a "bump" and "flip" trans­action - Grover incorporated Bow Bottom to hold the shopping centre - Ramrakha, his company and Bow Bottom (the plain­tiffs) sued Grover, alleging breach of fiduciary duty - Grover argued that he owed no fiduciary duty to Bow Bottom because he did not become a Bow Bottom director until after the "bump" in price - The Alberta Court of Appeal held that Grover owed a fiduciary duty to Bow Bottom which arose prior to its incorpo­ration and to the "bump" - Grover owed a fiduciary duty to Ramrakha and his com­pany because of the shopping centre a­greement which preceded the "bump" and "flip" - Grover breached his duty by not disclosing the "bump" - See paragraphs 13 to 31.

Equity - Topic 3801

Fiduciary relationships - Secret profits - General - [See Equity - Topic 1483 , Equity - Topic 3649 and Equity - Topic 3714 ].

Cases Noticed:

Highway Advertising Co. v. Ellis (1904), 7 O.L.R. 504 (C.A.), appld. [paras. 18, 112].

Hess Manufacturing Co., Re (1894), 21 O.A.R. 66 (C.A.), affd. (1894), 23 S.C.R. 644, refd to. [para. 19].

Commerce Capital Trust Co. v. Berk, Wall, Chadwick et al. (1989), 33 O.A.C. 373; 68 O.R.(2d) 260; 57 D.L.R.(4th) 759 (C.A.), refd to. [paras. 30, 78].

Lavigne v. Robern (1984), 6 O.A.C. 304; 51 O.R.(2d) 60 (C.A.), refd to. [para. 34].

Boardman v. Phipps, [1966] 3 All E.R. 721; [1967] 2 A.C. 46 (H.L.), affing. [1965] Ch. 992 (C.A.), affing., [1964] 1 W.L.R. 993 (Ch.), refd to. [para. 73].

Davey v. Woolley, Hames, Dale & Ding­wall (1982), 133 D.L.R.(3d) 647 (Ont. C.A.), refd to. [para. 75].

Brikenden v. London Loan & Savings Co., [1934] 3 D.L.R. 465; [1934] 2 W.W.R. 545 (P.C.), refd to. [para. 80].

Canson Enterprises Ltd. v. Boughton & Co., [1991] 3 S.C.R. 534; 131 N.R. 321; 6 B.C.A.C. 1; 13 W.A.C. 1; 85 D.L.R.(4th) 129; [1992] 1 W.W.R. 245, refd to. [para. 80].

Jacks v. Davis (1982), 141 D.L.R.(3d) 355 (B.C.C.A.), refd to. [para. 80].

Recha and Klein v. Yeamans and Gere (1993), 135 N.B.R.(2d) 360; 344 A.P.R. 360 (C.A.), refd to. [para. 80].

Weaver and Weaver v. Buckle and Buckle (1983), 42 A.R. 241 (C.A.), refd to. [para. 85].

R. v. McDonald, [1976] 2 S.C.R. 665; 9 N.R. 271; 29 C.C.C.(2d) 257, refd to. [para. 85].

Rumford v. Hinton, [1923] 2 D.L.R. 471; 52 O.L.R. 47 (C.A.), refd to. [para. 94].

International Corona Resources Ltd. v. LAC Minerals Ltd., [1989] 2 S.C.R. 574; 101 N.R. 239; 36 O.A.C. 57; 61 D.L.R.(4th) 14; 69 O.R.(2d) 287; 35 E.T.R. 1; 44 B.L.R. 1, refd to. [para. 98].

United Dominion Corp. v. Brian Propri­etary Ltd. (1985), 60 A.L.R. 741 (Aust. H.C.), refd to. [para. 98].

Wonsch Construction Co. et al. v. Danzig Enterprises Ltd. et al. (1990), 42 O.A.C. 195; 75 D.L.R.(4th) 732; 1 O.R.(3d) 382 (C.A.), refd to. [para. 99].

Owen Sound Lumber Co., Re (1917), 33 D.L.R. 487; 38 O.L.R. 414 (Ont. C.A.), refd to. [para. 101].

Proprietary Mines Ltd. v. MacKay, [1939] 3 D.L.R. 215; [1939] O.R. 461 (C.A.), refd to. [para. 101].

Hodgkinson v. Simms et al. (1994), 171 N.R. 245; 49 B.C.A.C. 1; 80 W.A.C. 1 (S.C.C.), refd to. [para. 103].

Quebec Bank v. Greenlees, [1917] 1 W.W.R. 746; 32 D.L.R. 282 (Alta. T.D.), refd to. [para. 104].

Erlanger v. New Sombrero Phosphate Co. (1878), 5 Ch. D. 73; 46 L.J. Ch. 425 (H.L.), refd to. [para. 104].

Canadian Aero Services Ltd. v. O'Malley, [1974] 1 S.C.R. 592; 40 D.L.R.(3d) 371, refd to. [para. 105].

Hitchcock v. Sykes (1913), 49 S.C.R. 403; 23 D.L.R. 518, refd to. [para. 109].

Hutchinson v. Flemming (1908), 40 S.C.R. 134, refd to. [para. 110].

Vitomen Cereal Ltd. v. Manitoba Grain Co., [1928] 4 D.L.R. 440; 40 B.C.R. 321 (S.C.), refd to. [para. 111].

Timmins and Timmins v. Kuzyk and Kuzyk (1962), 32 D.L.R.(2d) 207 (B.C.S.C.), refd to. [para. 116].

Panzer v. Ziefman (1978), 88 D.L.R.(3d) 131 (Ont. C.A.), refd to. [para. 116].

Monticello State Bank v. Guest, [1920] 3 W.W.R. 14 (Alta. T.D.), refd to. [para. 116].

United Shoe Machinery Co. v. Brunet, [1909] A.C. 330 (P.C.), refd to. [para. 116].

Austin et al. v. Habitat Development Ltd. et al. (1992), 114 N.S.R.(2d) 379; 313 A.P.R. 379; 94 D.L.R.(4th) 359 (C.A.), refd to. [para. 122].

Canada Safeway Ltd. v. Thompson, [1951] 3 D.L.R. 295 (B.C.S.C.), refd to. [para. 123].

Ontario Wheat Producers' Marketing Board v. Royal Bank of Canada (1983), 145 D.L.R.(3d) 663 (Ont. H.C.), refd to. [para. 123].

Constantine v. Ioan (Irons) (1969), 67 W.W.R.(N.S.) 615 (B.C.S.C.), refd to. [para. 123].

Regal (Hastings) Ltd. v. Gulliver, [1942] 1 All E.R. 378 (H.L.), refd to. [para. 127].

Lavigne v. Robern (1984), 6 O.A.C. 304; 51 O.R.(2d) 60 (C.A.), refd to. [para. 127].

Jackson and Parkview Holdings Ltd. v. Trimac Industries Ltd. et al. (1993), 138 A.R. 161 (Q.B.), refd to. [para. 131].

Statutes Noticed:

Business Corporations Act, S.A. 1981, c. B-15, sect. 115 [para. 105].

Judgment Interest Act, S.A. 1984, c. J-0.5, generally [para. 54]; sect. 2 [para. 126].

Real Estate Agents Licensing Act, R.S.A. 1980, c. R-5, sect. 30(3) [para. 14].

Authors and Works Noticed:

Black's Law Dictionary [para. 119].

Ellis, Mark Vincent, Fiduciary Duties in Canada (1993), pp. 9-22.1 [para. 90]; 20-17 [para. 123].

Law Society of Alberta, Professional Con­duct Handbook, c. III, Commentary No. 2 [para. 83]; c. V [para. 74]; c. V, Com­men­tary No. 5 [para. 83]; c. XVII, Com­men­tary No. 10 [para. 74].

Waters, D.W.M., The Law of Trusts in Canada (2nd Ed.), p. 409 [para. 123].

Counsel:

P. Kazakoff, for the appellants;

J.P. Peacock, Q.C., for the respondent, Gabor I. Zinner;

J.B. Laycroft, for the respondents, Paul Grover, Sabra Financial Corp. and Crownstar Properties Ltd.;

A.B. Shewchuk, for the respondent, Krishan Vadan.

This appeal was heard before Lieberman, Harradence and Hetherington, JJ.A., of the Alberta Court of Appeal. The decision of the court was delivered on October 28, 1994, including the following opinions:

Hetherington, J.A. (Lieberman, J.A., concurring) - see paragraphs 1 to 55;

Harradence, J.A. - see paragraphs 56 to 132.