CITATION: Barber v. Molson Sport & Entertainment Inc., 2010 ONCA 570 |
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DATE: 20100903 |
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DOCKET: C49191 and C49195 |
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COURT OF APPEAL FOR ONTARIO |
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Gillese, Juriansz and LaForme JJ.A. |
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BETWEEN |
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DOCKET: C49191 |
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Stephen Barber and Wahta Natural Spring Water |
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Plaintiffs (Respondents) |
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and |
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Johnathan Vrozos, Molson Sport & Entertainment Inc. and Great Moments in Catering |
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Defendants (Appellant) |
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AND BETWEEN |
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DOCKET: C49195 |
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Stephen Barber and Wahta Natural Spring Water |
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Plaintiffs (Respondents) |
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and |
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Jonathan Vrozos, Molson Sport & Entertainment Inc. and Great Moments in Catering |
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Defendants (Appellant) |
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Lawrence E. Thacker and Dena N. Varah, for the appellant Molson Sport & Entertainment Inc. |
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Gary M. Caplan, for the appellant Johnathan Vrozos |
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Brian Duxbury and Amanda Jordan McInnis, for the respondents Stephen Barber and Wahta Natural Spring Water |
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Heard: March 5, 2010 |
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On appeal from the judgment of Justice N. Borkovich of the Superior Court of Justice dated March 2, 2009, with reasons reported at 2008 CanLII 32300 (ON S.C.). |
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[1] July 30, 2003, was a hot day in Toronto, Ontario. A large concert featuring the Rolling Stones was held that day, to assist the hospitality and tourism industries following the outbreak of SARS. The present appeals arise from disputes over the sale and distribution of bottled water at the concert.
[2] The appellant Molson Sport & Entertainment Inc. (Molson) was the primary sponsor of the concert. It held all food, beverage and merchandizing rights for the concert. The appellant Johnathan Vrozos (Vrozos) wanted to be involved in the event.
[3] Molson made a written agreement with Vrozos to pay his company a management fee of $200,000 if the concert realized a net profit (the management contract). Molson and Vrozos also entered into an oral agreement under which Molson sold Vrozos the exclusive right to supply water at the concert (the Vrozos water contract). Vrozos paid $120,000 for the water rights, which amount was to be set off against the contingent management fee of $200,000 payable to his company under the management contract. The Vrozos water contract was reached by Vrozos and Bob Singleton (Singleton), Molson’s then Vice President and General Manager.
[4] On July 2, 2003, Vrozos entered into a handwritten agreement, which was later typed and slightly altered, with the respondent Stephen Barber (Barber) under the terms of which Barber purchased Vrozos’s water rights for the concert (the Wahta contract). Pursuant to this agreement, Barber paid Vrozos $100,000 and agreed to pay additional fees based on the number of bottles sold. In exchange, Barber obtained the exclusive right to supply, market, distribute and sell water at the concert, including the exclusive right to sell water at wholesale prices to other vendors.
[5] Barber then assigned his rights under the Wahta contract to the respondent Wahta Natural Spring Water, a partnership created and funded by aboriginal persons and employing aboriginals on the Wahta reserve. For convenience, Barber and Wahta are collectively referred to as the respondents or Wahta.
[6] Because Wahta acquired the exclusive right to sell water at the concert, it understood that every bottle of water sold at the concert would be Wahta water. That was not what transpired, however. At the concert, vendors sold water not obtained through Wahta. In addition, 650,000 bottles of Wahta water were given away free to concertgoers.
[7] The concert turned out to be a financial disaster for Wahta. Vrozos and Barber had anticipated that concertgoers would consume approximately 1,000,000 to 1,500,000 bottles of water. For reasons explained below, Wahta supplied 3,027,744 bottles of water but sold only approximately 250,000 bottles.[1]
[8] The trial judge found that both Molson and Vrozos made agreements with suppliers other than Wahta for the supply and sale of water at the concert.
[9] On July 14, 2003, despite the Vrozos water contract and with knowledge of Wahta’s rights with respect to water sales, Molson executed an agreement with Great Moments in Catering (GMIC), pursuant to which Molson granted GMIC the right to sell water in certain locations at the concert and to buy water from suppliers other than Wahta. GMIC eventually sold approximately 168,000 bottles of water at the concert.
[10] Without Wahta’s knowledge, Vrozos entered into a number of deals with other vendors in which he gave them the right to sell water at the concert. For instance, on the day of the concert, Vrozos accepted $10,000 from Pizza Pizza in exchange for permitting Pizza Pizza to sell its own water at the concert. Similarly, he gave Paragon Blu the right to sell up to 300,000 bottles of its own water in a barbecue area.
[11] In addition to authorizing other vendors to sell water, Vrozos also sold Wahta water to other parties without informing Wahta of the sales and without giving Wahta the sale proceeds. These included sales to Sports Café International and to Northwest Security for $3,744 and $1,872, respectively. In addition, Vrozos sold 350,000 bottles of Wahta water to Molson for $28,000 so that Molson could meet the requirements imposed by the public health authorities.
[12] In mid-July of 2003, Molson was advised by Toronto Public Health (TPH) and Emergency Medical Services (EMS) that health and safety concerns required that there be 3 million bottles of water on site at the concert. Due to a heat emergency declared by EMS on the day of the concert, 300,000 bottles of Wahta water were distributed at the concert without charge. In addition, the 350,000 bottles of Wahta water that Vrozos had sold to Molson for $28,000 were given to concertgoers at the gate without charge.
[13] Aside from issues directly relating to water sales and distribution, four other issues arose between Wahta and Vrozos. First, after the concert, Vrozos went to the Wahta money-counting trailer and took $631,616 in cash. When he was confronted the following day, he returned approximately $100,000 in coins. He has never returned the balance of $478,000. Second, Wahta paid Vrozos $20,000 to rent a hangar on site for the day of the concert. The hangar was to have been used to house Wahta employees and store water products and supplies. Vrozos not only failed to rent the hangar, he did nothing in an attempt to rent the hangar. On the night before the concert, Wahta was told by security personnel to vacate the hangar and its employees were forced to sleep in a field. Wahta had to pay an additional $120,000 to its employees to ensure that they would stay and work during the concert. Third, Vrozos told Wahta to rent trailers, ostensibly for Molson’s use. In fact, Vrozos used the trailers personally. Wahta paid $8,900 to rent the trailers. Fourth, Vrozos had Wahta rent gators for use at the concert. He then rented the gators to Molson for $2,500 and kept the proceeds for himself.
[14] Wahta commenced actions against Molson, Vrozos and GMIC. Just prior to trial, Wahta and GMIC reached a settlement. As a result, GMIC did not participate in the trial.
[15] Wahta pleaded two causes of action against Molson: (i) negligent misrepresentation, and (ii) intentional interference with economic relations. Against Vrozos, Wahta pleaded breach of contract, misrepresentation, and intentional interference with economic relations. Wahta also sought aggravated and punitive damages against both Molson and Vrozos.
[16] Vrozos counterclaimed against the respondents, arguing that he was owed a royalty fee of 50% of total gross sales. He crossclaimed against Molson in respect of damages and costs, and also made a claim for $80,000 pursuant to the management contract.
[17] Molson crossclaimed against Vrozos in respect of damages and costs.
[18] By judgment dated March 2, 2009 (the Judgment), the trial judge ordered Molson to pay Wahta damages in the amount of $632,000. He ordered Vrozos to pay Wahta damages of $711,616, plus punitive damages of $50,000. He ordered Molson to pay Vrozos $80,000.
[19] The trial judge dismissed the claim against Molson for negligent misrepresentation but found Molson liable for intentional interference with economic relations.
[20] One of the central issues at trial was the content of the Vrozos water contract. Molson maintained that there were several conditions attached to that contract, including that Vrozos would be: (i) the sole vendor entitled to have concession stands that sold water exclusively, (ii) the sole supplier of water to other vendors, provided he sold at fair market wholesale prices and was able to supply the quantity of water required, and (iii) responsible for meeting any water requirements imposed by public health authorities.
[21] The trial judge largely rejected these assertions. He found that under the Vrozos water contract, Molson gave Vrozos exclusive water rights with no significant conditions, aside from a guarantee that water would be sold to concertgoers at “stadium pricing”, which the parties agreed was $3.00 per bottle.
[22] The trial judge also found that Molson was aware that Vrozos had sold these same rights to Wahta, and that Molson interfered in the economic relationship between Wahta and Vrozos in two ways. First, Molson made an agreement with GMIC, allowing GMIC to sell water not purchased from Wahta. Second, Molson foisted its obligation to supply water pursuant to the TPH/EMS requirements onto Wahta. As a result of the TPH/EMS requirements, Wahta had over 3 million bottles on site, far more than it would have had otherwise (the excess water), and 650,000 bottles of Wahta water were given away for free.
[23] The trial judge awarded a total of $632,000 in damages to Wahta as against Molson. In respect of the GMIC agreement, he awarded $232,000 in damages for lost profits. He quantified damages for losses incurred in supplying the excess water at $400,000.
[24] The trial judge awarded damages against Vrozos of $711,616 plus prejudgment interest, together with punitive damages of $50,000.
[25] Two components made up the damage award for $711,616.
[26] First, the trial judge awarded $180,000 in damages for the tort of intentional interference with economic relations, made up of:
· $60,000 for damages at large; and
· $120,000 for the extra labour costs incurred by Wahta due to Vrozos’s failure to rent a hangar.
[27] The $60,000 award for damages at large was designed to compensate Wahta for three wrongful acts on the part of Vrozos. First, Vrozos made a side deal with Pizza Pizza, pursuant to which the latter was permitted to sell its own bottled water at the concert in exchange for paying Vrozos $10,000. Second, Vrozos made a similar deal with Paragon Blu for the sale of water in a barbecue area. Third, Vrozos persuaded Wahta to rent gators and trailers, ostensibly for Molson’s use. Wahta paid $8,900 for the trailers and Vrozos employed them for his own use. Vrozos rented the gators to Molson for $2,500 and kept the proceeds for himself.
[28] The $120,000 damage award was compensation for the extra wages that Wahta was forced to pay its employees because of Vrozos’s failure to provide a hangar. Wahta needed to house its employees who were to work at the concert. It asked Vrozos to arrange for a hangar to be used for that purpose. Vrozos agreed and took a payment of $20,000 from Wahta. Vrozos did not arrange for a hangar. In fact, the trial judge found that Vrozos made no attempt whatsoever to obtain the use of a hangar. As a result, the Wahta employees had nowhere to stay. They slept in the fields. In order to entice the employees to stay and work during the concert and to compensate them for the inconvenience they endured, Wahta incurred $120,000 in additional labour costs.
[29] The second component of the overall damage award was an award of $531,616 for the following breaches of contract:
· $28,000 for the sale of water at wholesale prices to Molson;
· $1,872 for sales of water to Northwest Security;
· $3,744 for sales of water to Sports Café International;
· $20,000 for the amount Vrozos collected from Wahta, ostensibly for renting a hangar; and
· $478,000 as the balance of the proceeds of retail sales that Vrozos took from Wahta’s money counting trailer.
[30] A brief description of these matters is as follows. Wahta gave Vrozos water to help Molson meet the TPH/EMS requirements. Vrozos sold the water to Molson for $28,000 and kept the money for himself. Vrozos made deals in respect of water with Northwest Security and Sports Café International and retained the proceeds of those deals – $1,872 and $3,744 respectively. As discussed above, $20,000 was the amount that Vrozos accepted from Wahta for rental of a hangar. As has also been mentioned, Vrozos took no steps towards fulfilling that agreement. Finally, on the night of the concert, Vrozos went into Wahta’s money counting trailer and took away a significant amount of the sale proceeds that Wahta employees had collected at the concert. He returned a portion of the money when confronted the next day. $478,000 is the balance that Vrozos never returned. The trial judge found that each of these acts amounted to a breach of contract.
[31] The trial judge found that Vrozos’s actions in respect of the hangar amounted to fraud. He held that those actions and other conduct of Vrozos entitled Wahta to punitive damages. After obtaining further submissions of the parties, he fixed the award of punitive damages at $50,000.
[32] In his pleadings, Vrozos counterclaimed for a royalty fee of 50% of whatever judgment Wahta might obtain at trial. The judgment was said to represent the total gross sales of bottled water.
[33] Vrozos’s counterclaim was based on his interpretation of the Wahta contract. He maintained that under its terms, he was entitled to an initial sum of $100,000, an escalating fee based on the number of bottles sold, and a royalty fee in the amount of 50% of the total gross sales.
[34] The respondents claimed that properly interpreted, the Wahta contract entitled Vrozos to the initial $100,000 payment plus a royalty fee that depended on the amount of water Wahta sold. They contended that the royalty fee provision was to apply only if the maximum sales figure in the escalating fees portion of the contract – 1,000,000 bottles and over – was exceeded.
[35] The trial judge preferred the respondents’ interpretation and found that Vrozos was not entitled to the royalty fee, as sales had not exceeded 1,000,000 bottles.
[36] Vrozos crossclaimed against Molson for $80,000. The crossclaim was based on the management contract, under the terms of which Vrozos was to be paid a $200,000 management fee if the concert was profitable. The $120,000 that he paid for the water rights was to be deducted from this sum, leaving the sum of $80,000 outstanding, according to Vrozos.
[37] Molson said that it lost $940,000 on the concert. As Molson made no profit, it submitted that Vrozos was not entitled to the management fee.
[38] As part of its promotional activities for the concert, Molson gave 60,000 concert tickets to Molson Breweries. Vrozos submitted that those tickets should be factored into the question of the concert’s profitability. Each ticket would have cost $20. Vrozos argued that if the tickets had been sold rather than given away, Molson would have received an additional $1,200,000 and the concert would have generated a profit.
[39] The trial judge accepted that the value of the 60,000 tickets should be attributed to Molson as revenue for the concert. He concluded that once the notional value of the tickets ($1.2 million) was allowed for, it more than offset Molson’s reported $940,000 loss. Accordingly, he accepted Vrozos’s submission and ordered Molson to pay Vrozos $80,000 in damages.
[40] Molson raises six grounds of appeal. It submits that the trial judge erred in:
(1) finding that Molson intended to injure the respondents and committed an illegal or unlawful act;
(2) his determination of the terms and conditions of the Vrozos water contract;
(3) failing to conclude that Vrozos, as an agent of the respondents, acquiesced to and accepted the TPH/EMS water requirements;
(4) his assessment and calculation of damages payable by Molson to the respondents;
(5) finding Molson liable to pay Vrozos $80,000 pursuant to the management contract; and
(6) failing to adjudicate or make any decision on Molson’s crossclaim against Vrozos.
[41] Vrozos also appeals. He submits that the trial judge erred in:
(1) failing to give adequate reasons for finding that no royalty fees were payable under the Wahta contract;
(2) his interpretation of the Wahta contract;
(3) finding fraud in the absence of it being pleaded or advanced at trial by the respondents;
(4) finding fraud in the absence of any evidence of fraud;
(5) his assessment of damages; and
(6) awarding punitive damages.
[42] The first two grounds of the Vrozos appeal are so closely related that they will be dealt with together. For similar reasons, the third and fourth grounds of appeal will also be analyzed together.
A Preliminary Comment
[43] The trial judge gave lengthy, detailed reasons in which he made a great many factual findings. Having said that, we acknowledge that the trial judge’s legal analysis is thin and, in some areas, incorrect. Nevertheless, because of the care he took in making his factual findings and because he made all the requisite findings, we have been able to make the necessary determinations to decide these appeals without the necessity of a new trial.
AN OVERVIEW
[44] The essence of Molson’s appeal flows from its contention that like Wahta, it was a victim of Vrozos’s wrongdoing. Molson claims that it sold Vrozos water supply rights subject to conditions and limitations, and that Vrozos then fraudulently purported to sell the respondents unconditional and exclusive water rights, which he did not own. Thereafter, Molson says, in a further fraud against Wahta, Vrozos sold water rights to several other vendors without disclosing those transactions to Wahta. Molson says that because Vrozos is the wrongdoer and it is merely another of his victims, it should not be liable in damages to Wahta and, if it is, Vrozos should pay those damages by way of contribution and indemnity.
[45] Wahta says that Molson’s position cannot stand given the trial judge’s findings of fact. We agree. On the record, it was open to the trial judge to make those findings and we see no reason for this court to interfere with them. Consequently, as we will explain, there is no basis on which to disturb the trial judge’s determination that Molson is liable to Wahta. Although the trial judge did err in one part of the damage calculation, for the reasons given below, it is unnecessary to adjust the quantum of damages that Molson has been ordered to pay Wahta.
[46] Molson also appeals the order requiring it to pay damages to Vrozos. For the reasons given below, we would allow this part of Molson’s appeal.
[47] To establish the tort of intentional interference with economic relations, the plaintiff must prove that: (i) the defendant intended to injure the plaintiff; (ii) the defendant interfered with the plaintiff’s economic interests by illegal or unlawful means; and (iii) as a result of that interference, the plaintiff suffered economic loss: Reach M.D. Inc. v. Pharmaceutical Manufacturers Assn. of Canada (2003), 65 O.R. (3d) 30 (C.A.), at para. 44. The trial judge found that Wahta had proven all three elements of the tort.
[48] Molson argues that the trial judge erred in finding that it intended to injure Wahta and in finding that it employed unlawful means to interfere with the respondents’ economic interests.
[49] Molson submits that to establish an intent to injure, Wahta was required to prove either (a) that the predominant purpose of Molson’s actions was to injure Wahta, or (b) that Molson’s actions were directed against Wahta. Negligence or disregard for the Wahta’s interests, Molson says, is not enough.
[50] Molson contends that there was no evidence that it was aware of the Wahta contract and therefore there was no basis on which the trial judge could infer knowledge or intent to injure Wahta on its part. The trial judge, it argues, relied on an erroneous understanding of the facts because in his reasons dealing with the GMIC agreement, he says that Molson was in breach of its contract with Wahta, when no such contract existed. Further, Molson argues that the TPH/EMS water requirements do not establish any intent on its part because the concert could not have occurred if those requirements were not met and Molson’s intent was to ensure that the concert took place.
[51] We do not accept these submissions.
[52] To satisfy the element of intent, the respondents did not need to prove that Molson’s predominant purpose was to injure them. It was sufficient to establish that Molson's unlawful act was in some measure directed against the respondents: Reach M.D., at para. 46. This requirement was met because the trial judge found that Molson sold water rights to GMIC after having sold them to Vrozos. Molson did so with knowledge that Vrozos had sold the water rights to the respondents and that permitting GMIC to sell water would interfere with the respondents’ exclusive water rights and reduce the respondents’ profits.
[53] The trial judge rejected Molson’s assertion that it was unaware of Wahta’s water rights. Barber gave evidence that Singleton – and, therefore, Molson – knew that the respondents were the "water people". On this matter, the trial judge found Barber's evidence to be "true and accurate".
[54] Contrary to Molson’s submissions, we do not read the trial judge’s reasons as being based on an erroneous assumption that Molson and Wahta had entered into a contract. Read in context, when the trial judge refers to Molson’s “breach of its contract with the plaintiffs”, he means that Molson breached its contract with Vrozos with complete disregard for any impact that breach would have on Wahta’s economic interests. While the structure of the sentence might suggest that the trial judge was referring to a contract between Wahta and Molson, when read in the broader context of the decision as a whole, it is clear that the reference was to the contract between Molson and Vrozos.
[55] As for the TPH/EMS requirements, the trial judge found that Molson knew that it was responsible for meeting those requirements. Given that Molson knew that Vrozos had entered into an agreement with Wahta in which Wahta became responsible for supplying the water, it was open to the trial judge to find that Molson’s act of pressuring Vrozos was in some measure directed against Wahta. Again, Molson’s submission on this point – that its primary objective was to ensure that the concert took place and not to injure Wahta – is of no moment. It is sufficient that, in order to accomplish this objective, Molson was willing to impose hardship on Wahta.
[56] Molson submits that illegal or unlawful means, in the context of this tort, are those prohibited by law or statute and are activities that the defendant is “not at liberty to commit”. In other words, Molson argues, Wahta had to establish that Molson committed either an illegal or tortious act.
[57] Molson says that only two allegations of an illegal act were made. The first was the negligent misrepresentation claim, which was dismissed. The second is in respect of the TPH/EMS water requirements. However, Molson argues, it did nothing wrong in respect of seeing that those requirements were met. It did not breach any contract and it did nothing inconsistent with Vrozos’s purported unconditional, exclusive water rights. And, in any event, Vrozos either accepted or acquiesced to Molson’s stipulation that he fulfill those requirements.
[58] We begin by noting that in Reach M.D., the scope of activities that a defendant is “not at liberty to commit” is interpreted broadly: see paras. 48-52. In that case, it was found that a voluntary trade association making decisions not authorized by its internal regulations amounted to such an act: para. 53. It is against this legal backdrop that one must assess Molson’s acts, as found by the trial judge.
[59] With respect to the GMIC deal, the trial judge found that Molson sold Vrozos the exclusive water rights for the concert, and then knowingly entered into an agreement with GMIC that allowed GMIC to sell water in its food tents and refuse to buy water from the respondents if it was not satisfied with the price. The trial judge held that in doing so, Molson breached its contract with Vrozos and sold something it did not own. We see no error in the trial judge’s findings or his conclusion that these were acts that Molson was not at liberty to commit.
[60] With respect to the TPH/EMS requirements, there is no dispute that these requirements had to be satisfied for the concert to take place. There is nothing to suggest that the trial judge erred in finding that it was Molson’s duty to meet those requirements. The question becomes, therefore: in meeting those requirements, did Molson act in ways that it was not at liberty to?
[61] Again, on the findings of the trial judge, the answer to that question is “yes”.
[62] Effectively, the trial judge found that after entering into the Vrozos water contract in which it gave Vrozos exclusive water distribution rights, Molson threatened to breach the contract without lawful reason and knowing that the result would be to cause Vrozos to breach his contract with Wahta. Molson was not at liberty to do that. Once Molson was told that it was responsible for providing a significant quantity of free water for health reasons, its only lawful course of action was to negotiate in good faith with its supplier for the purchase of that water.
[63] Accordingly, we would dismiss this ground of appeal.
[64] At trial, Molson contended that there were a number of conditions attached to the Vrozos water contract. Singleton testified that the following conditions were attached to the Vrozos water contract: Vrozos would be the sole vendor entitled to have concession stands that sold exclusively water; Vrozos would be the sole supplier of water to other food and beverage vendors so long as he was able to meet their demand and sold the water at a fair market wholesale price, otherwise the vendors could buy from someone else; Vrozos would have to comply with health and safety requirements imposed by TPH and EMS, whatever they might be; and, the maximum retail price for water could not exceed “stadium pricing”.
[65] Vrozos gave evidence that the only condition in the Vrozos water contract was that the pricing for water should not exceed “stadium pricing”.
[66] The trial judge accepted Vrozos’s evidence. He did so after expressly observing that Vrozos was a dishonest person whose testimony had to be scrutinized with great care. Nonetheless, he found that under the Vrozos water contract, Vrozos obtained the exclusive right to sell water at the concert subject only to the condition that water sold to concertgoers was to be at stadium pricing.
[67] The trial judge gave detailed reasons for not accepting Singleton’s testimony, including that Singleton had no memory of what he actually did or said,[2] was deliberately evasive,[3] never directly answered important questions as to what he did or said,[4] and that he was covering up his own short comings.[5] The trial judge found that Singleton had not told the truth at the trial.[6] He explained that he preferred Vrozos’s evidence as to the terms of the Vrozos water contract because Vrozos was a “shrewd businessman” who would not have paid $120,000 for exclusive water rights subject to the conditions as alleged by Molson which made the rights non-exclusive. Furthermore, the trial judge noted that at the time the Vrozos water contract was being negotiated, Singleton had no knowledge of any TPH/EMS requirements so he could not have made it a condition of the contract. The trial judge also referred to evidence that confirmed that Singleton was aware that he had sold the exclusive water rights to Vrozos.[7]
[68] On appeal, Molson asks this court to find that the trial judge erred in relying on Vrozos’s evidence in determining the scope of the water rights that Vrozos obtained under the Vrozos water contract. It begins by drawing attention to the fact, as found by the trial judge, that Vrozos attempted to extort a settlement from Molson during the trial. Vrozos arranged to meet with a Molson employee and told the employee that if Molson did not pay him $350,000 and meet his other demands, Vrozos would disclose documents that would be potentially embarrassing for Molson. During cross examination, Vrozos admitted to these facts.
[69] Molson also points to the trial judge’s findings that Vrozos was a “dishonest person” who admitted to lying under oath and for whom “lying and cheating is his way of doing business”. It argues that the trial judge did not consider whether Singleton too was a shrewd businessman nor did the trial judge undertake financial analysis about the conditions that Singleton said were attached to the Vrozos water contract.
[70] There is no doubt that both Vrozos’s and Singleton’s credibility were significant issues at trial. Indeed, the trial judge made numerous findings indicating that both lacked credibility. Thus, the trial judge was faced with a situation that is not uncommon in trials: he heard from two witnesses, neither of whom he found credible. Nonetheless, he had to decide on the terms of the Vrozos water contract – an oral agreement – and to do that, he was forced to come to grips with their evidence. The trial judge was entitled to accept Vrozos’s evidence that Molson sold him exclusive water rights, without a bundle of conditions attached. That is, he was allowed to prefer Vrozos’s testimony on this matter over that of Singleton.
[71] We see no basis on which to interfere with the findings of the trial judge on this issue. On the contrary, on the record and for the reasons given by the trial judge, those findings were fully open to him. We would dismiss this ground of appeal.
[72] Molson says that it always understood, based on Vrozos’s false representations, that Vrozos continued to own the water rights. Since the trial judge found that Vrozos deliberately misled the respondents into believing that Molson wanted Vrozos to be Wahta’s spokesperson in its dealings with Wahta, Molson says it was reasonable for it to have believed that Vrozos retained the water rights. As a result, it argues, Vrozos’s acceptance of the TPH/EMS water requirements proves that meeting those requirements was a condition of the Vrozos water contract or that Vrozos agreed to modify the terms of that agreement. Thus, the argument runs, Vrozos and by extension the respondents, are estopped from claiming that Molson breached the terms of any contract with Vrozos. Molson concludes this argument by saying the trial judge erred by failing to consider whether Vrozos was estopped by his own conduct.
[73] At trial, there was conflicting evidence regarding many aspects of the relationship between Vrozos and Wahta. Wahta essentially asserted that Vrozos sold it his rights but remained involved in some dealings with Molson and vendors because of his familiarity with various people. Vrozos, in contrast, described his relationship with Wahta as a “partnership” in which he was entitled to make the side deals and agreements that he did.
[74] Although the trial judge found that Vrozos had inserted himself between Molson and Wahta in various ways, it was open to the trial judge to reject Molson’s theory that Vrozos was acting as Wahta’s agent. The trial judge preferred Wahta’s evidence on this point. He found that Molson was aware that the respondents had acquired the water rights from Vrozos. In particular, he found that Barber had several telephone conversations and meetings with Singleton and that Singleton was made aware that the respondents had acquired Vrozos's exclusive water rights. He also found that Molson had the obligation to satisfy the TPH / EMS requirements. Barber’s evidence, which the trial judge believed, was that he had two conversations with Singleton in which he raised his concerns with respect to those additional water requirements. Singleton was therefore aware of the respondents’ concerns.
[75] The trial judge did not find that Vrozos acted as Wahta’s agent. Accordingly, whatever Vrozos might have said or done by way of acquiescence to Molson is not binding on Wahta. Furthermore, as Vrozos was not Wahta’s agent, the estoppel argument becomes irrelevant because it was Wahta that claimed reimbursement for the damages suffered as a result of having to fulfill the TPH/EMS requirements.
[76] Accordingly, we would dismiss this ground of appeal.
[77] Molson argues that the trial judge made three key errors in assessing damages in that he: (i) allowed the respondents to double-recover against Molson and Vrozos; (ii) ordered both reliance and expectation damages against Molson; and (iii) failed to rule on Wahta’s duty to mitigate losses.
i. Double Recovery
[78] We understand the double recovery argument to be as follows. As a result of the damage award against Vrozos, the respondents will make a net profit of $321,152. Having made a profit, Molson argues that Wahta cannot be said to have suffered a loss, hence damages against Molson should be assessed at $0.
[79] We disagree. This argument appears to confuse damages awarded for breach of contract with damages awarded for torts. The fact that Wahta was compensated by a damage award against Vrozos for his breaches of their contract, does not preclude Wahta from recovering from Molson for the torts that Molson was found to have committed and which caused Wahta harm. As explained above, the damages awarded against Molson were based on the trial judge’s determination that Molson had intentionally interfered in the respondents’ economic relations.
[80] Furthermore, the suggestion that Wahta should be held to have suffered no damages if it made any profit at all for the concert is not well founded in law.
[81] There was no double recovery because the trial judge did not compensate Wahta twice for the same wrongdoing. As we explain below, the damage award against Vrozos is largely to compensate Wahta for breaches of contract. The damage award against Molson is to compensate Wahta for the harm it suffered as a result of the torts that Molson committed.
ii. The Measure of Damages
[82] We do, however, accept that the trial judge erred by calculating damages against Molson based on contractual principles, rather than those that govern in tort.
a. GMIC Deal
[83] Molson’s contract with GMIC allowed GMIC to be the exclusive caterer of the event, and to sell water. The contract stipulated that GMIC would purchase its water from Molson’s supplier unless the supplier refused to sell at the wholesale price or could not provide the quantity of water required. GMIC ended up selling approximately 168,000 bottles of water that it did not buy from the respondents. For the reasons discussed above, this constitutes an intentional interference with Wahta’s economic relations.
[84] The trial judge stated that reliance damages should apply in calculating the respondents’ damages for interference. His focus was on the respondents’ loss as opposed to profit, which is the measure of expectation damages. The distinction is made in 900567 Ontario Ltd. v. Welsby and Associates Taxation Inc., 2003 CarswellOnt 738 (S.C.), at paras. 75-76:
The innocent plaintiff is generally entitled to recover either expectation damages or reliance damages, but not both. Expectation damages represent the benefit that the plaintiff expected to receive under the contract whereas reliance damages represent the costs it reasonably incurred. If the plaintiff wants to recover for the benefits it expected, it must be willing to pay the associated costs.
[85] The trial judge calculated the expectation damages for the GMIC sales as $420,000: the retail price ($2.50 per bottle) of 168,000 bottles. From this, he would have subtracted $20,000 as a rough estimate of the amount to which Vrozos was entitled, under the Wahta contract. However, instead of awarding these expectation damages, the trial judge awarded what he characterised as reliance damages in the amount of $232,000. In arriving at this amount the trial judge relied on the respondents’ expert report. That is, he took the total expenses for the concert at $791,274.03 and subtracted the total income of $559,306.00 resulting in a net loss of $231,968.03. He rounded the figure to $232,000.00. It was an attempt by the trial judge to reflect an amount for the fact that the respondents had incurred expenses to bring water which was effectively sold by GMIC.
[86] The trial judge erred in principle in calculating damages as he did. The relevant measure for damages in tort is the restitutio in integrum principle, which requires the court to place the plaintiff, insofar as possible, in the position the plaintiff would have been had the tort not been committed.
[87] It was not disputed between the parties that Vrozos had attempted to negotiate a contract to sell water to GMIC, but that they had not agreed on a price. It stands to reason that Wahta would similarly have been unable to come to an agreement as to price with GMIC. Consequently, Wahta would have sold its own water in the VIP area. The correct quantum of damages is, therefore, the revenue that Wahta would have made had it sold water in the VIP area. Thus, the quantum would have been 168,000 bottles at $2.50 per bottle[8] for a total of $420,000. As there was no cross appeal taken on this and Wahta has indicated that it is content with the trial judge’s quantification of this, the court is not at liberty to substitute the higher figure of $420,000.
[88] Consequently, Wahta remains entitled to damages of $232,000 for the harm suffered as a result of Molson’s contract with GMIC. The effect of this determination on Vrozos’s entitlement to royalties under the Wahta contract is a matter that lies between Wahta and Vrozos and is dealt with below.
b. TPS/EMS Requirements
[89] The trial judge assessed damages against Molson on the excess water requirement in the amount of $400,000 on the assumption that Wahta incurred additional costs of $7.00 per case to provide the excess water to the site. In essence, Molson argues that the trial judge erred by awarding an amount that confused reliance and expectation damages.
[90] We agree that the trial judge’s reasoning reflects confusion over the proper method of quantifying damages in tort. As with the GMIC contract, the relevant question is the position the respondents would have been in had the tort not been committed. To fulfill the TPH/EMS requirements and in light of the trial judge’s findings on Wahta’s exclusive rights in respect of the supply of water, Molson would have been required to purchase the water from Wahta. Given the quantity of water in issue, it seems reasonable to assume that Molson would have purchased the water at the wholesale price of $7.00 per case.
[91] Thus, for different reasons than those given by the trial judge, we would leave the damage award of $400,000, representing the price that Molson would have paid Wahta had it purchased the water. This award has no effect on Wahta’s obligation to pay Vrozos royalties because the Wahta contract excludes sales to vendors and emergency personnel when calculating the number of bottles sold.[9]
iii. The Duty to Mitigate
[92] Wahta made a business decision to sell its unsold water immediately after the concert, at a low price, on the basis that an immediate sale was preferable to incurring the costs of holding the water and hoping that it might be sold for a higher price at a later date. The discounted prices that Wahta obtained were between $1.75 and $3.50 per case.
[93] Molson says that the trial judge did not rule on the question of mitigation of damages. It recognizes that the labels on the Wahta bottles had been distorted as a result of condensation that formed on the bottles during the concert but argues that Wahta could have relabelled the water bottles (at a cost of $0.167 per case) and then resold them at market value (between $6.50 and $7.00 per case) instead of the discounted rate at which they were sold.
[94] Molson bore the burden of proving that Wahta failed to take reasonable steps to mitigate its damages. As stated by the Supreme Court in Michaels v. Red Deer College, [1976] 2 S.C.R. 324, at p. 332, quoting C.G. Cheshire, C.H.S. Fifoot and M.P. Furmston, Law of Contract, 8th ed. (London: Butterworths, 1972), at p. 599:
[T]he burden which lies on the defendant of proving that the plaintiff has failed in his duty of mitigation is by no means a light one, for this is a case where a party already in breach of contract demands positive action from one who is often innocent of blame.
[95] See also Belton v. Liberty Insurance Co. of Canada (2004), 72 O.R. (3d) 81, at paras. 33-34, where this court held that a trial judge had erred by requiring the plaintiffs to demonstrate that the steps they took to mitigate damages were reasonable.
[96] Wahta did mitigate its damages, albeit at discounted rates. What Molson is really arguing is that Wahta could have taken other or different steps and thereby mitigated to a greater extent. To establish this, Molson had the burden of demonstrating that there were reasonable steps that Wahta could have taken to dispose of the excess water that would have earned it more than $1.75 to $3.50 per case. Molson points to evidence of the cost of relabeling the bottles in support of its submission. In our view, this is not adequate to meet its burden.
[97] The price of relabeling the bottles is only one aspect of the costs associated with Molson’s suggested course of action. Molson has pointed to no evidence with respect to other associated costs, including the costs of transporting, storing, and marketing the water nor has it led evidence to show that the steps that Wahta took were unreasonable, in the circumstances. Consequently, Molson has not discharged its burden on this matter.
[98] In summary, we would dispose of Molson’s three submissions on this ground of appeal as follows. We reject the first and third submissions, that the damage awards made at trial allow Wahta double recovery and that the trial judge erred in failing to deal with Wahta’s duty to mitigate its losses. We accept the second ground – that the trial judge erred in his calculation of damages – but the amount awarded remains at $632,000.
[99] Molson argues that the trial judge erred in ordering it to pay Vrozos damages of $80,000. It makes two submissions in this regard. First, Molson contends that it was Vrozos’s numbered company – not Vrozos – who entered into the management contract. As Vrozos’s company was sold prior to trial, Molson contends that Vrozos had no standing or authority to enforce that contract.
[100] Second, Molson submits that the management contract gave Vrozos no control or veto over Molson’s budgetary choices, expenditures, or marketing and promotional decisions. According to its financial statements, Molson lost $940,000 on the concert. Thus, Molson argues, the trial judge erred in assigning a notional value to the promotional tickets.
[101] Molson’s first submission fails based on a plain reading of the management contract. The management contract is a short two-page letter from Molson to Vrozos. In the first paragraph of the contract, the parties are described as Molson, Vrozos’s numbered company and Vrozos himself. Although only Molson and Vrozos’s numbered company appear to have executed the contract, there are three signature lines in the contract. The third signature line is for Vrozos personally. These facts make it clear that the parties intended Vrozos to be a party to the management contract. Further, they treated him as such. Accordingly, it would appear that he had standing to enforce its terms. However, in light of our disposition on the second argument, we need not finally decide this issue.
[102] In our view, Molson must succeed on the second argument. In deciding this issue, the trial judge made no attempt to interpret the management contract. This is an error in principle – the starting point for resolving a dispute about the terms of a contract must begin with a consideration of those terms.
[103] On a plain reading of the management contract, Vrozos’s claim must be dismissed.
[104] Paragraphs 2 and 3 of the management contract are those that are relevant to this issue. They read as follows:
The parties agree that Molson shall be solely responsible for the organization of the Concert. Molson shall have all exploitation rights associated with the Concert, including without limitation all sponsorship, promotional and merchandising rights.
Within 30 days from the end of the Concert, Molson shall provide to [Vrozos] unaudited financial statements showing the net profits (or losses, as the case may be) in connection with the Concern. [Vrozos] shall be entitled to a brokers/management fee of CDN $200,000 in the event that the Concert shows a net profit and only to the extent of such net profit made.
[105] Paragraph 2 of the management contract gives Molson all promotional rights in respect of the Concert. That right is expressly made to be “without limitation”. Thus, Molson had the right to give away the tickets as part of its promotional strategy and the value of the tickets cannot be treated as revenue for the purposes of calculating net profits. Put another way, since Vrozos had no right to veto Molson’s promotional decision to give away tickets, he could not later contend that the tickets should be treated other than as a promotional expense. In any event, there was no evidence to support the trial judge’s conclusion that if Molson had not given the tickets away, it would have been able to sell them and generate revenue. The fact that the face value of the tickets is $1.2 million does not amount to evidence that 60,000 people would have been willing to pay for the tickets.
[106] Accordingly, we would allow Molson’s appeal on this matter and dismiss Vrozos’s crossclaim against it.
[107] Molson’s crossclaim is primarily directed at receiving contribution and indemnity from Vrozos for damages that it was found liable to pay Wahta.
[108] Vrozos concedes that the trial judge did not expressly address the issue of Molson’s crossclaim, but submits that given the findings at trial there was no need to. He says that although the trial judge did not make any findings as to whether liability for damages was joint, several, or joint and several, in awarding damages as he did, he must be taken to have allocated fault among the defendants. We agree.
[109] The trial judge established each defendant’s liability and determined the quantum of damages for each wrong. In doing so, he implicitly dealt with Molson’s argument for contribution and indemnity. Where he failed to properly quantify damages awarded against Molson, those errors have been rectified through this appeal. Accordingly, fault has been allocated with respect to each defendant and damages quantified for each.
[110] We would, therefore, dismiss this ground of appeal. The Judgment should be amended, however, to show that Molson’s crossclaim is dismissed.
[111] In sum, we would dispose of the Molson appeal by:
1. allowing Molson’s appeal in respect of Vrozos’s crossclaim and dismissing that crossclaim;
2. dismissing Molson’s crossclaim against Vrozos; and
3. in all other respects, dismissing Molson’s appeal.
[112] The trial judge found that Vrozos was entitled to the $100,000 initial payment for the water rights, but not to royalty fees. He read the contract as providing a base payment of $100,000, with an escalating scale of payments based on the number of bottles sold, beginning at 600,000 bottles and including a payment of 50% of total gross profits if sales exceeded 1,000,000 bottles. He found that Wahta’s sales did not exceed 500,000 bottles at best and, therefore, Vrozos was not entitled to any royalty fees.
[113] Vrozos argues that the trial judge’s reasons were inadequate and did not permit meaningful appellate review.
[114] Alternatively, Vrozos claims that the trial judge erred in his interpretation of the Wahta contract. He submits that the proper interpretation is as follows. Clause 4 provides for a scale of payments to Vrozos if sales exceed various benchmarks, ranging from 600,000 bottles to 950,000 bottles. Clause 5 provides for a payment of 50% of total gross sales. The two clauses operate independently. Clause 5 is not contingent on sales reaching any particular benchmark. Therefore, no matter what the number of sales, Vrozos is entitled to at least $100,000 plus 50% of total gross profits.
[115] Vrozos also argues that the effect of the Judgment is to compensate Wahta for the sale of water by GMIC. This, he says, would have brought Wahta’s total sales to 668,000 bottles. Accordingly, Vrozos maintains he is entitled to a total of $872,500, made up of the following:
· $100,000 fee;
· $37,500 as the listed fee for sales surpassed 650,000 bottles; and
· $835,000 (50% of total gross profits = .5 x (668,000 bottles x $2.50/bottle)
[116] From this, Vrozos would deduct those amounts that he does not dispute he is obliged to pay:
· $28,000 that he received from Molson for Wahta supplied water at the gates;
· $20,000 paid by Wahta for the hangar facility;
· $120,000 for extra labour costs resulting from the hangar not being rented;
· $3,744 received by Vrozos for sales to Sports Café;
· $1,872 received by Vrozos for sales to Northwest Security; and
· $478,000 already received on the day of the concert.
[117] These deductions total $651,616. As Wahta paid the initial $100,000 fee, Vrozos seeks an order dismissing Wahta’s claim against him and requiring Wahta to pay him $220,884.
[118] Wahta submits that the trial judge correctly interpreted the contract. Wahta contends that Vrozos’s proposed interpretation does not make commercial sense because that interpretation would lead to Vrozos receiving double compensation for every bottle of water sold above 600,000. Wahta submits that the trial judge was correct in finding that the requirement to pay 50% of gross sales was triggered only when sales were greater than 1,000,000 bottles.
[119] The reasons given by the trial judge on this matter consist of a single paragraph, which reads as follows.
[47] With respect to the royalty fee provision of the contract between Vrozos and Barber, I find that Vrozos was entitled to a royalty fee after the retail sale of bottles of water exceeded one million bottles. At best, Wahta’s retail sales of bottled water did not exceed 500,000 bottles. There is, therefore, no royalty fee payable by Barber to Vrozos under the contract.
[120] We accept that the trial judge’s reasons on this issue are inadequate, as they are conclusory and do not admit of appellate review. Nonetheless, we arrive at the same interpretation of the Wahta contract.
[121] The relevant parts of the Wahta contract read as follows.
“ROLLING STONES”
WATER CONTRACT
…
WHEREAS, both parties acknowledge that there has been a rights fee paid in the amount of $100,000.00 to the Grantors from Stephen Barber and National Promotions Inc. (Grantees)
…
4. In consideration of receiving these rights the Grantees agree to pay up to $150,000.00 to the Grantors based upon the sales of the bottled water at the event on the basis of the following formula:
600,000 bottles sold $18,750.00 (excluding sales to security, police and emergency personnel)
650,000 bottles sold $37,500.00 (excluding sales to security, police and emergency personnel)
700,000 bottles sold $56,250.00 (excluding sales to security, police and emergency personnel)
750,000 bottles sold $75,000.00 (excluding sales to security, police and emergency personnel)
800,000 bottles sold $93,750.00 (excluding sales to security, police and emergency personnel)
850,000 bottles sold $112,500.00 (excluding sales to security, police and emergency personnel)
900,000 bottles sold $131,250.00 (excluding sales to security, police and emergency personnel)
Over 950,000 bottles sold $150,000.00 (excluding sales to security, police and emergency personnel)
4a. Excludes sales to Vendors. [Handwritten in original.]
5. The Grantees also agree that they will pay the Grantors a royalty fee of 50% of the total gross sales of July 30, 2003.
[122] It is clear from the preamble set out above that Vrozos was entitled to the initial payment of $100,000. It is equally clear from the preamble that Wahta paid that sum. This matter was never in dispute. Nothing more need be said about the $100,000 initial fee.
[123] The real question is how clauses 4 and 5 are to be interpreted – in the way that Vrozos contends for or as the trial judge did. Both interpretations are available. The strongest argument favouring Vrozos’s interpretation is the word “also” in clause 5 of the agreement. However, the structure of the Wahta contract favours the interpretation placed on it by the trial judge. That is, clause 4 establishes an escalating scale of payments based on the numbers sold but the scale ends with a fee for the sale of 950,000. What is to happen when sales exceed that? Clause 5 provides the answer by stipulating that Vrozos is to be paid 50% of total gross sales.
[124] In our view, the interpretation of the trial judge is to be preferred as it is consistent with the true intention of the parties and is more commercially reasonable. In coming to this conclusion, we are guided by the words of the Supreme Court in Consolidated Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co., [1980] 1 S.C.R. 888, at p. 901:
[T]he normal rules of construction lead a court to search for an interpretation which, from the whole of the contract, would appear to promote or advance the true intent of the parties at the time of entry into the contract. Consequently, literal meaning should not be applied where to do so would bring about an unrealistic result or a result which would not be contemplated in the commercial atmosphere in which the insurance was contracted. Where words may bear two constructions, the more reasonable one, that which produces a fair result, must certainly be taken as the interpretation which would promote the intention of the parties. Similarly, an interpretation which defeats the intention of the parties and their objective in entering into the commercial transaction in the first place should be discarded in favour of an interpretation of the policy which promotes a sensible commercial result. [Emphasis added.]
[125] What was the true intent of the parties? Because the contract is ambiguous on its face (i.e. more than one interpretation is reasonably available), the court can consider extrinsic evidence in order to resolve the ambiguity. That evidence shows that both Vrozos and Wahta estimated that concertgoers would consume approximately 1,000,000 to 1,500,000 bottles of water. Accordingly, it makes sense that they would have intended to provide for royalties if sales were to fall within that range. On Vrozos’s interpretation, there is nothing in the contract that reflects this intention. The trial judge’s interpretation, however, is fully consonant with the parties’ intentions.
[126] More importantly, Vrozos’s interpretation does not produce a fair or reasonable result. As Wahta points out, on Vrozos’s interpretation, he would get double compensation for every bottle of water sold above 600,000. To see how unfair and unreasonable this is, one has only to look at Vrozos’s own calculations. On those calculations, Wahta owes him hundreds of thousands of dollars above and beyond the initial $100,000 it paid him, despite having suffered enormous losses. The trial judge’s interpretation leads to a fair and reasonable result for both parties. For the reasons given by the Supreme Court in Consolidated Bathurst, the trial judge’s interpretation can be taken to best reflect the parties’ true intentions.
[127] Accordingly, we would dismiss this ground of appeal.
[128] Vrozos submits that the trial judge erred in finding fraud because fraud was not pleaded and, in any event, he says that there was no evidence of fraud.
[129] We see nothing in these submissions.
[130] Given the factual allegations in Wahta’s statement of claim and the evidence at trial, including that of Vrozos himself, it could come as no surprise to Vrozos that the trial judge found he had committed fraud.
[131] The suggestion that there was no evidence on which the trial judge could find fraud is ludicrous. There are numerous instances in which Vrozos took and kept money that belonged to Wahta. Two especially egregious examples will suffice to dispose of Vrozos’s argument on this matter.
[132] After the concert was over, Vrozos went into Wahta’s money counting trailer and took the sale proceeds. He put the money into his car and drove off. He had no authorization for this. The weight of the money was so great that apparently the rear end of Vrozos’s car was barely off the ground, as he drove away. When confronted the following day, Vrozos returned approximately $100,000 in coins to Wahta. To date, he has not repaid $478,000, the balance of the money which he took that night. Vrozos himself concedes these events took place.
[133] The second example relates to the hangar. The trial judge singled out Vrozos’s conduct in this regard when making his award of punitive damages and with good reason. It will be recalled that this incident consisted of Wahta paying Vrozos $20,000 on the faith of his promise that he would obtain a hangar to house Wahta employees the night before the concert. Vrozos did not do this – indeed, he took no steps whatsoever to rent the hangar – with the result that the Wahta employees were forced to spend the night in a field. Wahta had to pay its employees an additional $120,000 to induce them to stay and work at the concert.
[134] The essence of fraud is deceit which leads to personal gain at another’s expense. Can it seriously be contended that the trial judge was not entitled to find fraud in these circumstances?
[135] The trial judge was fully justified in the factual findings he made. As we read the record, those findings were inescapable. The trial judge was also fully justified in holding that Vrozos had committed fraud. The third and fourth grounds of the Vrozos appeal are dismissed.
[136] Vrozos concedes that he owes Wahta $20,000 for the fee he collected to rent a hangar and the $120,000 in extra labour costs that resulted from his failure to rent the hangar. He maintains that these damages lie in contract, not in tort. Having conceded these amounts are owing, we find it unnecessary to say anything more on the matter.
[137] Vrozos disputes two aspects of the $60,000 damage at large award.
[138] First, with respect to the Pizza Pizza deal, Vrozos says he disclosed the deal to Barber on the day of the concert and Barber agreed to accept $10,000 in exchange for allowing the deal to happen. Vrozos contends that Wahta’s entitlement to the $10,000 should be conditional on his first receiving it from Pizza Pizza. He testified at trial that he had not received the money, and therefore Wahta should not be entitled to $10,000.
[139] We disagree. We accept that damages for his actions in respect of Pizza Pizza should be quantified on contractual principles as they amounted to a breach of the exclusivity clause in the Wahta contract. Having said that, there is no issue as to quantification because on Vrozos’s own testimony, the parties agreed on the amount: $10,000.
[140] It appears that the trial judge disbelieved Vrozos on the question of whether Vrozos had received the money from Pizza Pizza. At para. 19(e) of the reasons, the trial judge states that Vrozos “made a side agreement with Pizza Pizza allowing it to sell water on the site and collected $10,000 from Pizza Pizza without disclosure to the plaintiffs”. It is trite law that the trier of fact can believe some, none or all of a witness’s testimony. The trial judge was entitled to disbelieve Vrozos on this point. However, whether Vrozos received the payment from Pizza Pizza is irrelevant. The agreement he reached on this matter with Barber was not made conditional on Vrozos receiving the money from Pizza Pizza. Accordingly, Vrozos owes Wahta $10,000 for his breach of contract flowing from his deal with Pizza Pizza.
[141] Second, with respect to the Paragon Blu deal, Vrozos argues that it was a political concession based on a request by Dennis Mills to allow Paragon Blu to sell water at wholesale prices to barbecue vendors. Vrozos argues that Montour agreed to this deal on behalf of Wahta. However, the trial judge found that this was untrue. Vrozos argues that this was not open to the trial judge because there was no evidence to contradict his testimony.
[142] There is nothing to the submission that the trial judge had to accept Vrozos’s testimony in the absence of contradictory evidence. As we have already pointed out, the trier of fact is entitled to accept some, none or all of the testimony of a witness.
[143] Again, we accept that damages flowing from Vrozos’s agreement with Paragon Blu lie in contract and not in tort because they constituted breaches of the exclusivity clause in the Wahta contract. The question is the effect of this conclusion on the quantum of damages.
[144] Vrozos authorized Paragon Blu to sell up to 300,000 bottles of water to the barbecue vendors. He did so in breach of the Wahta contract. Had Vrozos not made the deal with Paragon Blu, Paragon Blu would have had to have purchased the water from Wahta. Accordingly, it can be assumed that Wahta would have sold the same quantity of bottled water to the barbecue vendors as Paragon Blu.
[145] The Paragon Blu invoice indicates that the wholesale price for its water was $7.50 per case. 300,000 bottles is 12,500 cases. If one assumes that Wahta would have wholesaled its water at the same price as Paragon Blu, Wahta would have earned $93,750 from sales to the barbecue vendors. Vrozos is liable in damages in the amount of $93,750 to Wahta for this breach.
[146] After damages for the Pizza Pizza and Paragon Blu deals are properly quantified on contractual principles, they must be removed as two of the three elements underlying the $60,000 damages at large award. The damages at large award must be adjusted to take into account that it is only designed to compensate Wahta for the third component. It will be recalled that the third component related to the $8,900 that Wahta paid to rent trailers used personally by Vrozos, and the gators, procured by Wahta, which Vrozos rented to Molson for $2,500. In the circumstances, a figure of $10,000 is adequate compensation to Wahta.
[147] Vrozos does not dispute the other elements of the damage award against him.
[148] In light of the foregoing, the damages award against Vrozos should be modified in the following way. The $60,000 damages at large award is reduced to $10,000. The sum of $120,000 for extra labour costs remains, albeit for breach of contract rather than the tort of intentional interference with economic relations. The existing damage award of $531,616 for breaches of contract must be increased to $635,366 to allow for damages of $10,000 and $93,750, in respect of the Pizza Pizza and Paragon Blu deals. Accordingly, the total damage award (excluding punitive damages) against Vrozos is $765,366, plus prejudgment interest.
[149] Unlike the Molson claim in respect of damages, the increase in damage award against Vrozos is warranted despite the absence of a cross appeal. Vrozos raised the issue of the quantification of damages and asked that damages be set on the basis of contractual principles. We accepted that argument and corrected the quantum accordingly. As Vrozos got what he asked for, he cannot now be heard to complain about the result.
(6) Did the trial judge err in awarding punitive damages?
[150] Vrozos submits that the trial judge erred in awarding punitive damages. He argues that imposing punitive damages in the circumstances of a breach of a commercial contract is rare. He also contends that through the damage awards that were made, Wahta has been made whole so there is no basis on which to make a punitive damage award.
[151] We disagree.
[152] To successfully claim punitive damages in an action for breach of contract, the plaintiff must meet two requirements. First, the plaintiff must establish that there was an independently actionable wrong and, second, the plaintiff must establish that the defendant’s conduct was sufficiently malicious, oppressive and high-handed that it offends the court’s sense of decency: Whiten v. Pilot Insurance Co., [2002] 1 S.C.R. 595, at paras. 36, 78.
[153] The trial judge’s determination that Vrozos committed fraud meets the first requirement of an independently actionable wrong. No more need be said on this point as it has been dealt within the context of the third and fourth issues in the Vrozos appeal.
[154] Was Vrozos’s conduct sufficiently egregious that it meets the second requirement? Although the threshold for this requirement is high, on the findings of the trial judge, it seems virtually inconceivable that this is contested.
[155] Punitive damages are most often awarded in cases where one party exercises a good deal of influence or authority over another and abuses that influence or authority to his or her own advantage: see Whiten, at para. 114. However, this court has made clear that such a power imbalance between the parties is not a necessary pre-condition to an award of punitive damages. Thus, punitive damages have been awarded in cases of libel and slander (Hill v. Church of Scientology of Toronto, [1995] 2 S.C.R. 1130), sexual assault (Norberg v. Wynrib, [1992] 2 S.C.R. 226), and personal injury resulting from drinking and driving (McIntyre v. Grigg (2006), 83 O.R. (3d) 161 (C.A.)). As this court stated in McIntyre v. Grigg, at para. 60:
An award of punitive damages therefore requires the defendant to have engaged in extreme misconduct. The type of conduct required to attract punitive damages has been described in many ways, such as: malicious, oppressive, arbitrary and high-handed that offends the court’s sense of decency... a marked departure from ordinary standards of decent behaviour... harsh, vindictive, reprehensible and malicious... offends the ordinary standards of morality and decency... arrogant and callous... egregious... high-handed and callous... arrogant, callous of the plaintiff’s rights and deliberate... outrageous or extreme... highly unethical conduct which disregards the plaintiff’s rights... and recklessly exposing a vulnerable plaintiff to substantial risk of harm without any justification... [citations omitted]
[156] In determining whether the threshold has been met, it is not necessary to show that the defendant’s conduct meets one or several of the above adjectives. Rather, the analysis must focus on whether the conduct in question is so serious that it engages the policy goals that underlie punitive damages: “[T]o give a defendant his or her just desert (retribution), to deter the defendant and others from similar misconduct in the future (deterrence), and to mark the community’s collective condemnation (denunciation) of what has happened”: Whiten, at para. 94. Or, as the Supreme Court said in Honda Canada Inc. v. Keays, [2008] 2 S.C.R. 362, at para. 68, the conduct must be “such that by any reasonable standard it is deserving of full condemnation and punishment”.
[157] The trial judge correctly set out a number of the legal principles governing an award of punitive damages. He was clearly aware of the purposes such an award is meant to serve. He also called on the parties for additional submissions on the issue of punitive damages to ensure that they were fully heard on the matter.
[158] We will not repeat again the numerous reprehensible ways in which Vrozos violated the trust that Wahta reposed in him. It is clear that at every turn, that trust and confidence was thoroughly abused by Vrozos for his own personal gain in ways that were utterly dishonest and gratuitous. Nor will we repeat the numerous findings of the trial judge that demonstrate Vrozos’s flagrant disregard for the basic legal principles that govern contractual dealings between parties. It is sufficient to note that the trial judge repeatedly denounced Vrozos’s conduct in the strongest possible terms.
[159] The trial judge’s award of punitive damages is fully justified. Vrozos’s conduct, as found by the trial judge, cries out for an award that demonstrates retribution, deterrence, and denunciation. By any reasonable standard, Vrozos’s conduct is deserving of full condemnation and punishment.
(7) Conclusion on the Vrozos Appeal
[160] For the foregoing reasons, we would vary the damage award against Vrozos to $765,366. The punitive damage award of $50,000 remains unchanged.
[161] Although there will be some changes to the Judgment as a result of this appeal, we would make only one change to the existing costs orders.
[162] The trial judge ordered Molson to pay Wahta costs of $264,651.93, plus $23,899.61 in disbursements. This represented 55% of Wahta’s costs award. He ordered Vrozos to pay Wahta costs of $216,533.39, plus $19,554.23 in disbursements, which represented the remaining 45% of Wahta’s costs award.
[163] The trial judge found that the damage awards exceeded Wahta’s offer to settle its claims with Molson and Vrozos for $1.1 million. He ordered costs on a partial indemnity basis to the date of the offer and a substantial indemnity basis thereafter. The effect of these appeals is to increase the damage awards to Wahta so the trial judge’s reasoning remains intact.
[164] The trial judge exercised his discretion in apportioning costs. He made no error in principle nor did he act unreasonably. There is no basis on which to disturb the apportionment.
[165] The one change that must be made relates to Molson’s success in relation to Vrozos’s crossclaim against it. The effect of the appeal is that Molson succeeded in having Vrozos’s crossclaim against it dismissed. Accordingly, Molson is entitled to its trial costs from Vrozos in that regard. If Molson and Vrozos are unable to agree on those costs, they are directed to return to the trial judge to have them fixed.
[166] For the reasons given, we would allow Molson’s appeal in only one respect, that relating to the Vrozos crossclaim. We would amend the Judgment by:
1. deleting para. 3 of the Judgment;
2. dismissing Vrozos’s crossclaim against Molson;
3. dismissing Molson’s crossclaim against Vrozos; and
4. ordering Vrozos to pay Molson the costs of his crossclaim, as agreed to by the parties or set by the trial judge.
[167] For the reasons given, we would dismiss Vrozos’s appeal but vary para. 2 of the Judgment to require Vrozos to pay the plaintiffs the sum of $765,366.
[168] Given the complexity of these appeals, the court agreed to accept written submissions on the matter of costs after its decision was released. If the parties are unable to agree on costs, they may make brief written submissions on the same within fifteen days of the date of release of these reasons.
RELEASED: SEP 03 2010 (“E.E.G.”)
“E. E. Gillese J.A.”
“H. S. LaForme J.A.”
“I agree. R. G. Juriansz J.A.”
[1] The trial judge made no finding as to how many bottles of water were actually sold by Wahta, although at para. 47 of the reasons, he says that its retail sales “did not exceed 500,000 bottles”. On the record, the best evidence supports a finding that Wahta sold approximately 250,000 bottles. .
[2] Trial Reasons, at para. 5.
[3] Ibid.
[4] Ibid., at para. 21.
[5] Ibid.
[6] Ibid., at para. 26.
[7] Trial Reasons, at paras. 33-34
[8] Although the parties agreed that the standard price was $3.00 per bottle, no cross appeal has been taken from the trial judge’s finding that $2.50 per bottle was a reasonable average price. It may be that this figure was used because Wahta’s expert evidence indicated that bottled water was sold at 2 for $5.00.
[9] See clauses 4 and 4(a) of the Wahta contract. Vrozos does not argue otherwise.