Indexed as:

997724 Ontario Inc. v. 407430 Ontario Ltd.




997724 Ontario Inc., applicant/respondent, and

407430 Ontario Ltd., Al Katzman Enterprises Ltd., 785097

Ontario Inc., 771976 Ontario Inc., appellants, and

State Mortgage Corporation et al., respondents


[1995] O.J. No. 3378


Court File No. C22087



 Ontario Court of Appeal

 Toronto, Ontario


Houlden, McKinlay and Abella JJ.A.


Heard: October 30 and 31, 1995.

 Judgment: November 3, 1995.


(3 pp.)


Practice -- Appeals -- General principles -- Duty of appellate court regarding findings of fact and calculations of trial judge.


This was an appeal from a decision that the appellants 407430 Ontario Ltd. and Al Katzman Enterprises Ltd. were indebted to the respondent 997724 Ontario Ltd. in the amounts of $1,000,000.00 principal and $125,000.00 interest. The trial judge held that an acknowledgement and consent provided by the appellants was a valid document, was not induced by misrepresentation, and was not subject to set-off.

HELD: The appeal was dismissed. In the appeal court's opinion, the amount owing to 997724 was correctly set out in the judgment. The court agreed with the trial judge's conclusions as to amounts due and set-offs as between the various parties.



R.G. Colautti and G.A. Campbell, counsel for the appellant, 407430 Ontario Ltd., Al Katzman Enterprises Ltd., 785097 Ontario Inc. and 771976 Ontario Inc.

Mark Goodman and Jeffrey Radnoff, counsel for the respondents, State Mortgage Corporation, International Freehold Financial Services Limited, and Yale Kline Levitsky Feldman Incorporated.

Lorne Silver and Robert Cohen, counsel for the respondent 997724 Ontario Inc.





The following judgment was delivered by

1     THE COURT (endorsement):-- For some time, Spence J. has been engaged with great skill in unravelling the financial dealings of the parties. In his judgment of June 16, 1995, the learned judge found that the appellants, 407430 Ontario Ltd. and Al Katzman Enterprises Ltd., were indebted to the respondent 997724 Ontario Inc. ("997724") in the amount of $1,000,000.00 on account of principal together with interest of $125,000.00. When the $1,000,000.00 loan, on which this part of the judgment is based, was made to Ron McCowan, the lender wanted to be assured that $1,000,000.00 for principal and $500,000.00 for interest was owing on the debentures that were being assigned as security for the loan. The appellants gave that assurance in the acknowledgement and consent which it provided to International Freehold Financial Services Limited ("IFFSL"), and the loan was made to McCowan. Without the acknowledgement and consent, the loan would not have been made. Spence J. correctly held that the acknowledgement and consent was a valid document, that it was not induced by misrepresentation and that it was not subject to set-off. IFFSL assigned the loan and all security held by it to 997724. In our opinion, the amount owing to 997724 is correctly set out in the judgment of June 16, 1995.

2     The set-offs allowed by Spence J. for $300,000.00 and for taxes as against respondents other than 997724 are not being contested in this appeal.

3     With respect to the alleged set-off for $1,612,614, even if the Chittel Report was admissible, in our opinion, it does not assist the appellants. When the purchase was made by the appellants, no amount was shown as being owing by McCowan. The purchaser was paying $4,000,000 for the assets shown on the August 19, 1988 balance sheet of the vendor. If the purchaser were now to be allowed a set-off for the $1.6 million dollars, it would be receiving an unexpected and unwarranted windfall. We agree with Spence J. that the appellants are not, in the circumstances, entitled to a set-off under the debenture in respect of the alleged loan of $1.6 million. The amount owing for federal and Ontario income taxes and Ontario corporation taxes arising out of the $1.6 million transaction, as Spence J. held, are properly set-off against the amount due under the debentures. This, of course, does not affect 997724, but only the other respondents.

4     For these reasons, the appeal is dismissed with costs.