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Good afternoon.

Following are this week’s summaries of the Court of Appeal for Ontario for the week of November 29 to December 3, 2021.

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On December 1, 2021, the Court released what is sure to be one of this year’s top appeals, not only because of the myriad of corporate legal issues considered, but because of its high-stakes, high-profile nature. In Extreme Venture Partners Fund I LP v. Varma, the Court considered claims of conspiracy, breach of contract, breach of fiduciary duty, and knowing assistance in breach of fiduciary duty arising from the underhanded business dealings of two of the directors of the corporate general partner of a limited partnership carrying on business in the tech sector. The limited partnership invested in start-up tech companies, including in the company that initially developed and launched the well-known dating App, Tinder. The directors who were operating the target business conspired with a prominent Silicon Valley tech billionaire, who was an original founding executive of Facebook, to sell him the business at a grossly suppressed price. In the process, they hid the limited partnership’s ownership interest in the company that owned Tinder, rid themselves of their original partners, with whom they were not getting along, and increased their stake in the business. In an expansion of the categories of fiduciary relationships, the Court held that directors of a corporate general partner of a limited partnership owe a fiduciary duty not just to the corporate general partner, but also to the underlying limited partnership. The Court also allowed the cross-appeal, resulting in a prophylactic disgorgement award in the amount of $29.5 million (U.S.), representing the entirety of the profits reaped by the faithless fiduciaries, and more than doubling the disgorgement award made by the trial judge. The tech billionaire who knowingly assisted in the breach of fiduciary duty and was the primary beneficiary of that breach, was found jointly and severally liable for the full disgorgement award. Apologies in advance for the length of the summary, but I wanted to make sure that I gave our readers a full flavour of most, if not all, of the interesting and complicated factual and legal issues canvassed in this 55-page decision.

In Kumarasamy v. Western Life Assurance Company, the Court held that the respondent’s long-term disability claim was statute-barred. The Court held that a clear and unequivocal denial of the respondent’s long-term disability claim was not required to start the limitations clock. Having a disability claim and not receiving payment from the insurer on that claim was enough to start the running of the limitation period.

In Bianco v. Deem Management Services Limited, the Court held that the motion judge made no error in determining that the construction lien claimants in the matter had priority over the appellant’s registered mortgage, the advances under which had been made years prior the mortgage was registered.

For our readers who are not yet aware of it, I would like to introduce them to a new online publication, Civil Procedure & Practice in Ontario (CPPO). The CPPO is a new free online resource jointly published by the University of Windsor and CanLII. CanLII is a not-for-profit organization operated by the Federation of Law Societies of Canada and is dedicated to assisting with access to justice through the free and open dissemination of the laws of Canada to all members of the public. The CPPO was written by a team of 135 leading litigators and experts in Ontario civil procedure, led by Professor Noel Semple of Windsor Law School. I had the privileged of co-writing two chapters to CPPO dealing with Rules 54 and 55 (Directing a Reference and Procedure on a Reference).

CPPO will serve as a guide to Ontario’s Rules of Civil Procedure, Courts of Justice Act, and Limitations Act, and will be accessible not only to practitioners, but to members of the public. It contains not only the text of all these rules and statutory provisions, but also commentary and annotations to all the relevant case law applying and interpreting each rule and section. To access Civil Procedure & Practice in Ontario, please click here, and make sure to bookmark the site for easy access.

I would encourage all of our readers to consult CPPO in their daily practice, to spread the word among colleagues, and to provide any feedback they may have.

Wishing everyone an enjoyable weekend.

John Polyzogopoulos
Blaney McMurtry LLP
416.593.2953 Email

Table of Contents

Civil Decisions

Kumarasamy v. Western Life Assurance Company, 2021 ONCA 851

Keywords: Contracts, Insurance, MVA, Long-Term Disability, Civil Procedure, Limitations Periods, Discoverability, Limitations Act, 2002, S.O. 2002, c. 24, Sched. B, Clarke v. Sun Life Assurance Company of Canada, 2020 ONCA 11, Longo v. MacLaren Art Centre Inc., 2014 ONCA 526, Thompson v. Sun Life Assurance Company of Canada, 2015 ONCA 162, Markel Insurance Company of Canada v. ING Insurance Company of Canada, 2012 ONCA 218, 407 ETR Concession Co. v. Day, 2016 ONCA 709, leave to appeal refused, [2016] S.C.C.A. No. 509, Nasr Hospitality Services Inc. v. Intact Insurance, 2018 ONCA 725, Presidential MSH Corp. v. Marr, Foster & Co. LLP, 2017 ONCA 325

Csizmazia v. Csizmazia, 2021 ONCA 865

Keywords: Family Law, Equalization of Net Family Property, Bankruptcy and Insolvency, Property of the Bankrupt, Bankruptcy and Insolvency Act, R.S.C., 1985, c. B-3, ss 21, 69.3, 71, Family Law Rules, Rules 1(8.4) and 25(19)

Bianco v. Deem Management Services Limited, 2021 ONCA 859

Keywords: Real Property, Construction law, Construction liens, Contracts, Mortgages, Priority, Bankruptcy and Insolvency, Construction Act, R.S.O. 1990, c. C.30, ss. 71(1), 78, Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3.3, ss. 193, 249, The Mechanics’ Lien Act, R.S.O. 1970, c. 267, ss. 14(1), Boehmers v. 794561 Ontario Inc. (1993), 14 O.R. (3d) 781 (Gen. Div.), aff’d. (1995), 21 O.R. (3d) 771 (C.A.), Dorbern Investments Ltd. v. Provincial Bank of Canada, [1981] 1 S.C.R. 459, Jade-Kennedy Development Corp. (Re), 2016 ONSC 7125, XDG Ltd. v. 1099606 Ontario Ltd. (2014), 186 O.A.C. 33 (Div. Ct.)

Extreme Venture Partners Fund I LP v. Varma, 2021 ONCA 853

Keywords: Torts, Conspiracy, Inducing Breach of Contract, Breach of Contract, Limited Partnerships, Corporations, Piercing Corporate Veil, Group Enterprise Theory of Liability, Breach of Fiduciary Duty, Knowing Assistance of Breach of Fiduciary Duty, Damages, Joint and Several Liability, Disgorgement, Punitive Damages, Prejudgment Interest, Foreign Currency Exchange Rate, Civil Procedure, Trials, Amending Pleadings, Evidence, Credibility, Courts of Justice Act, R.S.O. 1990, c. C.43, s. 121(1), Business Corporations Act, R.S.O. 1990, c. B. 16, s 135(4), Partnership Act, R.S.O. 1990, c. P.5, Rules of Civil Procedure, Rule 26.06, Penvidic v. International Nickel, [1976] 1 S.C.R. 267, Whitefish Lake Band of Indians v. Canada (Attorney General), 2007 ONCA 744, 1758704 Ontario Inc. v. Priest, 2021 ONCA 588, Southwind v. Canada, 2021 SCC 28, Hodgkinson v. Simms, [1994] 3 S.C.R. 377, Air Canada v. M & L Travel Ltd., [1993] 3 S.C.R. 787, Ultraframe (UK) Ltd. v. Fielding, [2005] EWHC 1638 (Ch.), Vyse v. Foster (1872) LR 8 Ch App 309, Enbridge Gas Distribution Inc. v. Marinaccio, 2012 ONCA 650, Imperial Parking Canada Corporation v. Anderson, 2015 BCSC 2221, McGrail v. Phillips, 2018 ONSC 3571, ScotiaMcLeod Inc. v. Peoples Jewellers Ltd. (1995), 26 O.R. (3d) 481, Frame v. Smith, [1987] 2 S.C.R. 99, Guerin v. R., [1984] 2 S.C.R. 335, Galambos v. Perez, 2009 SCC 48, In re Harwood, 637 F (3d) 615 at 622 (5th Cir 2011), In re USACafes, L.P. Litig., 600 A (2d) 43 (Del Ch 1991), Olson v. Gullo, (1994), 17 O.R. (3d) 790, Rochwerg v. Truster (2002), 58 O.R. (3d) 687, Strother v. 3464920 Canada Inc., 2007 SCC 24, Warman International Ltd v. Dwyer, [1995] HCA 18

Short Civil Decisions

Grand River Conservation Authority v. Geil, 2021 ONCA 861

Keywords: Civil Procedure, Contempt, Consent Orders, Evidence, Hearsay


Hamza v. Law Society of Ontario, 2021 ONCA 852

Keywords: Civil Procedure, Vexatious Litigants, Scaduto v. The Law Society of Upper Canada, 2015 ONCA 733

National Bank of Canada v. Guibord, 2021 ONCA 864

Keywords: Civil Procedure, Stay Pending Appeal, Writs of Possession, Summary Judgment, Rules of Civil Procedure, Rules 15.01(3) & 63.01(1), RJR-MacDonald Inc. v. Canada (Attorney General),[1994] 1 S.C.R. 311

CIVIL DECISIONS

Kumarasamy v. Western Life Assurance Company, 2021 ONCA 851

[MacPherson, Simmons and Nordheimer JJ.A.]

Counsel:

E. Bennet-Martin and H.M. Gastle, for the appellant
A.B. Kuciej, for the respondent

Keywords: Contracts, Insurance, MVA, Long-Term Disability, Civil Procedure, Limitations Periods, Discoverability, Limitations Act, 2002, S.O. 2002, c. 24, Sched. B, Clarke v. Sun Life Assurance Company of Canada, 2020 ONCA 11, Longo v. MacLaren Art Centre Inc., 2014 ONCA 526, Thompson v. Sun Life Assurance Company of Canada, 2015 ONCA 162, Markel Insurance Company of Canada v. ING Insurance Company of Canada, 2012 ONCA 218, 407 ETR Concession Co. v. Day, 2016 ONCA 709, leave to appeal refused, [2016] S.C.C.A. No. 509, Nasr Hospitality Services Inc. v. Intact Insurance, 2018 ONCA 725, Presidential MSH Corp. v. Marr, Foster & Co. LLP, 2017 ONCA 325

facts:

The respondent was injured in a car accident on August 25, 2014. At the time of the accident, the respondent was employed by Morris National Inc. (“Morris”), and was covered under Morris’ group long-term disability (“LTD”) policy with the appellant (the “Policy”). Under the terms of the Policy, the deadline for the respondent to provide a Notice of Claim to the appellant, and the first day that LTD benefits would become payable to the respondent, was February 26, 2015. The Policy also provided that a claimant waived their right to claim benefits if they did not provide notice within the prescribed time.

On August 26, 2014, the respondent retained litigation counsel to represent him with respect to his tort and accident benefits claim, but not with respect to any potential LTD claim.

On December 15, 2014, the respondent’s sister emailed Morris for a Notice of LTD Claim form. Morris emailed the Notice of Claim form to the respondent’s sister. On March 9, 2015, the respondent’s sister faxed the completed form back to the appellant.

On March 11, 2015, the appellant said it sent an acknowledgement letter directly to the respondent requesting that he complete an LTD application form. The appellant sent three follow-up letters to the respondent, including a letter dated June 2, 2015, that advised the respondent that it had closed the respondent’s file because he had not forwarded the completed LTD application forms. The motion judge found that, while the respondent did not receive the other letters, he did receive the June 2, 2015 letter.

On October 13, 2016, the respondent’s lawyers wrote to the appellant requesting the respondent’s LTD claim file. On November 8, 2016, the appellant responded to the lawyers to advise that the file had been closed on June 2, 2015, as the respondent had not sent the required LTD forms.

On February 10, 2017, the respondent signed a retainer letter with his lawyers to also represent him on his LTD claim and on June 14, 2017, the lawyers sent an email to the respondent to explain the delay in making the LTD claim. On June 28, 2017, the appellant wrote to the respondent advising that his claim was denied as the information provided did not support reasonable cause for the delay.

The respondent issued a statement of claim against the appellant and Morris on June 8, 2019. The appellant brought a summary judgment motion on the basis that the respondent’s claim was statute-barred under the Limitations Act, 2002.

The appellant argued that a reasonable person in the respondent’s circumstances ought to have discovered a claim on June 7, 2015 (the date by which he would have received the appellant’s letter closing the file). The respondent argued that he could not have become aware of the loss until June 28, 2017 (the date of the denial letter). The motion judge found that the claim was discoverable on June 28, 2017 (when the LTD claim was denied by the appellant) and, therefore, was not statute-barred.

issues:

Did the motion judge err in finding that the action was not statute-barred?

holding:

Appeal allowed.

reasoning:

The Court found that the central errors made by the motion judge were her conclusions regarding when the respondent ought to have known that a loss occurred and her conclusion that the required element of discoverability was only satisfied when the appellant clearly and unequivocally denied the respondent’s claim.

First, the Court found that the motion judge did not cite any authority for her conclusion, and it was at odds with other authorities, most notably, the Court’s decision in Thompson v. Sun Life Assurance Company of Canada, 2015 ONCA 162. In Thompson, the Court found that the injured party’s claim was barred because (1) the injured party had failed to meet the qualifying conditions of the policy and (2) the two-year limitation period had expired because the injured party knew of her disability in August 2008 but did not commence her action until September 17, 2010. Applying the Thompson approach, the limitation period would have commenced February 26, 2015, which was the first day benefits would have been payable had the respondent submitted a timely application and met the Policy’s definition of Total Disability. By that time, the respondent knew that he was injured, he believed that he was entitled to long-term disability payments, and he knew that the appellant was not making those payments.

The Court further found that there was no authority for the proposition that a clear and unequivocal denial of the respondent’s claim was required. It may be that there will be some cases where an insurer may, by its conduct, lead an insured person to believe that their claim has not been denied (and thus litigation is not required). Those cases will likely be rare, and, in any event, this case was not one of them. Additionally, to adopt such an approach would inject an unacceptable element of uncertainty into the law as the court would be required to assess the tone and tenor of communications in search of a clear denial, and would only serve to encourage insurers to make such denials at their earliest opportunity to ensure that the “limitations clock” started to run.

Finally, the Court found that the motion judge’s conclusion was contrary to Nasr Hospitality Services Inc. v. Intact Insurance, 2018 ONCA 725, which noted certain circumstances where conduct of an insurer may toll the limitation period: (i) where the plaintiff relied on the superior knowledge and expertise of the defendant, especially where the defendant undertook efforts to ameliorate the loss, and (ii) if an alternative dispute resolution process offered an adequate alternative remedy and that process had not fully run its course. The Court found that neither of those circumstances arose in this case.

Thus, the Court held that there were three potential start dates for the limitation period: February 26, 2015 (when the limitation period required by the Policy expired), June 7, 2015 (when the respondent would have received the appellant’s notification that his claim file had been closed), and November 8, 2016 (when the lawyers received copies of the same correspondence). The Court declined to decide which of these three dates was the actual start date for the running of the limitation period because the regardless of which date was chosen, the two-year limitation period had expired before the proceeding was commenced.


Csizmazia v. Csizmazia, 2021 ONCA 865

[van Rensburg and Roberts JJ.A. and Tzimas J. (ad hoc)]

Counsel:

E. Karp, for the appellant
T. Johnson as agent for S. Heeley, for the respondent

Keywords: Family Law, Equalization of Net Family Property, Bankruptcy and Insolvency, Property of the Bankrupt, Bankruptcy and Insolvency Act, R.S.C., 1985, c. B-3, ss 21, 69.3, 71, Family Law Rules, Rules 1(8.4) and 25(19)

facts:

The parties have been engaged in family law proceedings that were commenced in October 2017. In January 2020, as a result of the appellant’s non compliance with various court orders, including the requirement to pay an interim equalization payment and various costs awards, her pleadings were struck in relation to all issues in the proceedings except for custody and access. Eventually, the court ordered that the uncontested trial be adjourned to the sittings commencing November 16, 2020. Recognizing that under r. 1(8.4) of the Family Law Rules, the court has the discretion to permit a party whose pleadings are struck to participate in a more limited manner, the court required the respondent to serve a copy of the court’s endorsement on the appellant.

The uncontested trial proceeded on December 1, 2020. A final order was made dealing with the issues of equalization, child support, s. 7 expenses and costs. In particular, with respect to equalization, the court ordered that $37,100 be payable to the respondent by the appellant’s pension provider in full satisfaction of his one-half claim to the appellant’s pension during the course of the marriage, and that the appellant pay the respondent the sum of $79,348.59 by way of equalization. The appellant did not attend the uncontested trial.

The appellant brought a motion under r. 25(19) of the Family Law Rules seeking to change the final order “on the ground of misrepresentation and concealment of facts by the appellant, and on the ground that the order [would] cause significant miscarriage of Justice”. The respondent brought a cross-motion for an order that the appellant be prohibited from filing further motions.

The appellant appeals the order of the review judge refusing to set aside the final order that was made after an uncontested trial.

issues:

Were the reasons of the review judge inadequate to permit appellate review?

holding:

Appeal dismissed.

reasoning:

The Court found that the reasons of the review judge were sufficient and clear. Contrary to the appellant’s argument, the review judge did not overlook her assertions about the respondent’s changes to his NFP statement, which she had characterized as fraud in her written argument. Rather, he observed that the financial issues were moot, because of the appellant’s bankruptcy.

The appellant filed for bankruptcy on March 18, 2020. The effect of the bankruptcy was that the appellant’s property, including her equalization claims in the family law proceedings, vested in her trustee, and she had “cease[d] to have any capacity to dispose of or otherwise deal with” such property: Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (“BIA”), ss. 21 and 71. By order dated September 15, 2020, the stay of proceedings was lifted pursuant to s. 69.3 of the BIA to permit the respondent to establish the value of his claim against the appellant, and prohibited the enforcement of the claim without further order, except in relation to the division of the appellant’s pension for the purposes of equalization. This order was in the appeal record, and was before the review judge.

It was unnecessary for the review judge to address the appellant’s specific allegations about the changes to the respondent’s NFP before the uncontested trial when her property, including her property claims in the litigation, had vested in the trustee upon her bankruptcy, and she had no further rights with respect to equalization – whether by asserting or defending an equalization claim.


Bianco v. Deem Management Services Limited, 2021 ONCA 859

[Gillese, Trotter and Nordheimer JJ.A.]

Counsel:

David T. Ullmann and Brendan Jones, for the appellant

E. O. Gionet, for the respondent, Maxion Management Services Inc.

R. B. Bissell and J. Turgeon, for the receiver, Crowe Soberman Inc.

J. A. Armel, for EXP Services Inc.

H. T. Rosenberg, for Deep Foundations Contractors Inc.

E. L. D’Agostino, for Kieswetter Excavating Inc.1

Keywords: Real Property, Construction law, Construction liens, Contracts, Mortgages, Priority, Bankruptcy and Insolvency, Construction Act, R.S.O. 1990, c. C.30, ss. 71(1), 78, Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3.3, ss. 193, 249, The Mechanics’ Lien Act, R.S.O. 1970, c. 267, ss. 14(1), Boehmers v. 794561 Ontario Inc. (1993), 14 O.R. (3d) 781 (Gen. Div.), aff’d. (1995), 21 O.R. (3d) 771 (C.A.), Dorbern Investments Ltd. v. Provincial Bank of Canada, [1981] 1 S.C.R. 459, Jade-Kennedy Development Corp. (Re), 2016 ONSC 7125, XDG Ltd. v. 1099606 Ontario Ltd. (2014), 186 O.A.C. 33 (Div. Ct.)

facts:

In 2018, pursuant to an order of the Superior Court of Justice, Crowe Soberman Inc. was appointed as Receiver of several properties. The receivership arose out of a project that contemplated the redevelopment of one of the properties as a seniors’ retirement residence called the Uptown Residences (the “Uptown Project”). The respondent, Maxion Management Services Inc. (“Maxion”), was the general contractor on the Uptown Project. At some point in 2018, Maxion was advised to cease construction. Shortly after construction ceased, various service providers registered construction liens against title to the property.

The Uptown Project was sold by the Receiver in the summer of 2018. After making certain distributions, including payment of the first and second mortgages, the Receiver still holds in trust the sum of $5,477,224.57 from the proceeds of sale. As a result of competing priority claims between the lien claimants and a third mortgage held by the appellant, the Receiver was not able to distribute these remaining funds.

The appellant appealed from the order of the motion judge, who determined that the lien claimants in this matter, including the respondent, Maxion, had priority over the appellant’s registered mortgage.

issues:

(1) Did the motion judge err in ruling that subsection 78(6) of the Construction Act did not apply to the third mortgage?

(2) Did the motion judge err in ruling that the exception under subsection 78(2) of the Construction Act did not apply to the secured party?

(3) Did the motion judge err in failing to address the submissions of the Receiver?

(4) Did the motion judge err in the manner in which she expressed the public policy point in her reasons?

holding:

Appeal dismissed.

reasoning:

(1) No.

Subsection 78(6) of the Construction Act refers to “any advance made in respect of” the mortgage. In this case, the advances were made well before the third mortgage was granted and registered. Indeed, the third mortgage was granted and registered more than three years after the last advance and almost six years after the first advance. The Court did not see how, in those circumstances, it could be said that the advances were “made in respect of” the third mortgage.

The Court furthered noted that the appellant’s criticism of the motion judge for failing to refer to this legislative history was misplaced. While the motion judge may not have referred to the legislative history, her decision was consistent with the intent of s. 78, to the degree that that intent is revealed by the legislative history. Of more importance is the fact that the motion judge’s conclusion was consistent with the wording of s. 78(6).

The decision in Dorbern Investments Ltd. v. Provincial Bank of Canada, and its impetus for changes to the provisions of the Construction Act, had limited relevance to the issues raised by this case. Here, the mortgage was not a collateral mortgage but a direct mortgage. Further, the legislative change Dorbern caused, namely the addition of s. 78(5), was of no direct relevance to the issues the Court was called upon to determine.

(2) No.

The appellant could not bring itself within that exception for the same reason that undercuts the appellant’s reliance on s. 78(6), and that is that the wording of s. 78(2) of the Construction Act suggests that the intention to secure the financing operates prospectively. In other words, to fit within s. 78(2), the mortgagee must take the mortgage with the intention to secure financing of an improvement, which financing is then made. It does not operate retrospectively, that is, with respect to an intention to secure financing of an improvement that has already been made.

That conclusion with respect to the intention of s. 78(2) is consistent with the intention of s. 78 generally, which is to give priority to lien claimants. If a secured party wishes to propel its claim past the general priority given to lien claimants, then it bears the onus of bringing itself clearly within one of the exceptions set out in s. 78. In this case, the appellant failed to discharge that onus, both with respect to s. 78(6) and s. 78(2).

(3) No.

The motion judge was not required to specifically address any party’s submissions. What the motion judge was required to do was address the substance of all of the submissions made and reach a conclusion in light of all of those submissions, which was what the motion judge did in this case.

(4) No.

The Court did not consider it necessary to comment on the manner in which the motion judge expressed the point. The Construction Act sets out the general principle of providing lien claimants with priority. The basic concern that the motion judge identified regarding any conclusion that would undermine that legislative intent remained a valid one.

Extreme Venture Partners Fund I LP v. Varma, 2021 ONCA 853

[Hourigan, Huscroft and Coroza JJ.A.]

Counsel:

J. Lisus, C. Smith, N. Campion, V. Calina and J. C. Mastrangelo, for the appellants A.V., S. M., Varma Holdco Inc. and Madra Holdco Inc.
A. Brodkin, D. E. Lederman and D. Cappe, for the appellants C. P. and El Investco 1 Inc.
W. J. Kim, M. B. McPhee, A. Gyamfi and R. Sider, for the respondents

Keywords: Torts, Conspiracy, Inducing Breach of Contract, Breach of Contract, Limited Partnerships, Corporations, Piercing Corporate Veil, Group Enterprise Theory of Liability, Breach of Fiduciary Duty, Knowing Assistance of Breach of Fiduciary Duty, Damages, Joint and Several Liability, Disgorgement, Punitive Damages, Prejudgment Interest, Foreign Currency Exchange Rate, Civil Procedure, Trials, Amending Pleadings, Evidence, Credibility, Courts of Justice Act, R.S.O. 1990, c. C.43, s. 121(1), Business Corporations Act, R.S.O. 1990, c. B. 16, s 135(4), Partnership Act, R.S.O. 1990, c. P.5, Rules of Civil Procedure, Rule 26.06, Penvidic v. International Nickel, [1976] 1 S.C.R. 267, Whitefish Lake Band of Indians v. Canada (Attorney General), 2007 ONCA 744, 1758704 Ontario Inc. v. Priest, 2021 ONCA 588, Southwind v. Canada, 2021 SCC 28, Hodgkinson v. Simms, [1994] 3 S.C.R. 377, Air Canada v. M & L Travel Ltd., [1993] 3 S.C.R. 787, Ultraframe (UK) Ltd. v. Fielding, [2005] EWHC 1638 (Ch.), Vyse v. Foster (1872) LR 8 Ch App 309, Enbridge Gas Distribution Inc. v. Marinaccio, 2012 ONCA 650, Imperial Parking Canada Corporation v. Anderson, 2015 BCSC 2221, McGrail v. Phillips, 2018 ONSC 3571, ScotiaMcLeod Inc. v. Peoples Jewellers Ltd. (1995), 26 O.R. (3d) 481, Frame v. Smith, [1987] 2 S.C.R. 99, Guerin v. R., [1984] 2 S.C.R. 335, Galambos v. Perez, 2009 SCC 48, In re Harwood, 637 F (3d) 615 at 622 (5th Cir 2011), In re USACafes, L.P. Litig., 600 A (2d) 43 (Del Ch 1991), Olson v. Gullo, (1994), 17 O.R. (3d) 790, Rochwerg v. Truster (2002), 58 O.R. (3d) 687, Strother v. 3464920 Canada Inc., 2007 SCC 24, Warman International Ltd v. Dwyer, [1995] HCA 18

facts:

A.V. and S. M., along with their respective holding companies, V. Holdco Inc. (“V. Holdco”) and M. Holdco Inc. (“M. Holdco”), are the “V./M. Appellants.” C. P. is a well known silicon valley tech billionaire who was an original founding executive of Facebook, and his holding company, El Investco 1 Inc. (“Investco”), are the “P. Appellants”. They are collectively referred to as the “Appellants”. Extreme Venture Partners Fund I LP, EVP GP Inc., R. K. S., I. B. and K. T. are the “Respondents”.

Extreme Venture Partners Fund I LP (“Fund I”) is a venture capital fund that operated as a limited partnership and provided seed capital to start-up technology companies. It was established in November 2007 by the Respondents and the V./M. Appellants. Fund I’s general partner was EVP GP Inc., a corporation of which the shares were owned personally by the respondents S., B., and T., as well as the appellants V. Holdco and M. Holdco. EVP GP Inc. managed the business of Fund I, and the board of directors consisted of S., B., T., and the appellants V., and M. Fund I grew rapidly, but by late 2010, tensions had started to develop in the relationship between the Respondents and the V./M. Appellants.

In December 2011, the V./M. Appellants established a second fund named the Annex Fund with Northleaf Capital Partners (“Northleaf”). The V./M. Appellants did not tell the Respondents about the establishment of the Annex Fund. Instead, the V./M. Appellants surreptitiously obtained $5 million in financing from Northleaf. After the Annex Fund was established, the V./M. Appellants provided Northleaf with confidential information about Fund I’s portfolio and investment strategy. As a result, the Annex Fund invested in six of Fund I’s most successful portfolio companies and operated for two years until it closed in 2013.

One of Fund I’s investments was Xtreme Labs, a mobile software development lab business co-founded by V. and M., who were also the managing directors and co-CEOs of Xtreme Labs. By 2011, the parties had started to explore options to sell Xtreme Labs. V. and M. presented projections to the board that estimated Xtreme Labs’ growth would slow, despite the prior years’ rapid growth. Notwithstanding that they were officers and directors of the vendor, in 2012, they conspired with the P. Appellants to assist them in acquiring Xtreme Labs for $18 million, whereby the V./M. Appellants increased their interest in Xtreme Labs in the process.

In October 2013, the P. Appellants negotiated the sale of shares of Xtreme Labs to Pivotal for $60 million (U.S.). Prior to the sale, the Appellants carved certain assets out of Xtreme Labs and transferred them to a holding company of which they were the sole shareholders, 2390184 Ontario Inc. (“239 Ontario”). One of those assets was a 13% equity interest in Hatch Labs, which had developed the mobile dating app Tinder. In March 2014, 239 Ontario sold its stake in Hatch Labs to a large American corporation, InterActive Corp. (“IAC”), for $30 million (U.S.). In summary, then, the V./M. Appellants, who were operating the target business (Xtreme Labs), assisted the P. Appellants to purchase the assets of that business for $18 million, which assets were then flipped within two years for a combined $90 million.

At trial, the Respondents asserted two central claims: (1) the “Annex Fund Claim”, in which they alleged that the V./M. Appellants were liable for breach of fiduciary duty and breach of contract regarding the establishment of a competing business/fund, and (2) the “Xtreme Labs Claim”, in which they alleged that the V./M. Appellants were liable for breach of fiduciary duty, breach of contract, and conspiracy and that the P. Appellants were liable in tort for knowing assistance in breach of fiduciary duty, inducing breach of contract, and conspiracy, all concerning the sale of Xtreme Labs Inc. (“Xtreme Labs”).

The trial judge found in favour of the Respondents and ordered that: (1) on the Annex Fund Claim, V. and M. were liable for $250,000 in punitive damages, notwithstanding that no damages were proved, and (2) on the Xtreme Labs Claim, the P. Appellants and the V./M. Appellants were jointly and severally liable for $3.36 million (U.S.) in damages and $12.33 million (U.S.) in disgorgement of profits.

On this appeal, the V./M. Appellants alleged two legal errors pertaining to the trial judge’s calculation of damages and disgorgement order. The P. Appellants adopted the legal arguments advanced by the V./M. Appellants, and also advanced two other grounds of appeal. The P. Appellants alleged the trial judge erred in imposing joint and several liability for her disgorgement order, and further, that she erred in finding the appellant P. had knowingly assisted in the breaches of fiduciary duty.

Additionally, the Respondents brought a cross-appeal seeking to increase the amount of profits to be disgorged to them.

issues:

Appeal of V./M. Appellants
(1) Did the trial judge err in her calculation of damages on the sale of Xtreme Labs?
(2) Did the trial judge err in finding the amendment to the statement of claim to seek disgorgement regarding the sale of Hatch Labs Inc. (“Hatch Labs”) was valid, and ultimately ordering disgorgement?

Appeal of P. Appellants
(1) Did the trial judge err in imposing joint and several liability for her disgorgement order?
(2) Did the trial judge err in finding that the P. knowingly assisted in the breaches of fiduciary duty?
(a) Did the trial judge make a series of palpable and overriding errors of fact?
(b) Did the trial judge err in her findings of misconduct against the P. Appellants by basing them on her own “idiosyncratic moral values”?

Respondents’ Cross-appeal
(1) Should the disgorgement order be increased to achieve the purpose of deterrence?

holding:

Appeal of the V./M. Appellants dismissed.

Appeal of the P. Appellants dismissed.

Cross-appeal allowed.

reasoning:

Appeal of V./M. Appellants

(1) No.

The Appellants made three submissions regarding the award of damages on the sale of Xtreme Labs.

First, they submitted the damages award lacked an evidentiary foundation as the trial judge failed to accept both parties’ expert evidence that there were no damages. The Court held the trial judge was not obliged to accept the evidence of the expert witnesses on damages, and that she reasonably calculated damages based on the actual revenues for fiscal year 2012 and the fact that the Respondents were amenable to selling at a 1.5 multiplier.

Second, the Appellants submitted that the trial judge erred in ignoring the lack of evidence of a buyer at a higher price. The Court held that this submission ignored the critical fact that the misconduct of the Appellants prevented the company from being properly marketed, as the correct underlying revenue and other information was concealed by the Appellants and thus could not be presented to potential buyers.

Third, the Appellants argued the Respondents were awarded loss of chance damages that were not claimed or argued at trial. The Court disagreed, holding that while the Respondents changed the methodology of their damages calculation during the trial, they consistently sought damages on the sale of Xtreme Labs.

In sum, the Court held the trial judge made a sensible damages calculation grounded in the evidence. Accordingly, there was no basis for interference with the trial judge’s damage calculation.

(2) No.

Amendment of the Claim

The Court held that the trial judge reasonably exercised her discretion in permitting the amendment of the claim to seek disgorgement, and making the disgorgement order. Specifically, the Court held the trial judge was correct in finding that there was no prejudice to the Appellants. The Court noted that the Appellants had not articulated what substantial new evidence they might call at a new trial for disgorgement, which in the Court’s view, was because there was no new evidence. Further, the Court noted the Appellants were given an opportunity to either lead further evidence or seek an adjournment, but they declined both options. Accordingly, the Appellants had to live with the consequences of their choice.

Further, the fact that the pleading was not formally amended was of no consequence. Rule 26.06 of the Rules provides that “where a pleading is amended at the trial, and the amendment is made on the face of the record, an order need not be taken out and the pleading as amended need not be filed or served unless the court orders otherwise”.

The Disgorgement Order

Regarding the disgorgement order itself, it related to the finding that the V./M. Appellants had hid Xtreme Labs’ ownership interest in Hatch Labs, which was developing the Tinder App, prior to the sale of Xtreme Labs, thereby artificially suppressing the value of Xtreme Labs and eliminating the Respondents’ opportunity to decide to keep their interest in Hatch Labs.

The Appellants submitted the trial judge made four errors in making her order for disgorgement.

First, they submitted the trial judge erred in not requiring a causal relationship between the wrongdoing and the profits to be disgorged. Specifically, they submitted the Hatch Labs equity was only worth at most $500,000 (U.S.) when the Xtreme Labs sale closed, and the increase in value thereafter resulted from external independent events unrelated to the Appellants’ conduct. Accordingly, the Appellants’ submitted the trial judge allowed the Respondents to take the benefit of the significant increase in value unrelated to the wrongful conduct.

In rejecting the Appellants’ argument, the Court stressed that what the fiduciaries (the V.M. Appellants) had done was hide the investment in Hatch Labs/Tinder. As a consequence, Fund I lost the opportunity to participate in the upside of said investment. Accordingly, it was no defence to say that no one knew the investment in Hatch Labs would be profitable. The Court noted a fiduciary has a duty of utmost good faith and an obligation to disclose so that the beneficiary has an opportunity to make an informed decision about the best course of action. By breaching that duty, the Appellants denied the respondents the opportunity to make that decision.

Second, the Appellants submitted that the trial judge erred in ordering disgorgement from 239 Ontario, V. and M. when there was no evidence they had personally profited from Hatch Labs’ sale. Thus, they allege the trial judge pierced the corporate veil of 239 Ontario, a non-party.

The Court rejected this argument, noting the trial judge found that the Appellants or their holding companies “wholly owned” 239 Ontario, and that a sizable portion of the profits “were distributed” to the Appellants. The Court held this was an available inference on the facts because one of the purposes of the conspiracy was to conceal Hatch Labs from the selling shareholders for the benefit of the co-conspirators. Further, there was no order that 239 Ontario itself make any disgorgement, and therefore no veil piercing occurred.

Third, the Appellants submitted that the trial judge’s disgorgement award did not account for deductions/expenses in completing the sale. Essentially, they submitted the order was made in an evidentiary vacuum. The Court rejected this argument, as the Appellants were the ones that held the evidence relating to the sale, yet elected not to tender that evidence.

Fourth, the Appellants argued the trial judge’s damages calculation included an element of double counting. Specifically, they argued that the trial judge’s calculation was based on an enterprise value which included the price of Hatch Labs equity, therefore, ordering both damages and disgorgement was an error.

The Court rejected this argument, stating that the trial judge’s assessment of damages was based on the extent the actual fiscal year 2012 figures for the revenues of Xtreme Labs exceeded the depressed figures put forth by V. and M. The Court noted the Hatch Labs equity interest did not contribute to the Xtreme Labs revenue stream during that fiscal year, and was therefore not included in the damages calculation. Therefore, there was no double counting.

Appeal of P. Appellants

(1) No.

In submitting the trial judge erred in law by holding them jointly and severally liable with the V./M. Appellants, the P. Appellants cited the English case of Ultraframe (UK) Ltd. v. Fielding which provided that a knowing assistant should not face the same liability as a faithless fiduciary.

The Court noted there was Canadian jurisprudence where Canadian courts have found a knowing assistant to be jointly and severally liable. Further, the Court cited academic commentary that supported a finding of joint and several liability for the knowing assistant. Ultimately, the Court concluded there was little reason to hew closely to Ultraframe, as in the Court’s view, the reasoning in that case was inconsistent with the policy goals underlying equitable remedies.

Although the Court agreed that a knowing assistant should not be penalized, it noted that a judgment against a faithless fiduciary is often uncollectable. Accordingly, the Court concluded that, as between the wronged beneficiary and the knowing assistant, in most circumstances the loss more equitably falls on the shoulders of the knowing assistant who has deliberately taken steps to procure a breach of fiduciary duty.

Although the Court held that there might be circumstances where a knowing assistant should have their liability limited, it concluded this was not such a case. Specifically, the Court found the P. Appellants were active participants in the core wrongful conduct as well as its primary beneficiaries. Accordingly, there was no equitable reason why their liability should be limited.

(2) No.

Citing the Supreme Court of Canada case of Air Canada v. M & L Travel Ltd., the Court set out the constituent elements of the tort of knowing assistance in the breach of a fiduciary duty: (i) there must be a fiduciary duty; (ii) the fiduciary must have breached that duty fraudulently and dishonestly; (iii) the stranger to the fiduciary relationship must have had actual knowledge of both the fiduciary relationship and the fiduciary’s fraudulent and dishonest conduct; and (iv) the stranger must have participated in or assisted the fiduciary’s fraudulent and dishonest conduct.

The P. Appellants submitted the trial judge erred in her application of the knowing assistance test because there was no intentional wrongful act. Further, they argued the trial judge erred in reaching her factual conclusions, specifically alleging P.’s conduct was legal and consistent with Canadian business conduct standards. In order to address these submissions, the court considered whether: (a) the trial judge made palpable and overriding errors of fact; and (b) whether the trial judge erred in imposing her idiosyncratic moral code upon what was otherwise standard business conduct.

(a) No.

The Court noted the V./M. Appellants accepted the factual findings of the trial judge, whereas the P. Appellants did not. The Court went on to list some of the significant findings of fact made by the trial judge regarding the misconduct, including: P., V., and M. were incredible witnesses; P., V., and M. worked together and coordinated their efforts to present P.’s offer to buy Xtreme Labs to the board of directors; V. and M. downplayed Xtreme Labs’ financial prospects to facilitate P.’s acquisition of the company at a discounted price; P., V., and M. all knew the Pivotal multiple was higher than the 0.75x number contained in P.s offer, yet V. and M. nonetheless conveyed the offer to the board even though they knew the number was understated; and P’s testimony wherein he denied knowing anything about Hatch Labs at the time of the sale transaction was false.

The Court noted the P. Appellants challenged those factual findings, but failed to specify how the trial judge went wrong in her factual analysis. The P. Appellants submitted that the initial offer to purchase Xtreme Labs was rejected and therefore had no impact, but the Court noted that submission ignored the trial judge’s finding that the offer was only one instance of the illegal activity employed as part of the ongoing conspiracy.

Further, the P. Appellants submitted the board could have discovered the actual revenue numbers if they had undertaken more due diligence. The Court rejected this argument, as it was “not the way corporate law work[ed]”. Citing s. 135(4) of the Ontario Business Corporations Act, the Court held a board of directors has a right to believe what its officers and directors are telling it, and where that information is deliberately falsified (as in this case) it was no defence to say that the board should have known better.

Finally, the P. Appellants submitted the trial judge ought to have accepted P.’s evidence over the testimony of the Respondents. The Court held the problem with this argument was that it was dependant upon the Appellant’s credibility. The Court held the trial judge correctly found the Appellants to be incredible witnesses, as their sworn testimony routinely contradicted the written record. Further, the Court noted P. had an unusual habit in his public and private communications of bragging about specific aspects of his alleged misbehaviour, but then inexplicably denying any misconduct when testifying.

The Court was satisfied the trial judge made no factual errors in finding that P. was not only an active participant in the core wrongful activity, but also its primary beneficiary.

(b) No.

The P. Appellants asserted P.’s conduct was in keeping with how business is conducted in Canada, and that the trial judge inappropriately applied her idiosyncratic moral values and thereby found wrongdoing where there was none.

The Court categorized this as a straw man argument. The Court held that what was in issue was whether the Appellants had breached their duties and/or engaged in tortious conduct by organizing the sale of Xtreme Labs. The Court held the trial judge correctly rejected the Appellants’ submission by finding that this was not a case of tough business tactics, and was rather a case of a purchaser conspiring with fiduciaries to acquire a business and doing so based on breaches of fiduciary and contractual duties.

Specifically, the Court held the trial judge’s conclusions were not grounded in her idiosyncratic moral values, nor did she require P. to compromise his legitimate business interests. Rather, the trial judge applied well-established tort and corporate law principles to P.’s conduct and made findings of illegality supported by the record.

Other Grounds of Appeal

The Court also dealt summarily with several grounds of appeal found in the Appellants’ factums but not addressed in oral argument. Specifically, the Court held:

  • the trial judge did not err in awarding punitive damages on the Annex Fund Claim;
  • the trial judge did not err in exercising her discretion not to deviate from the default rules for prejudgment interest and the exchange rate;
  • the trial judge did not use the group enterprise theory to affix liability for any breach of fiduciary duty;

Further, the Appellants argued in their factums that they could not be held liable for any breach because the party to whom they owed the duty, EVP GP, was different than the party that suffered the loss, Fund I. The Court rejected this argument, but for different reasons than the trial judge.

First, the Court noted the position taken by the Appellants that no duty was owed directly to the Limited Partnership (because they were officers and directors of the corporate general partner of the Limited Partnership and therefore only owed duties to the corporate general partner) was inconsistent with the text of the Limited Partnership Agreement (“LPA”). Specifically, article 6.5 of the LPA stated the General Partner and its “officers, directors, shareholders or agents” can be liable to the Limited Partnership or a Limited Partner for acts or omissions “performed or omitted fraudulently or in bad faith” or that “constituted willful misfeasance or negligence in the performance of their obligations or as a result of the reckless disregard of such obligations”.

Second, the Court held it would be an anomalous result if the law offered no remedy for the breach of a director’s fiduciary duty in circumstances where the limited partnership suffered the resulting loss. The Court set out that the question in this case was whether V. and M.’s fiduciary duty should expand to include a duty to the Limited Partnership. The Court concluded that it should, as V. and M. conducted themselves in a manner that clearly breached their duties to EVP GP (the corporate general partner). Specifically, the Court noted they acted solely in their self-interest and contrary to the interests of both the general partner and the Limited Partnership.

In such a situation, the Court concluded the concept of a director’s fiduciary duty should be flexible enough to include duties to both the general partner and the limited partnership. Further, the Court noted that in a limited partnership, the raison d’être of the general partner was to manage the business operations of the limited partnership and shield the limited partners from the unlimited liability they would face in a partnership. In turn, the use of the corporate form by the general partner is designed to limit its liability to exposure. Accordingly, the Court held it would be inequitable if the corporate form could be used to insulate directors who are in breach of their duties to the general partner and who have caused damages to the limited partnership.

The Court concluded that, given the unique structure of limited partnerships, the common law should impose a fiduciary duty on corporate directors of the general partner towards the limited partnership. The Court cited Frame v. Smith, indicating it was well established that the “categories of fiduciary relationship are never closed”. Specifically, the Court cited Galambos v. Perez indicating courts can find an ad hoc fiduciary duty where (1) the fiduciary has the discretionary power to affect the vulnerable party’s legal or practical interests; and (2) the fiduciary has made an express or implied undertaking that it will exercise the discretionary power in the vulnerable party’s best interests.

The Court concluded V. and M. owed the limited partnership an ad hoc fiduciary duty. First, both the limited partners and the limited partnership constituted a class of vulnerable and defined beneficiaries whose interests could be, and in fact were, adversely affected by V. and M.’s exercise of discretion. Second, V. and M.’s undertaking arose from the LPA, as well as the nature of the business relationship itself: a general partner operates on behalf of the limited partnership.

In further support of their conclusion, the Court referenced the fact that certain jurisdictions in the United States had similarly determined the liability owed by a general partner to the limited partnership should be expanded. The Court made specific reference to comments made by Chancellor Allen in the Delaware case of In re USACafes, L.P. Litig. setting out that the theory underlying fiduciary duties is consistent with the recognition that a director of a corporate general partner bears such a duty towards the limited partnership.

The Court agreed and adopted Chancellor Allen’s analysis. Accordingly, the Court held both V. and M. were liable to Fund I (the Limited Partnership) for their fiduciary breaches as directors of EVP GP (the general partner of the Limited Partnership).

Respondents’ Cross-appeal

(1) Yes.

The trial judge awarded disgorgement of profits earned on the sale by the Appellants of Hatch Labs (which held an interest in Tinder) based on the Respondents’ ownership interest in Hatch Labs (about 42%) when they sold it to the Appellants. The Appellants were therefore permitted to retain approximately 58% of the profits earned. The Respondents submitted that the trial judge committed an error in principle because prophylactic disgorgement is aimed not at what the beneficiaries lost but rather at what the wrongdoers gained. They submitted that the apportioned disgorgement award issued by the trial judge represented an outcome where the wrongdoers were no worse off than if they had never breached their fiduciary duties in the first place, meaning no deterrence had been achieved.

The Court cited Strother v. 3464920 Canada Inc., the leading case on disgorgement of profits, which sets out that the remedy of disgorgement can be directed to either or both of two equitable purposes: (1) a prophylactic purpose, whereby any benefit or gain obtained by the fiduciary is appropriated for the benefit of the person to whom the fiduciary duty was owed, the objective of which is to preclude the fiduciary from being swayed by considerations of personal interest; and (2) a restitutionary purpose, the objective of which is to restore the beneficiary profit which properly belonged to the beneficiary.

Under the prophylactic purpose, “equity requires disgorgement of any profits received even where the beneficiary has suffered no loss because of the need to deter fiduciary faithlessness and preserve the integrity of the fiduciary relationship”.

The Court held it was evident that the disgorgement order was imposed to serve a prophylactic purpose, as the trial judge explicitly stated that a “disgorgement order is required to serve a deterrent purpose in this case.”

Therefore, the Court agreed with the Respondents that the disgorgement order actually made was erroneous because it did not achieve its purpose of deterrence. The Court next turned to whether it was required to order disgorgement of all of the ill-gotten gains, or whether it could make an order that achieved its deterrent purpose, but that did not require full disgorgement. The Court concluded that there may well be circumstances where it would be inequitable to order a faithless fiduciary to disgorge all profits earned as a result of a breach of fiduciary duty. However, the Court held that this was not such a case, and that, in this case, an order for disgorgement of all profits in the amount of $29.5 million (U.S.) was appropriate.


SHORT CIVIL DECISIONS

Grand River Conservation Authority v. Geil, 2021 ONCA 861

[Benotto, Huscroft and Miller JJ.A.]

Counsel:

S. Biesbroek, for the appellants
S. J. O’Melia, for the respondent

Keywords: Civil Procedure, Contempt, Consent Orders, Evidence, Hearsay

Hamza v. Law Society of Ontario,, Hamza v. Law Society of Ontario, 2021 ONCA 852

[van Rensburg and Roberts JJ.A. and Tzimas J. (ad hoc)]

Counsel:

O. Hamza, acting in person
K. Hensel, for the respondent, Law Society of Ontario
D. Mayer, for the Ministry of the Attorney General

Keywords: Civil Procedure, Vexatious Litigants, Scaduto v. The Law Society of Upper Canada, 2015 ONCA 733

National Bank of Canada v. Guibord, 2021 ONCA 861

[Nordheimer J.A. (Motions Judge)]

Counsel:

Grand Chief, acting in person
M. Myers, for the responding party

Keywords: Civil Procedure, Stay Pending Appeal, Writs of Possession, Summary Judgment, Rules of Civil Procedure, Rules 15.01(3) & 63.01(1), RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311


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.

Jump To: Table of Contents | Civil Decisions | Short Civil Decisions

Good afternoon.

Following are this week’s summaries of the Court of Appeal for Ontario for the week of November 22, 2021.

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In Blair v Ford, the Court dismissed an appeal by Brad Blair from the dismissal of his defamation claim against Premier Doug Ford. In the process, the Court again summarized the law applicable to Anti-SLAPP motions brought under section 137.1 of the Courts of Justice Act. Even though Mr. Blair’s action against the Premier was not a classic form of strategic litigation against public participation, the Anti-SLAPP provisions were still available to protect the Premier’s speech and to dismiss the action against him at the preliminary stage.

In Ottawa (City) v. ClubLink Corporation ULC, the provisions of an agreement requiring a golf course owner and operator to convey the land to the City if it ceased to operate the golf course created an interest in land in favour of the City. However, given that the operator ran the golf course for 24 years, the interest did not vest with the City until after the expiry of the 21 year period prescribed by the rule against perpetuities. Accordingly, the City’s interest in the land was void and unenforceable as being contrary to that rule. The appeal was allowed.

In Baldwin v. Imperial Metals Corporation, the Court considered the role of “public correction” in a shareholder’s proposed class action for misrepresentation in the secondary securities market pursuant to s.138.3 of the Securities Act. The Court concluded that there need not be facial symmetry between the public correction and the alleged misrepresentation or omission for the action to be allowed to proceed. While most of the secondary market misrepresentation cases that have come before the courts in Canada have involved express public corrections of prior representations, an express correction is not required. A plaintiff is not precluded from asking the court to infer a correction based on something other than an express statement by the issuer. The appeal was allowed and the matter remitted to the Superior Court for a determination of the motion for leave to commence the proceeding.

In a sad case, Adam v. Ledesma-Cadhit, the appellant’s five year old daughter died five days after being administered a swine flu vaccine manufactured and distributed by the respondent GSK. The Court upheld the trial judge’s dismissal of this product liability action on the basis that GSK had fulfilled its duty to warn of the risks of the vaccine by relying on the prescribing doctor to explain the risks to the patient (the learned intermediary rule).

In Mandel v. 1909975 Ontario Inc., the Court held that the application judge made no error in exercising his discretion to decline jurisdiction to determine whether the issuance of shares in a corporation was void because the shares were never paid for. The only dispute was with CRA, and the application judge was therefore correct to decline jurisdiction in favour of the Tax Court of Canada.

For our readers who are not yet aware of it, I would like to introduce them to a new online publication, Civil Procedure & Practice in Ontario (CPPO). The CPPO is a new free online resource jointly published by the University of Windsor and CanLII. CanLII is a not-for-profit organization operated by the Federation of Law Societies of Canada and is dedicated to assisting with access to justice through the free and open dissemination of the laws of Canada to all members of the public. The CPPO was written by a team of 135 leading litigators and experts in Ontario civil procedure, led by Professor Noel Semple of Windsor Law School. I had the privileged of co-writing two chapters to CPPO dealing with Rules 54 and 55 (Directing a Reference and Procedure on a Reference).

CPPO will serve as a guide to Ontario’s Rules of Civil Procedure, Courts of Justice Act, and Limitations Act, and will be accessible not only to practitioners, but to members of the public. It contains not only the text of all these rules and statutory provisions, but also commentary and annotations to all the relevant case law applying and interpreting each rule and section. To access Civil Procedure & Practice in Ontario, please click here, and make sure to bookmark the site for easy access.

I would encourage all of our readers to consult CPPO in their daily practice, to spread the word among colleagues, and to provide any feedback they may have.

Wishing everyone an enjoyable weekend.

John Polyzogopoulos
Blaney McMurtry LLP
416.593.2953 Email

Table of Contents

Civil Decisions

MDS Inc. v. Factory Mutual Insurance Company , 2021 ONCA 837

Keywords: Contracts, Interpretation, Insurance, Coverage, Civil Procedure, Trials, Costs, Disbursements, Expert Fees, Courts of Justice Act, RSO 1990, c C43, ss 131(1), Rules of Civil Procedure, Rule 57.01(1), Charlesfort Developments Limited v. Ottawa (City), 2021 ONCA 542, leave to appeal S.C.C. requested, 39818, Fan (Guardian ad litem of) v. Chana, 2011 BCCA 516

Adam v. Ledesma-Cadhit , 2021 ONCA 828

Keywords: Torts, Negligence, Product Liability, Duty of Care, Duty to Warn, Standard of Care, Learned Intermediary, Causation, Civil Procedure, Costs, Public Interest Litigation, Hollis v. Dow Corning Corp., [1995] 4 S.C.R. 634, Housen v. Nikolaisen, 2002 SCC 33, R. v. G.F., 2021 SCC 20, F.H. v. McDougall, 2008 SCC 53, Fontaine v. British Columbia (Official Administrator), [1998] 1 S.C.R. 424, Dickie v. Minett, 2014 ONCA 265, Clements v. Clements, 2012 SCC 32, Rothwell v. Raes (1990), 2 O.R. (3d) 332 (CA)

Caruso v. Bortolon , 2021 ONCA 842

Keywords: Corporations, Fraud, Civil Procedure, Summary Judgment, Limitation Periods, Adjournments, Fresh Evidence, Limitations Act, 2002, SO 2002, c 24, Sch B, Rules of Civil Procedure, Laski v. BMO Nesbitt Burns Inc., 2020 ONCA 300

Mandel v. 1909975 Ontario Inc., 2021 ONCA 844

Keywords: Corporations, Shares, Issuance, Consideration, Tax Law, Tax Planning, Deemed Dispositions, Taxable Benefits, Remedies, Rectification, Civil Procedure, Applications, Appeals, Jurisdiction, Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), ss. 3, 12(1), 15(1), Business Corporations Act (Ontario), R.S.O. 1990, c. B.16, ss. 17(3), 23(3), 130(1), 250(1), 255, Retail Sales Tax Act, R.S.O. 1990, c. R.31, Courts of Justice Act, R.S.O. 1990, c. C.43, ss. 6(2), 97, Tax Court of Canada Act, R.S.C. 1985, c. T-2, Rules of Civil Procedure, Rule 14.05, Baxter v. Attorney General of Canada, 2013 ONSC 3153, GLP NT Corp. v. Canada (Attorney General) (2003), 65 O.R. (3d) 840 (S.C.), Danso-Coffey v. Ontario, 2010 ONCA 171, Orman v. Marnat Inc., 2012 ONSC 549, Juliar v. Canada (Attorney General) (2000), 50 O.R. (3d) 728 (C.A.), Canada (Attorney General) v. Fairmont Hotels Inc., 2016 SCC 56, Dunham v. Apollo Tours Ltd. (1978), 20 O.R. (2d) 3 (H.C.), Penner v. Niagara (Regional Police Services Board), 2013 SCC 19, Ewert v. Canada, 2018 SCC 30, Holmes v. Schoenfeld Inc., 2016 ONCA 148

Blair v. Ford, 2021 ONCA 841

Keywords: Torts, Defamation, Civil Procedure, Anti-SLAPP, Appeals, Interlocutory Orders, Jurisdiction, Police Services Act, R.S.O. 1990, c. P.15, Courts of Justice Act, R.S.O. 1990, c. C.43, s. 6(2), s. 19(1)(b), s. 137.1, Rules of Civil Procedure, Rules 57.01 and 61.03(1)(b), PSA Code of Conduct, 1704604 Ontario Ltd. v. Pointes Protection Association, 2020 SCC 22, Mader v. South Easthope Mutual Insurance Company, 2014 ONCA 714, Brown v. Hanley, 2019 ONCA 395, Cole v. Hamilton (City) (2002), 2002 60 O.R. (3d) 284, Brown v. Hanley, 2019 ONCA 395, Azzeh v. Legendre, 2017 ONCA 385, Platnick v. Bent, 2018 ONCA 68, Bondfield Construction Company Limited v. The Globe and Mail Inc., 2019 ONCA 166

Baldwin v. Imperial Metals Corporation, 2021 ONCA 838

Keywords: Securities, Secondary Market Misrepresentations, Civil Procedure, Class Proceedings, Leave to Commence Proceedings, Securities Act, R.S.O. 1990, c.S.5, ss. 138.3 and138.8, Class Proceedings Act, 1992 S.O. 1992, Drywall Acousting Lathing Insulation, Local 675 Pension Fund v. Barrick Gold Corporation, 2021 ONCA 104, Canadian Imperial Bank of Commerce v. Green, 2015 SCC 60, Rahimi v. SouthGobi Resources Ltd., 2017 ONCA 719, Swisscanto v. Blackberry, 2015 ONSC 6434, The Trustees of the Drywall Acoustic Lathing and Insulation Local 675 Pension Fund v. SNC-Lavalin Group Inc., 2016 ONSC 5784, Cappelli v. Nobilis Health Corp., 2019 ONSC 2266, Kauf v. Colt Resources, Inc., 2019 ONSC 2179, Toward Improved Disclosure: A Search for Balance in Corporate Disclosure, interim report (Toronto: Toronto Stock Exchange, 1995), Ironworkers Ontario Pension Fund (Trustee of) v. Manulife Financial Corp., 2013 ONSC 4083, Mask v. Silvercorp Metals Inc., 2015 ONSC 5348

Ottawa (City) v. ClubLink Corporation ULC, 2021 ONCA 847

Keywords: Contracts, Real Property, Contingent Interests in Land, Rule against Perpetuities, City of Ottawa Act, 1999, S.O. 1999, c. 14, Sched. E, Canadian Long Island Petroleums Ltd. et al. v. Irving Industries Ltd., [1975] 2 S.C.R. 715, 2123201 Ontario Inc. v. Israel Estate, 2016 ONCA 409, London and South Western Railway Co. v. Gomm (1882), 20 CH. D. 562 (C.A.), Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, City of Halifax v. Vaughan Construction Company Ltd. and the Queen, [1961] S.C.R. 715, Weinblatt v. Kitchener (City), [1969] S.C.R. 157, Jain v. Nepean (City) (1992), 9 O.R. (3d) 11 (C.A.), leave to appeal refused, [1992] S.C.C.A. No. 473, Deslaurier Custom Cabinets Inc. v. 1728106 Ontario Inc., 2016 ONCA 246, aff’d 2017 ONCA 293, leave to appeal refused, [2016] S.C.C.A. No. 249, Loyalist (Township) v. The Fairfield-Gutzeit Society, 2019 ONSC 2203, Manchester Ship Canada Company v. Manchester Racecourse Company, [1901] 2 Ch. 37 (C.A.), Weber v. Texas Co., 83 F.2d 807 (5th Cir. 1936), Weyerhaeuser Company Limited v. Ontario (Attorney General), 2017 ONCA 1007, 3869130 Canada Inc. v. I.C.B. Distribution Inc., 2008 ONCA 396, Salah v. Timothy’s Coffees of the World Inc., 2010 ONCA 673, Fuller v. Aphria Inc., 2020 ONCA 403, Catalyst Capital Group Inc. v. Dundee Kilmer Developments Limited Partnership, 2020 ONCA 272, Thomas Edward Scrutton, Land in Fetters, (Cambridge: Cambridge University Press, 1896)

D.C. v. T.B., 2021 ONCA 850

Keywords: Family Law, Custody and Access, Parental Alienation, Costs, A.A. v. S.N.A., 2007 BCCA 363, A.M. v. C.H., 2019 ONCA 764

Short Civil Decisions

Thrive Capital Management Ltd. v. Noble 1324 Queen Inc., 2021 ONCA 846

Keywords: Civil Procedure, Judgments, Enforcement, Contempt, Costs

Environmental Waterproofing Inc. v. Huron Tract Holdings Inc., 2021 ONCA 835

Keywords: Bankruptcy and Insolvency, Receiverships, Priority, Civil Procedure, Judgments, Enforcement, Garnishment Proceedings


CIVIL DECISIONS

MDS Inc. v. Factory Mutual Insurance Company, 2021 ONCA 837

[Feldman, Harvison Young and Thorburn JJ.A.]

Counsel:

P.J. Pape, D.E. Liblong, S. Chaudhury, and C. Senese, for the appellant

B.J.E. Brock, Q.C., for the respondents

G.A. Smith and N. Bombier, for the intervenor

Keywords: Contracts, Interpretation, Insurance, Coverage, Civil Procedure, Trials, Costs, Disbursements, Expert Fees, Courts of Justice Act, RSO 1990, c C43, ss 131(1), Rules of Civil Procedure, Rule 57.01(1), Charlesfort Developments Limited v. Ottawa (City), 2021 ONCA 542, leave to appeal S.C.C. requested, 39818, Fan (Guardian ad litem of) v. Chana, 2011 BCCA 516

facts:

The appeal concerned whether the appellant insurer was required to provide insurance coverage for losses arising from an unplanned shutdown of the Atomic Energy of Canada Limited Nuclear Research Universal reactor. The appeal was allowed. The parties were unable to agree on the amount of costs to be awarded to the appellant for the trial. The appellant sought costs in the amount of $561,103.95, which was approximately 25% of the costs awarded to the respondent by the trial judge.

issues:

(1) What amount of costs should be awarded to the appellant for the trial?

holding:

The appellant was awarded partial indemnity costs and disbursements in the amount of $561,103.95.

reasoning:

The Court considered the factors set out in r. 57.01(1) of the Rules of Civil Procedure, including the importance of the issues, the conduct of the parties, the principle of indemnity including the lawyer’s experience, rates charged and hours spent, the fact that the appeal was neither improper nor vexatious, and the amount the losing party could reasonably expect to pay.

First, the Court found that the issues pursued at trial and on appeal were both complex and important. Over $56 million was at stake, several experts were engaged, and the Court’s interpretation of the disputed policy was of precedential value.

Second, the Court found that the hourly rates of appellant’s counsel were reasonable and the fees requested by the appellant reflected a partial indemnity rate.

Third, the Court agreed that the appellant should be allowed to recover disbursements for expert advice regardless of whether expert reports were introduced at trial and relied on by the trial judge. As per Charlesfort Developments Limited v. Ottawa (City), reasonable expert fees for export reports reasonably necessary for the conduct of the proceeding are recoverable whether or not the expert is called to give evidence. However, the fact that the expert was not called to give evidence is a factor to be taken into account in determining the reasonableness of the overall fees charged. Further, the reasonableness of retaining the expert is to be considered at the time the expense is incurred, not in hindsight: Fan (Guardian ad litem of) v. Chana.


Adam v. Ledesma-Cadhit, 2021 ONCA 828

[Brown, Roberts and Zarnett JJ.A.]

Counsel:

J. M. Ghosn, for the appellants

R. C. Sutton, K. Findlay and J. Smith, for the respondent GlaxoSmithKline Inc.

Keywords: Torts, Negligence, Product Liability, Duty of Care, Duty to Warn, Standard of Care, Learned Intermediary, Causation, Civil Procedure, Costs, Public Interest Litigation, Hollis v. Dow Corning Corp., [1995] 4 S.C.R. 634, Housen v. Nikolaisen, 2002 SCC 33, R. v. G.F., 2021 SCC 20, F.H. v. McDougall, 2008 SCC 53, Fontaine v. British Columbia (Official Administrator), [1998] 1 S.C.R. 424, Dickie v. Minett, 2014 ONCA 265, Clements v. Clements, 2012 SCC 32, Rothwell v. Raes (1990), 2 O.R. (3d) 332 (CA)

facts:

A., the daughter of the appellants, died on November 28, 2009 at age five, 5-days after receiving a vaccine called Arepanrix. The vaccine was manufactured and distributed by the respondent GlaxoSmithKline (“GSK”).

An autopsy concluded the cause of death was unascertained, with sudden arrhythmic death syndrome not excluded. The investigating coroner found the most likely cause of death was sudden arrhythmic death syndrome, however, the ultimate classification of A.’s cause of death was “undetermined”.

A.’s parents commenced this action against GSK, Dr. C. J. L.-C., their family physician who had administered the vaccine, Her Majesty The Queen in Right of Canada, and Her Majesty The Queen in Right of Ontario, alleging that Arepanrix had caused A.’s death. The appellants discontinued the action against Dr. C. J. L.-C. prior to trial, and the action was dismissed against the two government defendants in 2014.

The trial judge dismissed the action against GSK following a three-week trial after concluding the appellants had not introduced evidence that would demonstrate, on a balance of probabilities, that GSK breached the applicable standard of care or that Arepanrix caused A’s death.

The appellants appealed from the trial judge’s decision.

issues:

(1) Did the trial judge err in finding that GSK provided an adequate warning to A. and her mother, as caregiver to A., with respect to Arepanrix?

(2) Did the trial judge err in finding that GSK discharged its duty to warn by relying on the “learned intermediary rule”?

(3) Did the trial judge err in failing to find that GSK did not meet the standard of care required of it with respect to its “post-marketing commitments” in terms of its continuing duty to the consumer to evaluate adverse events?

(4) Did the trial judge err in failing to find that the circumstantial evidence in this case raised an inference of negligence that called for an explanation from GSK?

(5) Did the trial judge err in failing to award the unsuccessful appellants their full indemnity costs on the basis that this case required adjudication by the courts because it was novel public interest litigation?

holding:

Appeal dismissed.

reasoning:

(1) and (2) No.

The general principles governing the duty to warn are summarized by the Supreme Court of Canada in Hollis v. Dow Corning Corp. The Supreme Court in Hollis narrowed down the overarching question as to whether the manufacturer owed the patient a duty to warn of a specific risk, which the SCC broke down into two sub-questions. The Court adopted that approach, and set out the two questions in this case as follows:

(i) Did the trial judge err by concluding that GSK could satisfy its duty to warn recipients of Arepanrix by warning a learned intermediary physician, in this case A.’s family doctor, Dr. L.-C.?

(ii) If GSK could properly discharge its duty by warning the physician, did the trial judge err in concluding that GSK adequately warned Dr. L.-C. of the relevant risks of Arepanrix in light of its state of knowledge at that time?

Whether GSK discharged its duty of care was a question of mixed fact and law as it involved applying legal principles to facts, which attracted a standard of review of palpable and overriding error.

(i) No.

The appellants submitted that since A.’s mother learned about the vaccine and sought it out for her children independently, the learned intermediary rule did not apply. The Court rejected this argument, stating the vaccine was a product highly technical in nature which could only be obtained and used under the supervision of an expert, which brought the vaccine squarely within the ambit of the learned intermediary rule.

The appellants next argued that A.’s family doctor did not possess the same level of information as GSK regarding the risk of a high fever in a child after receiving the vaccine and how to treat such a high fever. This argument was based on: (1) a Health Canada email sent to GSK about a week before A. received her vaccine, asking for more information about three cases of significant or high-level fever observed in children, yet GSK did not publish any advisory regarding fever to the public; and (2) a communication from GSK to about 50,000 physicians advising them to consult a product information leaflet for detailed information about the vaccine, which contained information about common side effects, including fever, that was not included in the product monograph placed in boxes of Arepanrix distributed to physicians.

The trial judge did not accept that either consideration prevented GSK from relying on A’s family doctor to satisfy its duty to warn, and the Court found no reversible error, as the record disclosed two pieces of evidence as to why the trial judge reached that conclusion. First, Dr. L.-C. testified that she told A.’s mother the side effects included fever, and if fever appeared, she should administer Tylenol and return to her office if the children experienced any side effect the mother considered to be serious. Second, Dr. L.-C. confirmed that before administering the vaccine to A., she had read the GSK product monograph for Arepanrix, and the adverse reactions section of that document was identical to that in the product information leaflet.

(ii) No.

The appellants listed eight matters they alleged GSK should have disclosed to A.’s mother, including the risk of a high fever. The Court held that the product monograph accompanying the vaccine identified in some detail known adverse reactions to the vaccine, and that the appellants had not pointed to any evidence that GSK failed to disclose adverse risks that were known or ought to have been known at the time.

The Court noted that, as a practical matter, expert evidence concerning the complex area of vaccine manufacture and distribution was necessary in the circumstances of this case for the Court to reach a conclusion of a breach in the standard. As the plaintiffs led no such evidence, the Court saw no reversible error in the trial judge’s conclusion that the appellants had failed to establish that GSK breached the applicable duty to warn.

(3) No.

The trial judge held that although GSK did not learn of A.’s death until the lawsuit started, Dr. L.-C. had filed an adverse event report regarding A.’s death with the Toronto Public-Health Authorities. Further, the trial judge found there was no evidence to suggest the tracking system GSK or any of the public health authorities established somehow fell short of the standard of care applicable.

The appellants repeated their submission on appeal, and further alleged GSK’s failure to investigate A.’s severe adverse event amounted to bad faith and ought to have attracted punitive damages awarded to A.’s estate. The Court rejected the appellants’ submissions for three reasons.

First, the Court held the appellants submissions confused the purpose of a civil trial with the purpose of a public inquiry or coroner’s inquest. The record fully supported the trial judge’s conclusion that the appellants failed to establish identifiable legal wrongdoing on the part of the defendant.

Second, as the appellants’ action alleged the administration of Arepanrix caused A.’s death, establishing liability for A.’s death would require the appellants to demonstrate that some act or omission of GSK that took place prior to A.’s death caused her death. Further, even if the appellants contended that GSK’s post-marketing activities failed to disclose a risk that should have been known to GSK before the vaccine was administered to A., that argument would fail in light of the trial judge’s findings to the contrary, which the appellants had not demonstrated were tainted by palpable and overriding error.

Third, GSK’s November 19, 2009 Letter to health care professionals asked physicians to report any case of serious or unexpected adverse events to their local public health authorities, the Public Health Agency of Canada, or GSK. Dr. L.-C. sent an adverse event report to Toronto Public Health, and although it was not passed on to GSK, the Court held the failure to do so did not cause or contribute to A.’s death and, therefore, could not be a basis for civil liability in negligence against GSK.

(4) No.

In following the approach directed by Fontaine v. British Columbia (Official Administrator), the trial judge concluded there was no direct or circumstantial evidence from which he could infer GSK breached its standard of care. The Court held the appellants had not established that the conclusions of the trial judge rested on any misunderstanding of the applicable law, misapprehension of the evidence, or palpable and overriding error of fact.

Further, the Court held the trial judge carefully and accurately reviewed the evidence of the expert and lay witnesses and held there was no evidence the vaccine was capable of causing death and there was an absence of medical evidence that the vaccine caused or contributed to A.’s death. On a review of the evidence, the Court concluded it provided no assistance to the appellants’ task of establishing that the vaccine caused A.’s death, and accordingly, this ground of appeal did not succeed.

(5) No.

The Court saw no basis to interfere with the trial judge’s discretionary award of costs to GSK. The trial judge considered the relevant factors on a request for costs by an unsuccessful party and explained why those factors did not justify departing from the generally applicable principle that costs follow the cause.


Caruso v. Bortolon, 2021 ONCA 842

[Gillese, Trotter and Nordheimer JJ.A.]

Counsel:

M. Kersten, for the appellant

A. Jarvis, for the respondents

Keywords: Corporations, Fraud, Civil Procedure, Summary Judgment, Limitation Periods, Adjournments, Fresh Evidence, Limitations Act, 2002, SO 2002, c 24, Sch B, Rules of Civil Procedure, Laski v. BMO Nesbitt Burns Inc., 2020 ONCA 300

facts:

The appellant commenced an action against the defendants alleging that they defrauded him out of shares he claimed to own in 1947755 Ontario Limited (“the company”). The appellant pleaded that R.B. executed documents that stripped him of his shares on January 25, 2017. The appellant commenced his action more than two years later, on April 23, 2020. The respondents asserted that the appellant was never a shareholder in the company and that the action was statute barred as per the Limitations Act, 2002. The respondents successfully moved for summary judgment on the basis that there was no genuine issue for trial on the limitation period issue. The appellant challenged the fairness of the proceedings, the correctness of the decision to dismiss the action, and applied to adduce fresh evidence.

issues:

(1) Whether the motion judge erred in not granting him an adjournment to file further documentation to demonstrate fraudulent activity on the part of the respondents in January 2017?

(2) Whether the action was statute-barred?

(3) Whether the appellant’s application to adduce fresh evidence should be granted?

holding:

Appeal dismissed.

reasoning:

(1) No.

The Court found that in refusing the adjournment, the motion judge had carefully examined the lengthy history of the proceedings leading up to the hearing date. Moreover, the motion judge observed that the issue for the motion was not whether the appellant had been deprived of his shares, but whether he should have brought the action before it was commenced in April 2020. Therefore, the Court saw no error in the motion judge’s decision to refuse an adjournment. This was a discretionary decision that was entitled to substantial deference on appeal.

(2) Yes.

The Court found that the motion judge reviewed the documents tendered by the parties and concluded that the appellant’s injury, loss or damage was discoverable by February 2017. Further, the Court found that the totality of the evidence supported the motion judge’s conclusion that the action was statute-barred.

(3) No.

The appellant’s application to adduce fresh evidence was nothing more than an attempt to circumvent the motion judge’s refusal to grant an adjournment, which refusal was justified. Through proper diligence, the material could have been tendered on the summary judgment motion. In any event, the new material did not bear on the correctness of the motion judge’s analysis of the limitation period issue.


Mandel v. 1909975 Ontario Inc., 2021 ONCA 844

[Feldman, van Rensburg and Sossin JJ.A.]

Counsel:

P.H. Griffen, M.B. Lerner and A.H. Kanji, for the appellants

D. Aird and M. Ding, for the respondent, Attorney General of Canada

M.A. Ross, for the respondents 1909975 Ontario Inc., 2458730 Ontario Inc., 2458721 Ontario Inc., H. Inc. and M. Inc.

Keywords: Corporations, Shares, Issuance, Consideration, Tax Law, Tax Planning, Deemed Dispositions, Taxable Benefits, Remedies, Rectification, Civil Procedure, Applications, Appeals, Jurisdiction, Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), ss. 3, 12(1), 15(1), Business Corporations Act (Ontario), R.S.O. 1990, c. B.16, ss. 17(3), 23(3), 130(1), 250(1), 255, Retail Sales Tax Act, R.S.O. 1990, c. R.31, Courts of Justice Act, R.S.O. 1990, c. C.43, ss. 6(2), 97, Tax Court of Canada Act, R.S.C. 1985, c. T-2, Rules of Civil Procedure, Rule 14.05, Baxter v. Attorney General of Canada, 2013 ONSC 3153, GLP NT Corp. v. Canada (Attorney General) (2003), 65 O.R. (3d) 840 (S.C.), Danso-Coffey v. Ontario, 2010 ONCA 171, Orman v. Marnat Inc., 2012 ONSC 549, Juliar v. Canada (Attorney General) (2000), 50 O.R. (3d) 728 (C.A.), Canada (Attorney General) v. Fairmont Hotels Inc., 2016 SCC 56, Dunham v. Apollo Tours Ltd. (1978), 20 O.R. (2d) 3 (H.C.), Penner v. Niagara (Regional Police Services Board), 2013 SCC 19, Ewert v. Canada, 2018 SCC 30, Holmes v. Schoenfeld Inc., 2016 ONCA 148

facts:

The appellants restructured their family trusts in 2014 and 2015 to avoid a deemed disposition of the assets after 21 years and to maintain control of the underlying assets. As part of the restructuring arrangements, the appellants incorporated holding companies for their adult children (the “Child Corporations”) in which the appellants each subscribed for Class A voting shares and Class B convertible shares for a subscription price of $10 for the Class A shares and $100 for the Class B shares. The corporate documents stated that all the issued shares were fully paid. However, the appellants say that payment of $110 for the shares was never actually made.

In 2019, the Canada Revenue Agency (CRA) reassessed the appellants for the tax years 2014 and 2015, increasing each appellant’s taxable income by close to $15,000,000 on the basis that their receipt of shares in the Child Corporations constituted a taxable benefit under s. 15(1) of the Income Tax Act.

The appellants brought an application in the Superior Court of Justice for a declaration that because the shares were not paid for before they were issued, as required by s. 23(3) of Ontario’s Business Corporations Act (OBCA), they were not validly or lawfully issued, and the appellants were never shareholders of the Child Corporations. They also sought an order for rectification of the share registers of the Child Corporations under s. 250(1) of the OBCA.

The application judge declined to exercise jurisdiction over the application, deferring to the jurisdiction of the Tax Court of Canada. He also found that he would not have granted the declaration or ordered rectification had he assumed jurisdiction. The appellants appealed.

issues:

(1) Was the appeal from the application judge properly brought to the Ontario Court of Appeal, or should it have been brought to the Divisional Court?

(2) Did the application judge err in law in declining jurisdiction over the application in favour of the Tax Court?

(3) Does a corporation’s failure to comply with s. 23(3) of the OBCA by issuing shares without payment make the issuance of such shares invalid and void?

(4) Did the application judge err in declining to order rectification of the share register under s. 250(1) of the OBCA?

holding:

Appeal dismissed.

reasoning:

(1) The appeal was properly brought to the Ontario Court of Appeal.

The Court found that it had jurisdiction to hear the appeal. Section 255 of the OBCA provides that an appeal lies to the Divisional Court from any order made by the Superior Court under the OBCA. While the appellants sought relief under s. 250(1) of the OBCA, they were obliged to seek a declaration under s. 97 of the Courts of Justice Act in order to obtain the relief they sought as a result of the application of s. 23(3), because no order for relief for failure to comply with that section is mandated by the OBCA. An appeal from an order that grants or refuses a declaration of the Superior Court lies to the Court of Appeal. in addition, subsection 6(2) of the Court of Justice Act states that “The Court of Appeal has jurisdiction to hear and determine an appeal that lies to the Divisional Court or the Superior Court of Justice if an appeal in the same proceeding lies to and is taken to the Court of Appeal.”

(2) No.

The Court stated that on matters of judicial discretion, the Court will defer to the application judge unless the judge misdirected himself, gave no or insufficient weight to relevant considerations, or came to a decision that was clearly wrong, amounting to an injustice.

The application judge gave one reason for declining jurisdiction in favour of the Tax Court, and three additional reasons why declining a declaration would not cause injustice, which reinforced his discretionary decision to decline to exercise jurisdiction. The main reason the application judge gave for deferring to the Tax Court was that the only dispute in the case was between the appellants and the CRA, and that dispute was within the expertise of the Tax Court. In terms of why declining a declaration would not cause injustice, the application judge first found that the Child Corporations supported the appellants in their request for relief. Therefore, the parties did not require an order to correct mistakes and amend the register. Second, the application judge found the factual record was unclear. He concluded that factual findings should be made within the tax appeal context. Third, the application judge found that if he were to accede to the appellant’s position that shares issued but not paid for are void ab initio, that finding could have unintended consequences regarding the status of transactions and other steps taken by the corporation and its directors before the shares were declared void.

The Court held that the application judge made no error in considering the factors he did in exercising his discretion to decline jurisdiction in favour of the Tax Court (although the Court slightly differed with the application judge on the third reason given to decline to make the order sought – unintended consequences).

In circumstances where parties to an action have a dispute that requires the court to interpret the meaning and effect of a statutory provision, the court is not being asked to exercise a discretionary jurisdiction. It is required to answer the questions necessary to decide the dispute. However, where a party seeks a declaration of right, the court will only assume jurisdiction to decide the issue where the nature of the request meets criteria defined in the Rules or in a statutory provision. In such cases, the court has the discretion to decline jurisdiction. The Court found that this case was such a case.

(3) & (4) Not addressed.

The Court found it was neither necessary nor appropriate to address these issues in light of its conclusion that the application judge made no error by declining jurisdiction.


Blair v. Ford, 2021 ONCA 841

[Benotto, Miller and Sossin JJ.A.]

Counsel:

J. N. Falconer, R. Gilliland and A. James, for the appellant

G. Tighe and A. Melfi, for the respondent

Keywords: Torts, Defamation, Civil Procedure, Anti-SLAPP, Appeals, Interlocutory Orders, Jurisdiction, Police Services Act, R.S.O. 1990, c. P.15, Courts of Justice Act, R.S.O. 1990, c. C.43, s. 6(2), s. 19(1)(b), s. 137.1, Rules of Civil Procedure, Rules 57.01 and 61.03(1)(b), PSA Code of Conduct, 1704604 Ontario Ltd. v. Pointes Protection Association, 2020 SCC 22, Mader v. South Easthope Mutual Insurance Company, 2014 ONCA 714, Brown v. Hanley, 2019 ONCA 395, Cole v. Hamilton (City) (2002), 2002 60 O.R. (3d) 284, Brown v. Hanley, 2019 ONCA 395, Azzeh v. Legendre, 2017 ONCA 385, Platnick v. Bent, 2018 ONCA 68, Bondfield Construction Company Limited v. The Globe and Mail Inc., 2019 ONCA 166

facts:

In 2018, Premier Doug Ford announced that an OPP Commissioner had been appointed. Interim Commissioner Brad Blair was not chosen. The new Commissioner was a friend of the Ford family. Brad Blair wrote a scathing letter on official police letterhead to the provincial Ombudsman alleging improprieties in the selection process and requesting an independent review. The letter was made public. When reporters questioned premier Ford about the letter, he suggested that Mr. Blair had breached the Police Services Act. Mr. Blair sued premier Ford for defamation. The premier brought an Anti-SLAPP motion under s.137.1 of the Courts of Justice Act to dismiss the action.

The motion judge dismissed preliminary motions on November 23 and 30, 2020. He heard the s. 137.1 motion on December 4, 2020, and dismissed the defamation action. The motion judge deviated from the presumptive award of full indemnity costs and awarded premier Ford partial indemnity costs based on the motion judge’s own calculations. He also ordered that half of the costs be paid immediately with the other half payable when Mr. Blair’s separate action for wrongful dismissal, misfeasance in public office and other claims was settled or disposed of.

Mr. Blair appealed the preliminary motions and the main motion. Premier Ford cross-appealed the order for costs on the main motion.

issues:

(1) Does this court have jurisdiction to hear the appeal from the preliminary orders?

(2) Did the motion judge err in his consideration of s.137.1?

(3) Did the motion judge err in his determination with respect to costs?

holding:

Appeal dismissed. Cross-appeal allowed in part.

reasoning:

(1) No.

The preliminary orders were with respect to refusals to answer questions and to provide certain legal documents and with respect to further cross-examination. They were interlocutory orders. An appeal from an interlocutory order of a judge lies to the Divisional Court with leave pursuant to s. 19(1)(b) of the Courts of Justice Act. Leave must be sought within 15 days pursuant to Rule 61.03(1)(b) of the Rules of Civil Procedure. Leave was not sought.

The Court also rejected the appellant’s submission that the interlocutory orders were interrelated with the appeal and that leave would “inevitably” have been granted for two reasons. First, this proposal would have been repeatedly rejected by the Court. Second, the preliminary orders were dated November 23 and 30, 2020. The s. 137.1 motion was heard on December 4, 2020. Had the interim relief sought been integral to the main motion, the appellant could have – but did not – ask for an adjournment so that leave to the Divisional Court could be sought. It is not appropriate to await the outcome of the motion to then assert that the issue is intrinsically interrelated.

For these reasons, the appeals from the preliminary orders were quashed.

(2) No.

The Court provided a helpful overview of the nature of the s. 137.1 motion, which was meant to address SLAPP lawsuits. Section 137.1 allows a defendant to move at an early stage to dismiss such a lawsuit. A motion under s.137.1 involves a shifting burden and a framework that was set out in Pointes Protection. Often, an Anti-SLAPP motion is used to protect speech and combat a power imbalance sometimes present in defamation cases, where the plaintiff has significant resources and the defendant is vulnerable.

The Court rejected the arguments put forward by Mr. Blair that that the motion judge erred by : (i) ignoring the indicia of a SLAPP in his s. 137.1 analysis; (ii) using the wrong test for “no valid defence” and then misconstruing the defence of “fair comment”; and (iii) incorrectly finding that the public interest in permitting the proceeding to continue outweighed the public interest in protecting the expression. The Court addressed Mr. Blair’s arguments as follows:

(i) Ignoring the indicia of a SLAPP in his s. 137.1 analysis

The Court rejected the appellant’s submission that the indicia of a SLAPP should have been specifically addressed at each step in the judge’s analysis. Pointes Protection requires the motion judge to “scrutinize” what is really going on in the case before them. The reasons of the motion judge read as a whole indicate that he did just that. The motion judge’s comment that the “defamation action is not, strictly speaking a SLAPP” because “the plaintiff is not a large and powerful entity that is using litigation to intimidate a smaller and more vulnerable opponent” confirmed that he was alive to any perceived power imbalance that the appellant referenced.

(ii) Using the wrong test for “no valid defence” and then misconstruing the defence of a fair comment

The Court did not agree that the motion judge used the wrong test or raised the bar for Mr. Blair with respect to “valid defence.” The motion judge’s analysis made it clear that he found that Mr. Blair did not demonstrate that premier Ford’s defence of fair comment had no real prospect of success.

(iii) Incorrectly finding that the public interest in permitting the proceeding to continue outweighed the public interest in protecting the expression

Balanced against the importance of freedom of expression, the matters raised are of considerable public interest that justified expression and debate in the public forum. The motion judge’s finding – that the harm suffered as a result of premier Ford’s expression was not sufficiently serious that the public interest in permitting the action to continue outweighed the public interest in protecting that expression – was a discretionary finding entitled to deference.

(3) Yes.

The Court saw no error in the motion judge’s determination that the appropriate amount for premier Ford’s partial indemnity cost was $130,000, which was entitled to a high degree of deference.

However, the order tethering the costs to another action was made in error. The motion judge gave no reasons for the order requiring half of the costs to be paid immediately and the other half to be paid when Mr. Blair’s “wrongful dismissal action is settled or finally adjudicated”. This condition was added by the motion judge in the last substantive paragraph of his reasons. The parties had no opportunity to address this extraordinary order. The “wrongful dismissal” action had not even been commenced at the time of the reasons for decision. The Court granted the cross-appeal on this basis and amended the costs order to provide that the entire $130,000 award be payable in full as of the date of the order.


Baldwin v. Imperial Metals Corporation, 2021 ONCA 838

[Strathy C.J.O., Pepall and Pardu JJ.A]

Counsel:

M. G. Robb, K. Richard, G. Hunter and B. Pascutto, for the appellant

L. E. Thacker, A. Quinn and K. Glowach, for the respondents

Keywords: Securities, Secondary Market Misrepresentations, Civil Procedure, Class Proceedings, Leave to Commence Proceedings, Securities Act, R.S.O. 1990, c.S.5, ss. 138.3 and138.8, Class Proceedings Act, 1992 S.O. 1992, Drywall Acousting Lathing Insulation, Local 675 Pension Fund v. Barrick Gold Corporation, 2021 ONCA 104, Canadian Imperial Bank of Commerce v. Green, 2015 SCC 60, Rahimi v. SouthGobi Resources Ltd., 2017 ONCA 719, Swisscanto v. Blackberry, 2015 ONSC 6434, The Trustees of the Drywall Acoustic Lathing and Insulation Local 675 Pension Fund v. SNC-Lavalin Group Inc., 2016 ONSC 5784, Cappelli v. Nobilis Health Corp., 2019 ONSC 2266, Kauf v. Colt Resources, Inc., 2019 ONSC 2179, Toward Improved Disclosure: A Search for Balance in Corporate Disclosure, interim report (Toronto: Toronto Stock Exchange, 1995), Ironworkers Ontario Pension Fund (Trustee of) v. Manulife Financial Corp., 2013 ONSC 4083, Mask v. Silvercorp Metals Inc., 2015 ONSC 5348

facts:

The respondent, Imperial Metals Corporation (“Imperial”), is a reporting issuer in Ontario. Its shares trade on the Toronto Stock Exchange. The appellant is an individual shareholder and pleaded that she acquired shares of Imperial during the class period (defined as August 15, 2011 to August 14, 2014, inclusive) and held some or all of those shares at the end of the class period.

On August 4, 2014, Imperial issued a press release reporting that the tailings storage facility (the “TSF”) at its Mount Polley gold and copper mine in British Columbia had been breached, releasing an “undetermined amount of water and tailings”. The press release stated that the cause of the breach was unknown. Following the disclosure, Imperial’s share price declined by 40% and the company lost about $500 million in market capitalization.

The action was commenced pursuant to s.138.3 of the Securities Act, which creates a cause of action for misrepresentation in the secondary securities market. The appellant alleged that the breach of the TSF was caused by deficiencies in its design, construction and operation.

The motion judge dismissed the appellant’s motion for leave to pursue the statutory remedy under s. 138.8(1) of the Securities Act. He found that to obtain leave under the Act, the plaintiff must allege not only a misrepresentation but also some discrete and identifiable public correction. The motion judge found that the press release issued on August 4, 2014 could not be a public correction because it said nothing more than (1) the TSF had been breached; (2) the cause of the breach was unknown; and (3) the company was working with the authorities to assess the damage. The motion judge concluded that the required public correction had not been established and there was no reasonable possibility that the appellant could show otherwise at trial.

issues:

(1) Did the motion judge err in determining whether the alleged public correction was reasonably capable of being understood in the secondary market as correcting what was misleading in the impugned statement?

(2) Would this case have at least a reasonable possibility to satisfy the statutory test?

holding:

Appeal allowed.

reasoning:

(1) Yes.

The motion judge set the bar too high by requiring that the public correction be express and directly linked to a specific misrepresentation. There need not be facial symmetry between the public correction and the alleged misrepresentation or omission. While public correction is a necessary part of the statutory scheme, its role, at least at the leave stage, is a modest one.

(2) Yes.

This was not a case in which the motion judge could fairly and safely dispose of the requirement to determine whether the issuer released a document that contains a misrepresentation and conclude that there is no reasonable possibility that the action will be resolved at trial in favour of the plaintiff. Depending on what had been said, or not said, in Imperial’s public disclosures over the years concerning its waste management practices and environmental compliance measures, and the context in which the representations and the alleged public correction were made, a motion judge could find that the press release could be understood by the market as corrective and that there was a reasonable possibility that the action would be resolved in favour of the plaintiff at trial.

Accordingly, the appeal was allowed and the leave motion was remitted to the Superior Court for determination.


Ottawa (City) v. ClubLink Corporation ULC, 2021 ONCA 847

[Juriansz, Tulloch and Roberts JJ.A.]

Counsel:

M. P. Gottlieb, J. Renihan, M. R. Flowers and J. C. Mastrangelo, for the appellant

K. Crain, E. Blanchard, K. Takagi and T. Boro, for the respondent

Keywords: Contracts, Real Property, Contingent Interests in Land, Rule against Perpetuities, City of Ottawa Act, 1999, S.O. 1999, c. 14, Sched. E, Canadian Long Island Petroleums Ltd. et al. v. Irving Industries Ltd., [1975] 2 S.C.R. 715, 2123201 Ontario Inc. v. Israel Estate, 2016 ONCA 409, London and South Western Railway Co. v. Gomm (1882), 20 CH. D. 562 (C.A.), Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, City of Halifax v. Vaughan Construction Company Ltd. and the Queen, [1961] S.C.R. 715, Weinblatt v. Kitchener (City), [1969] S.C.R. 157, Jain v. Nepean (City) (1992), 9 O.R. (3d) 11 (C.A.), leave to appeal refused, [1992] S.C.C.A. No. 473, Deslaurier Custom Cabinets Inc. v. 1728106 Ontario Inc., 2016 ONCA 246, aff’d 2017 ONCA 293, leave to appeal refused, [2016] S.C.C.A. No. 249, Loyalist (Township) v. The Fairfield-Gutzeit Society, 2019 ONSC 2203, Manchester Ship Canada Company v. Manchester Racecourse Company, [1901] 2 Ch. 37 (C.A.), Weber v. Texas Co., 83 F.2d 807 (5th Cir. 1936), Weyerhaeuser Company Limited v. Ontario (Attorney General), 2017 ONCA 1007, 3869130 Canada Inc. v. I.C.B. Distribution Inc., 2008 ONCA 396, Salah v. Timothy’s Coffees of the World Inc., 2010 ONCA 673, Fuller v. Aphria Inc., 2020 ONCA 403, Catalyst Capital Group Inc. v. Dundee Kilmer Developments Limited Partnership, 2020 ONCA 272, Thomas Edward Scrutton, Land in Fetters, (Cambridge: Cambridge University Press, 1896)

facts:

The appellant, ClubLink Corporation ULC (“ClubLink”), acquired property subject to various historical land development agreements affecting its use, between Campeau Corporation (“Campeau”) and the former City of Kanata (“Kanata”) (“the Agreements”). Subsection 5(4) and 9 of the 1981 Agreement stated: Campeau, or its successors and assigns, must operate a golf course on the property in perpetuity, failing which, the golf course lands are to be conveyed at no cost to Kanata, now part of the respondent, the City of Ottawa (“the City”); and, if the golf course lands are conveyed, the City is obliged to continue using the golf course lands for recreation or natural environmental purposes, failing which, they are to be reconveyed to Campeau.

ClubLink operated the golf course for over 24 years then submitted planning applications for a zoning by-law amendment and approval of a plan of subdivision and publicly accessible green space on the golf course lands. The City brought an application for an order requiring ClubLink to withdraw its applications. Alternatively, it claimed ClubLink’s applications triggered its right to demand conveyance of the golf course lands to the City at no cost. The City requested a declaration that ClubLink’s obligations remain valid and enforceable, and that if the golf course lands were conveyed to the City, the City would not be required to reconvey the golf course lands, so long as they were used for recreation and natural environmental purposes. ClubLink argued the City’s right to call on a conveyance had not vested within the 21 years following the 1981 Agreement, therefore the provisions requiring the operation of a golf course in perpetuity were void, as contrary to the rule against perpetuities.

In the decision under appeal, the application judge determined that the parties did not intend to create an interest in land because they never intended for the conveyances to materialize. The 1981 Agreement was declared valid and binding, and ClubLink was required to operate the golf course in perpetuity or convey the golf course lands to the City if it ceased to do so. In the event the golf course lands were conveyed to the City, the City is not required to operate the golf course in perpetuity so long as it uses the lands for recreation and natural environmental purposes.

issues:

(1) Did the application judge err in finding that ss. 5(4) and 9 of the 1981 Agreement are not void for violating the rule against perpetuities?

holding:

Appeal allowed.

reasoning:

(1) Yes.

Sections 5(4) and 9 f the 1981 Agreement are void and unenforceable as being contrary to the rule against perpetuities, because the City’s right to call upon a conveyance of the golf course lands did not vest during the perpetuity period.

The application judge erred in his determination that because the parties never intended the rights to the conveyances to “crystallize”, there was no intention to create an interest in land. When the correct legal principles are applied, in the context of all the Agreements, the plain language of ss. 5(4) and 9 creates a contingent interest in land. The application judge made an extricable error of law in his interpretation of ss. 5(4) and 9 of the 1981 Agreement in concluding that contracting parties must intend a contingent interest in land to materialize in order to create a contingent interest in land.

The parties intended by ss. 5(4) and 9 of the 1981 Agreement to create contingent interests in the golf course lands. Under s. 5(4) of the 1981 Agreement, the City’s interest in the golf course lands was contingent on Campeau (or its successor or assign in title) ceasing to operate the golf course. Under s. 9, the reconveyance was contingent on, first, the conveyance under s. 5(4), and, second, the City ceasing to use the lands as prescribed. The owners operated the golf course for more than 21 years. Neither the City’s right to a conveyance nor ClubLink’s right to a reconveyance vested within the perpetuity period. As a result, the contingent interests in the golf course lands were void.


D.C. v. T.B., 2021 ONCA 850

[Roberts and Thorburn JJ.A. and Tzimas J. (ad hoc)]

Counsel:

M. J. Stangarone and A. MacEachern, for the appellant

C. Doris and J. Luscombe, for the respondent

Keywords: Family Law, Custody and Access, Parental Alienation, Costs, A.A. v. S.N.A., 2007 BCCA 363, A.M. v. C.H., 2019 ONCA 764

facts:

The appellant mother appealed from the final order of the trial judge granting the respondent father sole custody/decision making responsibility with respect to their 12-year-old child, R. The order appealed from also temporarily suspended contact between R. and the appellant or members of the appellant’s family.

issues:

(1) Did the trial judge misapply the best interests of the child test, particularly in the absence of expert evidence, by making the order he did?

(2) Did the trial judge fail to give adequate weight to R.’s views and preferences?

(3) Did the trial judge misapprehend and fail to give appropriate weight to evidence, specifically, that the appellant attempted to facilitate the relationship between R. and the respondent?

(4) Should the appellant be granted leave to appeal the costs award?

holding:

Appeal dismissed.

reasoning:

(1) No.

The Court held the trial judge’s thorough reasons left no doubt as to the clear basis for his decision. Expert evidence was not required to permit the trial judge to come to his determination of parental alienation based on the evidence that he heard and accepted at trial. There was no error in the trial judge’s treatment of Dr. F.’s evidence, which was appropriate in the context of the entirety of the evidence.
Further, the trial judge was alert to the fact that the order would represent a drastic change, and his reasoning followed the appropriate authorities.

(2) No.

The Court held that given the trial judge’s finding the appellant engaged in parental alienation and manipulation of R., it would not have been particularly useful to ascertain R.’s views and preferences by way of a further assessment or having her testify.

(3) No.

The Court noted the appellant was dissatisfied with the trial judge’s findings, particularly those adverse to her credibility, and asked the Court to reweigh the evidence and revisit those findings. The Court saw no error that would permit appellate intervention.

(4) No.

The Court saw no error in the trial judge’s costs award that would warrant leave being granted.


SHORT CIVIL DECISIONS

Thrive Capital Management Ltd. v. Noble 1324 Queen Inc., 2021 ONCA 846

[Strathy C.J.O., Pepall and Pardu JJ.A.]

Counsel:

J. Necpal, J. Nasseri and J. Ng, for the appellants

B. N. Radnoff and J. Suttner, for the respondents

Keywords: Civil Procedure, Judgments, Enforcement, Contempt, Costs

Environmental Waterproofing Inc. v. Huron Tract Holdings Inc., 2021 ONCA 835

[Gillese, Trotter and Nordheimer JJ.A.]

Counsel:

S. Zeitz, for the appellant

M. Cook, for the respondents

Keywords: Bankruptcy and Insolvency, Receiverships, Priority, Civil Procedure, Judgments, Enforcement, Garnishment Proceedings


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.

Jump To: Table of Contents | Civil Decisions | Short Civil Decisions |

Good afternoon.

Following are this week’s summaries of the civil decisions of the Ontario Court of Appeal for the week of November 15, 2021.

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In Grand River Conservation Authority v. Ramdas, a case in which injunctions were granted to prohibit improvements to a property without permits, Justice Lauwers made some observations surrounding self-represented litigants. First, Justice Lauwers called upon judges to not only rely on counsel for a clear understanding of where things stand in the litigation, but to permit self-represented parties to explain how they understand the status quo, in order to avoid any impression of favouritism or bias. Second, he cautioned judges about the confusion self-represented litigants may experience when understanding the difference between evidence and submissions. Finally, Justice Lauwers reminded opposing counsel of their obligations to assist both self-represented litigants and the court to ensure that justice is not only done, but is seen to be done.

Other topics covered this week included the enforcement of a fence bylaw, whether a refusal to issue a certificate of pending litigation is an interlocutory or final order, fraudulent conveyances and vexatious litigants.

I would like to introduce them to a new online publication, Civil Procedure & Practice in Ontario (CPPO). The CPPO is a new free online resource jointly published by the University of Windsor and CanLII. CanLII is a not-for-profit organization operated by the Federation of Law Societies of Canada and is dedicated to assisting with access to justice through the free and open dissemination of the laws of Canada to all members of the public. The CPPO was written by a team of 135 leading litigators and experts in Ontario civil procedure, led by Professor Noel Semple of Windsor Law School. I had the privileged of co-writing two chapters to CPPO dealing with Rules 54 and 55 (Directing a Reference and Procedure on a Reference).

CPPO will serve as a guide to Ontario’s Rules of Civil Procedure, Courts of Justice Act, and Limitations Act, and will be accessible not only to practitioners, but to members of the public. It contains not only the text of all these rules and statutory provisions, but also commentary and annotations to all the relevant case law applying and interpreting each rule and section. To access Civil Procedure & Practice in Ontario, please click here, and make sure to bookmark the site for easy access.

I would encourage all of our readers to consult CPPO in their daily practice, to spread the word among colleagues, and to provide any feedback they may have.

Wishing everyone an enjoyable weekend.

John Polyzogopoulos
Blaney McMurtry LLP
416.593.2953 Email

Table of Contents

Civil Decisions

Syrowik v. Wheeler, 2021 ONCA 819

Keywords: Administrative Law, Municipal Law, By-laws, Enforcement, Municipal Act, 2001, S.O. 2001, c. 25, s. 440, Wheeler v. Syrowik, 2017 ONSC 2901

Grand River Conservation Authority v. Ramdas, 2021 ONCA 815

Keywords: Municipal Law, Civil Procedure, Self-Represented Litigants, Injunctions, Adjournment, Conservation Authorities Act, Rules of Professional Conduct, Model Code of Professional Conduct, Canadian Code of Conduct for Trial Lawyers Involved in Civil Actions Involving Unrepresented Litigants, Irvine: American College of Trial Lawyers, 2009, Dhatt v. Beer, 2021 ONCA 137, Khimji v. Dhanani (2004), 69 O.R. (3d) 790 (C.A.), Pintea v. Johns, 2017 SCC 23, Johansson v. Janssen, 2021 BCCA 190, 50 B.C.L.R. (6th) 122, Gardaworld Cash Services Canada Corporation v. Smith, 2020 FC 1108, Malton v. Attia, 2016 ABCA 130, 35 Alta. L.R. (6th) 27, Girao v. Cunningham, 2020 ONCA 260

1388020 Ontario Corp. v. Machnowski, 2021 ONCA 806

Keywords: Civil Procedure, Settlements, Enforcement, Summary Judgement

Lee v. Singh, 2021 ONCA 829

Keywords: Contracts, Real Property, Civil Procedure, Orders, Enforcement, Striking Pleadings, Default Judgment, Setting Aside

Ebrahimpour v. Askari, 2021 ONCA 830

Keywords: Promissory Note, Caution, Constructive Trust, Equitable Charge, Certificate of Pending Litigation, Duress, Coercion, Rules of Civil Procedure, Taber v. Paris Boutique & Bridal Inc., 2010 ONCA 157, Sadie Moranis Realty Corporation v. 1667038 Ontario Inc., 2012 ONCA 475

Ball Media Corporation v. Imola, 2021 ONCA 833

Keywords: Torts, Fraud, Conversion, Property, Fraudulent Conveyances, Resulting Trust, Civil Procedure, Summary Judgment, Family Law Act, s. 14

1476335 Ontario Inc. v. Frezza, 2021 ONCA 822

Keywords: Civil Procedure, Orders, Costs, Enforcement, Fraudulent Conveyances, Certificates of Pending Litigation, Appeals, Jurisdiction, Final or Interlocutory, Summary Judgment, Courts of Justice Act, R.S.O. 1990, c. C.43, ss. 6(1)(b), 13, 18m 19(1)(a), 19(1.2), 134(2), Rules of Civil Procedure, Rule 62.02(4), Ball v. Donais (1993), 13 O.R. (3d) 322 (C.A.), Hendrickson v. Kallio, [1932] O.R. 675 (C.A.), Archer v. Archer (1975), 11 O.R. (2d) 432 (C.A.), Amphenol Canada Corp. v. Sundaram, 2019 ONCA 932, 561895 Ontario Ltd. v. Metropolitan Trust Co. of Canada (1997), 14 C.P.C. (4th) 195 (Ont. C.A.), leave to appeal to S.C.C. refused, 26191 (November 20, 1997), Skunk v. Ketash, 2016 ONCA 841, Tomec v. Economical Mutual Insurance Company, 2019 ONCA 839

Stewart v. Fuhgeh, 2021 ONCA 824

Keywords: Civil Procedure, Vexatious Litigants, Intervenors, Leave to Appeal, Canadian Charter of Rights and Freedoms, Rules of Civil Procedure, Rule 2.1, Fuhgeh v. Stewart, 2021 ONSC 3053, Simpson v. Chartered Professional Accountants of Ontario, 2016 ONCA 806

Short Civil Decisions

Cao v. Markham (City), 2021 ONCA 818

Keywords: Torts, Defamation, Dereliction of Duty, Racial Discrimination, Civil Procedure, Issue Estoppel, Evidence

Royal Bank of Canada v. Mundo Media Ltd., 2021 ONCA 832

Keywords: Bankruptcy and Insolvency, Receiverships, Equitable Set-Off


CIVIL DECISIONS

Syrowik v. Wheeler, 2021 ONCA 819

[MacPherson, Simmons and Nordheimer JJ.A.]

Counsel:

A. Baroudi, for the appellants

D. M. Sanders, for the respondents

Keywords: Administrative Law, Municipal Law, By-laws, Enforcement, Municipal Act, 2001, S.O. 2001, c. 25, s. 440, Wheeler v. Syrowik, 2017 ONSC 2901

facts:

The appellants and the respondents own neighbouring cottages in the Municipality of Lambton Shores (the “Municipality”) on Lake Huron. In 2015, the respondents built a privacy fence (the “Fence”) that runs parallel to the east wall of their cottage and their eastern property line, which divides their land from the appellants’ land. The Fence sits adjacent to the respondents’ cottage and runs beyond their cottage towards the lake.

The appellants contended that the Fence was to high and violated the Fence By-law of the Municipality. Accordingly, in April 2018, the appellants complained to the Municipality. By email dated may 25, 2018, the Municipality indicated it had considered the complaint, and although it believed the end of the Fence closest to the lake violated a 6.5 feet height restriction in the Fence By-law, it indicated it would not be conducting any further investigation with respect to the alleged violation based on all the circumstances.

Subsequently, the appellants brought an application to enforce the Fence By-law under s. 440 of the Municipal Act. Although the application judge assumed for the purposes of the application that the Fence was “probably higher than the Municipality permits”, he nonetheless declined to make an order that the respondents remove or lower the Fence. The application judge found the Municipality had looked into and declined to enforce the Fence By-law for articulable reasons. Further, given that the Municipality had not acted unreasonably or in bad faith, he saw no basis on which to intervene and grant the relief requested.

The appellants appealed from the application judge’s decision.

issues:

(1) Did the application judge err in concluding that in order to succeed on an application to enforce a by-law under s. 440 of the Municipal Act, where a municipality has declined to do so, a taxpayer is required to show that the Municipality acted unreasonably or in bad faith in declining to enforce the by-law?

(2) Should the appellants be granted an order restraining the respondent’s alleged contravention of the Fence By-law?

holding:

Appeal dismissed.

reasoning:

(1) Yes.

Both parties submitted, and the Court agreed, that the application judge erred in concluding that a taxpayer was required to show that the Municipality acted unreasonably or in bad faith in order to succeed on an application to enforce a by-law under s. 440 of the Municipal Act. However, the Court nonetheless held that the evidence the appellants adduced lacked sufficient detail to establish a clear breach of the Fence By-law and that they were therefore not entitled to an order restraining its contravention.

(2) No.

The Court noted that the Fence By-law’s height restrictions, as they applied to the respondent’s property, were determined by reference to the term “street”, defined in the Fence By-law to mean “a public highway which provides the principal means of vehicular access to abutting lots and includes its sidewalks and boulevards”. However, there were no “public highways” adjacent to the respondent’s property. Accordingly, whether and how the Fence By-law applied was “fraught with difficulty”.
Based on its review of the record, the Court held the appellants’ evidence was not sufficient to demonstrate whether or how the Fence By-law applied to the respondent’s property. Accordingly, the appeal was dismissed.


Grand River Conservation Authority v. Ramdas, 2021 ONCA 815

[Lauwers J.A.]

Counsel:

H. Syed, for the appellant

C.A. Brown, for the respondent Grand River Conservation Authority

D.N. Germain, for the respondent Township of Amaranth

Keywords: Municipal Law, Civil Procedure, Self-Represented Litigants, Injunctions, Adjournment, Conservation Authorities Act, Rules of Professional Conduct, Model Code of Professional Conduct, Canadian Code of Conduct for Trial Lawyers Involved in Civil Actions Involving Unrepresented Litigants, Irvine: American College of Trial Lawyers, 2009, Dhatt v. Beer, 2021 ONCA 137, Khimji v. Dhanani (2004), 69 O.R. (3d) 790 (C.A.), Pintea v. Johns, 2017 SCC 23, Johansson v. Janssen, 2021 BCCA 190, 50 B.C.L.R. (6th) 122, Gardaworld Cash Services Canada Corporation v. Smith, 2020 FC 1108, Malton v. Attia, 2016 ABCA 130, 35 Alta. L.R. (6th) 27, Girao v. Cunningham, 2020 ONCA 260

facts:

The appellant owned a property in the Township of Amaranth on the edge of a wetland regulated by the Grand River Conservation Authority. She began work on the property without a permit from the Township or the Conversation Authority.

The work came to the attention of the Township and Conversation Authority and, on July 5, 2018, a Conservation Authority staff member asked the workers to stop. They did not. On July 13, 2019, the appellant was charged with violating s. 28(16) of the Conservation Authorities Act and an associated regulation. On July 19, 2018, the appellant was served with a summons to appear in court. The work continued despite the charges. A by-law enforcement officer also investigated a complaint on July 11, 2018. He delivered a stop work order and a remedial order on July 16, 2018. On August 11, 2018, the officer again attended the property regarding complaints about ongoing filling activities.

The Conservation Authority and Township brought applications for injunctions to prevent the appellant from continuing work. Lemon J. granted interim injunctions on August 27, 2018. Thereafter proceedings were adjourned several times. By order dated June 3, 2019, Coroza J. ordered that no further adjournments would be granted without leave and required the appellant to file responding materials by September 30, 2019.

The applications for a permanent injunction came before the application judge on November 12, 2019. Although the appellant’s previous counsel served responding materials on October 30, 2018, they had not been filed, nor was a factum served or filed by the appellant. The application judge did not grant a further adjournment and the hearing proceeded without evidence from the appellant.

The application judge granted the permanent injunctions. The order in favour of the Conservation Authority obliged the appellant to comply with the law. The order in favour of the Township was more extensive and required the appellant to remediate the property and to reimburse the Township for its enforcement expenses and, should she fail to comply with the order, to pay its remediation costs.

issues:

(1) Did the application judge improperly deny the appellant’s request for an adjournment?

(2) Was it inappropriate for the Conservation Authority and the Township to proceed by way of application because there were contested facts?

holding:

Appeal dismissed.

reasoning:

(1) No.

A judge has broad discretion as to whether to grant an adjournment. Further, the Court is highly deferential and will set aside adjournment refusals in limited situations.

Justice Lauwers found no basis for intervention with the application judge’s adjournment refusal. Although the application judge acted on the basis that the appellant had requested an adjournment, the request was not clear on the transcript. Additionally, the appellant did not tell the application judge what she would do with an adjournment if granted.

(2) No.

Justice Lauwers found no basis for intervention on the merits. The hearing was peremptory to the appellant. The evidence on which the respondents relied was overwhelming. While there may have been conflict on points of credibility as to who said what to whom and when, there was no doubt that the appellant proceeded with excavations on her property without the requisite permits.

Observations:

The appellant was self-represented on the appeal. Following his reasoning, Justice Lauwers provided three observations surrounding self-represented litigants.

First, Justice Lauwers called upon judges to not only rely on counsel for a clear understanding of where things stand in the litigation, but to permit self-represented parties to explain how they understand the status quo in order to avoid any impression of favouritism or bias. Second, he cautioned judges about the confusion self-represented litigants may experience when understanding the difference between evidence and submissions. Finally, Justice Lauwers reminded opposing counsel of their obligations to assist both self-represented litigants and the court to ensure that justice is not only done but is seen to be done.


1388020 Ontario Corp. v. Machnowski, 2021 ONCA 806

[Doherty, Miller and Sossin JJ.A.]

Counsel:

P. Pape, for the appellants

D. Delagran, for the respondents

Keywords: Civil Procedure, Settlements, Enforcement, Summary Judgement

facts:

The parties were business partners. A dispute between them led to litigation, followed by judicial mediation, and ultimately resolution by way of a settlement agreement. The minutes of settlement included a clause – Clause 4 – making the provision of settlement funds contingent on the respondent’s production of business records. The respondent was required to deliver up to the accountants, Fuller Landau, “all books and records of 1388020 Ontario Corp. in their possession”. Both parties were to have an opportunity to discuss “the appropriateness of productions” with Fuller Landau, after which Fuller Landau was to advise the parties “if satisfied with” the production of records. After Fuller Landau advised that it was satisfied, the appellant was to advance the agreed settlement funds. Clause 5 provided that any dispute arising out of the minutes was to be submitted to the judge who presided over the mediation for determination.

There was a disagreement between the parties as to the sufficiency of the records produced by the respondent. The respondent’s position was that he satisfied his obligation under Clause 4 by producing all the financial statements and tax returns he had in his possession. The appellant argued this was not sufficient, and demanded production of all supporting records as well. Although Fuller Landau initially agreed with the appellant on its understanding that the minutes of settlement required production of supporting records, it ultimately changed its position and confirmed to both sides that it was satisfied with what the respondent had produced.

The appellant refused to advance the settlement funds on the basis that the productions were not sufficient, such that Fuller Landau could not be satisfied and was not satisfied with the production.

The respondent brought a summary judgment motion to enforce the terms of settlement. The motion judge granted summary judgment, enforcing the minutes of settlement.

issues:

(1) Did the motion judge err in finding that Fuller Landau was ultimately satisfied with the production received?

(2) Did the motion judge err by not considering early correspondence which showed that Fuller Landau had initially taken the position that the minutes of settlement required the respondent to produce supporting documents?

holding:

Appeal dismissed.

reasoning:

(1) No.

On October 10, 2019, Fuller Landau emailed counsel for the appellant and advised that “(b)ased on [the respondents] confirmation we are satisfied with the production of those records.” Counsel repeatedly pressed the issue with Fuller Landau, questioning how it could be satisfied with the production. Fuller Landau reiterated on October 11, 2019 that it believed that there are “no further documents available to deliver to our office”. It asked counsel to provide it with a detailed list of documents it believed were missing. The motion judge noted that there was no evidence of any reply to that request. Fuller Landau was not obligated to provide any further justification of its decision.

(2) No.

Fuller Landau’s initial interpretation of its role under the minutes of settlement was not dispositive of any issue. Further, the minutes of settlement did not specify what criteria Fuller Landau should use to determine whether production was satisfactory. Fuller Landau was entitled to reject its initial interpretation of the minutes of settlement as mistaken, as it evidently did.


Lee v. Singh, 2021 ONCA 829

[Feldman, van Rensburg and Coroza JJ.A]

Counsel:

M. Singh, speaking for the appellant

A. Mazinani and E.E. Mazinani, for the respondent

Keywords: Contracts, Real Property, Civil Procedure, Orders, Enforcement, Striking Pleadings, Default Judgment, Setting Aside

facts:

The appellant entered into an arrangement with the respondent relating to the purchase of a home in Oshawa, Ontario. The appellant lived in the home with her spouse and their family. A dispute arose between the parties as to the ownership of the home. The respondent’s position was that he is the lawful owner of the property and has paid all costs towards the home. The appellant filed a statement of defence and counterclaim that the respondent held the property in trust for her. The motion judge struck the appellant’s pleadings because she had not complied with previous orders of the Superior Court of Justice to pay occupation rent. Once the appellant’s pleadings were struck, the respondent obtained default judgment for possession of the home.

issues:

(1) Did the motion judge err by striking the appellant’s pleadings based on the record before him?

holding:

Appeal allowed.

reasoning:

(1) No.

The motion judge was entitled to strike the appellant’s pleadings based on the record before him and that he committed no error in doing so. However, during oral argument, the appellant advised the court that because he had recently found work, the appellant could satisfy the outstanding arrears shortly and that the litigation was ready to proceed in the Superior Court of Justice. The panel directed that if the appellant provided funds to counsel for the respondent in the amount of $49,500 by noon on November 5, 2021, the appeal would be allowed, and the order striking pleadings would be set aside along with the default judgment that followed it.

In light of the information received from the parties and the fact that the appellant paid the full amount claimed in arrears, the orders striking the appellant’s pleadings should be set aside. The respondent now having now received the arrears, the Court saw no identifiable prejudice to the respondent in proceeding with the litigation. In the circumstances of this case, the striking of the appellant’s pleadings was not a proportionate response.


Ebrahimpour v. Askari, 2021 ONCA 830

[Fairburn A.C.J.O., Roberts J.A. and Van Melle J. (ad hoc)]

Counsel:

J. A. Howlett, for the appellants

D. M. Bertao, for the respondent

Keywords: Promissory Note, Caution, Constructive Trust, Equitable Charge, Certificate of Pending Litigation, Duress, Coercion, Rules of Civil Procedure, Taber v. Paris Boutique & Bridal Inc., 2010 ONCA 157, Sadie Moranis Realty Corporation v. 1667038 Ontario Inc., 2012 ONCA 475

facts:

The appellants appealed an order made under rule 45.02 of the Rules of Civil Procedure, that the amount of $550,000 be paid into court pending the resolution of the parties’ dispute.

The respondent loaned funds and worked on a house building project with the appellants. The parties had a falling out. The respondent maintained that the appellants failed to repay the monies owing to him under a promissory note, pay him his share of the profits from the project, and compensate him for his services. Without advising the respondent, the appellants sold the house for $3,250,000. The respondent registered a caution on the property when he learned about the sale.

Before closing, the parties agreed that the caution would be removed in exchange for the appellants providing an irrevocable direction that $550,000 of the net proceeds of sale would be held in trust pending resolution of the parties’ respective claims. The respondent commenced an action claiming:

i. an equitable charge against $465,000 of the net proceeds from the house sale for the debt under the promissory note;
ii. a constructive trust or equitable charge over 25% of the net profit of the project; and
iii. a constructive trust or equitable charge over $72,000 of the net sale proceeds for alleged unpaid wages.

The appellants brought an application to set aside the irrevocable direction and for a declaration that the caution was invalidly registered in the first place. They sought an order releasing to them all of the proceeds of sale held in trust. The respondent brought a cross-application under rule 45.02 to have the proceeds of sale paid into court. The application judge dismissed the appellants’ application and allowed the respondent’s application.

issues:

(1) Did the application judge err in failing to find that, had the caution not been deleted, it would have been set aside because the respondent did not satisfy the test for a certificate of pending litigation?

(2) Did the application judge err in failing to find that the irrevocable direction was unenforceable because it was procured by economic duress caused by the invalid registration of the caution?

(3) Did the application judge err in failing to find that the test under rule 45.02 had not been met such that the funds ought to be paid into court?

holding:

Appeal dismissed.

reasoning:

(1) No
(2) No

There was no error in the application judge’s decisions.

The withdrawal of the caution was based upon a negotiated agreement reached between the parties, which were both represented by counsel, who all agreed that $550,000 would be held in trust. This context belied any suggestion that a certificate of pending litigation would not have been available or that there was a “coercion of will” sufficient to set aside the irrevocable direction.

(3) No

The finding that the respondent satisfied the criteria for an order under rule 45.02 was amply supported by the record. The parties’ agreement that the loan would be repaid, the profits shared, and the respondent’s wages paid from the sale of the property raised a serious issue to be tried regarding the respondent’s claim to the funds by way of the remedies of constructive trust or equitable charge. The balance of convenience favoured granting the relief sought by the respondent. The respondent will suffer substantial prejudice if the funds are dissipated before the parties’ dispute is resolved.


Ball Media Corporation v. Imola, 2021 ONCA 833

[Fairburn A.C.J.O., Roberts J.A. and Van Melle J. (ad hoc)]

Counsel:

R. Di Gregorio and C. Ellis, for the appellant

M. A. Jaeger, for the respondent

Keywords: Torts, Fraud, Conversion, Property, Fraudulent Conveyances, Resulting Trust, Civil Procedure, Summary Judgment, Family Law Act, s. 14

facts:

The appellants appealed from an order that $136,434.87, held in court, be paid to the respondent in partial satisfaction of summary judgment granted against P. I.; L. I. is P. I.’s husband and was the appellant in this proceeding.

The money held in court was the net proceeds from the sale of the I. home, which had been jointly owned by the I.’s until April 29, 2009, when the appellant transferred his interest to his wife for the purpose of insulating the property against a potential claim by the appellant’s former employer.

The house was sold six years after the transfer, and by that time P. I.’s employer had started an action against her for civil fraud, conversion, and misappropriation of funds. Therefore, the money from the sale was deposited into court with the I.’s consent to the credit of the civil action brought by the respondent.

Ultimately, P. I. was convicted of fraud and possession of stolen property. The respondent successfully moved for summary judgment against P. I. as the court imposed a $500,000 restitution order against P.I. in favour of the respondent. The respondent also obtained an order for the payment of all monies held in court from the sale of the home, which the appellant appealed from as he contended half of the money was his because he enjoyed a resulting trust over it.

issues:

(1) Did the motion judge err in her application of the resulting trust doctrine or by proceeding on the erroneous premise that the presumption of resulting trust under s. 14 of the Family Law Act is only applicable in Family law proceedings?

(2) Was there insufficient evidence from which to draw the inference that the appellant had gifted the house to his wife?

holding:

Appeal dismissed.

reasoning:

(1) No.

The Court noted the motion judge’s reference to any rights the appellant may have had regarding the net proceeds in Family law proceedings signified the basis on which she factually distinguished this particular case, rather than as a statement of legal principle as to when the presumption of resulting trust between spouses under s. 14 of the Family Law Act may be invoked.

(2) No.

The Court held the inferences drawn by the motion judge were available to her on the record, and that she clearly considered the material issue of the appellant’s intention in transferring his interest in the home to his wife and canvassed the evidence relevant to that issue. Accordingly, the Court saw no basis to interfere with the motion judge’s order.


1476335 Ontario Inc. v. Frezza, 2021 ONCA 822

[Feldman, van Rensburg and Coroza JJ.A.]

Counsel:

A. J. Gabriele, for the moving parties

D. J. Kirby, for the responding party B.F.

No one appearing for the responding parties O.F. , E.A.F. and J.F.

Keywords: Civil Procedure, Orders, Costs, Enforcement, Fraudulent Conveyances, Certificates of Pending Litigation, Appeals, Jurisdiction, Final or Interlocutory, Summary Judgment, Courts of Justice Act, R.S.O. 1990, c. C.43, ss. 6(1)(b), 13, 18m 19(1)(a), 19(1.2), 134(2), Rules of Civil Procedure, Rule 62.02(4), Ball v. Donais (1993), 13 O.R. (3d) 322 (C.A.), Hendrickson v. Kallio, [1932] O.R. 675 (C.A.), Archer v. Archer (1975), 11 O.R. (2d) 432 (C.A.), Amphenol Canada Corp. v. Sundaram, 2019 ONCA 932, 561895 Ontario Ltd. v. Metropolitan Trust Co. of Canada (1997), 14 C.P.C. (4th) 195 (Ont. C.A.), leave to appeal to S.C.C. refused, 26191 (November 20, 1997), Skunk v. Ketash, 2016 ONCA 841, Tomec v. Economical Mutual Insurance Company, 2019 ONCA 839

facts:

The moving parties are the plaintiffs in an action seeking to set aside three alleged fraudulent conveyances. In the current action, the plaintiffs alleged that during the prior litigation, which was dismissed in 2016 and resulted in a significant costs award in favour of the current plaintiffs, the current defendants E.A.F, O.F., and Frezza Management Inc. fraudulently transferred three properties to J.F. and B.F. for nominal consideration. The plaintiffs maintained that, as a result of these transfers, they were unable to enforce the costs order from the prior litigation against those defendants. They commenced the action to set aside the fraudulent conveyances against both the transferors and the recipients of the properties, the current defendants, and sought a certificate of pending litigation to prevent the disposal of the properties.

The plaintiffs’ motion for a certificate of pending litigation over two properties that are now owned by B.F. was dismissed by the motion judge on the basis that the fraudulent conveyance action was statute-barred. He also found that, in any event, a balancing of the equities favoured the defendants. The plaintiffs took two steps to appeal: they sought leave to appeal to the Divisional Court on the basis that the order denying the certificate may be interlocutory, and at the same time they filed a notice of appeal to the Court on the basis that the order may be final. The appellants adopted this unusual procedure on the basis that they were uncertain whether the motion judge’s order was final or interlocutory.

There were two motions before the Court. The moving parties asked, and the Divisional Court agreed, to hold the leave motion in abeyance while a motion for directions was brought in the Court of Appeal to determine the jurisdiction issue. The moving parties also brought a second motion in the Court asking it to grant leave to issue and register a certificate of pending litigation as interim relief pending appeal. Brown J.A., sitting in chambers, referred the interim relief motion to the panel to be heard following the panel’s determination whether the Court had the jurisdiction to hear the appeal: 1476335 Ontario Inc. v. Frezza, 2021 ONCA 732. The panel heard both motions.

issues:

(1) Was the order under appeal a final or an interlocutory order?

(2) Where the Court does not have jurisdiction over the appeal, can it make an interim order pending the appeal?

holding:

Appeal quashed.

reasoning:

(1) Interlocutory order.

The order sought to be appealed in this case was an order denying leave to issue and register a certificate of pending litigation. A number of authorities from the Court have held that an order granting or lifting a certificate of pending litigation is an interlocutory order. The reason is that the granting or lifting of the certificate does not finally determine the litigation, which is ongoing. The refusal to grant a certificate is analogous. It does not finally determine any issue in the litigation, which remains ongoing. It is therefore an interlocutory order. As a result, the appeal does not lie to the Court of Appeal but to the Divisional Court, with leave.

The appellants also asked the Court whether the order could be viewed as final based on the reasons of the motion judge. The motion judge’s primary reason for denying the certificate was that the action was statute-barred. The answer was no: the reasons for denying the motion for a certificate of pending litigation were not binding on the trial or summary judgment judge. The reasons did not constitute the final determination of the limitation period issue because the court was not asked to determine that issue for the purpose of granting or denying judgment. The full record for finally determining the issue may or may not have been placed before the motion judge, but only enough to allow the motion judge to make or deny the discretionary order that was sought. In any event, the court was not asked to make a final determination of the limitation issue.

(2) No.

Where the Court does not have jurisdiction to hear the appeal, it cannot make an interim order because such an order can only be made “pending the appeal”.

However, there have been rare occasions in the past where an appeal has been wrongly commenced in the Court and proceeded to an oral hearing before anyone realized that the appeal was in the wrong court, and where, on consent of all parties, the Court has requested the authority of the Chief Justice of the Superior Court to sit as the Divisional Court in order to save time and cost: Courts of Justice Act, ss. 13 and 18; Tomec v. Economical Mutual Insurance Company, 2019 ONCA 839.

This was not an appropriate case to seek to apply this procedure. The appeal to the Court was not brought by mistake. The appellants have their leave to appeal motion ready to proceed in the Divisional Court. The appellants may seek interim relief from the Divisional Court, if they decide to proceed with the appeal to that court.


Stewart v. Fuhgeh, 2021 ONCA 824

[Gillese, Trotter, and Nordheimer JJ.A.]

Counsel:

W.N.F. in person

No one appearing for the responding parties

Keywords: Civil Procedure, Vexatious Litigants, Intervenors, Leave to Appeal, Canadian Charter of Rights and Freedoms, Rules of Civil Procedure, Rule 2.1, Fuhgeh v. Stewart, 2021 ONSC 3053, Simpson v. Chartered Professional Accountants of Ontario, 2016 ONCA 806

facts:

On April 26, 2021, the motion judge dismissed W.N.F’s appeal proceedings in the Divisional Court pursuant to Rule 2.1 of the Rules of Civil Procedure. The motion judge reviewed the law respecting, and the principles applicable to, such motions. The motion judge concluded that there was no merit to the appeal and also that it was abusive, as it attempted to relitigate matters decided some years earlier. The motion judge also found that the appeal displayed “the hallmarks of vexatious proceedings”. W.N.F filed a notice of motion for leave to appeal to the Court from the motion judge’s order. The intervenors sought an order under Rule 2.1 to dismiss the motion for leave to appeal.

issues:

(1) Should the Court dismiss the motion for leave to appeal under Rule 2.1?

holding:

Appeal dismissed.

reasoning:

(1) Yes.

The Court found W.N.F’s notice of motion did not raise any arguable ground of appeal with respect to the motion judge’s analysis and conclusion. W.N.F’s belated attempt to invoke five different sections of the Canadian Charter of Rights and Freedoms did not assist in this regard. Rather, W.N.F’s efforts to take further steps in a proceeding that has been determined to be abusive in nature, must itself be seen as abusive. Thus, the Court held that W.N.F’s motion for leave to appeal constituted a proceeding that appeared on its face to be frivolous or vexatious or otherwise an abuse of the process of the court as defined in Rule 2.1.


SHORT CIVIL DECISIONS

Cao v. Markham (City), 2021 ONCA 818

[MacPherson, Simmons and Nordheimer JJ.A.]

Counsel:

Q. Cao, acting in person

D. Boghosian and M. Brown, for the respondents

Keywords: Torts, Defamation, Dereliction of Duty, Racial Discrimination, Civil Procedure, Issue Estoppel, Evidence

Royal Bank of Canada v. Mundo Media Ltd., 2021 ONCA 832

[Fairburn A.C.J.O., Roberts J.A. and Van Melle J. (ad hoc)]

Counsel:

R. Howell and D. Schatzker, for the appellant Vdopia Inc.

S. McGrath and R. Bengino, for Ernst & Young Inc., in its capacity as court-appointed receiver in the within proceeding

Keywords: Bankruptcy and Insolvency, Receiverships, Equitable Set-Off


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.