Rodaro v. Royal Bk., (2002) 157 O.A.C. 203 (CA)

• Judge: Doherty, Weiler and Feldman, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: March 26, 2002
• Jurisdiction: Ontario
• Citations: (2002), 157 O.A.C. 203 (CA);(2002), 59 OR (3d) 74;[2002] OJ No 1365 (QL);2002 CanLII 41834 (ON CA);2002 CanLII 41834 (NS CA);59 OR (3d) 74;22 BLR (3d) 274;[2002] CarswellOnt 1047;113 ACWS (3d) 68;157 OAC 203;49 RPR (3d) 227

Rodaro v. Royal Bk. (2002), 157 O.A.C. 203 (CA)

MLB headnote and full text

Temp. Cite: [2002] O.A.C. TBEd. AP.016

Frank Rodaro, Franro Engineering (Ontario) Ltd., Heritage Glen North Limited and Heritage Glen West Limited, 740484 Ontario Limited and Kingswood Community Corporation (plaintiffs/respondents/appellants by cross-appeal) v. Royal Bank of Canada and Barbican Properties Inc. (defendants/appellants/respondents by cross-appeal)

(C33844; C33883)

Indexed As: Rodaro et al. v. Royal Bank of Canada et al.

Ontario Court of Appeal

Doherty, Weiler and Feldman, JJ.A.

March 26, 2002.

Summary:

The Bank refused to advance further funds to finance the plaintiffs' real estate development. The Bank assigned its interest in the existing debt and security to Barbican, in which it held shares. Barbican sold the lands under the power of sale contained in the security instruments and claimed for the amount outstanding under the loans. The plaintiffs sued the Bank and Barbican. They also claimed against their former lawyers, alleging breach of their duties in respect of the same matters. The plaintiffs' principal claims were 1) that the Bank committed to provide long term continuing financial support that would see the project through to its conclusion in 10 to 12 years and that it failed to honour that commitment (the "umbrella agreement"), and 2) the Bank carried out a plan designed to appropriate the benefit of the project for itself through the alleged assignment to Barbican.

The Ontario Superior Court, in a decision reported at [2000] O.T.C. 85, held that there was no umbrella agreement, but that the Bank had breached its duty of confidentiality to the plaintiffs and both the Bank and Barbican were liable for damages for the breach. The court held that the debt and security (including Rodaro's personal guarantee for $1 million) could not be enforced. The court dismissed the plaintiffs' claims against their former lawyers. The Bank and Barbican appealed. The plaintiffs cross-appealed.

The Ontario Court of Appeal allowed the appeal and dismissed the cross-appeal. Barbican's counterclaim remained outstanding.

Banks and Banking - Topic 705

Duties of banks - General - Duty of confidentiality - The plaintiffs borrowed money from a bank to finance a large real estate development - The loan was in default - The Bank assigned its interest in the debt and security to Barbican, in which it held shares - Barbican sold the lands under the power of sale contained in the security instruments and claimed for the amount outstanding under the loans - The plaintiffs sued the Bank and Barbican for damages alleged to have resulted from the Bank's withdrawal of financing - The trial judge held that the Bank had breached its duty of confidentiality to the plaintiffs by disclosing confidential business information to Barbican - The Bank and Barbican appealed - The Ontario Court of Appeal questioned the trial judge's finding that the Bank had improperly disclosed confidential information - See paragraphs 39 to 47.

Banks and Banking - Topic 1445

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

Choses in Action - Topic 202

What may be assigned - General - Loans - A Bank assigned its rights, under a loan agreement, to collect a debt and realize on the security - The loan agreement provided that "The Bank may assign or sell participations in or transfer all or any portion of its rights, benefits and obligations under this agreement to any other financial institution ('assignee')." - The assignee was not a financial institution - The Ontario Court of Appeal held that the assignment provision in the agreement did not limit the Bank's right to assign its benefits under the agreement - The provision broadened the assignment rights that the Bank would otherwise have had - See paragraphs 34 to 37.

Choses in Action - Topic 243

What may be assigned - Obligations not assignable - Contractual obligations - The Ontario Court of Appeal stated that "Aside from limitations imposed by statute, public policy or the terms of a specific contract, a party to an agreement may assign its rights, but not its obligations under that agreement, to a third party without the consent of the other party to the contract. A party will not, however, be allowed to assign its rights under a contract if that assignment increases the burden on the other party to the agreement, or if the agreement is based on confidences, skills or special personal characteristics such as to implicitly limit the agreement to the original parties ..." - See paragraph 33.

Choses in Action - Topic 261

What may be assigned - Benefits or rights assignable - General - [See Choses in Action - Topic 243 ].

Choses in Action - Topic 281

What may be assigned - Benefits or rights not assignable - General - [See Choses in Action - Topic 243 ].

Contracts - Topic 1205

Formation of contract - Offer - What constitutes an offer - [See Contracts - Topic 1484 ].

Contracts - Topic 1484

Formation of contract - Collateral contracts - What constitutes a collateral contract - The plaintiffs sued the Bank and others for damages alleged to have resulted from the Bank's withdrawal of financing for a large real estate development - The plaintiffs claimed, inter alia, that the Bank breached an oral "umbrella agreement" to provide long term continuing financial support that would see the project through to its conclusion in 10 to 12 years - The trial judge rejected the claim - The discussions alleged to have created the umbrella agreement were an invitation by the Bank to establish a banking relationship, and not an offer of financing - Further, none of the events that followed had the effect of creating an umbrella agreement - The Ontario Court of Appeal agreed - See paragraphs 16 to 25.

Contracts - Topic 6806

Assignment - General - Without notice or consent - [See Choses in Action - Topic 202 ].

Damages - Topic 1527

General damages - Elements of general damages - Loss of opportunity - The Ontario Court of Appeal stated that "If as a result of a defendant's breach of contract, or negligence, a plaintiff loses a reasonable probability of realizing some economic benefit, the plaintiff is entitled to be compensated for that lost opportunity. The quantification of that loss may have to take into account contingencies and variables personal to the plaintiff and will often prove difficult. Nevertheless, the plaintiff is entitled to compensation ..." - See paragraph 55.

Equity - Topic 3902

Fiduciary or confidential relationships - Breach of confidence - What constitutes - [See Banks and Banking - Topic 705 ].

Practice - Topic 1458

Pleadings - Statement of claim - General - Necessity of claiming damages or relief - A trial judge held that the Bank had breached its duty of confidentiality to the plaintiffs by disclosing confidential business information and that the plaintiffs had suffered detriment in the form of a lost opportunity to negotiate - The Ontario Court of Appeal overturned the decision where: 1) loss of opportunity was never pleaded or otherwise raised by the plaintiffs at any stage of the lengthy proceedings; and 2) there was no evidence that the disclosure of the confidential information caused such a loss of opportunity - See paragraphs 48 to 71.

Cases Noticed:

Bank of Montreal v. Wilder (1983), 149 D.L.R.(3d) 193 (B.C.C.A.), affd. [1986] 2 S.C.R. 551; 70 N.R. 341, refd to. [para. 21].

Tolhurst v. Associated Portland Cement Manufacturers (1900) Ltd., [1902] 2 K.B. 660 (C.A.), affd. [1903] A.C. 414 (H.L.), refd to. [para. 33].

Tru-Wall Group Ltd. v. Stadium Corp. of Ontario Ltd., [1995] O.J. No. 2610 (Gen. Div.), refd to. [para. 33].

Tournier v. National Provincial and Union Bank of England, [1924] 1 K.B. 461 (C.A.), refd to. [para. 42].

Canadian Imperial Bank of Commerce v. Sayani et al., [1994] 2 W.W.R. 260; 33 B.C.A.C. 85; 54 W.A.C. 85 (C.A.), leave to appeal denied, [1994] 1 S.C.R. vi; 171 N.R. 244; 51 B.C.A.C. 306; 84 W.A.C. 306 (S.C.C.), refd to. [para. 42].

Montgomery v. Ryan (1908), 16 O.L.R. 75 (C.A.), refd to. [para. 45].

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, refd to. [para. 48].

ICAM Technologies Corp. et al. v. EBCO Industries Ltd. (1993), 36 B.C.A.C. 298; 58 W.A.C. 298; 52 C.P.R.(3d) 61 (C.A.), leave to appeal abandoned [1994] S.C.C.A. No. 23, refd to. [para. 48].

Eastwalsh Homes Ltd. v. Anatal Developments Ltd. (1993), 62 O.A.C. 20; 12 O.R.(3d) 675 (C.A.), leave to appeal denied, [1993] 3 S.C.R. vi; 162 N.R. 399; 67 O.A.C. 79, refd to. [para. 55].

Domowicz v. Orsa Investments Ltd. (1993), 15 O.R. (3d) 661 (Gen. Div.), refd to. [para. 55].

Ticketnet Corp. v. Air Canada (1997), 105 O.A.C. 87; 154 D.L.R.(4th) 271 (C.A.), leave to appeal denied (1998), 230 N.R. 400; 115 O.A.C. 399, refd to. [para. 55].

Cadbury Schweppes Inc. et al. v. FBI Foods Ltd. et al., [1999] 1 S.C.R. 142; 235 N.R. 30; 117 B.C.A.C. 161; 191 W.A.C. 161, refd to. [para. 57].

460635 Ontario Ltd. v. 1002953 Ontario Inc. et al. (1999), 127 O.A.C. 48 (C.A.), refd to. [para. 60].

Authors and Works Noticed:

Atiyah, P.S., The Law of Contract (4th Ed. 1989), pp. 378, 379 [para. 33].

Baxter, I., The Law of Banking (4th Ed. 1992), p. 57 [para. 45].

Perell, P., Breach of Confidence to the Rescue (2002), 25 Adv. Q. 199, p. 205 [para. 48].

Pitch, H., Damages for Breach of Contract (1985), pp. 29 to 46 [para. 55].

Counsel:

Catherine Francis and Tamara Vanmeggelen, for the appellant, Royal Bank of Canada;

Paul Macdonald and Brett Harrison, for the appellant, Barbican Properties Inc.;

Timothy H. Gilbert, Robert D. Minnes and Jean Claude J. Rioux, for the respondents/cross-appellants.

This appeal was heard on December 10, 11 and 12, 2001, by Doherty, Weiler and Feldman, JJ.A., of the Ontario Court of Appeal, who delivered the following decision on March 26, 2002.