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Please find below our summaries of the civil decisions of the Court of Appeal for the week of April 12, 2021.

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Marshallzehr Group Inc. v. Ideal (BC) Developments Inc. addressed the interpretation of a commitment letter for a commercial loan cancelled by the lender as a result of the borrower’s failure to satisfy the conditions of financing (the postponement of a pre-existing mortgage). At trial, the respondent was awarded certain amounts for its fees and expenses, including the lender’s fee, which was payable out of the amount advanced. The Court of Appeal found for the lender on most issues, including its right to cancel the financing, but it sided with the borrower and determined the lender’s fee had not been earned because no funds were advanced. The result turned on the specific wording of the commitment letter.

Nemchin v. Green dealt with the statutory assignment and trust provisions of section 267.8 of the Insurance Act which required a plaintiff who had been compensated for their injuries by a defendant to assign collateral benefits they received to the defendant’s insurer. The purpose of these provisions is to avoid double-recovery.

Makeeva v. Makeev is a family law decision. The Court allowed the cross-appeal because the trial judge failed to deduct the value of the respondent’s date of marriage assets (a condo that was not a matrimonial home) when calculating the equalization payment to be made.

Please join us on April 27, 2021, from 5:30-7:45pm for our fifth annual “Top Appeals” CLE, which will take place via Zoom. We are set to have a great turnout. Justice Benjamin Zarnett will be co-chairing the event with myself and Chloe Snider of Dentons. Following is our excellent slate of decisions and panelists:

2020 Update from the Bench

The Honourable Benjamin Zarnett, Court of Appeal for Ontario

Panel 1 – Advocacy Practice Tips from the Court

Girao v. Cunningham, 2020 ONCA 260

OZ Merchandising Inc. v. Canadian Professional Soccer League Inc., 2020 ONCA 532

Welton v. United Lands Corporation Limited, 2020 ONCA 322

Jordan Goldblatt, Adair Goldblatt Bieber LLP

Sara Erskine, Weintraub Erskine Huang LLP

Panel 2 – Negligently Designed Financial Products – A New Age in Product Liability?

Wright v. Horizons ETFS Management (Canada) Inc., 2020 ONCA 337

Seumas Woods, Blake, Cassels & Graydon LLP

Alistair Crawley, Crawley MacKewn Brush LLP

Elizabeth Bowker, Stieber Berlach LLP

Panel 3 – Developments in Insolvency Law – Priority of Construction Trust Claims and Landlord Claims in Bankruptcy

Urbancorp Cumberland 2 GP Inc. (Re), 2020 ONCA 197

7636156 Canada Inc. (Re), 2020 ONCA 681

Ken Kraft, Dentons LLP

Kevin Sherkin, Miller Thomson LLP

D.J. Miller, Thornton Grout Finnigan LLP

There is still plenty of time to register for the program by visiting the OBA’s website.

Wishing everyone a safe and pleasant weekend.

John Polyzogopoulos
Blaney McMurtry LLP
416.593.2953 Email

Table of Contents

Civil Decisions

Marshallzehr Group Inc. v. Ideal (BC) Developments Inc., 2021 ONCA 229

Keywords: Contracts, Breach, Interpretation, Commercial Reasonableness, Duty of Good Faith and Fair Dealing, Debtor-Creditor, Commercial Lending, Commitment Letters, Conditions, Termination, Damages, Lender’s Fees, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, Ventas, Inc. v. Sunrise Senior Living Real Estate Investment Trust (2007), 85 O.R. (3d) 254 (C.A.), Deslaurier Custom Cabinets Inc. v. 1728106 Ontario Inc., 2017 ONCA 293, Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District, 2021 SCC 7, Chijindu v. Prudential Property Management, 2014 ONSC 4759

Makeeva v. Makeev , 2021 ONCA 232

Keywords: Family Law, Spousal Support, Child Support, Lump Sum Payments, Imputed Income, Equalization of Net Family Property, Date of Marriage Assets, Reopening of Case, Fresh Evidence, Divorce Act, section 15.3(1), Family Law Act, section 38.1(1)

Nemchin v. Green, 2021 ONCA 238

Keywords: Insurance, Subrogation, Collateral Benefits, Long-term Disability, Statutory Assignment of Rights and Benefits, Statutory Trusts, Civil Procedure, Procedural and Natural Justice, Insurance Act, R.S.O. 1990, c. I.8, Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), s. 267.8, Lewin on Trusts, 19th ed. (London: Sweet & Maxwell, 2015), Rodaro v. Royal Bank of Canada (2002), 59 O.R. (3d) 74 (C.A.), Kant v. The Queen, [2001] 2 C.T.C. 2703 (T.C.C.), Bapoo v. Co-Operators General Insurance Co. (1997), 154 D.L.R. (4th) 385 (Ont. C.A.), leave to appeal refused, [1998] S.C.C.A. No. 62, Cadieux v. Cloutier, 2018 ONCA 903, leave to appeal refused [2019] S.C.C.A. No. 63, Carroll v. McEwen, 2018 ONCA 902, Cobb v. Long Estate, 2017 ONCA 717, El-Khodr v. Lackie, 2017 ONCA 716, leave to appeal refused, [2017] S.C.C.A. No. 461, Re Scott, [1948] SASR 193, Frederick v. Aviation & Gen. Ins. Co., [1966] O.J. No. 1064 (C.A.), Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27, Pugh v. Canada, [2000] T.C.J. No. 585, Bouchard v. Canada, 2008 TCC 408.

Short Civil Decisions

Lengyel v. TD Home and Auto Insurance, 2021 ONCA 237

Keywords: Torts, Negligence, MVA, Civil Procedure, Settlements, Court Approval, Litigation Guardians, Appeals, Jurisdiction, Kavuru (Litigation guardian of) v. Heselden, 2014 ONSC 6718.

CIVIL DECISIONS

Marshallzehr Group Inc. v. Ideal (BC) Developments Inc., 2021 ONCA 229

[Rouleau, Brown and Miller JJ.A.]

Counsel:

M.A. Russell, for the appellants

S. Schwartz, for the respondents

Keywords: Contracts, Breach, Interpretation, Commercial Reasonableness, Duty of Good Faith and Fair Dealing, Debtor-Creditor, Commercial Lending, Commitment Letters, Conditions, Termination, Damages, Lender’s Fees, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, Ventas, Inc. v. Sunrise Senior Living Real Estate Investment Trust (2007), 85 O.R. (3d) 254 (C.A.), Deslaurier Custom Cabinets Inc. v. 1728106 Ontario Inc., 2017 ONCA 293, Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District, 2021 SCC 7, Chijindu v. Prudential Property Management, 2014 ONSC 4759

facts:

The respondents, Marshallzehr Group Inc. (“MZ”), agreed to advance funds to the appellants, Ideal (BC) Developments Inc. (“Ideal”), for a residential development project under a commitment letter (the “CL”). Under the terms of the CL, MZ was going to syndicate the loan but was not required to advance any funds to Ideal until Ideal had satisfied certain preconditions. Shortly after the CL was executed, the syndicated lenders began to advance funds, but because Ideal had not satisfied the preconditions, MZ transferred the funds to its counsel to be held in trust pending the satisfaction of the preconditions. MZ informed Ideal that interest was beginning to accrue on the funds.

Roughly one month later, MZ notified Ideal that it was terminating the CL because the funding conditions had not been met. One of the predominant issues was that MZ and Ideal could not agree on a postponement and standstill agreement for a pre-existing first mortgage. The pre-funding conditions required the execution of all ancillary agreements including postponements in a form satisfactory to MZ (the “Subordinate Financing Clause”). The parties could never agree on the form of these postponements. No funds were ever advanced to Ideal.

MZ brought this action to recover its fees and expenses and Ideal counter-claimed for damages caused by a wrongful termination of the CL by MZ. MZ moved for summary judgment which was granted in favour of MZ both on the main action and the counter-claim.

issues:

(1) Did the motion judge err in determining that MZ had the right to terminate the CL and thus dismissing the counter-claim?

(2) Did the motion judge err in calculating the fees and expenses to which MZ was entitled to upon cancellation of the CL?

holding:

Appeal allowed in part.

reasoning:

(1) Did the motion judge err in determining that MZ had the right to terminate the CL and thus dismissing the counter-claim?

No. This ground of appeal concerned the motion judge’s interpretation of the contract, the CL. The standard of review was that articulated in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53. Ideal submitted that the motion judge committed an error on an extricable question of law, namely that the motion judge failed to interpret the provisions of the CL as a whole and thus failed to assign meaning to all of the contested terms.

The CL covered two distinct time periods: i) the time between signing the CL and advancing the funds (the pre-closing period); and ii) the time from advancing the funds until the end of the 13 month term of the loan (the post closing period). The conditions to funding related to the pre-closing period whereas the section of the CL dealing with default by Ideal and termination for default (the “Demand and Default Provisions”) related to the post closing period. There was also a general cancellation right in the CL which gave MZ the right to cancel the undrawn portion of the loan at any time, for any reason and without notice.

The crux of Ideal’s arguments was that in order to terminate the CL, MZ needed to rely on the Demand and Default Provisions, which required MZ to notify Ideal of a default and give Ideal an opportunity to remedy the default. Ideal argued that since MZ never gave notice or an opportunity to cure, the termination of the CL was wrongful.

The motion judge held that the cancellation right required MZ to have a reason for cancelling and that MZ’s reason for doing so was that it became apparent that Ideal could not or would not satisfy the pre-funding conditions. Ideal argued on appeal that the Demand and Default Provisions needed to be given meaning and priority. However, the Court of Appeal rejected this submission because the Demand and Default Provisions only applied after funds had been advanced, which was not the case.

Ideal also argued that the cancellation language only entitled MZ to cancel the undrawn portion of the loan, not terminate the CL entirely. The Court rejected this argument as it was commercially unreasonable. At the time MZ advised Ideal it was terminating the CL, no funds had been advanced and so the full value of the loan was undrawn. The effect of cancelling this portion and terminating the CL were the same – Ideal would not receive any money. While the CL’s language may not have been clear, the motion judge’s finding that MZ could terminate the CL gave practical meaning to all the CL’s terms and was commercially reasonable.

Ideal further argued that the Subordinate Financing Clause treated the parties’ inability to resolve the dispute over standstill agreements as a default and thus MZ had to resort to the Demand and Default Provisions. The Court of Appeal rejected this submission as the Subordinate Financing Clause clearly defined two events of default – the failure to agree to resolve the dispute over the standstill was not one of them. The failure by Ideal to provide security documents in a satisfactory form to MZ materially altered the level of risk MZ was taking on and that gave MZ sufficient reason to rely on the cancellation provision.

Ideal’s last argument on this ground focused on good faith and the duty to exercise contractual discretion in good faith. Ideal argued that when MZ unreasonably demanded a permanent standstill agreement in excess of what was required under the CL and terminated the CL without notice, it breached its duty of good faith. Ideal did not advance this argument before the motion judge. On appeal, Ideal also sought to rely on Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District, 2021 SCC 7. The Court of Appeal refrained from commenting on the ability of an appellant to argue on appeal a pleaded defence it chose not to pursue at trial or the lateness of the hour at which the appellant raised the issue thus depriving the court of the parties’ submissions on the Wastetech decision.

The Court chose instead to address Wastech directly. The Court observed that while Wastech states that contractual discretion must be exercised reasonably, in light of the purpose for which it was conferred, the decision notes that such a duty of good faith “does not displace the detailed, negotiated bargain as the primary source of justice between the parties”. The Court went on to note that in the case at hand, the pre-conditions to financing and the cancellation right existed to define the level of risk that MZ was willing to take on. When Ideal did not or would not meet the conditions, the level of risk was materially altered and so MZ used the cancellation right for the exact purpose it was given for.

(2) Did the motion judge err in calculating the fees and expenses to which MZ was entitled to upon cancellation of the CL?

Yes, in part. The motion judge’s judgment consisted of three awards: i) standby interest; ii) expenses; and iii) a lender fee. The Court of Appeal addressed each of these awards in turn.

Standby Interest

The CL provided that interest would become payable, among other things, upon termination of the CL without any advances having been made. Ideal argued that since MZ had cancelled the CL, not terminated it under the Demand and Default Provisions, the standby interest was not payable. The Court of Appeal rejected this argument, as the practical effect of cancelling the CL under the cancellation provisions was to terminate the CL without advances having been made. The award for standby interest was affirmed.

Expenses and Good Faith Deposit

MZ was entitled to all reasonable expenses including all legal costs and to retain a $50,000 non-refundable good faith bonus regardless of whether Ideal proceeded with the transaction. Ideal submitted that MZ exercising the cancellation provisions did not constitute Ideal failing to proceed with the transaction. The motion judge held, and the Court of Appeal affirmed that the evidence amply supported the finding that Ideal could not or would satisfy the conditions and that the failure to meet the conditions was conduct sufficient to show that Ideal failed to proceed with the transaction. The award for expenses and the good-faith deposit were upheld.

Lender’s Fee

The CL provided that fees for MZ were to be $396,000 and were to be deducted from the initial advance of funds. The motion judge held that the lender’s fee was recoverable despite Ideal’s argument that the lender fee was clearly only payable once an advance was made. The Court of Appeal agreed with Ideal in that the language saying the fee shall be deducted from the initial advance indicates that the fee was not earned until funds were advanced. MZ relied on Chijindu v. Prudential Property Management, 2014 ONSC 4759, however, the Court of Appeal distinguished that case because it did not involve the same language that the lender’s fee was to be deducted from the advance of funds. As well, in Chijindu, the lender had actually advanced funds. The Court of Appeal held that the motion judge erred in awarding MZ its lender’s fee and thus reduced the damage award against Ideal accordingly.

Makeeva v. Makeev, 2021 ONCA 232

[Rouleau, Brown and Miller JJ.A.]

Counsel:

R. Korytko, for the appellant/respondent by way of cross-appeal

J.W. Bruggeman, for the respondent/appellant by way of cross-appeal

Keywords: Family Law, Spousal Support, Child Support, Lump Sum Payments, Imputed Income, Equalization of Net Family Property, Date of Marriage Assets, Reopening of Case, Fresh Evidence, Divorce Act, section 15.3(1), Family Law Act, section 38.1(1).

facts:

The parties separated after fifteen years of marriage and had two children. At trial, the judge ordered the appellant to pay $905 per month in spousal support to the respondent. The trial judge also ordered the appellant to make an equalization payment. After the judge issued her decision, the appellant attempted to reopen the trial and file fresh evidence. The trial judge dismissed this motion largely on the basis that this evidence would not change her original judgment.

The appellant appealed on several grounds. The respondent cross-appealed the equalization payment calculation.

issues:

(1) Did the trial judge err by allowing the interpreter to continue despite the appellant’s objections?

(2) Did the trial judge err by failing to order a lump sum child support payment?

(3) Did the trial judge err in imputing the respondent’s income at $28,000 per year?

(4) Did the trial judge err in awarding spousal support?

(5) Did the trial judge err by failing to admit the fresh evidence?

(6) Did the trial judge err by failing to deduct the value of a date of marriage asset from the respondent’s net family property?

holding:

Appeal dismissed, cross-appeal allowed.

reasoning:

(1) Did the trial judge err by allowing the interpreter to continue despite the appellant’s objections?

No. The appellant alleges that the incompetency of the interpreter led to inaccuracies and omissions in the translation at trial which were substantial and resulted in an unfair trial. The Court of Appeal rejected this. The appellant’s lawyer only raised the issue on the seventh day of the trial. The trial judge gave the appellant three options on how to proceed. The appellant chose to proceed with the interpreter and was therefore precluded from appealing from that choice.

(2) Did the trial judge err by failing to order a lump sum child support payment?

No. The appellant argued that lump sum child support should have been ordered as the respondent had regularly failed to make periodic payments since separation. The Court of Appeal rejected this argument. The issue was one of mixed fact and law. While lump sum payments are appropriate when there is a real risk that periodic payments will not be made, the appellant did not marshal any evidence to suggest that future non-payment of periodic payments was a risk.

(3) Did the trial judge err in imputing the respondent’s income at $28,000 per year?

No. The appellant argued that the respondent was intentionally underemployed and so greater income should have been imputed to him. The appellant argued that given factors such as age, education, experience and health, income should have been imputed to the respondent in the $60,000 range. Alternatively, since the respondent had previously been a truck driver, his previous income in that role of $50,000 should be imputed.

The Court of Appeal rejected this argument and affirmed the trial judge’s decision. The issue was one of mixed fact and law and the respondent could show no error, let alone a palpable and overriding error to justify intervention. There was no evidence indicating that the respondent could earn anything close to $60,000 as a self-employed electrician servicing only Russian speaking people in the GTA. Further, the respondent had to quit his trucking job in 2008 because of chronic back pain so there was no reason to impute that previous income.

(4) Did the trial judge err in awarding spousal support?

No. The appellant submitted that the trial judge did not give sufficient consideration to s. 15.3(1) of the Divorce Act or s. 38.1(1) of the Family Law Act requiring courts to prioritize child support over spousal support. The trial judge found that the respondent had foregone paid work and career opportunities so the appellant could pursue a nursing degree. The respondent was significantly older than the appellant and working a minimum wage job while the appellant had a prosperous career ahead of her. There was a substantial inequality between their incomes and so the trial judge’s decision to award spousal support in the mid-range of the advisory guidelines was reasonable and entitled to deference.

(5) Did the trial judge err by failing to admit the fresh evidence?

No. The appellant sought to adduce fresh evidence after the trial judge had given her decision but before the final order was given. The trial judge refused to admit the evidence because she was of the opinion that had it been before the court, it would not have changed the decision. The Court of Appeal saw no issue with the trial judge’s decision to reject the fresh evidence.

(6) Did the trial judge err by failing to deduct the value of a date of marriage asset from the respondent’s net family property?

Yes. The respondent owned a condo at the time of the marriage, which was sold and the proceeds reinvested. The trial judge found that the condo was not a matrimonial home, but refused to deduct the value of the date of marriage asset from the respondent’s net family property. The respondent submitted that the failure to deduct it was an error. The Court of Appeal agreed and allowed the cross-appeal. The trial judge ought to have deducted that value of the condo or its sale proceeds from the respondent’s net family property. While the trial judge correctly found that it was not a matrimonial home and addressed the proceeds, the trial judge failed to explain why she did not deduct the value, which was an error.

Nemchin v. Green, 2021 ONCA 238

[Roberts, Trotter and Thorburn JJ.A.]

Counsel:

J.Y. Obagi and E. A. Quigley for the appellant, T.N.

S.G. Ross, T. Macmillan and M. Rodrigues for the respondent, Y.G.

Keywords: Insurance, Subrogation, Collateral Benefits, Long-term Disability, Statutory Assignment of Rights and Benefits, Statutory Trusts, Civil Procedure, Procedural and Natural Justice, Insurance Act, R.S.O. 1990, c. I.8, Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), s. 267.8, Lewin on Trusts, 19th ed. (London: Sweet & Maxwell, 2015), Rodaro v. Royal Bank of Canada (2002), 59 O.R. (3d) 74 (C.A.), Kant v. The Queen, [2001] 2 C.T.C. 2703 (T.C.C.), Bapoo v. Co-Operators General Insurance Co. (1997), 154 D.L.R. (4th) 385 (Ont. C.A.), leave to appeal refused, [1998] S.C.C.A. No. 62, Cadieux v. Cloutier, 2018 ONCA 903, leave to appeal refused [2019] S.C.C.A. No. 63, Carroll v. McEwen, 2018 ONCA 902, Cobb v. Long Estate, 2017 ONCA 717, El-Khodr v. Lackie, 2017 ONCA 716, leave to appeal refused, [2017] S.C.C.A. No. 461, Re Scott, [1948] SASR 193, Frederick v. Aviation & Gen. Ins. Co., [1966] O.J. No. 1064 (C.A.), Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27, Pugh v. Canada, [2000] T.C.J. No. 585, Bouchard v. Canada, 2008 TCC 408.

facts:

This case arose out of a motor vehicle accident involving the appellant and respondent where the appellant sustained serious injuries and became totally disabled. As a result, the appellant was awarded substantial damages against the respondent at trial. The appellant’s injuries also triggered coverage for long-term disability income continuation benefits from Sun Life Assurance Company of Canada (“Sun Life”), her employer’s group benefits insurer. Both the appellant and her employer had contributed to the plan, and as a result, Sun Life deducted and remitted income taxes from its payments to the appellant under the plan.

Following the trial, the respondent brought a motion under s. 267.8(12) of the Insurance Act (the “Act”) to require the appellant to assign her rights to the Sun Life benefits to the respondent’s insurer from the date of the judgment. The trial judge granted the respondent’s request and included an additional order that the appellant “top up” any amount paid from Sun Life to the respondent’s insurer to account for the fact that Sun Life deducted applicable income taxes from its payments to the appellant.

The appellant then appealed the trial judge’s order requiring her to top up the amount of the long-term disability benefits that she assigned to the respondent’s insurer. The appellant did not contest the assignment of her benefits to the respondent’s insurer, rather the appellant argued that the trial judge’s order was contrary to the principles of natural justice and exceeded her jurisdiction because neither party sought the top up that she ordered. Further, the appellant argued that the trial judge erred in her interpretation of s. 267.8 of the Act.

issues:

(1) Was the trial judge’s top up order procedurally unfair and contrary to natural justice?

(2) Did the trial judge err in her interpretation and application of s. 267.8 of the Insurance Act?

holding:

Appeal allowed.

reasoning:

(1) Was the trial judge’s top up order procedurally unfair and contrary to natural justice?

Yes. The Court stated that neither party requested that the trial judge make the top up order, nor did the trial judge request submissions from the parties on the issue of top up. Instead, the Court held that the trial judge resolved the rights of the parties, imposed a burden on the appellant, and provided a remedy to the respondent, “on a theory never pleaded and with respect to which battle was never joined”. Therefore, the Court agreed with the parties’ request that it ought to look at the top up question and the underlying issue of the parties’ respective rights and obligations under the statutory assignment, rather than remitting it to the trial judge for a rehearing.

(2) Did the trial judge err in her interpretation and application of s. 267.8 of the Insurance Act?

Yes. The Court found that the trial judge misinterpreted ss. 267.8(9), (10), and (12)(a)(ii) of the Act and applied the trust and assignment provisions in a manner that was contrary to the plain meaning of the legislative text and its purposes. The trial judge also erred by failing to take into account Sun Life’s withholding and remittance of income tax as a statutory trust and its effect on the appellant’s rights under the plan. The legislative purpose of s. 267.8 is to promote fair compensation to injured plaintiffs and prevent double recovery. However, the Court stated that the effect of the trial judge’s order led to an unfair result for the appellant and ran counter to the principle of full compensation because it imposed a financial burden on the appellant that she would not have incurred if she did not have collateral benefits from Sun Life.

The trust provisions under ss. 267.8(9) and (10)

Subsections 267.8(9) and (10) of the Act impose a statutory trust on the payments that a plaintiff actually receives for the benefit of the defendant or the defendant’s insurer. The trust property in this case consisted of the net after-tax payments that the appellant received pre-assignment from Sun Life from the date of the judgment. The appellant, as trustee, was only required to hold in trust and then pay to the respondent’s insurer these actual payments from Sun Life, which were net of tax.

The Court stated that while the trial judge did not expressly address the application of the trust provisions under ss. 267.8(9) and (10) to the amounts received by the appellant pre-assignment, the effect of the order requiring the deduction of the gross amount of the payments to the appellant under the Sun Life plan since the date of judgment resulted in the deduction of more than the amount of the payments actually received and held in trust by the appellant post trial and pre-assignment. Thus, the Court held that the effect of the order was contrary to the provisions of ss. 267.8(9) and (10).

The assignment provisions under s. 267.8(12)(a)(ii)

Subsection 267.8(12)(a)(ii) of the Act permits a defendant to seek the assignment to its insurer of “all rights in respect of all payments to which the plaintiff who recovered damages is entitled in respect of the incident…under an income continuation benefit plan”. In the Court’s view, the trial judge conflated the entitlement of the respondent’s insurer to the rights to the plan benefits with the mechanism of a specific mode of payment (i.e. an assignment), and therefore failed to apply the assignment provisions under s. 267.8(12)(a)(ii) in a manner consistent with the trust provisions. Therefore, the trial judge effectively concluded that the respondent’s insurer was entitled to collect the appellant’s gross benefits as if they were not taxable or as if the appellant had elected to take the entire taxable sum in hand.

Instead, the Court stated that the correct interpretation is that the respondent’s insurer, as assignee, steps into the shoes of the appellant and acquires the entitlement to the rights to the appellant’s benefits subject to all the equities and obligations existing between the appellant and Sun Life under the plan (Frederick v. Aviation & Gen. Ins. Co., [1966] O.J. No. 1064 (C.A.)). Therefore, the assignment of the appellant’s rights under the plan means that the respondent’s insurer is entitled to a credit for the actual payments that the appellant receives under the plan, which in this case meant net of the taxes withheld by Sun Life. The respondent’s insurer is entitled to take whatever steps necessary, at its own expense and with the appellant’s co-operation, as required under s. 267.8(12)(b), to deal with the issue of the tax withholdings with Sun Life and the CRA. However, the respondent’s insurer is not entitled to receive payments greater than those the appellant received.

The trust and assignment provisions are complementary mechanisms

The Court held that the trial judge’s approach failed to take into account the complementary nature of the trust and assignment provisions in the context of s. 267.8 as a whole for two reasons. First, ss. 267.8(9), (10), and (12) provide for two different mechanisms that work together to achieve the same underlying aim of providing compensation without over-compensation. However, the trial judge’s approach instead introduced a discrepancy between the provisions by having the assignment apply to gross pre-tax amounts when the trust did not. Second, the word “payments” should be given the same meaning in each of ss. 267.8(9), (10) and (12). The “payments” referred to in ss. 267.8(9) and (10) are the payments actually received and held in trust by the appellant. Thus, the word “payments” in s. 267.8(12) must refer to the same payments but to be received under the mechanism of an assignment.

Sun Life’s statutory obligations

The Court held that due to the errors in the interpretation and application of the trust and assignment provisions, this led the trial judge to ignore the effect of Sun Life’s withholding and remittance of income taxes to the CRA from the plan payments pursuant to its statutory obligations. As the appellant’s assignee, the respondent’s insurer has all the same rights as against Sun Life as the appellant, and Sun Life has all the same defences, which may include any statutory obligation on the part of Sun Life to withhold and remit taxes to the CRA from the plan payments.

The Court stated that since Sun Life purports to withhold and remit income taxes pursuant to a statutory obligation to the CRA, this means that those monies are imposed with a statutory trust and do not form part of the payments made under the plan. Therefore, so long as Sun Life withholds and remits taxes pursuant to the statutory trust provisions of the Income Tax Act, the assigned rights of the respondent’s insurer are to the net after-tax payments. The Court held that the respondent and its insurer could not complain of this situation, because had they acceded to the appellant’s request to seek a ruling from the CRA on the tax issue, the issues of quantum and liability for taxes following the assignment could have been ascertained. Since they did not, the respondent’s insurer is only entitled to receive what Sun Life pays.

Further, the Court disagreed with the respondent’s submission that the trial judge’s order causes no prejudice to the appellant because she can simply apply for a tax refund and be in no worse position. The Court stated that it was by no means certain that the CRA would agree that the appellant was entitled to a refund of the taxes remitted by Sun Life, and that the appellant would likely be required to incur considerable expense to ascertain whether the CRA accepted this position. Thus, this would further undermine the purpose of full compensation for the appellant.

In conclusion, the Court held that the trial judge’s order should be amended to provide for the assignment from the date of judgment of the appellant’s rights in respect of all payments under the Sun Life plan to the respondent’s insurer, net of all income tax withholdings, so long as Sun Life continued to withhold and remit income taxes to the CRA from the payments made under its plan. This will continue until the appellant reaches the age of 65 or the respondent’s insurer has been fully reimbursed for its payment of the loss of income damages award, whichever event occurs first.

SHORT CIVIL DECISIONS

Lengyel v. TD Home and Auto Insurance, 2021 ONCA 237

[Tulloch, Nordheimer and Jamal JJ.A.]

Counsel:

G.L., in person/responding party

H. Hogan, for the Public Guardian and Trustee/moving party

No one appearing for the defendant

Keywords: Torts, Negligence, MVA, Civil Procedure, Settlements, Court Approval, Litigation Guardians, Appeals, Jurisdiction, Kavuru (Litigation guardian of) v. Heselden, 2014 ONSC 6718

The information contained in our summaries of the decisions is not intended to provide legal advice and does not necessarily cover every matter raised in a decision. For complete information or for specific advice, please read the decision or contact us.

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Good evening.

Please find below our summaries of the civil decisions of the Court of Appeal for the week of April 5, 2021.

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In Farrell v Kavanagh, the Court dismissed a motion to grant a stay pending appeal in an action concerning the validity of two mortgages. Congratulations to Blaneys’ own Reeva Finkel, who acted for some of the successful respondents.

Atlas (Brampton) Limited Partnership involves the interpretation of the Personal Property Security Act. Specifically, the Court found that a pledge of shares accompanied by a term in a security agreement that doubled as a control agreement granting a power of attorney allowing the secured party to effect the transfer of the shares in the event of a default constituted “control” within the meaning of the PPSA generally, and s. 17.1 specifically. Further, the Court also concluded that s. 17.1(2) of the PPSA is not applicable to foreclosures on pledged shares, and that any purported foreclosures must still comply with the procedural notice requirements outlined in Part V of the PPSA, notwithstanding any agreement to the contrary between the parties. The Court found that the notice provided by the secured party in this case before foreclosing was sufficient and that, in any event, there was no evidence that the debtor was in a position to redeem.

Other topics covered this week included child protection, the enforcement of guarantees of debt, security for costs of an appeal in a mortgage enforcement case, and the striking of a claim on the basis that the named plaintiff did not have the legal capacity to sue.

Please mark down April 27, 2021, from 5:30-7:45pm in your calendars for our fifth annual “Top Appeals” CLE, which will take place via Zoom. Justice Benjamin Zarnett will be co-chairing the event with myself and Chloe Snider of Dentons. Following is our excellent slate of decisions and speakers:

2020 Update from the Bench

The Honourable Benjamin Zarnett, Court of Appeal for Ontario

Panel 1 – Advocacy Practice Tips from the Court

Girao v. Cunningham, 2020 ONCA 260

OZ Merchandising Inc. v. Canadian Professional Soccer League Inc., 2020 ONCA 532

Welton v. United Lands Corporation Limited, 2020 ONCA 322

Jordan Goldblatt, Adair Goldblatt Bieber LLP

Sara Erskine, Weintraub Erskine Huang LLP

Panel 2 – Negligently Designed Financial Products – A New Age in Product Liability?

Wright v. Horizons ETFS Management (Canada) Inc., 2020 ONCA 337

Seumas Woods, Blake, Cassels & Graydon LLP

Alistair Crawley, Crawley MacKewn Brush LLP

Elizabeth Bowker, Stieber Berlach LLP

Panel 3 – Developments in Insolvency Law – Priority of Construction Trust Claims and Landlord Claims in Bankruptcy

Urbancorp Cumberland 2 GP Inc. (Re), 2020 ONCA 197

7636156 Canada Inc. (Re), 2020 ONCA 681

Ken Kraft, Dentons LLP

Kevin Sherkin, Miller Thomson LLP

D.J. Miller, Thornton Grout Finnigan LLP

In the meantime, please register for the program by visiting the OBA’s website.

Wishing everyone an enjoyable weekend.

John Polyzogopoulos
Blaney McMurtry LLP
416.593.2953 Email

Table of Contents

Civil Decisions

Madison Joe Holdings Inc. v. Mill Street & Co. Inc., 2021 ONCA 205

Keywords: Contracts, Debtor-Creditor, Promissory Notes, Guarantees, Fair Protection Rule, Civil Procedure, Summary Judgment, Standard of Review, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, Heritage Capital Corp. v. Equitable Trust Co., 2016 SCC 19, Kevin McGuinness, The Law of Guarantee, 3rd ed. (Toronto: Lexis Nexis Canada, 2013)

Goldentuler v. Simmons Dasilva LLP , 2021 ONCA 219

Keywords: Torts, Professional Negligence, Lawyers, Wills and Estates, Civil Procedure, Striking Pleadings, Capacity, Rules of Civil Procedure, Rule 21.01(3)(b), Conveyancing and Law of Property Act, R.S.O. 1990, c. C.34

Farrell v. Kavanagh, 2021 ONCA 213

Keywords: Contracts, Real Property, Mortgages, Torts, Fraud, Civil Procedure, Appeals, Stay Pending Appeal, RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311, 2257573 Ontario Inc. v. Furney, 2020 ONCA 742, Circuit World Corp. v. Lesperance (1997), 33 O.R. (3d) 674 (C.A.), Starkman v. Home Trust Company, 2015 ONCA 436

Catholic Children’s Aid Society of Toronto v. V.R. (Publication Ban), 2021 ONCA 209

Keywords: Family Law, Child Protection, Crown Wardship, Access, Best Interests of the Child, Child, Youth and Family Services Act, 2017, S.O. 2017, c. 14, Sched. 1, ss. 74(3), 105(5)-(6).

Sub-Prime Mortgage Corporation v. Kaweesa, 2021 ONCA 215

Keywords: Contracts, Real Property, Mortgages, Civil Procedure, Settlements, Enforcement, Writs of Possession, Appeals, Security for Costs, Rules of Civil Procedure, Rule 61.06(1)(a), Rule 63.01(1), Rule 63.02(1), Courts of Justice Act, s. 7(2), s. 134(2), Heidari v. Naghshbandi, 2020 ONCA 757, Hakim Optical Laboratory Ltd. v. 1570710 Ontario Ltd., 2010 ONCA 627, Waxman v. Waxman (2003), 168 O.A.C. 217 (C.A.), Abuzour v. Heydary, 2015 ONCA 249, RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311

Atlas (Brampton) Limited Partnership v. Canada Grace Park Ltd.a, 2021 ONCA 221

Keywords: Contracts, Debtor-Creditor, Security Agreements, Control Agreements, Share Pledges, Enforcement, Foreclosure, Notice of Intention to Enforce Security, Right of Redemption, Statutory Interpretation, Principle of Implied Exclusion, Personal Property Security Act, R.S.O. 1990, c. P.10, ss. 17.1 and 63(4), Securities Transfer Act, 2006, S.O. 2006, c. 8, s. 24, Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27, University Health Network v. Ontario (Minister of Finance) (2001), 208 D.L.R. (4th) 459, Casse v. Credifinance Securities Ltd. (1999), 14 P.P.S.A.C. (2d) 352

Short Civil Decisions

Ritchie v. Castlepoint Greybrook Sterling Inc., 2021 ONCA 214

Keywords: Contracts, Real Property, Agreements of Purchase and Sale of Land, Exclusion of Liability Clauses, Allocation of Risk

CIVIL DECISIONS

Madison Joe Holdings Inc. v. Mill Street & Co. Inc., 2021 ONCA 205

[MacPherson, Gillese and Nordheimer JJ.A.]

Counsel:

M Simaan, for the appellants

J Berall, for the respondent

Keywords: Contracts, Debtor-Creditor, Promissory Notes, Guarantees, Fair Protection Rule, Civil Procedure, Summary Judgment, Standard of Review, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, Heritage Capital Corp. v. Equitable Trust Co., 2016 SCC 19, Kevin McGuinness, The Law of Guarantee, 3rd ed. (Toronto: Lexis Nexis Canada, 2013)

facts:

Madison Joe Holdings Inc. (“MJH”) was the 100% owner of All Source Security Container Mfg. Corp. (“All Source”). In 2014, Mill Street & Co. Inc. (“Mill Street”) purchased a 50% interest in All Source from MJH. Part of the payment was by way of promissory notes. Mill Street acquired the remaining 50% interest in All Source from MJH in 2016. At the time of the second 50% purchase, Mill Street still owed payments to MJH under the existing promissory notes it had issued in connection with the first 50% purchase. To restructure that debt, the existing promissory notes were extinguished and All Source executed two new promissory notes to MJH in their place. The new promissory notes were guaranteed by Mill Street, Noah Murad (“Noah”) and Roy Murad (“Roy”) (collectively, the “Guarantors”). In connection with the second 50% purchase, Noah, on behalf of All Source, entered into a Loan Agreement with TD Bank. All Source, MJH and TD Bank then entered into an Inter-Creditor Agreement.

After the promissory notes were executed in 2016, All Source paid the required monthly interest payments, but failed to pay the principal and outstanding interest owing under the promissory notes on their maturity dates. MJH commenced an action against All Source and the Guarantors. MJH then moved for summary judgment on the unpaid promissory notes. The motion judge found that the Inter-Creditor Agreement restricted All Source from repaying the principal but not the monthly interest under the promissory notes, which was payable before and after their maturity dates. She found that the Inter-Creditor Agreement did not shield the Guarantors from their joint and several obligations to pay the principal and monthly interest amounts under the promissory notes. Accordingly, the plaintiff was granted judgment against All Source and each of the Guarantors.

issues:
  1. Did the motion judge err in her interpretation of the guarantees in ignoring the “in accordance with its terms” language, which prevented enforcement of the guarantees on the same terms as enforcement could be made on the promissory notes?
holding:

Appeal dismissed.

reasoning:

No. The motion judge was required to interpret several commercial and contractual documents as part of her analysis. Contractual interpretation involves issues of mixed fact and law, meaning deference is owed to the court of first instance and the “palpable and overriding” standard applies on appellate review.

The guarantees stated that they were to be resorted to only if the debtor defaulted in making payments under a promissory note in accordance with its terms. The appellants argued that non-payment did not equal default in certain circumstances, and that without default there could be no enforcement on the guarantees. The appellants further submitted that their proposed interpretation was commercially reasonable and consistent with the Guarantors’ agreement to only be liable if the default was caused by events other than the financial situation of the debtor, which was inextricably linked to a formula under the Inter-Creditor Agreement.

The motion judge rejected the appellants’ argument. She stated that the alternative interpretation urged by the appellants would render the security of the guarantees illusory because it would mean that if All Source was not in a financial position to repay the promissory notes because of its other financial obligations, then the Guarantors would not have to pay either, whereas a guarantee would ordinarily be called upon in precisely that circumstance.

The Court agreed with the motion judge, and that she therefore had not committed any palpable and overriding error. The motion judge’s interpretation was consistent with legal scholarship on guarantees and the “Fair Protection Rule”. Guarantees are read so as to give effect to the apparent intent of the parties, so as to afford fair protection to a creditor in accordance with that apparent intent. The Court concluded that all the elements of the guarantee in this case had been satisfied. All Source defaulted in making payments due under the promissory notes. As a result, All Source owed money to MJH, and the guarantee was triggered as a result.

Goldentuler v. Simmons Dasilva LLP, 2021 ONCA 219

[Juriansz, Nordheimer and Jamal JJ.A.]

Counsel:

S. Dewart and A. Lei, for the appellants

E. Goldentuler, in person

Keywords: Torts, Professional Negligence, Lawyers, Wills and Estates, Civil Procedure, Striking Pleadings, Capacity, Rules of Civil Procedure, Rule 21.01(3)(b), Conveyancing and Law of Property Act, R.S.O. 1990, c. C.34

facts:

The respondent’s late brother, a lawyer in private practice, had commenced an action before he passed away. The respondent, also a lawyer, obtained an order to continue the action in the name of his late brother’s Estate. The Estate obtained judgment. In his capacity as Estate trustee, the respondent retained the appellants to pursue an appeal which was successful, resulting in the damages award in favour of the Estate being increased. A dispute arose concerning the appellant’s fees, regarding which the respondent commenced this solicitor’s negligence action in his own name and in his personal capacity. He sought damages, alleging that the appellants fell below the standard of care in conducting the appeal.

The appellants brought a motion to dismiss the action on the grounds that the respondent did not have legal capacity to sue them, as the appellants had acted for the Estate, not the respondent. The motion judge dismissed the motion to dismiss the action, finding that the appellants were aware that the respondent had purchased the law firm from his late brother’s wife, who was the executor of the Estate. The motion judge concluded that the respondent had capacity to bring the action because: (i) the account for legal fees was directed to the respondent and (ii) the respondent was the only party who could have been affected by the outcome of the appeal, since he had purchased the law firm.

issues:
  1. Did the motion judge err in dismissing the motion?
holding:

Appeal allowed.

reasoning:

Yes. The Court held that the motion judge made a palpable and overriding error. The crucial question was, who retained the appellants? It was clearly the Estate. It was the Estate in whose name the original litigation was continued, it was the Estate that was the party on the appeal and for whose benefit the damage award was increased. The Court noted that it was the Estate to whom payment was made on the ultimate judgment and on whose behalf the retainer agreement with the appellants was signed. The Court added that nothing of consequence turned on the fact that the account for legal fees was directed to the respondent. He was the individual who provided instructions to the appellants on behalf of the Estate. The addressee of the account ded not change on whose behalf the appellants were retained. The Court held that the respondent did not have a personal claim arising from the retainer of the appellants given the party on whose behalf the appeal was brought and on whose behalf the appellants were retained. He did not, therefore, have capacity to bring the solicitor’s negligence claim. As a result, the appeal was granted and the action was dismissed.

Farrell v. Kavanagh, 2021 ONCA 213

[Paciocco J.A. (Motion Judge)]

Counsel:

M. J. Neirinck for the moving parties

D. P. Preger, D. Seifer and Reeva M. Finkel for the responding parties

Keywords: Contracts, Real Property, Mortgages, Torts, Fraud, Civil Procedure, Appeals, Stay Pending Appeal, RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311, 2257573 Ontario Inc. v. Furney, 2020 ONCA 742, Circuit World Corp. v. Lesperance (1997), 33 O.R. (3d) 674 (C.A.), Starkman v. Home Trust Company, 2015 ONCA 436

facts:

The moving parties appealed a Judgment from December 2020 dismissing their action concerning the validity of a mortgage (the “Action”). The Action involved a mortgage debt of $5 million that was secured against two properties owned by the corporate moving party (the “Properties”).

In the Action, the moving parties claimed that the mortgages were fraudulent and sought a money judgment against the respondent, J.K. They also sought a declaration that the mortgage was invalid based on what they alleged the responding party mortgagee knew about the supposed fraud. After years of litigation, the trial judge in the Action ruled against the moving parties and declared the mortgage valid.

In this appeal, the moving parties sought a stay of that declaration of validity and of the enforcement of the mortgage pending the outcome of the appeal.

issues:
  1. Should the moving parties be granted a stay of the declaration of validity and of the enforcement of the mortgage pending the outcome of the appeal?
holding:

Motion dismissed.

reasoning:

No. The Court was not persuaded that a stay pending appeal was in the interests of justice. To obtain a stay pending appeal, a moving party must meet the three-part RJR-Macdonald test for an interlocutory injunction.

i. Is there a serious question to be determined on the appeal?

The threshold to establish a serious question on the appeal is low and courts must make a preliminary assessment of the merits of the case and determine whether the issues on appeal are either frivolous or vexatious. The Court in this case held that the serious issue to be determined on appeal criteria was met, however, the Court emphasized that it had barely been met.

In coming to this conclusion, the Court stated that it agreed with the responding parties that the grounds of appeal advanced did not identify any palpable or overriding errors and were largely an attempt by the moving parties to re-try factual findings and credibility determinations. However, the Court also stated that since it had not found that the grounds of appeal were frivolous or vexatious, they satisfied the low-threshold of whether there was a serious issue to be determined.

ii. Will the moving party suffer irreparable harm if the stay is denied?

The Court found that the moving parties would not suffer irreparable harm if the declaration of validity remained and enforcement efforts were permitted to proceed. Irreparable harm is a “harm which either cannot be quantified in monetary terms or which cannot be cured, usually because one party cannot collect damages from the other” (RJR-MacDonald). The Court found that there is nothing unique about the Properties at issue, and that the moving parties’ concerns that current poor market conditions would make a sale improvident were not supported by evidence. Further, any claims that market conditions would improve if a sale was delayed until the end of the appeal period were speculative. Thus, the Court held that even if the moving parties were successful in the appeal, any loss they incur as a result of the sale of the Properties prior to the appeal being heard could be compensated by a monetary award. As well, there was no suggestion that the responding party mortgagees could not pay a money judgment to compensate the moving parties, if required.

The Court also noted that the responding mortgagee had scheduled an upcoming hearing to seek the appointment of a receiver. If a receiver is appointed, the receiver will be obliged to consider the moving parties’ interests as well as any offers they have procured, as one of the purposes underlying court-supervised receivers is to avoid improvident sales. Therefore, any risk the Properties would be sold at less than market value was speculative.

iii. Which party does the balance of convenience favour if the stay is granted?

The Court found that the balance of convenience did not favor granting a stay pending appeal. The moving parties argued that they would be inconvenienced if the mortgage was enforced because they expected that enforcement would not be sought until the action was finally disposed of on appeal. The Court found that there was no clear agreement to this effect and no evident breach of such an undertaking. The moving parties also did not present evidence supporting their position that there was ample equity in the Properties to mitigate the risk to the responding parties if a stay was granted. While the Court accepted that there would be inconvenience to the moving parties to recover from the 13 responding party mortgagees if the appeal was successful, this inconvenience did not outweigh the continued costs to the responding parties.

Regarding the continued costs to the responding parties, the Court was not persuaded that the delay would benefit the responding parties. The responding party mortgagees had seen none of the interest owing under the mortgages and had enjoyed no benefits from their investment. Thus, the enforcement delay would only perpetuate this for what the moving parties estimate would be at least another year. Therefore, the Court found that the balance of inconvenience arising from the risk of financial shortfall favoured the responding party mortgagees.

Interests of Justice

The final submission by the moving parties was that the interests of justice required a stay in this case because they contested the validity of the mortgage debt. Although the moving parties were not seeking to stay enforcement measures they had agreed to accept when the mortgage was executed, the moving parties had benefited from a significant portion of the money advanced and had paid virtually nothing in return. Further, the trial judge had already found that the mortgage entered into was valid, both in fact and in law. Therefore, the Court held that it could not accept this submission.

Catholic Children’s Aid Society of Toronto v. V.R. (Publication Ban), 2021 ONCA 209

[Fairburn A.C.J.O., van Rensburg and Huscroft JJ.A.]

Counsel:

D. Miller, for the appellant

C. Andrikakis, for the respondent

Keywords: Family Law, Child Protection, Crown Wardship, Access, Best Interests of the Child, Child, Youth and Family Services Act, 2017, S.O. 2017, c. 14, Sched. 1, ss. 74(3), 105(5)-(6).

facts:

D.R. was seriously injured on two occasions in the first few months of her life. At a few weeks old, she suffered a fracture to her upper arm. At four months old, she suffered a head injury and seizures as a result of blunt force trauma and/or inertial forces. The trial judge found that D.R was injured in the care of her parents and that her injuries were intentionally inflicted by either or both parents. D.R. was placed in the extended care of the Catholic Children’s Aid Society with no parental access and with a view to adoption by her foster parents.

The appellant mother appealed. The appeal judge found that the trial judge wrongly put the onus on the appellant to demonstrate that access would be in the child’s best interests. Rather than remit the matter, the appeal judge assumed jurisdiction to determine the access question. The appeal judge concluded that access was not in the best interests of the child and made the “no access” order that was the subject of this appeal. D.R.’s father did not participate in any of the proceedings and he was deported to Portugal in 2018. The appellant was also deported to Portugal prior to this appeal being heard.

issues:

  1. Did the appeal judge err by determining the access question rather than remitting the matter?

holding:

Appeal dismissed.

reasoning:

No. The appellant argued that on any reasonable application of the best interests analysis on the evidence in this case, an access order should result. The appellant said she demonstrated normal, healthy parenting skills, D.R. enjoyed her access visits, and that access would not impair D.R.’s opportunities for adoption by her foster parents. The Court found that the appellant’s submission was effectively an attempt to retry the matter, which was not the function of an appeal. The appeal judge conducted a best interests analysis, and considered whether the relationship was beneficial and meaningful to the child in light of the criteria and relevant circumstances set out in s. 74(3) of the Child, Youth and Family Services Act, 2017. The Court saw no error by the appeal judge that warranted intervention.

The most significant consideration was the degree of risk to the child that led to the protection finding. During the short time she was cared for by the appellant, D.R. was seriously injured on two occasions. The trial judge found that either or both of the parents had intentionally inflicted the injuries on D.R. or failed to protect her from the other parent. The trial judge rejected the appellant’s explanation for how D.R.’s injuries occurred. By contrast, D.R. has spent most of her life in her foster parents’ care and has thrived due to the continuity of the care she has received.

The appeal judge’s finding that the most significant circumstance was the degree of risk that led to the protection finding was supported by the evidence and was reasonable. So too was the appeal judge’s finding that there was no factual foundation to support that the parental relationship was beneficial and meaningful to D.R., regardless of how well the access visits had gone. The appeal judge’s decision was fortified by the affidavit evidence of D.R.’s foster father. Therefore, there was no basis to interfere with the appeal judge’s no access order.

Sub-Prime Mortgage Corporation v. Kaweesa, 2021 ONCA 215

[Paciocco J.A. (Motion Judge)]

Counsel:

G. Cohen, for the moving parties Sub-Prime Mortgage Corporation and Elle Mortgage Corporation

R. Das, for the moving party T.W.

M. Tubie, for the responding parties

Keywords: Contracts, Real Property, Mortgages, Civil Procedure, Settlements, Enforcement, Writs of Possession, Appeals, Security for Costs, Rules of Civil Procedure, Rule 61.06(1)(a), Rule 63.01(1), Rule 63.02(1), Courts of Justice Act, s. 7(2), s. 134(2), Heidari v. Naghshbandi, 2020 ONCA 757, Hakim Optical Laboratory Ltd. v. 1570710 Ontario Ltd., 2010 ONCA 627, Waxman v. Waxman (2003), 168 O.A.C. 217 (C.A.), Abuzour v. Heydary, 2015 ONCA 249, RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311

facts:

This motion concerned a heavily encumbered residential property in Toronto (the “Property”). The moving party mortgagees (the “Mortgagees”) collectively hold first, second and fifth mortgages over the Property. When these mortgages fell into default, the Mortgagees initiated enforcement proceedings, while the responding parties issued a counterclaim.

The parties eventually executed minutes of settlement (the “Minutes”) in November 2020. A key term of the Minutes required the responding parties to pay $2.1 million to one of the Mortgagees before January 25, 2021. If the responding parties failed to make such payment, the Mortgagees would be entitled to a payment of $2.7 million, a dismissal of the responding parties’ counterclaim, as well as leave to issue a writ of possession for possession of the Property.

When the responding parties failed to make the payment before the deadline, the Mortgagees brought a motion for judgment in accordance with the Minutes. The responding parties contested the motion and requested an extension of the payment deadline, arguing that the Minutes had been frustrated due to difficulties securing financing as a result of the ongoing COVID-19 pandemic.

The extension was denied and the Minutes were enforced. Namely, by awarding a monetary judgment in the amount of $2.7 million, terminating the respondents’ counterclaim, and issuing a writ of possession against the Property (the “Judgment”). However, the writ of possession was temporarily stayed for a period of 90 days following the termination of Ontario’s state of emergency. Further still, such temporary stay was conditional on the responding parties making monthly payments of $3,000 to the City of Toronto in connection with realty tax arrears (the “Stay Condition”).

The responding parties subsequently failed to comply with the Stay Condition, but argued that they were no longer required to comply because of an apparent agreement with the City of Toronto relieving them from paying the tax arrears until this action was settled.

issues:
  1. Should an order be granted requiring the responding parties to post security for the moving parties’ costs of the appeal?
  2. Should an order be granted revoking the temporary stay of the writ of possession?
  3. Should an order be granted requiring the responding parties to post further security for the costs awarded in the Judgment?
  4. Should an order be granted expediting the hearing of the appeal?
holding:

Motion granted in part.

reasoning:
  1. Should an order be granted requiring the responding parties to post security for the moving parties’ costs of the appeal?

Yes. Under Rule 61.06(1)(a) of the Rules of Civil Procedure, an order for security may be made if: (i) there is good reason to believe that the appeal is frivolous and vexatious; and (ii) the responding parties have insufficient assets in Ontario to pay the costs of their appeal.

With respect to the first condition, the motion judge concluded that the appeal appeared to be both frivolous and vexatious. It was frivolous in the sense that there was good reason to believe that the various grounds of appeal were “devoid of merit, with little prospect of success” (Heidari v. Naghshbandi, 2020 ONCA 757).

Vextiousness was established by the finding that various allegations made by the responding parties did nothing to actually advance the appeal on its merits, but simply served to impugn the integrity and/or professionalism of various individuals involved in the proceedings. As further noted in Heidari, an appeal is vexatious when it is “taken to annoy or embarrass the respondent or conducted in a vexatious manner.”

With respect to the second condition, it was apparent that the Property was the sole asset claimed by the responding parties. Notwithstanding the valuation of the Property at $3.5 million, its heavily encumbered nature meant that there was insufficient equity to cover the proven encumbrances, plus the costs of the appeal. Accordingly, both requirements under Rule 61.06(1)(a) were established.

2. Should an order be granted revoking the temporary stay of the writ of possession?

Yes. First, the motion judge rejected the responding parties’ argument that they were not in breach of the Stay Condition as a result of the apparent agreement with the City of Toronto. First, the responding parties provided no evidence that this agreement actually existed. Second, even if such agreement did exist, the Stay Condition was never contingent on the City of Toronto demanding payment, it simply provided that monthly payments were to be made in reduction of the realty tax arrears.

The motion judge also rejected the responding parties’ argument that a conditional writ of possession is automatically stayed on appeal pursuant to Rule 63.01(1). It was clear that Rule 63.01(1) is intended to automatically stay monetary remedies pending appeal, not in rem remedies.

The motion judge also cited his authority for making an order revoking the temporary stay, being section 134(2) of the Courts of Justice Act (the “CJA”). The jurisdiction conferred by s. 134(2) of the CJA may be exercised by a single judge of the Court of Appeal pursuant to s. 7(2) of the CJA (Hakim Optical Laboratory Ltd. v. 1570710 Ontario Ltd., 2010 ONCA 627). However, while the authority under s. 134(2) is broad, it is not unlimited, and any remedy provided under s. 134(2) must be focused on the interests of justice and preventing prejudice (Waxman v. Waxman (2003), 168 O.A.C. 217 (C.A.).

Accordingly, the test under s. 134(2) is the same test for granting a stay pending appeal pursuant to Rule 63.02(1) (Abuzour v. Heydary, 2015 ONCA 249), which is in turn based on the test for an interlocutory injunction as set out by the Supreme Court of Canada in RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311. Specifically, the following criteria must be considered: (i) whether there is a serious question to be adjudicated on appeal; (ii) whether the moving party would suffer irreparable harm if the relief were refused; and (iii) whether the balance of convenience favours the moving party.

With respect to the first criterion, the motion judge simply reiterated his earlier finding that the appeal was frivolous and vexatious as grounds for concluding that there was no serious question to be adjudicated. With respect to the second criterion, the motion judge noted the heavily encumbered nature of the Property, and how the passage of time meant that the prospect of full collection ever being achieved by the Mortgagees was increasingly threatened.

The motion judge did acknowledge the reality of the responding parties being displaced from their residence while considering the third criterion. However, it was also noted that displacement in the event of non-payment was a consequence that they accepted, that the responding parties have been living in the residence without paying the associated expenses for some time, and that there was never any guarantee that the responding parties could continue to possess the Property until the end of their appeal. In sum, the motion judge concluded that the interests of justice favoured lifting the temporary stay, even when considering the relevant “equitable arguments”.

3. Should an order be granted requiring the responding parties to post further security for the costs awarded in the Judgment?

No. The motion judge simply commented that although making such an order was within his authority, he would not exercise his discretion to order payment of a costs order that remained a live issue.

4. Should an order be granted expediting the hearing of the appeal?

No. Given the orders made regarding security for costs and lifting the temporary stay, there was no need to expedite the appeal.

Atlas (Brampton) Limited Partnership v. Canada Grace Park Ltd., 2021 ONCA 221

[Lauwers, Miller and Nordheimer JJ.A.]

Counsel:

J. A. Kaufman and B. Adams, for the appellants

P. H. Starkman, for the respondents

Keywords: Contracts, Debtor-Creditor, Security Agreements, Control Agreements, Share Pledges, Enforcement, Foreclosure, Notice of Intention to Enforce Security, Right of Redemption, Statutory Interpretation, Principle of Implied Exclusion, Personal Property Security Act, R.S.O. 1990, c. P.10, ss. 17.1 and 63(4), Securities Transfer Act, 2006, S.O. 2006, c. 8, s. 24, Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27, University Health Network v. Ontario (Minister of Finance) (2001), 208 D.L.R. (4th) 459, Casse v. Credifinance Securities Ltd. (1999), 14 P.P.S.A.C. (2d) 352

facts:

One of the appellants, Romlex International Ltd. (“Romlex”), and one of the respondents, Canada Grace Ltd. (“Canada Grace”), were each shareholders in a development venture incorporated as Atlas Springbank Developments Ltd. (“Atlas”). Atlas later loaned $1.8 million to the appellant limited partnership (“Atlas Brampton”). When Atlas Brampton failed to make the first interest payment, the loan fell into default.

To address the default, the parties entered into a security agreement (the “Security Agreement”), whereby Romlex agreed to pledge all of its shares in Atlas to Canada Grace. The terms of this pledge of shares included that upon a default by Atlas Brampton, the shares would be “transferred” to Canada Grace, that the principal of Canada Grace was to have an irrevocable power of attorney to effect such a transfer as necessary, and that the principal of Romlex would be deemed to be removed as a director of Atlas.

Almost immediately after executing the Security Agreement, Atlas Brampton was put into receivership by a third party, constituting an event of default under the Security Agreement. Following an exchange of messages, the solicitor for Atlas wrote to the principal of Romlex on behalf of Canada Grace to inform him that the pledged shares had been transferred, and that he was removed as a director of Atlas. The letter did not offer any possibility of curing the default.

Afterwards, the appellants issued a notice of application seeking a declaration that the transfer of the pledged shares was null and void because the respondents failed to give appropriate notice of their intention to foreclose on the pledged shares. Specifically, the appellants contended that they were entitled to notice under s. 63(4) of the Personal Property Security Act, R.S.O. 1990, c. P.10 (“PPSA”), and were also entitled to an opportunity under s. 66 of the PPSA to redeem the pledged shares by paying the amount due under the loan.

The application judge found that Canada Grace did in fact fail to provide the requisite notice under the PPSA. However, he went on to add that this failure was inconsequential, as the respondents had acted in accordance their contractual rights under the Security Agreement, which effectively gave them the right to foreclose without any notice requirements. Because the respondents had not pursued a remedy under the PPSA, the appellants were therefore not entitled to invoke their right of redemption under the PPSA.

issues:
  1. What was the nature of Canada Grace’s security interest in the pledged shares?
  2. Does s. 17.1(2) of the PPSA permit Canada Grace to foreclose on the pledged shares?
  3. If s. 17.1(2) of the PPSA does not permit foreclosure, did Canada Grace foreclose on the pledged shares in accordance with the requirements of Part V of the PPSA?
holding:

Appeal dismissed.

reasoning:
  1. What was the nature of Canada Grace’s security interest in the pledged shares?

Despite not being argued before the application judge, the Court requested the parties’ submissions on s. 17.1 of the PPSA, which allows a secured party that has control over investment property to sell, transfer, use or otherwise deal with the collateral, subject only to the terms of the security agreement. The Court’s analysis on whether s. 17.1 applied to the pledged shares hinged on the interpretation of the term “control”.

Under the PPSA, “control” is determined with reference to the Securities Transfer Act, 2006 (the “STA”). Specifically, s. 24(1)(b) of the STA applies with respect to uncertificated securities, which was the case with the pledged shares. Per s. 24(1)(b), control is established if the issuer has agreed to comply with instructions prescribed by the secured party, without the further consent of the registered owner. Such circumstances are commonly known as a “control agreement”.

The Court found that the Security Agreement doubled as a control agreement by virtue of the aforementioned terms granting an irrevocable power of attorney to Canada Grace’s principal. Importantly, the Security Agreement was executed by all the necessary parties to constitute a proper control agreement as contemplated by s. 24(1)(b) of the STA: the issuer of the shares (Atlas), the registered owner of the shares (Romlex), the debtor (Atlas Brampton), and the secured party (Canada Grace). Aside from this important requirement, the Court noted that control agreements need not take on any particular form, and may be interpreted functionally rather than formalistically. Accordingly, the Court concluded that Canada Grace’s security interest in the pledged shares fell within the scope of s. 17.1 of the PPSA.

2. Does s. 17.1(2) of the PPSA permit Canada Grace to foreclose on the pledged shares?

No. Section 17.1(2) of the PPSA gives the secured party the right to “sell, transfer, use or otherwise deal with the collateral in the manner and to the extent provided in the security agreement”. Accordingly, the respondents submitted that they were entitled to foreclose on the pledged shares without providing any notice to the appellants, given that the Security Agreement did not require any such notice.

The Court disagreed with this argument, with the analysis once again turning on the interpretation of certain terms, this time being the phrase “sell, transfer, use or otherwise deal”. The Court found that according to the principles of statutory interpretation, this phrase cannot be said to include actions relating to foreclosure. This required interpreting the words in their entire context and ordinary sense, harmoniously with the scheme of the Act and the intention of Parliament (Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27). The Court’s conclusion on this issue was broken down into four reasons.

First, because s. 17.1(2) creates an exception to the general enforcement scheme of Part V of the PPSA, and the effect of that exception is to reduce statutory protections for debtors in the name of contractual freedom, such exception must be construed narrowly.

Second, the principle of implied exclusion, as set out in University Health Network v. Ontario (Minister of Finance) (2001), 208 D.L.R. (4th) 459, was applied on a plain reading of the words. Given specific attention afforded to actions of foreclosure elsewhere in the PPSA, its absence from s. 17.1(2) implies that it was intentionally excluded.

Third, the fact that foreclosure entails different legal and practical consequences than a sale, transfer or use meant that its inclusion would not assimilate well with the elaborate debtor-protective statutory scheme that is characteristic of Part V of the PPSA. Again, related to this point was the fact that Part V expressly imposes certain requirements on a foreclosing secured party.

Last, the Court noted that an interpretation permitting foreclosure under s. 17.1(2) would not make sense given the primary reason for which s. 17.1(2) was enacted in the first place – namely, to facilitate capital markets transactions. In this respect, a foreclosing creditor cannot be said to be in a similar position to a broker or securities intermediary, who must act quickly to liquidate rapidly depreciating accounts.

3. If s. 17.1(2) of the PPSA does not permit foreclosure, did Canada Grace foreclose on the pledged shares in accordance with the requirements of Part V of the PPSA?

Yes. Notwithstanding the rejection of the respondents’ argument that they were not required to give notice at all as a result of s. 17.1(2), the Court subsequently found that Canada Grace did in fact provide the requisite notice under Part V of the PPSA. This was established by the correspondence submitted as evidence.

The Court noted that the applicable notice provisions in Part V mandate a list of necessary recipients of the notice, but do not set out required contents of the notice. As a result, the evaluation of the adequacy of notice’s contents falls to the courts. The Court commented that adequate notice of an intention to foreclose on collateral should: (i) cite the PPSA; (ii) include the amount of the secured obligation; (iii) include a description of the collateral; (iv) express a clear intention to retain the collateral in satisfaction of the debt (and not as continuing security); and (v) indicate that the recipients have 15 days to object.

Related to the fourth point, the Court endorsed the law as described in Casse v. Credifinance Securities Ltd. (1999), 14 P.P.S.A.C. (2d) 352, where it was held that “the court must be able to conclude on all the evidence that the debtor knew that the purpose of the secured party in retaining the collateral was to satisfy the obligation”. In this respect, the Court considered the cumulative effect of the numerous messages exchanged between the parties leading up to the foreclosure, and concluded that all requirements were met. Similarly, the Court also found that the appellants were provided with an opportunity to redeem the pledged shares, but provided no evidence that such redemption was ever a realistic possibility.

SHORT CIVIL DECISIONS

Ritchie v. Castlepoint Greybrook Sterling Inc., 2021 ONCA 214

[Doherty, Rouleau and Miller JJ.A.]

Counsel:

G. D. E. Adair, for the appellants

S. J. Tenai and B. Chung, for the respondents

Keywords: Contracts, Real Property, Agreements of Purchase and Sale of Land, Exclusion of Liability Clauses, Allocation of Risk

The information contained in our summaries of the decisions is not intended to provide legal advice and does not necessarily cover every matter raised in a decision. For complete information or for specific advice, please read the decision or contact us.

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Good afternoon.

Following are this week’s summaries of the civil decisions of the Court of Appeal for Ontario.

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In a lengthy decision in Fram Elgin Mills 90 Inc. v Romandale Farms Limited, the Court set aside the trial judge’s decision and ordered specific performance against the respondent, requiring it to fulfill its obligations under an agreement of purchase and sale of land entered into in 2005. In coming to this conclusion, the Court held the principle of estoppel by convention applied to estop the respondent from arguing that the agreement was no longer enforceable.

Francis v. Ontario involves a class action lawsuit brought by a former inmate against the province. The Court addressed the constitutionality of administrative segregation, or “solitary confinement”, as practiced in Ontario prisons. The Court of Appeal upheld the motion judge’s finding that placing inmates suffering from serious mental illness in administrative segregation for any length of time (or placing any inmates in administrative segregation for more than 15 days at a time) violated their right to life under s. 7 of the Charter, as well as their right to be free of cruel and unusual treatment under s. 12. The Court concluded that the motion judge’s award of aggregate damages in the amount of $30,000,000 was appropriate. The Court also addressed whether the province could be held liable for systemic negligence for breaching the duty of care owed to inmates subjected to administrative segregation. The Court rejected the province’s attempt to classify the manner in which administrative segregation was carried out as “policy” rather than “operations” under the Crown Liability and Proceedings Act. To allow for such an expansive definition of “policy” would carry the risk of effectively immunizing the Crown from civil liability. The Court held the province’s actions were operational in nature, and the province was liable for systemic negligence.

Fontaine v. Canada (Attorney General) is the latest instalment the Indian Residential School Settlement litigation and deals with the production and archiving of claim and non-claim records. The Court, applying the principles in the companion decision of Canada (Attorney General) v. Fontaine, 2017 SCC 47, held that any records containing confidential, sensitive and/or privileged information should not be produced or archived. However, a finding that any information or records in fact raised such confidentiality, sensitivity or privilege concerns must be based on an actual evidentiary record, rather than theoretical inferences.

Other topics covered this week included security for costs, summary judgment in respect of the failure to close on an agreement of purchase and sale of land, oppression applications under the Condominium Act, 1998, spousal support, rights of appeal under the Bankruptcy and Insolvency Act, 1985, and sealing orders in the context of the Laurentian University insolvency under the Companies’ Creditors Arrangement Act, 1985.

Please mark down April 27, 2021, from 5:30-7:45pm in your calendars for our fifth annual “Top Appeals” CLE, which will take place via Zoom. Justice Benjamin Zarnett will be co-chairing the event with myself and Chloe Snider of Dentons. Following is our excellent slate of decisions and speakers:

2020 Update from the Bench

The Honourable Benjamin Zarnett, Court of Appeal for Ontario

Panel 1 – Advocacy Practice Tips from the Court

Girao v. Cunningham, 2020 ONCA 260

OZ Merchandising Inc. v. Canadian Professional Soccer League Inc., 2020 ONCA 532

Welton v. United Lands Corporation Limited, 2020 ONCA 322

Jordan Goldblatt, Adair Goldblatt Bieber LLP

Sara Erskine, Weintraub Erskine Huang LLP

Panel 2 – Negligently Designed Financial Products – A New Age in Product Liability?

Wright v. Horizons ETFS Management (Canada) Inc., 2020 ONCA 337

Seumas Woods, Blake, Cassels & Graydon LLP

Alistair Crawley, Crawley MacKewn Brush LLP

Elizabeth Bowker, Stieber Berlach LLP

Panel 3 – Developments in Insolvency Law – Priority of Construction Trust Claims and Landlord Claims in Bankruptcy

Urbancorp Cumberland 2 GP Inc. (Re), 2020 ONCA 197

7636156 Canada Inc. (Re), 2020 ONCA 681

Ken Kraft, Dentons LLP

Kevin Sherkin, Miller Thomson LLP

D.J. Miller, Thornton Grout Finnigan LLP

In the meantime, please register for the program by visiting the OBA’s website.

Wishing everyone celebrating a Happy Easter long weekend and Happy Pesach.

John Polyzogopoulos
Blaney McMurtry LLP
416.593.2953 Email

Table of Contents

Civil Decisions

Danesh v Vahed, 2021 ONCA 189

Keywords: Contracts, Real Property, Agreements of Purchase and Sale of Land, Completion Date, Extension, Deposits, Forfeiture, Civil Procedure, Summary Judgment, Appeals, Fresh Evidence, Hryniak v. Mauldin, 2014 SCC 7

Mohamoud v Carleton Condominium Corporation No. 25, 2021 ONCA 191

Keywords: Real Property, Condominiums, Oppression, Condominium Act, 1998, S.O. 1998, c. 19, ss. 89, 90, 135, Metropolitan Toronto Condominium Corporation No. 1272 v. Beach Development (Phase II) Corporation, 2011 ONCA 667, Canada Inc. v. Carleton Condominium Corporation No. 375, 2016 ONCA 650

Cvetkovic v Cvetkovic-Gorovic, 2021 ONCA 193 

Keywords: Family Law, Spousal Support, Review, Termination, Variation, Material Change in Circumstance, Expert Evidence, Divorce Act, R.S.C., 1985, c. 3 (2nd Supp.), ss 15.2(6) and 17(7)

Shaver-Kudell Manufacturing Inc. v Knight Manufacturing Inc., 2021 ONCA 202

Keywords: Bankruptcy and Insolvency, Stay of Proceedings, Lifting of Stay, Obtaining Property by False Pretences, Torts, Breach of Confidence, Misappropriation of Trade Secrets, Civil Procedure, Appeals, Extension of Time, Security for Costs, Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, ss 69(1), 69.4, 178(1)(e), 193, Bankruptcy and Insolvency General Rules, C.R.C., c. 368, Rule 31(1), Courts of Justice Act, R.S.O. 1990, c. C.43, s. 6(1), Rules of Civil Procedure, Rule 61.06(1)(c), Business Development Bank of Canada v. Astoria Organic Matters Ltd., 2019 ONCA 269, Water Matrix Inc. v. Carnevale, 2018 ONSC 6436,  Beneficial Finance Co. v. Durward (1961), 2 C.B.R. (N.S.) 173 (Ont. Co. Ct.), Graves v. Hughes, 2001 NSSC 68, 25 C.B.R. (4th) 255, Gray (Re), 2014 ONCA 236, Korea Data Systems (USA), Inc. v. Aamazing Tehnologies Inc., 2015 ONCA 465, H.Y. Louie Co. Limited v. Bowick, 2015 BCCA 256, Lawyers’ Professional Indemnity Company v. Rodriguez, 2018 ONCA 171, leave to appeal refused, [2018] S.C.C.A. No. 128, Re McKee (1997), 47 C.B.R. (3d) 70 (Alta. Bankruptcy Registrar), Re Mariyanayagam (1998), 10 C.B.R. (4th) 105 (Ont. Gen. Div.), Re Bissonette, 2006 CarswellOnt 7023 (Bankruptcy Registrar), Re Di Paola (2006), 84 O.R. (3d) 554 (C.A., In Chambers), Re Berger, 2010 ONSC 4376, (Bankruptcy Registrar), Dal Bianco v. Deem Management Services Limited, 2020 ONCA 585, Third Eye Capital Corporation v. Resources Dianor Inc./Dianor Resources Inc., 2019 ONCA 508, 2403177 Ontario Inc. v. Bending Lake Iron Group Ltd., 2016 ONCA 225, MNP Ltd. v. Wilkes, 2020 SKCA 66, 80 C.B.R. (6th) 1, Royal Bank of Canada v. Bodanis, 2020 ONCA 185, (In Chambers), Elias v. Hutchison, 1981 ABCA 31, Ravelston Corp., Re (2005), 24 C.B.R. (5th) 256, (Ont. C.A.), Business Development Bank of Canada v. Pine Tree Resorts Inc., 2013 ONCA 282, Canada (Attorney General) v. Bourassa (Trustee of), 2002 ABCA 205, Lang v. Soyatt (1988), 68 C.B.R. (N.S.) 201, (Ont. Sup. Ct.), Re Wilson (1930), 11 C.B.R. 425 (Ont. Sup. Ct.), Re Cameron, 2002 ABCA 183, 40 Park Lane Circle v. Aiello, 2019 ONCA 451, H.Y. Louie Co. v. Bowick, 2015 BCCA 363, Celanese Canada Inc. v. Murray Demolition Corp., [2010] O.J. No. 6347 (S.C.), Toronto Dominion Bank v. Cushing, 2007 BCSC 1581, Yaiguaje v. Chevron Corporation, 2017 ONCA 827, Combined Air Mechanical Services Inc. v. Flesch, 2010 ONCA 633, Perron v. Perron, 2011 ONCA 776 (In Chambers), Henderson v. Wright, 2016 ONCA 89 (In Chambers), York University v. Markicevic, 2017 ONCA 651 (In Chambers)

Laurentian University of Sudbury, 2021 ONCA 199

Keywords: Bankruptcy and Insolvency, Civil Procedure, Sealing Orders, Appeals, Leave to Appeal, Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C.36, s. 13, Courts of Justice Act, R.S.O. 1990, c. C.43, s. 137(2), Canadian Charter of Rights and Freedoms, s.2(d), Sierra Club of Canada v. Canada (Minister of Finance), 2002 SCC 41, 9354-9186 Québec inc. v. Callidus Capital Corp., 2020 SCC 10, Edgewater Casino Inc. (Re), 2009 BCCA 40, Nortel Networks Corp. (Re), 2016 ONCA 332.

Francis v Ontario, 2021 ONCA 197

Keywords: Torts, Negligence, Constitutional Law, Charter Claims, Right to Life and Security of the Person, Freedom from Cruel and Unusual Punishment, Oakes Test, Crown Liability, Corrections, Administrative Segregation (Solitary Confinement), Civil Procedure, Class Proceedings,  Canadian Charter of Rights and Freedoms, ss. 7, 12, 24(1), Constitution Act, 1982, s. 52, Ministry of Correctional Services Act, R.S.O. 1990, c. M.22, ss. 20(1.1), 20(2), 20(3), 60(1), General, R.R.O. 1990, Reg. 778, ss. 2(1), 34(1), 34.0.1, 34(5), Correctional Services and Reintegration Act, 2018, S.O. 2018, c. 6, Sched. 2, Crown Liability and Proceedings Act, 2019, S.O. 2019 c. 7, Sched. 17, ss. 11, 31(4), Proceedings Against the Crown Act, R.S.O. 1990, c. P.27, s. 5, Corrections and Conditional Release Act, S.C. 1992, c. 20, Class Proceedings Act, 1992, S.O. 1992, c. 6, Bill 100, An Act to implement Budget measures and to enact, amend and repeal various statutes, 1st Sess., 42nd Parl., Ontario, 2019 (short title “Protecting What Matters Most Act (Budget Measures), 2019”), Canadian Civil Liberties Association v. Canada (Attorney General), 2019 ONCA 243, Brazeau v. Canada (Attorney General), 2020 ONCA 184, Brazeau v. Canada (Attorney General), 2020 ONSC 3272, Brazeau v. Attorney General (Canada), 2019 ONSC 1888, Reddock v. Canada (Attorney General), 2019 ONSC 5053, Corporation of the Canadian Civil Liberties Association v. Her Majesty the Queen, 2017 ONSC 7491, rev’d on other grounds, 2019 ONCA 243, Vancouver (City) v. Ward, 2010 SCC 27, Henry v. British Columbia (A.G.), 2015 SCC 24, Conseil scolaire francophone de la Colombie-Britannique v. British Columbia, 2020 SCC 13, Mackin v. New Brunswick (Minister of Finance), 2002 SCC 13, Cooper v. Hobart, 2001 SCC 79, MacLean v. The Queen, [1973] SCR 2, Rumley v. British Columbia, 2001 SCC 69, Cloud v. Canada (Attorney General) (2004), 73 OR (3d) 401 (Ont CA), Good v. Toronto (Police Services Board), 2016 ONCA 250, Seelster Farms v. Her Majesty the Queen and OLG, 2020 ONSC 4013, Barker v. Barker, 2020 ONSC 3746, Cirillo v. Ontario, 2020 ONSC 3983, Leroux v. Ontario, 2020 ONSC 1994, Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 SCR 27, Canada (Attorney General) v. Thouin, 2017 SCC 46, Just v. British Columbia, [1989] 2 SCR 1228, R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42, Sutherland Shire Council v. Heyman, [1985] HCA 41 (Aus HC), Operation Dismantle Inc. v. The Queen, [1985] 1 SCR 441

9383859 Canada Ltd. v Navaratnam, 2021 ONCA 210

Keywords: Contracts, Real Property, Agreements of Purchase and Sale of Land, Civil Procedure, Striking Pleadings, Orders, Security for Costs, Enforcement, Quashing Appeal, Rules of Civil Procedure, Rules 21.01(1)(b), 56.01(1)(d), 61.06(1)-(2), Virc v. Blair (2016), 134 OR (3d) 795 (Ont CA), Susin v. Susin, 2008 ONCA 66

Fontaine v. Canada (Attorney General), 2021 ONCA 203

Keywords: Torts, Negligence, Crown Liability, Indian Residential School Settlement, Civil Procedure, Class Proceedings, Records, Confidentiality, Solicitor-Client Privilege, Litigation Privilege, Standard of Review, Canada (Attorney General) v. Fontaine, 2017 SCC 47, Housen v. Nikolaisen, 2002 SCC 33, Amertek Inc. v. Canadian Commercial Corp. (2005), 76 O.R. (3d) 241 (C.A.), H.L. v. Canada (Attorney General), 2005 SCC 25, MacDougall v. MacDougall (2005), 205 O.A.C. 216 (C.A.)

Fram Elgin Mills 90 Inc. v. Romandale Farms Limited, 2021 ONCA 201

Keywords: Contracts, Real Property, Agreements of Purchase and Sale of Land, Settlements, Anticipatory Breach, Repudiation, Frustration, Mistake, Unconscionability, Duty of Good Faith and Fair Dealing, Estoppel by Representation, Estoppel by Convention, Breach of Fiduciary Duty, Remedies, Specific Performance, Limitations Act, 2002, S.O. 2002, c. 24, Sched B ss. 4 & 5, Survival of Actions Act, R.S.N.L. 1990, s. S-32 , Rules of Civil Procedure, Rule 6, Ryan v. Moore, 2005 SCC 38, Scotsburn Co-operative Services Ltd. v. W.T. Goodwin Ltd., [1985] 1 S.C.R. 54, Naylor Group Inc. v. Ellis-Don Construction Ltd., 2001 SCC 58, Miller Paving Ltd. v. B. Gottardo Construction Ltd., 2007 ONCA 422, Wood v. Farr Ford Ltd., 2008 CanLII 53848 (Ont. S.C.), Mohamed Imran Hanif v. Ontario College of Pharmacists, Her Majesty the Queen in Right of Ontario and AGO, 2013 ONSC 6991 (Div. Ct.), Canadian Superior Oil Ltd. v. Paddon-Hughes Development Co., [1970] S.C.R. 932, Page v. Austin (1884), 10 S.C.R. 132, Pacific National Investments Ltd. v. Victoria (City of), 2004 SCC 75, First Elgin Mills Developments Inc. v. Romandale Farms Limited, 2014 ONCA 576, Capital Quality Homes Ltd. v. Colwyn Construction Ltd. (1975), 61 D.L.R. (3d) 385 (Ont. C.A.), Focal Properties Ltd. v. George Wimpey (Canada) Ltd. (1975), 73 D.L.R. (3d) 387 (Ont. C.A.), : Naylor Group Inc. v. Ellis-Don Construction Ltd., 2001 SCC 58, Perkins v. Sheikhtavi, 2019 ONCA 925, Miller Paving Ltd. v. B. Gottardo Construction Ltd., 2007 ONCA 422, : Zeitel v. Ellscheid (1991), 85 D.L.R. (4th) 654 (Ont. C.A.), Ali v. O-Two Medical Technologies Inc., 2013 ONCA 733, Erie Sand & Gravel Ltd. v. Series’ Farms Ltd., 2009 ONCA 709, Semelhago v. Paramadevan, [1996] 2 S.C.R. 415, Di Millo v. 2099232 Ontario Inc., 2018 ONCA 1051, Manitoba Metis Federation Inc. v. Canada (Attorney General), 2013 SCC 14, Intact Insurance Company of Canada v. Lombard General Insurance Company of Canada, 2015 ONCA 764, St. Jean v. Cheung, 2009 ONCA 9, Climans v. Latner, 2020 ONCA 554, Grasshopper Solar Corporation v. Independent Electricity System Operator, 2020 ONCA 499, leave to appeal refused, [2020] S.C.C.A. No. 360, Martin v. American International Assurance Life Co., 2003 SCC 16, Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, Onex Corp. v. American Home Assurance Co., 2013 ONCA 117, leave to appeal refused, [2013] S.C.C.A. No. 178, Dumbrell v. The Regional Group of Companies Inc., 2007 ONCA 59, Chartbrook Limited v. Persimmon Homes Limited, [2009] UKHL 38, Energy Fundamentals Group Inc. v. Veresen Inc., 2015 ONCA 514, M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd., [1999] 1 S.C.R. 619, Canadian Pacific Hotels Ltd. v. Bank of Montreal, [1987] 1 S.C.R. 711, Hodgkinson v. Simms, [1994] 3 S.C.R. 377, Bhasin v. Hrynew, 2014 SCC 71, Greenberg v. Meffert (1985), 50 O.R. (2d) 755 (C.A.), C.M. Callow Inc. v. Zollinger, 2020 SCC 45, Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District, 2021 SCC 7, Matthew Brady Self Storage Corporation v. InStorage Limited Partnership, 2014 ONCA 858, leave to appeal refused, [2015] S.C.C.A. No. 50, Paterson Veterinary Professional Corporation v. Stilton Corp. Ltd., 2019 ONCA 746, leave to appeal refused, [2019] S.C.C.A. No. 420, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, 1193430 Ontario Inc. v. Boa-Franc Inc. (2005), 260 D.L.R. (4th) 659 (Ont. C.A.), Majdpour v. M&B Acquisition Corp. (2001), 206 D.L.R. (4th) 627 (Ont. C.A.), Hunter Engineering Co. v. Syncrude Canada Ltd., [1989] 1 S.C.R. 426

Short Civil Decisions

LeBlanc v Ontario, 2021 ONCA 204

Keywords: Contracts, Agreements of Purchase and Sale of Land, Crown Liability, Sheriffs, Civil Procedure, Judgments, Enforcement, Seizure and Sale, Courts of Justice Act, RSO 1990, c C43, s 142

CIVIL DECISIONS

Danesh v Vahed, 2021 ONCA 189

[Lauwers, Trotter and Zarnett JJ.A.]

Counsel:

S. Siddiqui, for the appellant E.V.

E. Mehrabi, for the respondent M.D.

A. Gibson, for the respondent Remax Crossroads Realty Inc.

M. Kestenberg, for the respondent M.B.

Keywords: Contracts, Real Property, Agreements of Purchase and Sale of Land, Completion Date, Extension, Deposits, Forfeiture, Civil Procedure, Summary Judgment, Appeals, Fresh Evidence, Hryniak v. Mauldin, 2014 SCC 7

facts:

The respondent had agreed to purchase a condo from the appellant under an agreement of purchase and sale (the “APS”). An extension to closing was agreed to and the closing was moved to September 6, 2018. The day before the closing, the respondent’s lawyer advised the appellant, through her lawyer, that the respondent had been unable to obtain financing and was seeking a further extension to September 25 for closing. The appellant instructed her lawyer to agree to the extension on the condition that the respondent pay various carrying costs for the extension and the respondent’s lawyer undertake to have the respondent acknowledge that he would forfeit the deposits if the APS did not close on the 25th.

The appellant’s lawyer relayed these terms to the respondent’s lawyer on September 6th and the respondent agreed. The terms were confirmed in a signed letter from the appellant’s lawyer on the same day, but the appellant’s lawyer did not provide a copy to the appellant. He did, however, make reference to the respondent’s agreement to the conditions in subsequent communication. The appellant later took the position that the extension had never been agreed to and refused to close on the 25th, claiming that the APS had expired on September 6thHe. The deal never closed and the brokerage returned half the deposit to the respondent.

The respondent brought this action for the return of the other half of the deposit and for damages for the appellant failing to close the APS. On summary judgment, the motion judge found for the respondent and also dismissed the appellant’s counterclaim against her lawyer for failing to follow her instructions and against the brokerage for releasing the deposit to the respondent.

issues:

(1) Should the appellant be granted leave to adduce fresh evidence on this appeal?

(2) Did the motion judge err in deciding the case by way of summary judgment and in finding that there was no genuine issue for trial?

(3) Did the motion judge err in dismissing the counterclaim?

(4) Did the motion judge err in awarding costs against the appellant for the counterclaim?

holding:

Appeal dismissed.

reasoning:
  1. Should the appellant be granted leave to adduce fresh evidence on this appeal?

No. The appellant sought to produce correspondence between her lawyer and the brokerage prior to the September 6th closing date, as it would be relevant to credibility. However, the Court of Appeal found that this evidence could have been discovered with reasonable diligence before the motion for summary judgment. Further, the evidence, even if admitted, was not relevant to the central issue of the appeal, and so was not admissible.

  1. Did the motion judge err in deciding the case by way of summary judgment and in finding that there was no genuine issue for trial?

No. The appellant’s appeal turned on whether or not there was in fact a letter on September 6th, 2018, confirming the extension of closing. The appellant argued that the letter was an after the fact fabrication and that therefore there was nothing in writing agreeing to an extension of the closing date made on September 6. The motion judge’s decision showed he clearly considered the ‘red flags’ raised by the appellant and the other relevant considerations. The decision of a motion judge as to whether there is a genuine issue for trial is entitled to deference: Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87.

Ultimately, the motion judge found that the correspondence and letter dated September 6th, 2018 did in fact happen and that the closing was thus extended to September 25th and that the appellant breached the APS. The Court of Appeal held that the motion judge committed no palpable and overriding error in that regard.

  1. Did the motion judge err in dismissing the counterclaim?

No. The appellant argued that she instructed her lawyer to obtain an undertaking to acknowledge the conditions. Instead, the respondent’s lawyers just confirmed that their client agreed to the conditions. The appellant submits that this was a failure to follow her instructions. In dismissing this ground of appeal, the Court noted that it was irrelevant as to the appeal against the respondent because there was no evidence either he or his lawyer knew of any limitation in the authority of the appellant’s lawyer. Further, there was no material difference between the undertaking requested and what the appellant received. Thus there was no error. The Court also noted that even if there was a material difference, because the appellant had breached the APS, she never became entitled to the deposits or the benefits of the conditions and so no loss would have been suffered.

  1. Did the motion judge err in awarding costs against the appellant for the counterclaim?

The appellant appealed the decision to grant costs against her in favour of the brokerage. She claimed she suffered substantial damages when the brokerage advanced the funds prematurely. Since the appellant was never entitled to the deposit, she suffered no loss. Further, the motion judge found that the brokerage immediately replaced the funds when it realized it was premature and so even if the appellant was entitled to the deposits, the money would have been there for her to collect.

Mohamoud v Carleton Condominium Corporation No. 25, 2021 ONCA 191

[Tulloch, Miller and Thorburn JJ.A.]

Counsel:

G. G. Boyd and H. Chung, for the appellant

M. Andrews, for the respondent

Keywords: Real Property, Condominiums, Oppression, Condominium Act, 1998, S.O. 1998, c. 19, ss. 89, 90, 135, Metropolitan Toronto Condominium Corporation No. 1272 v. Beach Development (Phase II) Corporation, 2011 ONCA 667, Canada Inc. v. Carleton Condominium Corporation No. 375, 2016 ONCA 650

facts:

The appellant appealed the order of the application judge, which dismissed her application under the Condominium Act, 1998 (the “Act”). The appellant owned a unit in the respondent’s condominium. The appellant brought an application against the respondent alleging that: (1) the respondent failed to properly maintain and repair the common elements under ss. 89 and 90 of the Act, and (2) it acted in a manner that was oppressive or unfairly prejudicial, or that unfairly disregarded her interests, under s. 135 of the Act. The application involved a noise complaint relating to fans located above the appellant’s unit. In 2014, the appellant notified the respondent of the noise and in 2019 the respondent removed the fans. The appellant alleged that the respondent did not take her complaints seriously, and did not rectify the problem in a timely manner. The judge dismissed the application, finding that the respondent met its obligations under the Act.

issues:
  1. Did the application judge err in using the legal test of “reasonableness” when determining whether the respondent acted oppressively within the meaning of s. 135 of the Act?
  2. Did the application judge err by only considering the applicant’s reasonable expectation that the respondent would comply with its maintenance and repair obligations, without also considering her other reasonable expectations?
holding:

Appeal dismissed.

reasoning:
  1. Did the application judge err in using the legal test of “reasonableness” when determining whether the respondent acted oppressively within the meaning of s. 135 of the Act?

No. The appellant argued that the judge conflated the test of oppression under s. 135 with the test of reasonableness under ss. 89 and 90. Under s. 135(2) of the Act, the Court must determine whether the impugned conduct is, or threatens to be, oppressive or unfairly prejudicial to the applicant or unfairly disregards their interests. The test under s. 135(2) has two prongs. First, the Court must assess whether there has been a breach to the claimant’s reasonable expectations; and if so, whether the conduct complained of amounts to oppression. The Court held that the application judge understood and applied the correct test under s. 135(2). The application judge found that the appellant failed to satisfy the first prong of the test: the respondent did not act in a manner that breached the appellant’s reasonable expectations because it acted reasonably and complied with its statutory obligations. Moreover, the Court found that, based on the evidence, the judge was entitled to find that the respondent’s conduct did not amount to oppression on the basis that the respondent acted reasonably. The application judge was satisfied that the respondent had addressed the appellant’s complaint in a reasonable manner by meeting with her, communicating with her orally and in writing, visiting her unit on multiple occasions, retaining contractors and experts to investigate, and in following the recommendations of the experts. The application judge’s finding was entitled to deference on appeal and the Court found no error in the decision.

  1. Did the application judge err by only considering the applicant’s reasonable expectation that the respondent would comply with its maintenance and repair obligations, without also considering her other reasonable expectations?

No. The appellant submitted that the application judge erred by failing to consider her reasonable expectations that: the respondent would address her concerns in a timely manner; she could have quiet enjoyment of her unit; the respondent would act in accordance with the professional advice it received; and the respondent would take her concerns seriously. The Court found that the appellant’s argument was not borne out in the facts, as found by the judge. The respondent tried to address the appellant’s concerns in a timely manner and tried to ensure that she had quiet enjoyment of her unit. The respondent took action even when it was contrary to the professional advice that it had received. The application judge specifically found that the respondent took the appellant’s concerns seriously, and that the respondent spent considerable amounts of money trying to address them. The Court found no error in the judge’s decision.

Cvetkovic v Cvetkovic-Gorovic, 2021 ONCA 193

[Fairburn A.C.J.O., van Rensburg and Huscroft JJ.A.]

Counsel:

M. DeGroot, for the appellant

D.C., acting in person

Keywords: Family Law, Spousal Support, Review, Termination, Variation, Material Change in Circumstance, Expert Evidence, Divorce Act, R.S.C., 1985, c. 3 (2nd Supp.), ss 15.2(6) and 17(7)

facts:

The parties were divorced and pursuant to a final order made in 2009, the respondent was to pay spousal and child support to the appellant. The order provided for review every four years and that either party could make an application to the court if they could not agree on the amount and duration of spousal support. Some years later, the appellant brought a motion to vary the order based on her assertion that the respondent had not disclosed all of his income both before the final order and since then. The appellant brought his own motion to terminate or reduce spousal support because the appellant was refusing to hold a full-time employment position despite ample qualifications.

After a trial of the issues, the order for spousal support was terminated, and the appellant appealed this decision.

issues:

(1) Did the trial judge err in treating the trial as a variation proceeding instead of a review?

(2) Did the trial judge err in terminating spousal support based on the material changes found?

(3) Did the trial judge err in admitting the opinion of a jointly retained expert on the respondent’s income despite the expert not testifying?

holding:

Appeal dismissed.

reasoning:
  1. No.

While there is a difference between a variation proceeding and a review proceeding, there was no practical difference in this case. A review permits an order to be revisited without any threshold determinations for change, whereas a variation requires the party to establish a material change in circumstances. Once the threshold is established, however, a review and a variation both consider the same objectives, those set out in ss. 15.2(6) and ss. 17(7) of the Divorce Act. Whether characterized as a review or a variation, the trial judge considered the appropriate circumstances and factors and so there was no practical difference.

  1. No.

The appellant asserted that the respondent had not disclosed income from one of his numbered companies in 2009 and thus his imputed income should have been higher. After reviewing the evidence, the trial judge saw nothing to indicate that income had not been reported either before 2009 or since then. The Court of Appeal saw no reason to interfere with this factual finding.

On the question of whether to terminate spousal support, the trial judge considered that the appellant had not worked since 2015. While she claimed medical reasons were preventing her from working, she failed to adduce sufficient evidence that she had attempted to become economically self-sufficient or to provide evidence of medical circumstances that rendered her unable to do so. The trial judge found that since the appellant had not demonstrated sufficient efforts to become self-sufficient, and given that the appellant had sufficient equity in her home to repay all outstanding debts, the objectives of spousal support in the Divorce Act were not met by continuing support, and therefore spousal support was terminated. This was a finding of fact and the Court of Appeal saw no reason to interfere with, as the trial judge’s approach was proper.

  1. No.

The expert report was admitted as hearsay evidence. The trial judge considered the appropriate test – whether the evidence was necessary and reliable – and concluded that it was. This was the appropriate approach and so no error was committed. Further, the appellant herself relied on aspects of the report in advancing her case and so it was not open to the appellant to now question the trial judge’s reliance on the report.

Shaver-Kudell Manufacturing Inc. v Knight Manufacturing Inc., 2021 ONCA 202

[van Rensburg J.A. (Motions Judge)]

Counsel:

I. Klaiman for the appellant, Knight Manufacturing Inc., L.S., D.B., and A.K.

C. Hammond for the respondent, Shaver-Kudell Manufacturing Inc.

Keywords: Bankruptcy and Insolvency, Stay of Proceedings, Lifting of Stay, Obtaining Property by False Pretences, Torts, Breach of Confidence, Misappropriation of Trade Secrets, Civil Procedure, Appeals, Extension of Time, Security for Costs, Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, ss 69(1), 69.4, 178(1)(e), 193, Bankruptcy and Insolvency General Rules, C.R.C., c. 368, Rule 31(1), Courts of Justice Act, R.S.O. 1990, c. C.43, s. 6(1), Rules of Civil Procedure, Rule 61.06(1)(c), Business Development Bank of Canada v. Astoria Organic Matters Ltd., 2019 ONCA 269, Water Matrix Inc. v. Carnevale, 2018 ONSC 6436,  Beneficial Finance Co. v. Durward (1961), 2 C.B.R. (N.S.) 173 (Ont. Co. Ct.), Graves v. Hughes, 2001 NSSC 68, 25 C.B.R. (4th) 255, Gray (Re), 2014 ONCA 236, Korea Data Systems (USA), Inc. v. Aamazing Tehnologies Inc., 2015 ONCA 465, H.Y. Louie Co. Limited v. Bowick, 2015 BCCA 256, Lawyers’ Professional Indemnity Company v. Rodriguez, 2018 ONCA 171, leave to appeal refused, [2018] S.C.C.A. No. 128, Re McKee (1997), 47 C.B.R. (3d) 70 (Alta. Bankruptcy Registrar), Re Mariyanayagam (1998), 10 C.B.R. (4th) 105 (Ont. Gen. Div.), Re Bissonette, 2006 CarswellOnt 7023 (Bankruptcy Registrar), Re Di Paola (2006), 84 O.R. (3d) 554 (C.A., In Chambers), Re Berger, 2010 ONSC 4376, (Bankruptcy Registrar), Dal Bianco v. Deem Management Services Limited, 2020 ONCA 585, Third Eye Capital Corporation v. Resources Dianor Inc./Dianor Resources Inc., 2019 ONCA 508, 2403177 Ontario Inc. v. Bending Lake Iron Group Ltd., 2016 ONCA 225, MNP Ltd. v. Wilkes, 2020 SKCA 66, 80 C.B.R. (6th) 1, Royal Bank of Canada v. Bodanis, 2020 ONCA 185, (In Chambers), Elias v. Hutchison, 1981 ABCA 31, Ravelston Corp., Re (2005), 24 C.B.R. (5th) 256, (Ont. C.A.), Business Development Bank of Canada v. Pine Tree Resorts Inc., 2013 ONCA 282, Canada (Attorney General) v. Bourassa (Trustee of), 2002 ABCA 205, Lang v. Soyatt (1988), 68 C.B.R. (N.S.) 201, (Ont. Sup. Ct.), Re Wilson (1930), 11 C.B.R. 425 (Ont. Sup. Ct.), Re Cameron, 2002 ABCA 183, 40 Park Lane Circle v. Aiello, 2019 ONCA 451, H.Y. Louie Co. v. Bowick, 2015 BCCA 363, Celanese Canada Inc. v. Murray Demolition Corp., [2010] O.J. No. 6347 (S.C.), Toronto Dominion Bank v. Cushing, 2007 BCSC 1581, Yaiguaje v. Chevron Corporation, 2017 ONCA 827, Combined Air Mechanical Services Inc. v. Flesch, 2010 ONCA 633, Perron v. Perron, 2011 ONCA 776 (In Chambers), Henderson v. Wright, 2016 ONCA 89 (In Chambers), York University v. Markicevic, 2017 ONCA 651 (In Chambers)

facts:

This case arose from a 2018 action (the “Action”), where the appellant was held liable for committing breach of confidence and misappropriation of the respondent’s trade secrets. A further trial was to be held on the issue of damages.

Following the trial of the Action, the appellant was assigned into bankruptcy. Pursuant to s. 69(1) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (the “BIA”), all proceedings against the appellant were stayed. The respondent then brought a motion for an order under s. 178(1)(e) and s. 69.4 of the BIA declaring that the appellant’s discharge from bankruptcy would not release any debts or liabilities arising from its claims against him in the Action and to lift the stay of proceedings. The motion judge held that the appellant’s debts arising from claims in the Action, including the outstanding costs award, would survive his bankruptcy discharge and that the stay under s. 69(1) of the BIA would no longer operate with respect to the Action.

The appellant attempted to file a notice of appeal from the motion judge’s order, but was unable to do so due to an administrative issue. The appellant then moved for an extension of time to file a notice of appeal. The appellant asserted that he had the right to appeal and, in the alternative, sought leave to appeal under s. 193 of the BIA. The respondent opposed the motion on the basis that there is no right to appeal without leave under s. 193 of the BIA and that the extension should be refused because the appeal was lacking in merit. The respondent also brought a cross-motion for security for costs of the appeal under Rule 61.06(1)(c) of the Rules of Civil Procedure.

issues:

(1) Does the appellant have the right to appeal the motion judge’s order?

(2) Should the respondent be granted security for the costs of the appeal under Rule 61.06(1)(c)?

holding:

Motion granted. Cross-motion dismissed.

reasoning:

(1) Yes. The appellant’s motion for an extension of time to appeal was granted.

Right of Appeal under s. 193 of the BIA

The first point asserted by the respondents was that the extension of time should be refused because there was no appeal as of right. The Court stated that an appeal can be brought under s. 193 of the BIA where the order sought to be appealed is granted in reliance on jurisdiction under the BIA (Business Development Bank of Canada v. Astoria Organic Matters Ltd., 2019 ONCA 269). If the motion judge’s order was not made in reliance on jurisdiction under the BIA, it would be appealable to under s. 6(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43.

The Court then considered the jurisdiction regarding the two components of the motion judge’s order: the declaration under s. 178(1)(e) of the BIA and the lift-stay order. The lift-stay order could only be made under s. 69.4 of the BIA, whereas declaratory orders under s. 178(1) are made in the exercise of the court’s general jurisdiction. The Court found that the motion judge’s order was made on a motion during the appellant’s bankruptcy, and, as part of the order the motion judge lifted the stay under s. 69(1) of the BIA to permit the Action to continue against the bankrupt. Therefore, the Court held that the proper appeal route in this case was under s. 193 of the BIA.

Turning to s. 193, the Court agreed with the appellant’s argument that he had the right to appeal the motion judge’s order under ss. 193(a) and (c). Section 193(c) provides for a right of appeal “if the property involved in the appeal exceeds in value ten thousand dollars”. The Court followed the authority in Royal Bank of Canada v. Bodanis, 2020 ONCA 185, in which the Court had stated that s. 193(c) “clearly applies… where the appellant’s entire property ha[s] been taken out of their control and placed into the hands of a Trustee in Bankruptcy, who has the right to dispose of that property and distribute it among the creditors, without further court intervention.” The Court here found that the property involved in the appeal of the motion judge’s declaration under s. 178 exceeded $10,000 in value. Further, since the lift-stay provision was part of the motion judge’s order and dependent on that declaration, the entire order was subject to appeal as of right under s. 193(c).

Section 193(a) provides for a right of appeal “if the point at issue involves future rights”. The Court found that the motion judge’s order involved the future rights of both parties, being the appellant’s right to be discharged from the debts and liabilities arising out of the judgments in the Action and the respondent’s right, as a creditor of the bankrupt, to enforce the judgments following his discharge from bankruptcy.

Merits of the Appeal

The second point asserted by the respondents was that the extension of time should be refused because the appeal lacked merit. The Court stated that the question to be asked is whether there is “so little merit in the proposed appeal that the appellant should be denied [his] important right of appeal” (40 Park Lane Circle v. Aiello, 2019 ONCA 451 (In Chambers)). The Court held that the appeal at issue had “at least an arguable chance of success” and raised legitimate questions about the interpretation of “obtaining property by false pretences” within s. 178(1)(e) of the BIA. For these reasons the motion to extend time to file the notice of appeal was granted.

(2) No. The respondent’s motion for security for costs was dismissed.

The respondent argued that security under this provision was warranted because the appeal had little merit and it would be difficult to recover costs of the appeal from the bankrupt appellant.

The Court stated that an order for security for costs under Rule 61.06(1) of the Rules of Civil Procedure is permissive and may be made where (a) there is good reason to believe that the appeal is frivolous and vexatious and that the appellant has insufficient assets in Ontario to pay the costs of the appeal; (b) an order for security for costs could be made against the appellant under Rule 56.01; or (c) for other good reason. In regards to (c), the Court stated that the “other good reason” must be compelling and that parties may only resort to this provision when the respondent has been unable to obtain security under the other two categories. Further, security for costs under Rule 61.06(1)(c) should not be made routinely.

The Court had already determined that the appellant had a right of appeal and that the appeal was of arguable merit. Further, there had not been any finding that the appellant committed fraud or tried to put his assets out of reach of his creditors. Therefore, the Court found that the respondent had not met the test for security for costs and the motion was dismissed.

Laurentian University of Sudbury, 2021 ONCA 199

[Hoy, Pepall and Zarnett JJ.A.]

Counsel:

M. Gold and J. Harnum, for the moving party the Ontario Confederation of University Faculty Associations

S. Philpott and C. Sinclair, for the moving party the Laurentian University Faculty Association

M. Martin, for the moving party the Canadian Union of Public Employees

D.J. Miller, S. McGrath and D. Harland, for the responding party Laurentian University of Sudbury

A. Taylor, E. Pillon and Z. Smith, for the responding party Ernst & Young Inc., acting as the Monitor

Keywords: Bankruptcy and Insolvency, Civil Procedure, Sealing Orders, Appeals, Leave to Appeal, Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C.36, s. 13, Courts of Justice Act, R.S.O. 1990, c. C.43, s. 137(2), Canadian Charter of Rights and Freedoms, s.2(d), Sierra Club of Canada v. Canada (Minister of Finance), 2002 SCC 41, 9354-9186 Québec inc. v. Callidus Capital Corp., 2020 SCC 10, Edgewater Casino Inc. (Re), 2009 BCCA 40, Nortel Networks Corp. (Re), 2016 ONCA 332

facts:

Due to recurring operational deficits, Laurentian has encountered a liquidity crisis and is insolvent. Laurentian sought and obtained protection under the Companies’ Creditors Arrangement Act (“CCAA”) to permit it to restructure. Among the stated reasons for Laurentian’s CCAA application was what it described as unsustainable “academic costs”, which Laurentian attributes in part to the terms of its collective agreement with its faculty members. Two unions representing Laurentian employees – the Laurentian University Faculty Association (“LUFA”) and the Canadian Union of Public Employees (“CUPE”) – and the Ontario Confederation of University Faculty Associations (“OCUFA”), an umbrella organization representing faculty associations, seek leave to appeal the decision of the CCAA judge which continues a sealing order over two documents that Laurentian filed on its application for CCAA protection.

issues:

Should leave to appeal be granted?

holding:

Motion dismissed.

reasoning:

No. Section 13 of the CCAA provides that any person dissatisfied with a decision made under the CCAA may appeal with leave. Leave to appeal is to be granted sparingly and only where there are serious and arguable grounds that are of real and significant interest to the parties. This cautious approach is a function of several factors. First, a high degree of deference is owed to discretionary decisions made by CCAA judges. Appellate intervention is justified only where the judge erred in principle or exercised their discretion unreasonably. Second, CCAA proceedings are dynamic. It is often inappropriate to consider an exercise of discretion by the judge in isolation of other exercises of discretion by the judge in endeavouring to balance the various interests. Third, CCAA restructurings can be time sensitive. The existence of, and delay involved in, an appeal can be counterproductive to a successful restructuring.

The effect of the sealing provision was that both the broader public and the parties to the CCAA proceeding were prevented from accessing the documents. The CCAA judge held that the sealing provision was authorized under s. 137(2) of the Courts of Justice Act and by the application of the principles in Sierra Club of Canada v. Canada (Minister of Finance). According to Sierra Club, a sealing order should only be granted when (a) such an order is necessary to prevent a serious risk to an important interest in the context of litigation because reasonably alternative measures will not prevent the risk; and (b) the salutary effects of the confidentiality order outweigh its deleterious effects. Under the first branch of the test, the CCAA judge concluded that disclosure of the documents, at this time, could be detrimental to any potential restructuring efforts. Accordingly, the CCAA judge found that the risk in disclosing the documents was real and substantial and posed a serious risk to the future viability of Laurentian. He found that the commercial interest was that of the entire Laurentian community; that it was of paramount importance that all efforts to restructure be explored; and that it was necessary to maintain the confidentiality of the documents in order to do so. He was satisfied that there were no reasonable alternatives to a sealing order since any alternative would have negatively impacted the mediation efforts. Turning to the second branch of the test, the CCAA judge was also satisfied that the salutary effects of the sealing provision outweighed its deleterious effects.

In addressing whether leave should be granted, the Court considered four factors, specifically whether: (a) the proposed appeal is prima facie meritorious or frivolous; (b) the points on the proposed appeal are of significance to the practice; (c) the points on the proposed appeal are of significance to the action; and (d) whether the proposed appeal will unduly hinder the progress of the action.

(a) Leave not Prima Facie Meritorious

The Court was not persuaded that the proposed appeal, challenging what is a discretionary order, is prima facie meritorious. The moving parties argued that they should have access to the documents for the purpose of formulating their positions. The CCAA judge set out the Sierra Club test and was aware that it required him to balance the deleterious effects of the sealing order. The CCAA judge recognized the exceptionally short timeline required for successful restructuring. Thus, the CCAA judge concluded that the risk to the potential restructuring of Laurentian within this extremely tight timeframe if the documents were disclosed outweighed other relevant interests.

The moving parties expressed concern that the sealing order created an informational imbalance. Nothing before the Court suggested that the moving parties had been hampered by any informational imbalance. The judicial mediator appointed by the CCAA judge would have pointed out concerns of informational imbalance had there been any. Furthermore, the Court did not see anything in the sealing provision that would prevent a party from making a request to the CCAA judge, at the appropriate time, for relief on appropriate terms. As noted, the sealing provision was expressly subject to “further order of the Court”. The moving parties also argued that the CCAA judge failed to consider the impact his ruling would have on freedom of expression. The Court was satisfied he did take that factor into account, as he mentioned it in setting out the test and later said that the deleterious effects included the public interest in accessing the documents.

The moving party also argued that there was no evidence that the sealing order was necessary to protect a valid commercial interest. The CCAA judge was satisfied that there was a sufficient evidentiary basis. He based his conclusion that disclosing the documents posed a serious risk to the restructuring on his review of the documents and other evidence. Additionally, the Monitor supported Laurentian’s position that disclosure posed a serious risk, and the CCAA judge concluded that disclosure posed a serious risk. The CCAA judge exercised his judgment, based on an evidentiary record. The fact the proposed appeal was not prima facie meritorious weighed significantly against granting leave.

(b) No Significance to the Practice

Although the facts of this case highlighted some interesting questions about the Sierra Club test in the CCAA context, this was not an appropriate case to explore issues of significance to the practice given the Court’s view of the merits of the proposed appeal and the other factors.

(c) No Significance to the Action

Given the involvement of a court-appointed mediator and that it was open to the CCAA judge to revisit the sealing provision and possibly revoke it or limit its impact by allowing the parties to the CCAA proceeding to access the sealed documents, the significance of the proposed appeal to the action was insufficient to justify leave.

(d) Appeal would Hinder Progress of the Action

Since the restructuring was on an exceptionally short timeline, there was urgency to being able to reach a successful restructuring in light of Laurentian’s financial position and the need for certainty regarding the next academic year. There was too great a risk that an appeal would be a distraction from restructuring efforts and thus would unduly hinder the progress of the proceeding, which weighed significantly against granting leave.

Francis v Ontario, 2021 ONCA 197

[Doherty, Nordheimer and Harvison Young JJ.A.]

Counsel:

A Clark, V Yankou, H Evans, S Hanley, T Jemec and M Chung, for the appellant

J Sayce, C Hatt and N Gondek, for the respondent

M Horner and I Essajee, for the intervener Ontario Human Rights Commission

J Lisus, Z Naqi and P Underwood, for the intervener Canadian Civil Liberties Association

Keywords: Torts, Negligence, Constitutional Law, Charter Claims, Right to Life and Security of the Person, Freedom from Cruel and Unusual Punishment, Oakes Test, Crown Liability, Corrections, Administrative Segregation (Solitary Confinement), Civil Procedure, Class Proceedings,  Canadian Charter of Rights and Freedoms, ss. 7, 12, 24(1), Constitution Act, 1982, s. 52, Ministry of Correctional Services Act, R.S.O. 1990, c. M.22, ss. 20(1.1), 20(2), 20(3), 60(1), General, R.R.O. 1990, Reg. 778, ss. 2(1), 34(1), 34.0.1, 34(5), Correctional Services and Reintegration Act, 2018, S.O. 2018, c. 6, Sched. 2, Crown Liability and Proceedings Act, 2019, S.O. 2019 c. 7, Sched. 17, ss. 11, 31(4), Proceedings Against the Crown Act, R.S.O. 1990, c. P.27, s. 5, Corrections and Conditional Release Act, S.C. 1992, c. 20, Class Proceedings Act, 1992, S.O. 1992, c. 6, Bill 100, An Act to implement Budget measures and to enact, amend and repeal various statutes, 1st Sess., 42nd Parl., Ontario, 2019 (short title “Protecting What Matters Most Act (Budget Measures), 2019”), Canadian Civil Liberties Association v. Canada (Attorney General), 2019 ONCA 243, Brazeau v. Canada (Attorney General), 2020 ONCA 184, Brazeau v. Canada (Attorney General), 2020 ONSC 3272, Brazeau v. Attorney General (Canada), 2019 ONSC 1888, Reddock v. Canada (Attorney General), 2019 ONSC 5053, Corporation of the Canadian Civil Liberties Association v. Her Majesty the Queen, 2017 ONSC 7491, rev’d on other grounds, 2019 ONCA 243, Vancouver (City) v. Ward, 2010 SCC 27, Henry v. British Columbia (A.G.), 2015 SCC 24, Conseil scolaire francophone de la Colombie-Britannique v. British Columbia, 2020 SCC 13, Mackin v. New Brunswick (Minister of Finance), 2002 SCC 13, Cooper v. Hobart, 2001 SCC 79, MacLean v. The Queen, [1973] SCR 2, Rumley v. British Columbia, 2001 SCC 69, Cloud v. Canada (Attorney General) (2004), 73 OR (3d) 401 (Ont CA), Good v. Toronto (Police Services Board), 2016 ONCA 250, Seelster Farms v. Her Majesty the Queen and OLG, 2020 ONSC 4013, Barker v. Barker, 2020 ONSC 3746, Cirillo v. Ontario, 2020 ONSC 3983, Leroux v. Ontario, 2020 ONSC 1994, Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 SCR 27, Canada (Attorney General) v. Thouin, 2017 SCC 46, Just v. British Columbia, [1989] 2 SCR 1228, R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42, Sutherland Shire Council v. Heyman, [1985] HCA 41 (Aus HC), Operation Dismantle Inc. v. The Queen, [1985] 1 SCR 441

facts:

The respondent, who suffered from serious mental illness, was held in detention for over two years on remand while awaiting trial on charges related to a bank robbery. While incarcerated, the respondent was placed in administrative segregation twice, once for 8 days. Correctional officials classified his refusal to take mental health medication as “refusing to follow an order”, which they determined justified his administrative segregation. The respondent’s experience in administrative segregation was excruciating. His anxiety was out of control, he felt terrorized, and he was in a state of delirium and shock.

The respondent commenced this proceeding as a class action. He sought declarations that his and the class members’ Charter rights had been infringed by Ontario’s administrative segregation system and that Ontario was liable in negligence, plus damages under s. 24(1) of the Charter. The certified class was made up of two groups: seriously mentally ill inmates, such as the respondent (“SMI Inmates”); and inmates who were left in segregation for 15 or more consecutive days (“Prolonged Inmates”).

In Ontario, administrative segregation involves isolation in a small cell for 22 hours or more with no meaningful human contact. The motion judge found the conditions of administrative segregation in Ontario were “the same or very similar” as those in the federal system, which the Court of Appeal has twice found to constitute cruel and unusual treatment. The mentally ill are markedly overrepresented among inmates subjected to administrative segregation, and spend on average 30% more time in segregation than other inmates. Over time, Ontario made changes to its system of administrative segregation. Despite these efforts, the motion judge observed that “Ontario’s good words were not always followed by corresponding good deeds.”

The motion judge held that Ontario’s system of administrative segregation breached ss. 7 and 12 of the Charter, both with respect to the respondent and with respect to the members of the class. The evidence revealed that, once a placement in administrative segregation has become prolonged, the stress and anxiety is serious and thus the security of the person guaranteed by s. 7 of the Charter was engaged. The motion judge also stated that the increased risk of suicide for all class members subjected to administrative segregation infringed the right to life under s. 7.

The motion judge concluded that the Charter infringements did not comply with the principles of fundamental justice. He found that temporary segregation that amounted to solitary confinement was not rationally connected to the objectives of security and safety, and that the effects of administrative segregation were grossly disproportionate to its purposes. He also found that, absent an independent timely review procedure, confinement in administrative segregation of any inmate violated procedural due process rights under s. 7 of the Charter. With respect s. 12, the evidence established that administrative segregation, as administered by Ontario during the class period, was a cruel and unusual treatment of both the SMI Inmates and Prolonged Inmates. The motion judge also concluded that the infringements were not saved under s. 1 of the Charter.

The motion judge then rejected each of Ontario’s submissions with respect to the negligence claim. He found that Ontario owed a duty of care to the respondent and the class members. He distinguished this case from Brazeau v. Canada (Attorney General), 2020 ONCA 184 (“Brazeau/Reddock”), where a claim of systemic negligence could not be made out because the primary negligence claim was “negligence at the policy-making level.” He rejected Ontario’s claim that the decisions in question were policy decisions, and instead found they were operational decisions that did not escape liability if performed negligently.

Having found liability both in negligence and under the Charter, and based in part on the Court’s conclusions about Charter damages in Brazeau/Reddock, the motion judge found that s. 24(1) damages were appropriate in this case. He awarded aggregate damages of $30 million and specified that any amount for damages for negligence would be subsumed in the award of aggregate damages for the Charter breaches.

issues:

(1) Did the motion judge err in finding that detaining SMI Inmates in administrative segregation violated ss. 7 and 12 of the Charter?

(2) Did the motion judge err in awarding Charter damages?

(3) Did the motion judge err in holding Ontario liable in negligence?

holding:

Appeal dismissed.

reasoning:

(1) Did the motion judge err in finding that detaining SMI Inmates in administrative segregation violated ss. 7 and 12 of the Charter?

No. SMI Inmates were defined using two criteria. First, they had been diagnosed as suffering from one or more mental disorders listed in the class definition. Second, their disorders had manifested themselves in one of the ways set down in the appendix to the class definition. Ontario conceded that administrative segregation of SMI Inmates for more than 15 consecutive days violated ss. 7 and 12 of the Charter, and that the absence of a timely independent review process violated s. 7. However, Ontario disagreed that the s. 7 and s. 12 rights of SMI Inmates were breached when those inmates were placed in administrative segregation for any length of time. Ontario relied on Corporation of the Canadian Civil Liberties Association v. Her Majesty the Queen, 2019 ONCA 243 (“CCLA”) in support of its argument.

The Court did not read CCLA as deciding the issue. While the court in CCLA concluded that administratively segregating an inmate for more than 15 consecutive days breached that inmate’s constitutional rights under s. 12 of the Charter, the evidence did not provide a meaningful way to identify inmates whose particular mental illnesses rendered administrative segregation for any length of time cruel and unusual. In this case, unlike CCLA, the nature of the mental illnesses suffered by the class members and the manifestation of those illnesses were part of the class definition. Therefore, the motion judge considered the impact of administrative segregation on the specific group of inmates who fell within the definition provided, and found any time spent in administrative segregation constituted cruel and unusual treatment.

The motion judge’s factual findings were supported by medical expert evidence, which showed that administrative segregation of SMI Inmates for any period of time violated their ss. 7 and 12 Charter rights. It might have been helpful for the motion judge to indicate why a cap of something less than 15 days in respect of SMI Inmates would not satisfy constitutional requirements. However, his failure to address that specific question did not amount to reversible error.

(2) Did the motion judge err in awarding Charter damages?

No. The nature and seriousness of the Charter breaches were central to whether Charter damages provided an “appropriate and just” remedy. Ontario relied on “good governance concerns” to argue that damages were inappropriate. However, state conduct that is sufficiently blameworthy will give rise to Charter damages despite good governance concerns. The blameworthiness threshold is not a single bright line but varies with the nature of the state conduct giving rise to both the Charter violations and the good governance claim.

The Court considered Brazeau/Reddock, where aggregate Charter damages of $20 million were awarded. The Court of Appeal upheld that award in respect of inmates held in administrative segregation for more than 15 consecutive days, and agreed that seriously ill inmates who had been unconstitutionally held in administrative segregation were entitled to Charter damages. In the present appeal, as was the case in Brazeau/Reddock, the appropriateness of Charter damages turned on whether good governance concerns should preclude a damages award and, if so, whether the state conduct was sufficiently blameworthy to override those concerns. The Court also stated that good governance concerns are not limited to actions flowing directly from the enactment of legislation, but can also arise in the context of a regulatory scheme.

To assess blameworthiness, the motion judge needed evidence about the physical and mental effects of administrative segregation on inmates, and what the correctional authorities knew or ought to have known about those effects. There was abundant expert evidence regarding the longstanding knowledge of the harmful physical and mental consequences of solitary confinement, particularly on the seriously mentally ill. Most of this information was readily available to correctional authorities, and would have informed their appreciation of the risk of those consequences. The evidence was replete with studies, reports and recommendations that indicated the consequences of solitary confinement fell within the meaning of cruel and unusual treatment under the Charter. The Court agreed with the motion judge’s analysis on this point and was satisfied that Ontario was aware of the very real risk, if not the very real likelihood, that administrative segregation, as practised in Ontario jails, routinely violated the constitutional rights of inmates.

(3) Did the motion judge err in holding Ontario liable in negligence?

No. The motion judge found that a duty of care arose from Ontario’s statutory duties and its relationship with the inmates. Ontario challenged that conclusion on the basis that under Brazeau/Reddock a systemic negligence claim could not be established. The Court noted that Brazeau/Reddock dealt with the federal correctional system, but disagreed that Brazeau/Reddock predetermined the outcome in this case. The pleadings in the present appeal differed from those in Brazeau/Reddock. The first distinction involved the class definition in this case, which did not include all other inmates outside the class who may have been subjected to administrative segregation in different circumstances. The second distinction was that the respondent’s claim focused on the implementation of administrative segregation in Ontario institutions, and relied on decisions and actions of an operational nature. Based on the specific allegations made respecting negligence in operational decisions, and in reliance on the evidence before him, the motion judge concluded that Ontario was systemically and routinely negligent in the operation of administrative segregation in violation of Ontario’s own policies and practices.

The Court agreed with the motion judge’s analysis. There was clearly proximity between Ontario and the inmates. It is well-established that governments owe a duty of care to individuals in their custody. It followed, from the nature of the relationship, that actions resulting in injury to an inmate were reasonably foreseeable. There were no residual policy considerations that militated against a finding of a duty of care.

There was no finding of systemic negligence in Brazeau/Reddock because the duty alleged arose from different acts in different circumstances and in relation to different individuals. Here, the actions alleged did not constitute different acts in different circumstances. At the very core of this claim was the allegation that the same act was undertaken, being placing inmates in administrative segregation, in two specific circumstances involving members of a defined class where injury was foreseeable. The expert evidence established that both of these actions would give rise to injury or harm to each and every affected individual within the class. As such, commencing this action under the Class Proceedings Act was appropriate.

Ontario submitted that the respondent’s claim was barred by the Crown Liability and Proceedings Act, 2019 (“CLPA”). The motion judge disagreed, and found that the CLPA simply codified the existing law regarding Crown immunity and the policy/operational dichotomy that rendered the Crown immune from liability for the former, but not the latter. The Court upheld the motion judge’s finding that Ontario’s conduct was operational and not a policy matter. In the Court’s view, the expansive meaning of s. 11(5)(c) of the CLPA urged by Ontario would include virtually any step taken to carry out any “program, project or other initiative”, and would characterize essentially every government decision as policy. This would dramatically change the current state of the law and effectively immunize the Crown from suit, an intolerable outcome.

By contrast, an interpretation of the CLPA that maintains the existing separation between policy and operational decisions aligns with the Court’s analysis of legislative intent. Ontario’s decision to allow for the use of administrative segregation in its correctional facilities is a policy matter. However, the manner in which the policy is actually applied is an operational matter. If a Superintendent of a correctional institution applies the policy on administrative segregation to an inmate in a negligent manner, then Ontario is liable for injury or harm to that inmate.

9383859 Canada Ltd. v Navaratnam, 2021 ONCA 210

[Paciocco J.A. (Motions Judge)]

Counsel:

M.S. Martin, for the moving party MRN (M52312)

J.R.G. Cook, for the moving party KN (M52313)

B.M. Martin, for the moving party RL (M52314)

S. Singh, as representative of the responding party

Keywords: Contracts, Real Property, Agreements of Purchase and Sale of Land, Civil Procedure, Striking Pleadings, Orders, Security for Costs, Enforcement, Quashing Appeal, Rules of Civil Procedure, Rules 21.01(1)(b), 56.01(1)(d), 61.06(1)-(2), Virc v. Blair (2016), 134 OR (3d) 795 (Ont CA), Susin v. Susin, 2008 ONCA 66

facts:

The proceedings arose from a failed real estate transaction and assignment of an agreement of purchase and sale (the “APS”). 9383859 Canada Ltd. (“938”) was the original purchaser and assignor. More than two years after the deal fell through, 938 sued the moving parties, who were all lawyers involved in the failed transaction or related litigation, but who did not act for 938. Pursuant to a Motion to Strike Order, 938’s actions were dismissed, without leave to amend, for failing to disclose a reasonable cause of action. The judge found that none of the moving parties owed a legal duty to 938, one of the respondents had absolute immunity to the claims against him, the actions were statute-barred, and they were an abuse of process. 938 appealed the Motion to Strike Order (the “Main Appeal”).

938’s sole director and shareholder was granted leave to represent 938 on the Main Appeal and a Security for Costs Order was issued at the same time. It required 938 to post total security of $150,000. Rather than comply, 938 attempted to file materials for a panel review of the Security for Costs Order but failed to do so on time. 938 then brought a motion for an order extending the time to file its materials. The motion to extend time was denied, and 938 then filed a request for a panel review of that denial, evidently in the hopes of re-opening the door to persuade a panel to set aside or vary the Security for Costs Order. Meanwhile, the date of the Main Appeal was approaching.

issues:

Should the appeal from the Motion to Strike Orders be quashed for failure to comply with the Security for Costs Order?

holding:

Motion granted.

reasoning:

Yes. Once a failure to comply with an order to pay security for costs is established, the ‘onus then shifts to the appellant to provide compelling reasons why dismissal is not in the interests of justice. 938 failed to comply with the Security for Costs Order and has not provided compelling reasons why dismissal is not in the interests of justice. The Court was satisfied in the circumstances of this case that it was in the interests of justice to dismiss the Main Appeal.

In her endorsement of the Security for Costs Order, Pepall J.A. found there was good reason to believe that if the moving parties were successful in the Main Appeal, they would be unable to recover their costs because 938 is a single-purpose corporation and has no assets. The Court agreed.

The Court acknowledged the public interest rationale of permitting litigants to have their day in court so that an appeal may be determined by a panel on its merits. However, the Court found there was no realistic basis upon which the Motion to Strike Order could have been challenged. The actions commenced by 938 were legally hopeless, and a waste of the moving parties’ time and resources. Moreover, the amount 938 was required to post by way of security was modest and did not unfairly impede 938’s opportunity to access justice.

Finally, the Court considered whether the motions for dismissal were premature. In the Court’s view, the interests of justice would not be served by waiting for that review to play out. 938 provided no meaningful basis to resist the Security for Costs Order, no meaningful basis to resist the Extension Denial Decision and seek a panel review of the Security for Costs Order, and no meaningful basis to doubt the Motion to Strike Order, which is the subject of the Main Appeal. It was therefore in the interests of justice to grant the moving party’s orders. The Main Appeal was dismissed.

Fontaine v. Canada (Attorney General), 2021 ONCA 203

[Roberts, Jamal and Thorburn JJ.A.]

Counsel:

J. Birenbaum, for the appellant National Centre for Truth and Reconciliation

C.A. Coughlan and B. Thompson, for the respondent Attorney General of Canada

S. Wuttke and J. Kolodziej, for the respondent Assembly of First Nations

P. J. Faulds, Q.C., for the respondent National Administration Committee

Keywords: Torts, Negligence, Crown Liability, Indian Residential School Settlement, Civil Procedure, Class Proceedings, Records, Confidentiality, Solicitor-Client Privilege, Litigation Privilege, Standard of Review, Canada (Attorney General) v. Fontaine, 2017 SCC 47, Housen v. Nikolaisen, 2002 SCC 33, Amertek Inc. v. Canadian Commercial Corp. (2005), 76 O.R. (3d) 241 (C.A.), H.L. v. Canada (Attorney General), 2005 SCC 25, MacDougall v. MacDougall (2005), 205 O.A.C. 216 (C.A.)

facts:

The Indian Residential Schools Settlement Agreement (“IRSSA”) settled the class actions and civil claims of approximately 79,000 survivors of abuse who were residents of the residential schools in Canada. The IRSSA also addressed the need for the archiving of documents to advance truth-telling and reconciliation, and recognize the state’s “duty to remember”.

The Independent Assessment Process (“IAP”) was created as a means for claimants to seek financial compensation for the abuse that they suffered at the residential schools. The Indian Residential Schools Adjudication Secretariat (the “Secretariat”) manages the IAP under the direction of the Chief Adjudicator. Given the sensitive and confidential nature of the information that is disclosed during the IAP, there was a high premium placed on confidentiality by the participants.

The records of the IAP have been the subject of several court proceedings. This specific appeal concerned the disposition of certain documents and data related to the administration of the Secretariat under the direction of the Chief Adjudicator. In anticipation of the completion of IAP adjudication work by December 2020 and the projected administrative closeout of the Secretariat by March 31, 2021, the Chief Adjudicator sought the direction of the Supervising Judge of the Ontario Superior Court of Justice (the “Supervising Judge”) concerning the appropriate disposition of these records.

Specifically, the Chief Adjudicator brought a Request for Directions (“RFD”) before the Supervising Judge with respect to two types of records. The first type were referred to as the “proposed Static Reports”. The proposed Static Reports were intended to be a final set of statistical reports that provide an overview of the IAP claimant population, and the claims process. The Chief Adjudicator proposed to produce and archive the proposed Static Reports with the appellant National Centre for Truth and Reconciliation (“NCTR”). Model proposed Static Reports were produced under seal as examples for the Supervising Judge’s review.

The second type were referred to as “Non-Claim Records”, which essentially comprised all records that did not relate to the actual claims advanced by the residential school survivors (the “Claim Records”). The Claim Records were the subject of an earlier RFD that was settled by the Supreme Court of Canada’s decision in Canada (Attorney General) v. Fontaine, 2017 SCC 47. In Fontaine (SCC), the Supreme Court upheld the Supervising Judge’s decision that all Claim Records must be destroyed following a 15-year “retention period” to protect the privacy and confidentiality rights of the claimants. However, during the retention period, individual IAP claimants may elect to have their personal Claim Records preserved and archived.

The Supervising Judge concluded that the proposed Static Reports should not be generated, produced or archived. This conclusion was based on concerns that the proposed Static Reports might reveal, through deductive reasoning, the identity of IAP claimants, which would contravene the prior order in Fontaine (SCC). Also cited in the Supervising Judge’s reasoning were concerns that the data could be manipulated negatively, and that some of the data might not advance the objectives of truth and reconciliation.

With respect to the Non-Claim Records, the Supervising Judge held that Canada, not the Chief Adjudicator, should submit a new RFD for the disposition and archiving of the Non-Claim Records, subject to the Supervising Judge’s directions concerning the inclusion and exclusion of certain documents in the Non-Claim Records collection. These directions generally excluded from the Non-Claim Records collection any material that could potentially reveal IAP personal information, confidential information, or information subject to solicitor-client or litigation privilege.

issues:

(1) Did the Supervising Judge err in concluding that the Static Reports should not be generated or archived, and that the model proposed Static Reports should remain sealed?

(2) Did the Supervising Judge err in excluding from the NCTR certain Non-Claim Records?

(3) Did the Supervising Judge err by permitting Canada to archive the excluded Non-Claim Records while prohibiting Canada from ever transferring these records to the NCTR?

holding:

Appeal allowed in part.

reasoning:

The Court began its analysis by summarizing the standard of review applicable on this appeal. Due to the fact that the conclusions of the Supervising Judge involved the “interpretation of the evidence as a whole”, and that this interpretation involved factual or inferential determinations, such determinations were entitled to deference. (Housen v. Nikolaisen, 2002 SCC 33; Amertek Inc. v. Canadian Commercial Corp. (2005), 76 O.R. (3d) 241 (C.A.)). Therefore, the Supervising Judge’s decision should not be overturned except where there is a palpable and overriding error leading to a decision that is not supported by the evidence (H.L. v. Canada (Attorney General), 2005 SCC 25; MacDougall v. MacDougall (2005), 205 O.A.C. 216 (C.A.)).

(1) Did the Supervising Judge err in concluding that the proposed Static Reports should not be generated or archived, and that the model proposed Static Reports should remain sealed?

Yes. As mentioned above, the Supervising Judge outlined three key concerns in support of his decision with respect to the proposed Static Reports: (i) whether the confidentiality of the IAP claimants could be preserved; (ii) whether the information was susceptible for manipulation; and (iii) whether production would advance the objectives of truth and reconciliation. However, the Court found that the parties adduced no actual evidence with respect to any of these concerns, nor did the Supervising Judge request further evidence to be submitted.

While the concerns themselves were valid concerns, the Court noted that the Supervising Judge should have requested further information from the parties to allow for a proper analysis of these concerns. His decision not to do so ultimately led to rendering a decision in the absence of an evidentiary foundation, thus leading to a conclusion that the decision was tainted by palpable and overriding error.

This issue was remitted to the Supervising Judge for determination in accordance with the reasons of the Court of Appeal, as well as certain directions. Chief among these directions was the order that any proposed Static Reports be produced in final form, placed under seal, and submitted to the Supervising Judge prior to the rehearing. The Court noted that a significant obstacle to the proper determination of this issue was that no proposed Static Reports were actually generated, only models. Without full and final Static Reports produced, it is difficult to allow the parties to respond to the Supervising Judge’s concerns, raise objections, and substantiate those objections with specific references.

(2) Did the Supervising Judge err in excluding from the NCTR certain Non-Claim Records?

No. The Supervising Judge was required to balance non-claimant individual rights to privacy, confidentiality and legal privilege in accordance with the objectives of the IRSSA. In doing so, he determined that certain categories of Non-Claim Records contained confidential, sensitive and privileged information. This decision was firmly rooted in unchallenged evidence.

(3) Did the Supervising Judge err by permitting Canada to archive the excluded Non-Claim Records while prohibiting Canada from ever transferring these records to the NCTR?

No. The Supervising Judge’s clear prohibition against the public disclosure of confidential IAP information was confirmed by Fontaine (SCC). Importantly, the Supervising Judge did not prohibit Canada from transferring any other Non-Claim Records to the NCTR. As an alternative point, while the NCTR may certainly be an appropriate archive, it has no legal or contractual right to demand the transfer of any documents.

Fram Elgin Mills 90 Inc. v Romandale Farms Limited, 2021 ONCA 201

[Gillese, Lauwers and Benotto JJ.A.]

Counsel:

C. G. Paliare and T. H. Lie, for the appellants J.K., 2001251 Ontario Inc., and First Elgin Developments Inc. (C67533)

S. R. Block, J. Opolsky, S.J. Erskine, and B. Lerer for the appellants Fram Elgin Mills 90 Inc. (formerly Frambordeaux Developments Inc.) and Fram 405 Construction Inc. (C67557)

S.E. Batner, K. Kalogiros, and A. Bourassa, for the respondent Romandale Farms Limited (C67533 and C67557)

Keywords: Contracts, Real Property, Agreements of Purchase and Sale of Land, Settlements, Anticipatory Breach, Repudiation, Frustration, Mistake, Unconscionability, Duty of Good Faith and Fair Dealing, Estoppel by Representation, Estoppel by Convention, Breach of Fiduciary Duty, Remedies, Specific Performance, Limitations Act, 2002, S.O. 2002, c. 24, Sched B ss. 4 & 5, Survival of Actions Act, R.S.N.L. 1990, s. S-32 , Rules of Civil Procedure, Rule 6, Ryan v. Moore, 2005 SCC 38, Scotsburn Co-operative Services Ltd. v. W.T. Goodwin Ltd., [1985] 1 S.C.R. 54, Naylor Group Inc. v. Ellis-Don Construction Ltd., 2001 SCC 58, Miller Paving Ltd. v. B. Gottardo Construction Ltd., 2007 ONCA 422, Wood v. Farr Ford Ltd., 2008 CanLII 53848 (Ont. S.C.), Mohamed Imran Hanif v. Ontario College of Pharmacists, Her Majesty the Queen in Right of Ontario and AGO, 2013 ONSC 6991 (Div. Ct.), Canadian Superior Oil Ltd. v. Paddon-Hughes Development Co., [1970] S.C.R. 932, Page v. Austin (1884), 10 S.C.R. 132, Pacific National Investments Ltd. v. Victoria (City of), 2004 SCC 75, First Elgin Mills Developments Inc. v. Romandale Farms Limited, 2014 ONCA 576, Capital Quality Homes Ltd. v. Colwyn Construction Ltd. (1975), 61 D.L.R. (3d) 385 (Ont. C.A.), Focal Properties Ltd. v. George Wimpey (Canada) Ltd. (1975), 73 D.L.R. (3d) 387 (Ont. C.A.), : Naylor Group Inc. v. Ellis-Don Construction Ltd., 2001 SCC 58, Perkins v. Sheikhtavi, 2019 ONCA 925, Miller Paving Ltd. v. B. Gottardo Construction Ltd., 2007 ONCA 422, : Zeitel v. Ellscheid (1991), 85 D.L.R. (4th) 654 (Ont. C.A.), Ali v. O-Two Medical Technologies Inc., 2013 ONCA 733, Erie Sand & Gravel Ltd. v. Series’ Farms Ltd., 2009 ONCA 709, Semelhago v. Paramadevan, [1996] 2 S.C.R. 415, Di Millo v. 2099232 Ontario Inc., 2018 ONCA 1051, Manitoba Metis Federation Inc. v. Canada (Attorney General), 2013 SCC 14, Intact Insurance Company of Canada v. Lombard General Insurance Company of Canada, 2015 ONCA 764, St. Jean v. Cheung, 2009 ONCA 9, Climans v. Latner, 2020 ONCA 554, Grasshopper Solar Corporation v. Independent Electricity System Operator, 2020 ONCA 499, leave to appeal refused, [2020] S.C.C.A. No. 360, Martin v. American International Assurance Life Co., 2003 SCC 16, Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, Onex Corp. v. American Home Assurance Co., 2013 ONCA 117, leave to appeal refused, [2013] S.C.C.A. No. 178, Dumbrell v. The Regional Group of Companies Inc., 2007 ONCA 59, Chartbrook Limited v. Persimmon Homes Limited, [2009] UKHL 38, Energy Fundamentals Group Inc. v. Veresen Inc., 2015 ONCA 514, M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd., [1999] 1 S.C.R. 619, Canadian Pacific Hotels Ltd. v. Bank of Montreal, [1987] 1 S.C.R. 711, Hodgkinson v. Simms, [1994] 3 S.C.R. 377, Bhasin v. Hrynew, 2014 SCC 71, Greenberg v. Meffert (1985), 50 O.R. (2d) 755 (C.A.), C.M. Callow Inc. v. Zollinger, 2020 SCC 45, Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District, 2021 SCC 7, Matthew Brady Self Storage Corporation v. InStorage Limited Partnership, 2014 ONCA 858, leave to appeal refused, [2015] S.C.C.A. No. 50, Paterson Veterinary Professional Corporation v. Stilton Corp. Ltd., 2019 ONCA 746, leave to appeal refused, [2019] S.C.C.A. No. 420, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, 1193430 Ontario Inc. v. Boa-Franc Inc. (2005), 260 D.L.R. (4th) 659 (Ont. C.A.), Majdpour v. M&B Acquisition Corp. (2001), 206 D.L.R. (4th) 627 (Ont. C.A.), Hunter Engineering Co. v. Syncrude Canada Ltd., [1989] 1 S.C.R. 426

facts:

Romandale Farms Limited (“Romandale”) was initially the sole owner of two neighboring farms in Markham which consisted of undeveloped land (the “Lands”). In 2003, Romandale sold an undivided 5% interest in the Lands to the appellant group of companies, Fram Elgin Mills 90 Inc. and Fram 405 Construction Ltd. (“Fram”). Fram was incorporated for the purpose of developing the Lands.

Romandale and Fram entered into a number of agreements relating to the Lands so that they could be developed for residential use. These agreements included co-owners agreements (the “COAs”). Under the COAs, subject to limited exceptions, neither party could dispose of its interest in the Lands. The COAs also contained a buy-sell mechanism that was generally available only after secondary planning approval (“SPA”) from the Town of Markham had been obtained for the Lands. SPA is required before the Lands can be developed.

The COAs contained a buy-sell provision which permitted a co-owner, under certain conditions, to tender on the other an offer to sell its entire interest in the Lands and at the same time, an offer to buy the other’s entire interest in the Lands on the same terms as the offer to sell. The COAs also provided that if an event of default occurs and is continuing, the non-defaulting party has the right to, among other things, bring proceedings for specific performance and/or buy the defaulting party’s interest in the Lands at 95% of fair market value.

The agreements entered into by Romandale and Fram also included a Construction Management Agreement (“CMA”), under which Fram was to construct and sell residential units on the Lands, once the Lands achieved SPA; and a Development Management Agreement (“DMA”), which governed the development process for the Lands.

In August of 2005, Romandale entered into an agreement (the “2005 August Agreement”) with the second appellant group of companies, 2001251 Ontario Inc., First Elgin Developments Inc., and J.K. (together “Kerbel”), which consists of land developers and builders. One of the transactions was the sale of Romandale’s 95% interest in the Lands to Kerbel. This was to be achieved in two steps: (1) Romandale sold Kerbel 5% of its interest in the Lands; and (2) Romandale agreed to sell its remaining interest in the Lands to Kerbel (“Remaining Interest”), conditional on either Fram’s consent to the sale or Romandale’s exercise of the buy-sell provisions in the COAs (the “Conditional Provision”).

Ensuing Litigation

In 2007, Fram sued Romandale and Kerbel, claiming that the 2005 August Agreement was an impermissible disposition of Romandale’s interest in the Lands under the COAs (the “2007 Action”)

In 2008, Fram and the development manager for the Lands (a company related to Fram) sued Romandale and Kerbel. They alleged that the 2005 August Agreement amounted to a breach of the construction management agreements between Fram and Romandale respecting the Lands (the “2008 Action”).

Prior to the trial date of the 2007 and 2008 Actions, Fram, Kerbel and Romandale reached an agreement in principle. That agreement included a statement of the parties’ intention that the purchase and sale of Romandale’s remaining interest in the Lands to Kerbel would take place after the Lands obtained SPA (the “Statement”). Romandale later withdrew from the settlement agreement. However, Fram and Kerbel subsequently settled the matters between them and entered into a settlement agreement which also contained the Statement (the “Settlement Agreement”).

In 2009, government decisions on planning changes significantly changed the timelines and development prospects for the Lands.

In 2014, Romandale sued Kerbel claiming Kerbel breached the 2005 August Agreement by taking steps to reduce the amount of developable acreage on the Lands, and thereby the price payable under the 2005 August Agreement (the “2014 Action”).

In 2016, Kerbel sued Romandale to compel it to perform its remaining obligation under the 2005 August Agreement, as Romandale took the position that, because of the Statement in the Settlement Agreement, Kerbel had repudiated the 2005 August Agreement and considered itself no longer bound by the 2005 August Agreement (the “2016 Action”).

The four actions involving the Lands were tried together in the Fall of 2018 and all four actions were resolved in favour of Romandale (the “Judgment”). The trial judge’s key determination was that Kerbel repudiated the 2005 August Agreement when it entered into the Settlement Agreement because it stipulated that the parties’ intention was the purchase and sale of the Remaining Interest would take place after SPA. The trial judge found that Romandale had accepted the repudiation and concluded that the 2005 August Agreement was at an end.

Both Fram and Kerbel’s appeals were consolidated and the appellants asked the Court to declare that the 2005 August Agreement was valid and enforceable, and to make an order for specific performance requiring Romandale to perform its obligations under the 2005 August Agreement.

issues:

(1) Did the trial judge err in failing to find that Romandale was estopped, based on estoppel by representation or by convention, from claiming that the Settlement Agreement breached the 2005 August Agreement?

(2) Did the trial judge err in determining that, by entering into the Settlement Agreement, Kerbel breached the 2005 August Agreement?

(3) Did the trial judge err in concluding that Kerbel repudiated the 2005 August Agreement?

(4) Did the trial judge err in concluding that the 2005 August Agreement was frustrated?

(5) Did the trial judge err in concluding that the 2005 August Agreement was void for mistake?

(6) Did the trial judge err in finding Kerbel’s claim was limitation-barred?

(7) Did the trial judge err in concluding that Kerbel was not entitled to specific performance of the 2005 August Agreement?

holding:

Appeals allowed.

reasoning:

(1) Yes. Although Fram and Kerbel did not satisfy the legal test giving rise to estoppel by representation, they satisfied the criteria that form the basis for the doctrine of estoppel by convention. Romandale was estopped from resiling its shared assumptions with the appellants.

Estoppel by Representation

The trial judge did not err in finding that Fram and Kerbel failed in their claim of estoppel by representation. Fram and Kerbel failed on the first essential factor giving rise to estoppel by representation, which is a representation “intended to induce a course of conduct” on the part of the person to whom the representation was made: Canadian Superior Oil Ltd. v. Paddon-Hughes Development Co., [1970] S.C.R. 932.

Romandale did not make a representation with the intention that Fram and Kerbel should act on it. Fram and Kerbel’s knowledge of Romandale’s position that the 2005 August Agreement was valid and the fact its position remain unchanged from the time that it entered into the 2005 August Agreement until the time when the Settlement Agreement was reached was not tantamount to Romandale representing that it would not change its position going forward.

Estoppel by Convention

The Court addressed the issue of estoppel by convention on a de novo basis, as the parties expressly raised and argued this issue but the trial judge did not address it in her reasons for decision. There are three criteria that form the basis of estoppel by convention: (a) assumption shared and communicated; (b) reliance; and (c) detriment. The applicability of the doctrine of estoppel by convention does not depend on the parties having entered into a contract with one another. Rather, the question is whether the “parties’ dealings” were based on a shared assumption of fact or law: Ryan v. Moore, 2005 SCC 38 at para 59.

       i. Assumption Shared and Communicated

The assumptions shared and communicated met the first criterion for estoppel by convention. Fram, Kerbel, and Romandale based their dealings on two assumptions: (1) the buy-sell provision in the COAs could not be triggered until after SPA had been achieved for the Lands; and (2) under the 2005 August Agreement, Kerbel could not cause Romandale to trigger the buy-sell under the COAs until after SPA (the “Shared Assumptions”). As it turned out, the Shared Assumptions were not correct, and under the terms of the COAs, Romandale could have triggered the buy-sell at any time after the DMA had been terminated (in 2007).

There was no ambiguity or lack of clarity about the Shared Assumptions: they had sufficient certainty and clarity to satisfy that requirement in the first criterion of estoppel by convention. Further, the parties were of a “like mind” as they: (1) held the Shared Assumptions at the material times; (2) communicated to the others that they held the Shared Assumptions; and (3) based their dealings on them: Ryan at paras 61-62.

The Settlement Agreement and the drafts leading to it satisfied the requirements of the first criterion for estoppel by convention. Romandale expressly affirmed the parties’ shared understanding that the sale and purchase of Romandale’s Remaining Interest would occur after SPA. Letters between counsel and the pleadings and evidence at trial reinforced this conclusion.

       ii. Reliance

Fram and Kerbel satisfied the reliance criterion. It was clear that Fram and Kerbel entered into the Settlement Agreement in reliance on the Shared Assumptions. As a result of having entered into the Settlement Agreement, their respective legal positions under the COAs and the 2005 August Agreement were altered.

As Romandale did not communicate to Fram and Kerbel that it no longer held the Shared Assumptions until 2015, it was not unreasonable for Fram and Kerbel to rely on the Shared Assumptions when they entered into the Settlement Agreement.

       iii. Detriment

Fram and Kerbel satisfied the detriment criterion, as it was unjust and unfair to allow Romandale to resile from the Shared Assumptions. At all material times during its dealings with Fram and Kerbel, Romandale manifestly represented to them that it held the Shared Assumptions. Fram and Kerbel then relied on the Shared Assumptions and entered into the Settlement Agreement which altered their legal positions.

If Romandale had not been permitted to resile from the Shared Assumptions, Kerbel would not have been found to have been in breach of the 2005 August Agreement and it would not have lost the right to compel Romandale to fulfill its obligations under that agreement.

In accordance with the Settlement Agreement, Fram discontinued its claims against Kerbel in the 2007 and 2008 Actions and gave up significant claims against Romandale under the COAs. Because Romandale was permitted to resile from the Shared Assumptions, Romandale was no longer obliged to sell its Remaining Interest to Kerbel and Fram gave up its claims for nothing.

Concurring Reasons on Issue # 1 [Lauwers J.A.]

(1) No. Although no party raised or argued the legal effect of Fram’s consent to the sale of Romandale’s Remaining Interest pursuant to the 2005 August Agreement, any estoppel ceased to have practical effect when Fram consented just before the trial in August of 2018. The alleged estoppel prevented Romandale from insisting on an earlier closing date than after SPA, but this purpose of the estoppel was rendered redundant by Fram’s consent in August of 2018.

Estoppel by convention was not made out. Any application of estoppel by convention in this case required the Court to account for the role that the supposedly shared but mistaken assumption regarding the interpretation of the COAs actually played in the formation of the Settlement Agreement. Here, the claimed estoppel by convention could not survive Kerbel’s knowledge, when the Settlement Agreement was negotiated, that the Shared Assumption was mistaken. First, given the fact of Kerbel’s knowledge, it was difficult to accept that the assumption that the buy-sell could not be triggered until after SPA was shared in the manner required for estoppel by convention. Second, Kerbel’s knowledge that the assumption was incorrect rendered unreasonable any reliance by Kerbel and Fram on the mistaken trigger date.

(2) Yes. In light of the conclusion on the doctrine of estoppel by convention, Romandale was barred from asserting that the buy-sell provisions in either the COAs or the 2005 August Agreement could be exercised before SPA. Because the trial judge’s interpretation permitted for the buy-sell provision in the 2005 August Agreement to be exercised before SPA, it was contrary to the Shared Assumptions and could not stand.

Concurring Reasons on Issue # 2 [Lauwers J.A.]

(2) Yes. The trial judge erred in finding that Kerbel breached the 2005 August Agreement and its duty of good faith performance by entering into the Settlement Agreement with Fram. By entering into the Settlement Agreement, all Kerbel was doing was pursuing its own ends within the limits of the contractual language in the 2005 August Agreement in order to reduce its exposure to the land and to the risks posed by the litigation with Fram.

Kerbel never undertook to perform its obligations under the 2005 August Agreement for Romandale’s benefit, or even for their “mutual benefit,” as Romandale argued. The parties reasonably expected that the commercial realities would pressure all sides to move with alacrity, but Kerbel did not bind itself to do so. Nor was it clear that, had Kerbel and Fram never entered into the Settlement Agreement and had Fram not consented to the sale, there would be any obligation on Kerbel to cause Romandale to trigger the buy-sell provision in the COAs.

(3) Yes. Estoppel by convention operated to bar Romandale from attacking the validity of the Statement in the Settlement Agreement, as this was the basis on which the trial judge concluded that Kerbel repudiated the 2005 August Agreement.

Concurring Reasons on Issue # 3 [Lauwers J.A.]

(3) Yes. Because Kerbel did not breach the 2005 August Agreement, on that ground alone, there was no basis for finding that Kerbel repudiated that agreement. The trial judge’s approach to repudiation was wrong in principle however, and required comment.

The trial judge wrongly deconstructed the 2005 August Agreement into constituent parts. This approach was not consistent with the holistic approach courts must take to carefully negotiated commercial agreements. Just as a court interpreting a contract must read the contract as a whole, a court analyzing whether a fundamental breach amounting to repudiation has occurred should consider both the alleged breach, and the obligations the breaching party has performed, in relation to the breaching party’s obligations under the whole contract.

(4) Yes. The trial judge erred in law in concluding that the 2005 August Agreement was frustrated. The planning changes did not amount to a “supervening event” as that term is used in the doctrine of frustration. Neither the change to the timing of the development of the Lands nor the fact that the development paths of the two farms had diverged rendered Romandale’s obligations under the 2005 August Agreement radically different from that to which it agreed.

This conclusion followed inescapably from a consideration of the 2005 August Agreement as a whole, including the Conditional Provision. Those obligations were clearly spelled out and the parties specified the two methods by which the transaction could be completed – rather than simply setting a date for its completion – because they wanted to ensure that the 2005 August Agreement did not run afoul of Romandale’s pre-existing legal obligations to Fram under the COAs.

While the planning changes altered the timing horizon for the development of the Lands and the development paths of the farms, those changes did not radically alter what the parties had agreed to under the 2005 August Agreement. Because the parties’ obligations under the Conditional Provision were not altered by the planning changes, it cannot be said that compelling performance of the 2005 August Agreement would be to order Romandale to do something “radically different” from that to which it agreed.

(5) Yes. The trial judge made both a palpable and overriding error and erred in law when concluding that the 2005 August Agreement was void for mistake. As the subject matter of the 2005 August Agreement remained essentially the same as what the parties believed it to be when they entered into the agreement, mistake was not made out at common law.

Romandale also failed to make out the requirements for common mistake in equity. The trial judge made a palpable and overriding error by not taking into consideration the fact that Fram had provided its consent to the transaction in the Condition Provision. Further, the trial judge erred in law in failing to take into account the relevant consideration of Fram’s consent when determining whether it would be unconscionable to enforce the 2005 August Agreement.

(6) Yes. The trial judge made a palpable and overriding error in finding that Kerbel’s 2016 Action was brought out of time and that the two-year limitation period began running in 2011. Two of the findings that the trial judge made were very different and irreconcilable on either the facts or the law.

Romandale’s anticipatory repudiation of the 2005 August Agreement occurred for the first time in 2015 through its express statement to that effect by its new counsel. There was no anticipatory breach by Romandale of its obligations under the Conditional Provision in 2011 and the limitation clock did not begin ticking. By February of 2011, Kerbel was aware that Romandale was in breach of the 2005 August Agreement because of its conduct respecting the development process for the Lands. However, that breach was not a repudiation of the Conditional Provision. Further, even if Romandale’s conduct could be construed as a repudiation of the Conditional Provision, it was an anticipatory breach. As such, the limitation period did not begin running unless Kerbel accepted the repudiation, which it not do.

(7) Yes. The trial judge erred in three ways in reaching the conclusion that Kerbel was not entitled to specific performance of the 2005 August Agreement.

First, the trial judge erred in law in relying on the evidence of the experts to provide a value for the Lands to find that the Lands were not unique to Kerbel. The experts had used the direct comparison approach to value the Lands, which did not address the legal requirements for determining whether land is unique.

Second, it was a palpable and overriding error for the trial judge to find that the only evidence on uniqueness was Mr. Kerbel’s “bald assertion” to that effect. The trial judge neglected to consider various points such as Kerbel already owning a 4.75% undivided interest in the Lands and fully owning the adjoining property, and Kerbel having already made significant investments in time, money, and expertise in the development of the Lands.

Third, the trial judge incorrectly found that the Lands were merely an investment for Kerbel with any number of suitable substitutes available. A property is unique if there is no readily available substitute property.

The trial judge also erred in law when giving laches as a further reason for refusing to grant specific performance. Kerbel did not acquiesce in Romandale’s attempts to shut it out of the development process and continued to be actively involved in the development process despite Romandale’s attempts to shut Kerbel out. Further, Romandale did not change its position in reliance on Kerbel’s alleged acceptance of the status quo.

SHORT CIVIL DECISIONS

LeBlanc v Ontario, 2021 ONCA 204

[Rouleau, Brown and Miller JJ.A.]

Counsel:

A. Ostrom for the appellant, T.L.

E. Machado and P. Entecott for the respondent, Her Majesty the Queen in Right of Ontario

Keywords: Contracts, Agreements of Purchase and Sale of Land, Crown Liability, Sheriffs, Civil Procedure, Judgments, Enforcement, Seizure and Sale, Courts of Justice Act, RSO 1990, c C43, s 142

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