Grand Financial Management Inc. v. Solemio Transportation Inc., a March 2, 2016 decision of the Ontario Court of Appeal, discusses when it is appropriate to raise a new issue on appeal. In the context of a decision discussing intentional interference with economic relations, the Court decided multiple issues related to appellate practice:

  • when a new defence should be permitted to be raised on appeal, whether:
    • specifically in response to an inadequate pleading in the court below; or
    • more generally; and
  • deference due to a trial judge in awarding “damages at large” for an intentional tort.

Background

The trial judge awarded the plaintiff (“Grand Financial”) $200,000 in damages for sums allegedly owing to it under an agreement. This award was appealed partially because Grand Financial had not pleaded that it was owed this sum pursuant to the agreement upon which the trial judge found it was owed. The trial judge also held that Grand Financial had committed the tort of interference with economic relations, and therefore awarded the defendant (“Solemio”) $175,000 in “damages at large” on its counterclaim.

Permitting a New Defence on Appeal – Inadequate Pleadings

Justice Blair, for a unanimous Court of Appeal, set aside the award of $200,000 because Grand Financial’s pleading did not give the defendant Solemio adequate notice of the case it had to meet in respect of the theory accepted by the trial judge. As such, it was “technically unnecessary” to consider whether Solemio should be allowed to raise a limitations defence for the first time on appeal. Justice Blair nonetheless held that Solemio “ought not to be precluded” from doing so:

[55]      Solemio raised the limitation defence on appeal, arguing that it could not have done so earlier because the issue of Grand Financial’s right to recover under the Wild Lions Agreement was not pleaded at trial. Grand Financial disputes this and says that Solemio ought to have argued the defence at trial, that no evidence was led at trial on the limitations issue, and that Solemio ought not to be permitted to argue a new issue for the first time on appeal.

[56]      In this respect, Grand Financial relies on the following comments of this Court in Ontario Energy Savings L.P. v. 767269 Ontario Ltd., 2008 ONCA 350, at para. 3:

In Ross v. Ross (1999), 181 N.S.R. (2d) 22, the Nova Scotia Court of Appeal set out the test concerning receiving arguments for the first time on appeal. The court said that such an argument, “should only be entertained if the court of appeal is persuaded that all of the facts necessary to address the point are before the court as fully as if the issue had been raised at trial”. The rationale for the principle is that it is unfair to permit a new argument on appeal in relation to which evidence might have been led at trial had it been known the issue would be raised.

[57]      I shall return to this notion when dealing with Grand Financial’s contention that it is entitled to set-off its claim on the Wild Lions Agreement against the damages at large awarded in favour of Solemio – an argument also raised for the first time on appeal. I am satisfied, however, that Solemio ought not to be precluded from raising the defence, in this context, for the first time on appeal.

[58]      Having regard to my determination that the issue of Grand Financial’s right to recover under the Wild Lions invoices pursuant to the Wild Lions Agreement was not one that was properly before the trial judge, and therefore not one on which he could grant judgment, it is technically unnecessary to deal with the limitation defence raised by Solemio on appeal. Nonetheless, had the trial judge considered the claim under the Wild Lions Agreement to have arisen during the course of the trial, it would have been an error for him to have granted judgment, since the claim would have been statute barred on any interpretation of the record. The evidence was that by the end of January 2008, the monies were due and owing. Everyone was aware of that. By the time of trial, the two-year limitation period for initiating a claim had long expired.

Permitting a New Defence on Appeal – Generally

By contrast, Grand Financial was not permitted to raise a defence of “equitable set-off” in response to Solemio’s counterclaim for the first time on appeal. This defence was also based upon the amount allegedly owing to it pursuant to the other agreement. Justice Blair did not allow this as a more complete evidentiary record would have been necessary:

[94]      […] it is too late, in my view, for Grand Financial to raise this argument for the first time on appeal. Recall that Grand Financial itself argues that Solemio is foreclosed from raising the limitation period defence for the same reason, taking the position that it was incumbent upon Solemio to raise the limitation issue through evidence and argument at trial, and having failed to do so, Solemio, “as a matter of law forfeited [its] right to do so now for the first time on appeal”: see Ontario Energy Saving LP, at para. 3. Although I would not give effect to that argument with respect to Solemio’s limitation period defence, as explained above, that rationale does apply to preclude Grand Financial’s attempt to rely on equitable set-off at this stage of the proceedings, in my opinion.

[95]      Unlike Solemio with respect to the Wild Lions Agreement claim, Grand Financial knew from the outset that it was facing a Solemio counterclaim. It could have raised equitable set-off in that context, but did not do so. Equitable set-off was not pleaded, was not the subject of any evidentiary foundation (or counter-foundation), and was not argued. In short, it was not an issue to which either the parties or the trial judge turned their minds.

[96]      Grand Financial submits that, even in the absence of a plea of set-off and any joinder of issue on that point, the evidentiary foundation still exists for this Court to determine that equitable set-off applies. I disagree. There may be some evidentiary basis upon which to propose, or to oppose, the argument, but we do not know what other evidence may have been led, or arguments made, had it been known that the issue was in play.

[97]      Equitable set-off is a defence that is particularly rooted in the circumstances of the individual case. It requires, amongst other things, that the set-off claim go directly to impeach the plaintiff’s demands, the “plaintiff” in this case being Solemio and the “claim” being an award of damages to compensate it for harm suffered as a result of an intentional wrongdoing – the tort of interference with economic relations. To put it another way, the defence requires that the set-off claim be so closely connected to the plaintiff’s demands that it would be “manifestly unjust” to allow the plaintiff (Solemio) to enforce payment without taking into account the set-off claim:  […]

[98]      In addition, the application of equitable set-off is subject to the equitable doctrine of “clean hands”. The courts will not allow a party to set-off “where there [is] an equity to prevent [the party from] doing so; that is to say, where the rights, although legally mutual, [are] not equitably mutual”: […] Here, Grand Financial seeks to set off against its contractual claim under the Wild Lions Agreement Solemio’s judgment for damages caused by Grand Financial’s own intentional wrongdoing, albeit a wrongdoing that may have some connection with, or arise from, the issues regarding the Wild Lions Agreement. Whether equitable set-off would be available as a defence in such circumstances is something that would require viva voce evidence and credibility findings made during an assessment focused on that particular issue.

[99]      All of these considerations underscore the need for a trial record focused on the set-off issue to enable effective appellate review. It does not exist in this case.

Standard of Review for Awarding “Damages at Large”

Both Solemio and Grand Financial also argued that the trial judge had erred in his approach to calculating “damages at large” for the intentional tort. Justice Blair did not accept this, as deference was owed to the trial judge:

[89]      … damages at large are “a matter of impression” and are not something that can be precisely measured.  It is difficult for an appellate court to say that the assessment is plainly erroneous in such circumstances: […]. While I may not have arrived at the amount of $175,000, I cannot say that the trial judge erred in principle in doing so. He properly took into account all of the relevant factors in arriving at his conclusion.