Ag v. Gaming Lottery Corporation

Ag v. Gaming Lottery Corporation Collection Decisions of the Court of Appeal Date 2000-03-02 Docket numbers C32855 Judges Weiler, Karen Merle Magnuson; Rosenberg, Marc; Goudge, Stephen Thomas Subject Civil Decision Content DATE: 20000302 DOCKET: C32855 COURT OF APPEAL FOR ONTARIO RE: BANK LEU AG (Plaintiff) –and– GAMING LOTTERY CORPORATION, HELIX CAPITAL CORPORATION, HELIX CAPITAL CORP. LTD., MONTREAL TRUST COMPANY OF CANADA, EQUITY TRANSFER SERVICES INC., THE ROYAL BANK OF CANADA and GUIDO FRANZ-JOSEPH BENSBERG (Defendants) AND BY CROSSCLAIM: GAMING LOTTERY CORPORATION (Plaintiff by Crossclaim/Appellant) –and– HELIX CAPITAL CORPORATION, HELIX CAPITAL CORP. LTD., GUIDO FRANZ-JOSEPH BENSBERG and THE ROYAL BANK OF CANADA and EQUITY TRANSFER SERVICES INC. (Defendants to the Crossclaim/Respondent) AND RE: EQUITY TRANSFER SERVICES INC. (Plaintiff by Crossclaim/Respondent) –and– GAMING LOTTERY CORPORATION (Defendant by Crossclaim/Appellant) AND BY THIRD PARTY CLAIM: GAMING LOTTERY CORPORATION (Defendant/ Claimant) –and– GARY L. MOORE, STEPHEN E. DADSON, COGLAN WIZINSKY DADSON & LONGPRÉ, SANDY ANDERSON, NORTH SHORE CREDIT UNION, JAMES ERICKSTEEN, CHARLES ANTHONY FERRACONE, JAMES W. FARRELL, JILL HALL, ROBERT W. HLADUN, HLADUN & COMPANY, MAX JOSEF STRAUSS, KHADJAVI STRAUSS, CLAUS KOERNER, PAUL M. STEIN and CASSELS BROCK & BLACKWELL (Third Parties) BEFORE: WEILER, ROSENBERG and GOUDGE JJ.A. COUNSEL: Allan Sternberg, for the appellant Gaming Lottery Corporation John Harild, for the respondent Equity Transfer Services Inc. HEARD: March 1, 2000 On appeal from the summary judgment of Ground J. dated August 24, 1999. E N D O R S E M E N T [1] The only ground of appeal pursued by the appellant is that contained in paragraph 87 of its factum: The motions judge should have allowed the GLC to proceed to trial on its claim that a duty was triggered on the facts of this case obliging Equity Transfer not to issue the certificate where Equity Transfer knew from its review that neither the transaction nor the lawyer’s explanation of it made any sense and where Equity Transfer knew from the nature of its transfer agency business that the instruction at the outset to refuse later on to register a stranger as shareholder despite the stranger presenting for cancellation a signed off certificate made no sense, was unworkable, was inconsistent with the nature of a share, and inconsistent with the requirements for and the nature of a transfer agent’s function. [2] As a result, GLC asked that the order of Ground J. granting Equity Transfer’s motion for summary judgment to dismiss GLC’s crossclaim against Equity Transfer be set aside. [3] The appellant agrees that Equity Transfer acted in good faith. The appellant submits that Equity Transfer failed to exercise its duty of due diligence under s.91(1) of the Ontario Business Corporations Act. The appellant concedes that this provision was not brought to the attention of the motions judge. The motions judge dealt with the matter on the basis that Equity Transfer had a common law duty to act reasonably. The appellant submits that, although Equity Transfer spoke to legal counsel, it did not seek legal advice but only obtained further details of the transaction. The appellant further submits that, even if legal advice was obtained, Equity Transfer was under a further duty not to act until it had obtained an opinion from its own counsel about whether it was unlawful to sign off on the shares. [4] Equity Transfer had a concern about issuing a share certificate that said shares were paid for when they were not and raised this concern with GLC’s inside counsel. In the circumstances, Equity Transfer did not fail, either in its statutory duty of due diligence or its common law duty, and the motions judge was correct in dismissing the crossclaim against Equity Transfer. [5] The motions judge also ordered that Equity Transfer was entitled on its crossclaim against GLC to contribution and indemnity from GLC for all amounts for which Equity Transfer might be found liable in the action. In our opinion, this order is overly broad and premature and we would amend paragraph 2 of the order of the motions judge to read as follows: Equity Transfer Services Inc. is entitled on its crossclaim against the defendant Gaming Lottery Corporation, to contribution and indemnity in accordance with paragraph 9 of the agreement between them. [6] Having regard to s.91 of the Ontario Business Corporations Act, it is our opinion that paragraph 9 of the agreement providing for indemnification only applies with respect to claims by third parties. As a result, we would strike paragraph 3 of the order of Ground J. We would order that Equity Transfer is entitled to its costs of the motion for judgment on a party-and- party basis before the motions judge. [7] There were two issues on this appeal. The respondent has been successful on the main one. Accordingly, the respondent is entitled to its party-and-party costs of this appeal. Signed: “K.M. Weiler J.A.” “M. Rosenberg J.A.” “S.T. Goudge J.A.”