Hello again to everyone.  Below are summaries of this week’s Ontario Court of Appeal civil decisions (non-criminal).  In an interesting Charter decision this week, Tanudjaja v Canada, the Court (2-1) rejected on the basis of justiciability a Charter challenge on whether the Charter guarantees the right to affordable housing.  Among other grounds for dismissing the application on a preliminary basis and without hearing the merits was a determination by the Court that the matters complained of were matters of policy that are not justiciable.  Justice Feldman dissented, so it will be interesting to see if the decision is appealed to the Supreme Court and whether leave is granted.  Other topics covered this week included class actions (costs), dismissals for delay, insolvency (approving professional and legal fees of court-appointed receivers), condominium law (solicitor’s negligence and negligent misrepresentation), real property (specific performance, leases, adverse possession, mortgages, title insurance), banking law (cheques, Bills of Exchange Act and conversion), summary judgment and more.

Wishing everyone a nice weekend.

John Polyzogopoulos

Blaney McMurtry LLP

Tel: 416.593.2953

Holley v. Northern Trust Company, Canada, 2014 ONCA 857

[Strathy C.J.O, Rouleau and Hourigan JJ.A.]

Joel Rochon, for the appellant
Jeff Galway, for the respondent The Northern Trust Company, Canada
Christine Lonsdale, for the respondent The Royal Trust Company

Keywords: Costs, Class Proceedings Act 1991

The appellant’s appeal was dismissed on the basis that the proposed class action was statute-barred.  Both respondents were seeking costs of the appeal. The appellant submitted that there should be no order as to costs because the class action was brought in the public interest and raised a new point of law; thus, engaging s. 31(1) of the Class Proceedings Act, 1991. The appellant also argued that the appeal was reasonably brought and was founded on the improper conduct by the respondents in their administration of trust assets. Despite the above, the appellant submitted that the appeal was relatively straight forward and therefore no costs should be awarded.

Should the respondents be awarded costs?

Costs awarded. The amount of costs sought by the respondents was reasonable.

Yes.  The Court agreed with the trial judge and rejected the appellant’s submission of s. 31(1) of the Class Proceedings Act, 1991 and ordered costs in the ordinary course. The respondents had to deal with all the issues raised in the appeal which were significant and the time spent by the respondents was warranted.  Furthermore, there was no finding of improper conduct by the respondents, as the appeal was dismissed simply on the basis that the claim was statute-barred.

Bank of Nova Scotia v. Diemer
, 2014 ONCA 851

[Hoy A.C.J.O., Cronk and Pepall JJ.A.]

Peter H. Griffin, for the appellant PricewaterhouseCoopers Inc.
James H. Cooke, for the respondent Daniel A. Diemer
No one appearing for the respondent The Bank of Nova Scotia

Keywords: Bankruptcy and Insolvency Law, Receiverships, Approval of Fees, Fairness and Reasonableness

This is an appeal of a motion judge’s refusal to approve legal costs of $255,955 requested by a court appointed receiver on behalf of its counsel in a Southwestern Ontario cattle farm receivership. The farm and much of the cattle were ultimately sold for an amount sufficient to discharge the debt owed to The Bank of Nova Scotia. The receivership appointment order stated that the receiver and its counsel would be paid at their standard rates and charges, but it did not specify what the standard rates and charges were. The receiver asked the motion judge to approve receiver’s fees of $138,297 plus disbursements for 408.7 hours spent — an average hourly rate of $338.38. It also asked the motion judge to approve the legal fees of the receiver’s counsel of $255,995 plus disbursements. These rates reflected 397.6 hours spent at an average hourly rate of $643.75 by a downtown Toronto law firm. The motion judge found that counsel’s efforts and the work involved were disproportionate to the size of the receivership, holding that after the size of the estate became known, the usual or standard rates were too high. The motion judge also took issue with the need for, and excessive work done by, senior counsel on routine matters. He rejected the receiver’s opinion endorsing its counsel’s fees, found that the number of hours reflected a significant degree of inefficiency, and that some of the work could have been performed at a lower hourly rate. He adopted the average London, Ontario rate of $475 per hour for lawyers of similar experience and expertise. He also expressly limited this case to the facts at hand, noting that his reasons should not be construed as saying that Toronto rates have no application in matters in the Southwest Region. He assessed legal fees at $157,500. The receiver appealed.

(1) Did the motion judge err by failing to apply the clear provisions of the appointment order which entitled the receiver’s counsel to charge fees at its standard rates?

(2) Did the motion judge err by reducing the fees of the receiver’s counsel in the absence of evidence that the fees were not fair and reasonable?

(3) Did the motion judge err by making unfair and unsupported criticisms of counsel?

Appeal dismissed.

(1) No. The Court endorsed the factors applicable to receiver’s compensation in Re Bakemates International Inc. (2002), 164 O.A.C. 84 (C.A.). These include: the nature, extent and value of the assets; the complications and difficulties encountered; the degree of assistance provided by the debtor; the time spent; the receiver’s knowledge, experience and skill; the diligence and thoroughness displayed; the responsibilities assumed; the results of the receiver’s efforts; and the cost of comparable services when performed in a prudent and economical manner. The factors are not exhaustive and the fairness and reasonableness of the fees are the lynchpins of this analysis. Value provided should predominate over the mathematical calculation reflected in the hours times hourly rate equation.

The Court held that the initial appointment order stating that the compensation of counsel was to be paid at standard rates and the subsequent approval of the receiver’s reports did not oust the need for the court to consider whether the fees claimed are fair and reasonable.

(2) No. The Court held that there were cases in which the fees generated by the hourly rates charged by a receiver will be reduced if the application of one or more of the Bakemates factors so requires. It also noted that there was no evidence before the Court that the standard rates were disclosed prior to the appointment of the receiver. The Court held that the motion judge properly considered the factors in Bakemates, it was open to him to reduce the legal fees, and that the motion judge’s decision was owed deference.

(3) Yes. The Court found that motion judge made unfair criticisms of counsel. However, this was not fatal because the motion judge’s decision was informed by the Bakemates factors.

Tanudjaja v Canada (Attorney General),
2014 ONCA 582

[Feldman, Srathy and Pardu JJ.A.]

T. Heffernan, F. Faraday and P. Rosenthal, for the appellants
J.E. Minor and S. Chace, for the respondent the Attorney General of Ontario
M. H. Morris and G. Sinclair, for the respondent the Attorney General of Canada
A. D. Griffin, for the intervener the Ontario Human Rights Commission
A. Go and M. Eberts, for the intervener the Colour of Poverty/Colour of Change Network
C. Milne, for the intervener the David Asper Centre for Constitutional Rights
M. Chen and J. Esmonde, for the intervener the coalition of the Income Security and Advocacy Centre, the ODSP Action Coalition and the Steering Committee on Social Assistance
V. Sinha, R. Agarwal and L. Posloski, for the intervener the Women’s Legal Education and Action Fund
M. Reynolds and R. Lax, for the intervener the coalition of Amnesty International Canada and the International Network for Economic, Social and Cultural Rights
L. Letheren and R. Lang, for the intervener the coalition of ARCH Disability Law Centre, the Dream Team, Canadian HIV/AIDS Legal Network and HIV/AIDS Legal Clinic Ontario
M. Jackman and B. Ries, for the intervener the coalition of the Charter Committee on Poverty, Pivot Legal Society and Justice for Girls

Keywords: Constitutional Law, Charter of Rights and Freedoms, sections 1, 7 and 15; Rules of Civil Procedure, Rule 21.01(1)(b), Motion to Strike Pleading, No Reasonable Cause of Action, Justiciability, Social and Economic Rights

The applicants-appellants brought a challenge under the Charter of Rights and Freedoms, alleging that actions and inaction on the part of Canada and Ontario have resulted in homelessness and inadequate housing. They submitted that the respondent governments have taken an approach that violates their s. 7 and s. 15 rights under the Charter. The core of their application provided: “Canada and Ontario have instituted changes to legislation, policies, programs and services which have resulted in homelessness and inadequate housing. Canada and Ontario have either taken no measures, and/or have taken inadequate measures, to address the impact of these changes on groups most vulnerable to, and at risk of, becoming homeless. Canada and Ontario have failed to undertake appropriate strategic coordination to ensure that government programs effectively protect those who are homeless or most at risk of homelessness. As a result, they have created and sustained conditions which lead to, support and sustain homelessness and inadequate housing.” (Amended Notice of Application, para 14)

The appellants did not expressly challenge any particular law or state action which they asserted violated s. 7 and/or s. 15 of the Charter. Rather, they submitted that the social conditions by the overall approach of the federal and provincial governments violated their rights to adequate housing. The appellants made numerous broad submissions in support of their contention that the respondent governments had increased the risk of homelessness and inadequate housing. These included: cancelling funding for the construction of new social housing; phasing out funding for affordable housing projects under cost-sharing agreements with the provinces; failing to institute a rent supplement program comparable to those in other countries; and downloading the cost and administration of existing social housing to municipalities. The appellants sought a wide-range of remedies in their application, including: a declaration that the decisions, programs, actions and failures by the respondent governments had created and sustained conditions of homelessness and inadequate housing; a declaration that the respondent governments have obligations pursuant to s. 7 and s. 15 of the Charter to implement effective housing and homelessness strategies; a declaration that they have failed in these obligations and that this failure violates the appellants’ Charter rights; and an order that the respondent governments implement effective strategies to reduce and eliminate homelessness and inadequate housing.

On the respondents’ motion under Rule 21.01(1)(b) to strike the appellants’ pleading, the motion judge struck the appellants’ application, without leave to amend, on the basis that it was plain and obvious that the application could not succeed. He found that the application disclosed no reasonable cause of action and was not justiciable.

Appeal dismissed.

[Pardu, Strathy JJ.A.]

The application was not justiciable.  Justiciability involves “a normative inquiry into the appropriateness as a matter of constitutional judicial policy of the courts deciding a given issue, or instead deferring to other decision making institutions of the polity.” The issue is whether the matter before the court is essentially a political issue or a legal issue. This case was distinguishable from both Canada (Attorney General) v PHS Community Services Society, 2011 SCC 44 and Chaoulli v Quebec (Attorney General), 2005 SCC 35. Those cases involved Charter challenges to a specific state action and a specific law, respectively. In this case, there was no sufficient legal component to engage the decision-making capacity of the courts.

Furthermore, several aspects of the application made it unsuitable for Charter scrutiny. First, the appellants’ assertion that s. 7 confers a general freestanding right to adequate housing was a doubtful proposition in light of Chaoulli, where McLachlin C.J. and Major J. expressly denied that there was a freestanding right to health care. Second, the diffuse and broad nature of the claims did not permit an analysis under s. 1 of the Charter. Thirdly, there was no judicially discoverable and manageable standard for assessing in general whether housing policy was adequate or whether sufficient priority had been given in general to the needs of the homeless. This was a question for the legislature, not for the courts. Judicial supervision of the adequacy of housing policy developed by Canada and Ontario would take the court well beyond the limits of its institutional capacity.

Given that the application was not justiciable, it was unnecessary to address the appellants’ submissions with respect to s. 7 and s. 15 of the Charter.

Finally, there was no reason to interfere with the motion judge’s discretionary decision to hear the respondents’ motions to strike even though they were brought more than two years after the application was issued. The appellants’ voluminous record was only served on the respondents six months before the latter brought the motions to strike. The motion judge found that it was not reasonable to require that the motion to strike be brought before the record was served. Only then would the respondents have an appreciation of the case to meet.

[Feldman J.A. (dissenting)]

In Feldman J.A.’s  view, it was an error law of to strike the application at the pleading’s stage.

The application raised significant issues of public importance. Although the appellants’ approach was admittedly novel, given the jurisprudential journey of the Charter’s development to date, it was neither plain nor obvious that the appellants’ claims were doomed to fail. As the Supreme Court of Canada has reminded, some very significant innovations in the law have developed from motions to strike or from similar preliminary motions, including the general duty of care owed to one’s neighbor from Donoghue v Stevenson.

There were four problems with the motion judge’s approach to s. 7 of the Charter.

First, he misunderstood the appellants’ s. 7 claim and stated it in an overly broad manner. Second, he erred in stating that the s. 7 jurisprudence on whether positive obligations can be imposed on governments to address homelessness is settled. Third, he erred in purporting to define the law in a critical area of Canadian jurisprudence on a motion to strike. Fourth, and most importantly, he erred in concluding that the issue of whether the appellants had a potential claim under s. 7 could be decided without considering the full evidentiary record.

The appellants’ s. 15 Charter claim should also not have been struck at the pleadings stage. The motion judge erred in conducting a lengthy and detailed discussion of the merits of the appellants’ s. 15 claim, concluding in a number of places, that it is not the impugned government conduct that causes homelessness or the problems faced by the homeless. This was the very issue intended to be addressed by an application judge on a full record. It is only based on such a record that reliable conclusions regarding causation can be drawn. It is not the role of a motion judge on a motion to strike to make factual findings that are not in the pleadings.

Lastly, the justiciability of social and economic rights under the Charter remains an open question. Courts should be extremely cautious before foreclosing any enforcement of these rights. To strike a serious Charter application at the pleadings stage on the basis of justiciability is therefore inappropriate. The application was novel and a number of procedural as well as conceptual difficulties could arise when the court addresses whether the Charter has been infringed, and if appropriate, determines and applies a reasonable and workable remedy. However, the novelty of a claim is not a bar to allowing it to proceed. Furthermore, we are still in the early stages of Charter jurisprudence. There is no reason to believe that the current procedural approach is fixed in stone. On remedy, the court could limit itself to granting declaratory relief only, as was done in Canada (Prime Minister) v Khadr, 2010 SCC 3.

Korea Data Systems (USA), Inc. v Aamazing Technologies Inc. (Ajay Amazing Technologies Inc.),
2014 ONCA 863

[Watt, Tulloch and Benotto JJ.A.]

Scott Hutchinson, for the moving party Korea Data Systems (USA), Inc. on M44059
Hilary Book, for the moving party Christina Chiang on M43941 and M44015
Catherine Francis and Mark A. Freake, for the moving party Mendlowitz & Associates Inc. on M43880
J.T. Curry and K.M. Pentney, for moving party Jay Chiang on M44009

Keywords: Costs

Appellant Korea Data Systems (USA) was successful on a motion heard by the Court of Appeal on August 25, 2015. The motion had complex issues and extensive history.

What is the appropriate costs award?

Costs awarded fixed in the amount of $25,000, inclusive of disbursements and applicable taxes. Costs to be paid jointly by the Trustee and Christina Chang.

Orr v. Metropolitan Toronto Condominium Corporation No. 1056, 2014 ONCA 855

[Feldman, Tulloch and Lauwers JJ.A.]
G.D.E. Adair, Q.C., for Kelly-Jean Marie Orr, also known as Kelly-Jean Rainville
B.A. Percival, Q.C. and Theodore B. Rotenberg, for Metropolitan Toronto Condominium Corporation No. 1056, Bruce Ward, Larry Boland and Richard Dorman
R. J. Clayton, for Brookfield LePage Residential Management Services, a division of Brookfield Management Services Ltd., Patrick Post and Pamela Cawthorn
D. Gadsden, J.B. Casey and M. Saunders, for Gowling, Strathy & Henderson
T.W. Arndt, for Richard Weldon

Keywords: Real Estate Law, Condominium Law, Purchase and Sale, Solicitor’s Negligence, Negligent Misrepresentation, Queen v Cognos, Common Elements, , Estoppel Certificate, Agency Law, Vicarious Liability for Agent, Measure of Damages, Lost Profit, BG Checo International Ltd. v. British Columbia Hydro & Power Authority, V.K. Mason Construction Ltd. v. Bank of Nova Scotia, Punitive Damages, Whiten v. Pilot Insurance Co.

The appellant purchased what she believed was a three-storey condominium townhouse (“condo”) from Richard Wheldon, the builder and first owner of the property. Several months after the transaction closed, the condominium corporation Metropolitan Toronto Condominium Corporation No. 1056 (“MTCC”), which governed her condo, advised the appellant that the third floor of her condo was illegally built into common element attic space, such that she had not acquired valid title to it. The condominium’s description, which formed part of its declaration, revealed that the appellant’s townhouse was legally only two stories, and the third floor was common element space. This information was only brought to the appellant’s attention after she moved into the condo and began conducting renovations to the third floor.

One year after the transaction for her condo closed, the appellant brought an action against MTCC, its property manager Brookfield, and several Brookfield employees for negligent misstatement and negligent misrepresentation. The appellant brought this action on the basis that she signed an estoppel certificate prepared by Brookfield (referred to in the case as the “second” estoppel certificate), which incorrectly represented to her that she was purchasing and obtaining valid title to the third floor of the condo, as it stated that there were “no continuing violations of the [condominium’s] declaration, by-laws, and/or rules of the Corporation.” The appellant also brought an action against her solicitors, Gowlings, for negligence, on the basis that her lawyer incorrectly and carelessly certified that she would obtain valid title to the third floor in the purchase of the condo. In response to the appellant’s action, MTCC brought a third party claim against one its directors, the vendor Wheldon, for breach of fiduciary duty.

At trial, the appellant was granted judgment against Gowlings for solicitor’s negligence and was awarded over $400,000 in damages. The trial judge also ordered Gowlings to pay to MTCC, on  behalf of the appellant, the cost of restoring the third floor to common element attic space, with such cost to be determined on a reference before a construction lien master. Further, Gowlings was ordered to reimburse the appellant for a portion of her decorating and renovation costs associated with the third floor, with the sum to be determined on a reference to a construction lien master. MTCC was also ordered to pay the appellant $20,000, representing half of the repair costs she incurred to fix water damages and related problems to the third floor. However, the trial judge refused to make an order under s. 109(2) of the former Condominium Act, amending the Declaration to regularize the third floor. The trial judge also found that the appellant failed to establish her negligence claims against MTCC and Brookfield.

MTCC was successful at trial on its cross-claim against the appellant, and was awarded $56,000 plus per diem interest for the appellant’s use of the common elements in the third floor of the townhouse. The appellant was also ordered to close up the third floor and return it to common element attic space. MTCC was also successful in its third party claim against Wheldon, who was ordered to pay the MTCC more than $18,000 for occupation rent for the third floor. Wheldon was also ordered to indemnify MTCC for over $20,000, that it had been ordered to pay to the appellant for repairs to the common element attic space. Finally, Wheldon had to pay $50,000 in punitive damages to MTCC.

(1) Did the trial judge err in dismissing the appellant’s negligence claims against Brookfield and MTCC regarding the estoppel certificate?

(2) Did the trial judge fail to award the appellant a sufficient quantum of damages to restore her to the position she would have been in but for the negligence of Gowlings, Brookfield, and MTCC?

(3) Did the trial judge err in ordering MTCC to pay the appellant one half of her expenses to repair the water damages to the common element attic before she was ordered to stop the repairs?

(4) Did the trial judge err in finding that Gowlings was negligent towards the appellant in its representations that she was purchasing valid title to the third floor of the condo?

(5) Did the trial judge err in dismissing Gowlings’ cross-claim against MTCC for contribution and indemnity?

(6) Did the trial judge commit an error in principle in ordering Wheldon to pay MTCC punitive damages?

The appellant’s appeals relating to its claims of negligence against MTCC and the related quantum of damages on that matter were both allowed, but its appeal against Brookfield was dismissed. MTCC’s cross-appeal on the matter of the appellant’s repair costs was dismissed. Gowlings’ appeal that it should not be found liable to the appellant was dismissed, and its cross-claim against MTCC was also dismissed. Wheldon’s appeal on the matter of punitive damages was dismissed.

(1) Yes, in part. Applying the test for negligent misrepresentation or misstatement from the Supreme Court of Canada case of Queen v Cognos, MTCC was statutorily obligated by ss. 32(8) of the former Condominium Act to provide an estoppel certificate to the appellant. Furthermore, it owed a common law duty of care in preparing the certificate and ensuring the contents were correct, even though it contracted out that responsibility to Brookfield. MTCC and Brookfield both breached any reasonable standard of care by failing to make virtually any inquiries to confirm the representation in the estoppel certificate that the condo the appellant intended to purchase complied with the condominium’s Declaration. The appellant detrimentally relied on the estoppel certificate, as it was found at trial that she would not have proceeded with the purchase of the condo if she knew the third floor did not form part of the property. Due to the appellant’s reliance, she suffered harm as she purchased a condo that was one floor smaller than she wanted, impacting her use of the condo as an inhabitant, and also decreased the unit’s resale value.

In sum, the appellant successfully established that MTCC was liable to her for negligent misstatement in regards to its error in the estoppel certificate. However, the appellant’s appeal against Brookfield on this matter was dismissed, as it was held that Brookfield was MTCC’s agent and did not owe Ms. Rainville an independent duty of care. Due to the finding that MTCC was liable to the appellant, MTCC is estopped on its cross-appeal from demanding that the appellant close up the third floor and restore the unit to its two storey configuration at her own expense and that she pay occupancy rent for the third floor.

(2) Yes. The trial judge erred in principle in awarding damages to the appellant for the negligence of Gowlings and MTCC in three ways. First, the trial judge erred by refusing to award the appellant the entire proven cost of her repairs to the common elements. Pursuant to both the former and current versions of the Condominium Act, MTCC had a statutory obligation to incur all expenses necessary to repair the common elements (see s. 41 of the former Act and ss. 89-90 of the current Act). The stop work letter, where MTCC requested that the appellant stop her repairs of the common element attic, did not shift this statutory obligation to the appellant. Therefore, MTCC must reimburse the appellant for the full amount of her expenses for these repairs, and not simply one-half as the trial judge concluded.

The second error in principle by the trial judge was her order that required Gowlings to reimburse the appellant for only a portion of her legal fees. Specifically, she failed to apply the appropriate test for damages in negligence from Athey v Leonati, which requires that the plaintiff be returned to the position she would have been in had the negligence at issue not occurred. Applying this test, the appellant is entitled not only to reimbursement for her legal fees relating to both the purchase of the townhouse and the dispute regarding the third floor (which the trial judge awarded), but also for her legal fees stemming from the dispute regarding the common element repairs. But for Gowlings’ negligence, the appellant would not have purchased the townhouse. Had she not done so, she would not have incurred any expenses relating to the common element repairs and associated legal disputes. In order to return the appellant to her prior position, she must be reimbursed for these legal fees.

Finally, the trial judge erred in the manner of setting damages to account for the fact that the appellant did not get the three-storey townhouse she paid for. On appeal, it was held that the appellant is entitled to damages for loss of the value of the third floor as a result of the trial judge’s undisturbed finding that Gowlings was negligent, and due to the finding on appeal that  MTCC is liable for negligent misstatement in the error contained in the estoppel certificate. Generally, the remedy for negligent misstatement is ordinarily to award damages to return the plaintiff to the position he or she would have been in had the misrepresentation not occurred (BG Checo International Ltd. v. British Columbia Hydro & Power Authority). However, given the unique circumstances of the case, the negligence of Gowlings and MTCC has deprived the appellant of the opportunity to sell her condo as a renovated three-storey unit. Applying the approach to damages from the Supreme Court case of V.K. Mason Construction Ltd. v. Bank of Nova Scotia, justice could only be done if the appellant’s damages were measured by the loss she will suffer from losing the opportunity to sell her property as if it had been a renovated three-storey townhouse. Therefore, it was held that Gowlings and MTCC were liable to the appellant for the difference between the value of her condo as a renovated three-storey unit and as a two-storey unit. The valuation date was set as the date the decision was released.

(3) No. Due to the finding that MTCC was negligent towards the appellant, its appeal of the order requiring it to pay the appellant one half of the value of the common element repairs, which she made before she was ordered to stop work, must be dismissed.

(4) No. Gowlings failed to identify any palpable and overriding error in the trial judge’s finding that its solicitor was negligent towards the appellant by certifying that she was purchasing title to the third floor of the condo. Furthermore, Gowling’s new argument on appeal that the appellant validly purchased title to the third floor could not be resolved on the evidence presented at trial or on appeal. The court refused to entertain an entirely new issue on appeal.

(5) No. The trial judge’s reasoning on this matter was followed. Gowling’s cross-claim against MTCC’s negligence in the preparation of the estoppel certificate was dismissed, as the trial judge found that the estoppel certificate was never intended to provide evidence of proper title to a property.

(6) No. Wheldon’s appeal was dismissed because he failed to demonstrate that the trial judge made a palpable and overriding error in her award of punitive damages against him. She applied the correct principles and her conclusion that Wheldon’s conduct was intentional, fraudulent, and reprehensible is entitled to deference. The $50,000 award is not outside the applicable range. MTCC’s cross-appeal that the punitive damages award should be increased to $140,000 is also dismissed, as the same reasons apply equally to the dismissal of Wheldon’s appeal on this matter.

Matthew Brady Self Storage Corporation v. InStorage Limited Partnership, 2014 ONCA 858

[Doherty, Blair and Tulloch  JJ.A.]

Robert Malen and Robert Drake, for the appellants
Clifford Lax, Q.C., and Shaun Laubman, for the respondent

Keywords:  Contracts, Interpretation, Put/Call Agreements, Specific Performance, Semelhago v. Paramadevan, Costs, Rule 49 Offers, Substantial Indemnity

This appeal concerns the purchase of a vacant factory in Windsor and its conversion into a self-storage facility (the “Property”) . The parties initially agreed they would split the purchase price of the Property and have equal interests until the completion of its conversion into a self-storage facility. The conversion was to be carried out by the respondent Matthew Brady Self Storage Corporation (“MBSSC”). The appellant, InStorage, would then purchase the Property from MBSSC and operate it as a self-storage facility.

Prior to purchasing the Property on these terms, InStorage ran into financial difficulties and the parties renegotiated. Under the new arrangement, the principals of MBSSC would pay the entire purchase price and MBSSC would be the sole owner of the Property pending completion.The parties entered into a Put/Call Agreement (the “Agreement”), under which MBSSC could force InStorage to purchase the Property through a “Put,” and InStorage could force MBSSC to sell the Property through a “Call.” The parties were able to exercise their options beginning one year following substantial completion of the project and up to three years thereafter. The Agreement provided that the parties would have 15 days to agree on a purchase price, failing which, a pre-determined appraiser (“Appraiser”) would decide the “Fair Market Value” of the Property, as defined in the Agreement. The appraisal would bind the parties “in the absence of a manifest error.”

By the time MBSSC exercised its Put, InStorage had been acquired by Storage Mart in a hostile take-over. Storage Mart’s CEO was openly opposed to honouring the Agreement and was committed to “negotiating in court.” The parties could not agree on price and the Appraiser concluded that the fair market value of the property was $7.3 million. InStorage refused to accept the appraisal, taking the position that the Appraiser made a manifest error by not valuing the property in accordance with the Agreement’s definition of “Fair Market Value,” which stated that the net cash flow of the property was to be “a primary consideration.”

At trial, InStorage attempted to introduce the report and evidence of a different appraiser who, using primarily an income approach, calculated fair market value at less than $5 million. The trial judge not only excluded this evidence, but also ruled mid-trial that the Appraiser made no manifest error. This effectively took “manifest error” off the table for further argument at the conclusion of the trial.The trial judge awarded MBSSC specific performance of the Agreement, thereby requiring InStorage to accept a conveyance of the Property and pay MBSSC the $7.3 million purchase price. As MBSSC made an offer to InStorage to settle for a lesser amount, the trial judge awarded MBSSC substantial indemnity costs from the date of the offer.

(1) Did the trial judge err by concluding that the Appraiser had not made a manifest error in his valuation, or by coming to that decision mid-trial?

(2) Did the trial judge err in awarding MBSSC specific performance and in finding there was no duty to mitigate?

(3) Did the trial judge err in awarding costs on a substantial indemnity basis due to the fact that MBSSC’s offer was not served on InStorage’s solicitors, as required by the Rules?

(4) Did the trial judge err in awarding substantial indemnity costs based on a multiplier greater than 1.5?

Appeal dismissed.

(1) No. The Agreement did not require that the Appraiser actually use the income approach as a valuation method. The words “primary consideration” suggested that the Appraiser was merely required to consider the income approach. if the income approach was unhelpful in the circumstances, the Appraiser was empowered to use a different valuation method. Assuming the trial judge should not have made a finding regarding manifest error until the conclusion of the trial, InStorage has not proved that it suffered prejudice by its counsel’s inability to make submissions on this issue.

(2) No. There is no absolute rule that vendors are never entitled to specific performance.  When determining whether a vendor is so entitled, Semelhago v. Paramadevan requires us to determine whether the subject matter of the contract (and not the land alone) is unique or unusual. The transaction must be looked at as a whole. The trial judge did not err in concluding that MBSSC was entitled to specific performance. Numerous factors suggested that damages were inadequate, that there was a fair, real and substantial justification to compel performance of the Agreement, and that the equities favoured MBSSC. These factors were:

  • InStorage was always intended to be the sole owner of the Property;
  • the Property was renovated according to InStorage’s specifications and design criteria;
  • MBSSC would not have acquired the property and retrofitted it for a business it did not engage in but-for InStorage’s commitment to owning the property;
  • InStorage had occupied, managed and operated the building since the completion of the retrofit, and did a poor job in managing the property, thereby reducing its value and impeding a ready sale; and
  • The conduct of Burnham in purposely resiling from the Agreement;

That being the case, there was no obligation to attempt to mitigate.

(3) No. This Court has previously ruled that failure to comply with this technical requirement ought not to alter the nature and legal effect of the offer under Rule 49 where there was no difficulty or confusion created by non-compliance.

(4) No. The trial judge was alive to the 1.5 multiplier stipulated in the definition of “substantial indemnity costs” in Rule 1.03(1) of the Rules. He used that as a starting point, but then properly exercised his discretion to increase the multiplier due to the conduct of the appellant.

Kayani LLP v. The Toronto-Dominion Bank
, 2014 ONCA 862

[Hoy A.C.J.O., Epstein and Hourigan JJ.A.]

Martin Greenglass, for the appellant
Martin Sclisizzi, for the respondents

Keywords: Banking Law, Fraud, Conversion, Boma Manufacturing v. Canadian Imperial Bank of Commerce, Bills of Exchange Act, ss. 20(5)

The appellant, The Toronto-Dominion Bank appeals the judgment of the trial judge awarding damages for conversion to the respondents, Raza Kayani LLP and Jack Sheldon Zwicker. The respondents commenced separate actions against the Bank. However, given the similar facts and legal issues between the two cases, the actions were heard together. Both actions arose out of a fraud perpetrated against the respondents, who are lawyers.

In essence, the fraud consisted of fraudulent third parties inducing the respondents to issue a trust cheque or obtain a bank draft on the strength of a counterfeit cheque deposited into their trust accounts. As part of the scheme, the fraudsters had appropriated the descriptive portion of the name and address of a corporation that had previously carried on business but was no longer doing so at the date of the fraud. The respondents made their trust cheque and bank draft payable to that entity, of which they had no previous knowledge and the funds were deposited into an account in the name of that entity and then removed by the fraudsters.  The counterfeit cheque was not honoured and the respondents were out of pocket the amount of their trust cheque and bank draft.  They sued the Bank in negligence and conversion. At trial, the case proceeded only on the conversion allegation. The Bank counterclaimed for monies held in accounts maintained by its co-defendants. The issue at trial and on appeal was whether the trust cheque and bank drafts were made payable to “non-existent” payees.  If so, the bank was entitled to negotiate them to bearer and therefore woule not be liable for conversion.  The trial judge found that the payee was not “non-existent” and therefore found the bank liable for conversion.  The bank appealed.

Did the trial judge err in concluding that the Bank was liable in conversion to the respondents?

Yes. Appeal allowed.

The tort of conversion “involves a wrongful interference with the goods of another, such as taking, using or destroying these goods in a manner inconsistent with the owner’s right of possession”: Boma Manufacturing Ltd. v. Canadian Imperial Bank of Commerce, [1996] 3 S.C.R. 727, at para. 31; 373409 Alberta Ltd. (Receiver of) v. Bank of Montreal, 2002 SCC 81, [2002] 4 S.C.R. 312, at para. 8.

An authorized interference is not wrongful and, therefore, cannot amount to conversion.

Subsection 20(5) of the Bills of Exchange Act protects a bank from fraud committed by a third party on the drawer (in this case, the respondents) of an instrument. Pursuant to that subsection, an instrument payable to a payee that is either non-existent or fictitious may be treated as payable to the bearer and not to order. The court also concluded that the trial judge erred in failing to find that the payee of the instruments was a non-existent person and thus the conclusion that this case comes within Falconbridge’s fourth proposition of when a payee is non-existent and fictitious was in error.

The trial judge did not conduct a proper analysis of the respondent’s knowledge of the named payees at the time the instruments were drawn. Based on the evidence, the respondents could not possibly establish that “the payee is the name of a real person, intended by the drawer to receive payment”, as required to bring themselves within Falconbridge’s fourth proposition.  The trust cheque and bank draft were made payable to non-existent payees and therefore the Bank was entitled to treat them as payable to bearer and therefore was not liable for conversion.

Goreway Total Health Inc. v. Goldbrite Trading Co. Ltd.,
2014 ONCA 873

[Blair, Pepall and Lauwers JJ.A.]

Roger A. Gosbee, for the appellant
Robert A. Watson, for the respondent

Keywords: Real Estate Law, Commercial Tenancies, Leases, Contract Interpretation

This is an appeal from the judgement of Justice Jamie K Trimble of the Superior Court of Justice dated April 4, 2014.

Whether the requirement to maintain eight doctors as tenants and the corresponding abatement provision in a lease were eliminated by a renewal agreement.

Appeal Dismissed.

The requirement to maintain eight doctors as tenants and the corresponding abatement provision in the lease were not eliminated by the renewal agreement. These were fundamental and central to the bargain and contract between landlord and tenant. They did not constitute an inducement within the meaning of the renewal agreement. The application judge applied the correct principles and considered the commercial context and the language of both the lease and the renewal agreement. The application judge was also owed deference.

Kara v Arnold,
2014 ONCA 871

[Blair, Pepall and Lauwers JJ.A]

Paul R. Sweeny and Adam J. Huff, for the appellants
Kosta Kalogiros, for the respondent

Keywords: Civil Litigation, Administrative Dismissal for Delay, Rules of Civil Procedure, Rule 48.14

The appellants sued the respondent Dr. Arnold and others claiming medical malpractice, as a result of an over-prescription of medication established by Dr. Arnold for the appellant, Shafik Kara. On April 22, 2014 the action was dismissed for delay pursuant to rule 48.14 by a Status Court order of Gray J. At the time of the Status Court hearing the action was more than 14 years old, with the facts underpinning the claim occurring from 1997-1999. The action had proceeded at a leisurely pace on the part of both sides. The appellants sought to set aside the Status Court order, dismissing their action for delay.

(1) Should the order dismissing the action for delay under rule 48.14 be set aside?

(2) Did the hearing judge err by failing to apply the “contextual approach” from Scaini v Prochnicki?

Appeal Dismissed.

(1) No, the decision of a judge presiding at a status hearing under rule 48.14 is discretionary and is entitled to considerable deference. The test is two-fold and conjunctive: the plaintiff has the onus of demonstrating both that there was an acceptable explanation for the delay and that, if the action were allowed to proceed, the defendant would suffer no non-compensable prejudice. The hearing judge applied that test and determined the appellants had not provided an acceptable explanation for the delay. The hearing judge considered the inordinate length of the delay, the explanations offered by the appellants for the delay, the contribution of the respondent to the delay, the appellants’ delay in obtaining expert reports and the issue of prejudice. He concluded the appellants had failed to provide a satisfactory or reasonable explanation for a delay of almost 11 years. The court held that this finding was open to be made, and there was no basis to interfere.

The court stated that dismissals for delay involve a balancing between competing values. On one hand, the Rules of Civil Procedure need to be enforced in a way that ensures timely and efficient justice. On the other hand, society and the parties have an interest in the resolution of disputes on the merits and in the availability of flexibility to avoid potentially draconian results. The courts do not take a rigid approach to the application of timelines in the Rules that would frustrate the fundamental goal of resolving disputes on their merits; however rule 48.14 was designed to have some teeth to promote timely justice.

(2) No, the appellants argued the hearing judge erred by failing to apply the “contextual approach” enunciated in Scaini v Prochnicki, by not considering and weighing all relevant factors to determine what is just in the circumstances. The court did not agree and stated that there was little to be gained by debating differences between the “contextual approach” and the approach from Faris and 1196158 Ontario Inc. v 6274013 Canada Ltd. In considering the reasonableness of any explanation for delay, the status hearing judge will invariable engage in a weighing of all relevant factors. The court held that the authorities were not inconsistent with one another.

Parenteau v. Dekany,
2014 ONCA 877  

[Blair, Rouleau and Pepall JJ.A.]

Mark Parenteau, in person
Katalin Dekany, in person

Keywords: Family Law, Child Support, Findings of Fact, No Palpable or Overriding Error

The appellant mother appeals the quantum of the child support awarded to her by the order of Salmers J. of the Superior Court of Justice. The appellant also appealed the dismissal of her action against the respondent for breach of contract and intentional infliction of emotional distress.

(1) Did Salmers J. err in finding that the appellant is capable of earning an annual income of $10,000, or in computing the annual income of the respondent father to calculate the appropriate child support award?

(2) Did Salmers J. err in dismissing the actions for breach of contract and intentional infliction of emotional distress?

The appeal was dismissed.

(1) No. The appellant appealed factual findings of Salmers J., but she failed to demonstrate that he made any palpable or overriding error. Furthermore, applying the test to overturn a child support order set out in Hickey v Hickey, Salmers J’s reasons do not disclose an error in principle or a significant misapprehension of the evidence, and the award is not clearly wrong.

(2) No. The appellant failed to present sufficient evidence at trial to demonstrate intentional infliction of emotional distress. She also failed to establish her action for breach of contract. The appellant failed to show that these findings demonstrate any palpable or overriding error.

Sumner v. Sullivan
, 2014 ONCA 869

[Doherty, Feldman and Epstein JJ.A.]

M.D. McArthur and P. Karsten, for the appellants
P.M. Quinlan and G. Ayres (student), for the respondents

Keywords:   Real Property Law, Adverse Possession, Exclusion of True Owner

On appeal from the judgment of Justice P.B. Hambly of the Superior Court of Justice dated March 19, 2014.

Appeal dismissed.

We are in substantial agreement with reasons of the motion judge.   The three-pronged test for adverse possession is well recognized. The third requirement, “effective exclusion of the true owner”, applies even in cases of mutual mistake. Although there were facts in dispute, the facts relevant to the third requirement could be and were determined on the motion.

Sweda Farms Ltd. v. Egg Farmers of Ontario
, 2014 ONCA 878

[ Laskin, Blair and Pepall JJ.A.]

Donald Good and Christopher Olutola, for the appellants
P. David McCutcheon and Chole Snider, for the respondents

Keywords:   Civil Litigation, Summary Judgment, Evidentiary Record, Best Foot Forward, Fresh Evidence on Appeal

On appeal from the order of Justice Susan G. Himel of the Superior Court of Justice dated April 22, 2014, with reasons reported at 2014 ONSC 2219. The appellant unsuccessfully brought a motion to adduce fresh evidence.

Did the motion judge err in granting summary judgment?

Motion to adduce fresh evidence dismissed. Appeal dismissed. Leave to appeal costs dismissed.

No. The summary judgment motion was not argued until 17 months after Burnbrae delivered its affidavit of documents. If the appellants’ complaint was that Burbrae had not complied with its disclosure obligations, then the appellants were obliged to take steps to compel production. They did not do so. Accordingly, they did not meet their obligation to put their best foot forward on the motion. The motion judge nonetheless considered the areas of “missing evidence” and concluded it was unlikely to assist the appellants. There were no errors in that reasoning.

Zabanah v. Capital Direct Lending Corp
., 2014 ONCA 872

[Blair, Watt and Lauwers JJ.A.]

Antonio Conte, for the appellant
Anthony Cole and Kim T. Duong, for the respondent, Capital Direct Lending Corp.
Ted Evangelidis, for the respondent, Chicago Title Insurance Company

Keywords:   Real Property Law, Mortgages, Negligence, Limitation Periods, Limitations Act, 2002, Real Property Limitations Act

As an investment, the appellant purchased a second mortgage from Capital Direct Lending Corp (“CDLC”) in 2007. When CDLC arranged the second mortgage, the mortgagor fraudulently informed CDLC that the first mortgage on the home was $83,000 when in reality it exceeded $200,000. The appellant became aware of the mortgagor’s fraud in early 2008, but nonetheless renewed the second mortgage in 2008, 2009 and 2010. The mortgagor made an assignment in bankruptcy in 2010. The subsequent power of sale on the  mortgagor’s home did not yield sufficient proceeds to pay off the first mortgage, leaving the appellant with nothing. The appellant sued CDLC for negligence, breach of contract and breach of fiduciary duty, and also sought a declaration that the title insurer was obligated to cover her loss, pursuant to the policy that CDLC assigned to her. The title insurer and CDLC moved for summary judgment. The title insurer was granted summary judgment under Rule 20 on the basis that the policy specifically excluded recovery for any loss or damage that arose under the first mortgage. CDLC was granted summary judgment on the basis that the action was statute-barred. The motion judge held that the applicable limitation period was two years, pursuant to the Limitations Act, 2002, and not ten years, pursuant to the Real Property Limitations Act. (“RPLA”). The motion judge further held that the appellant discovered her claim in April 2008 at the latest. At this point, the appellant knew that her investment was not adequately secured, that CDLC failed to inform her of these facts, and that CDLC or the title insurer might be liable to her.

(1) Did the motion judge err in holding that the appellant’s loss was not covered by the policy?

(3) Did the motion judge err in holding that the applicable limitation period was two years?

(2) Did the motion judge err in her determination of when the appellant’s claim was discoverable?

Appeal dismissed.

(1) No. The motion judge did not err in her interpretation of the policy. The policy was intended to cover the validity and priority of the second mortgage, and could not be construed as investment insurance.

(2) No. The appellant’s claim against CDLC is in negligence and in contract, and is not a claim for an interest in land. In order for the ten-year limitation in the RPLA to apply, there needs to be an “action upon a covenant contained in an indenture of mortgage or any other instrument …. to repay the whole or part of any money secured by a mortgage.” That is not engaged in the present case.

(3) No. The issue of discoverability of a claim depends on findings of fact, and the appellant has not demonstrated that the motion judge committed a palpable and overriding error.

Raba v Landlord and Tenant Board,
2014 ONCA 864

[Watt, van Rensburg, and Pardu JJ.A.]

T. Raba, appearing in person
H. Burnett and J. Smith, for the respondent

Keywords: Residential Tenancies, Landlord and Tenant Board, Suable Entity, Costs

This was an appeal from the order of Justice Carole J. Brown of the Superior Court of Justice dated April 30, 2014.

Appeal dismissed.

The Court was not persuaded that the motions judge erred in law in holding that the respondent was not a suable entity. This was dispositive of the appeal. The motion judge also made no error on the issue of costs.

Cochrane v. Kawartha Lakes (Police Services Board)
, 2014 ONCA 860

[Blair, Rouleau and Pepall JJ.A.]

Shawn McNamara, for the appellant
Kevin McGivney and Natalie Kolos, for the respondents

Keywords: Civil Litigation, Negligence, Police

The principal allegation was that the police conducted a negligent investigation resulting in the failure to send the needle to be tested for communicable diseases.

Appeal dismissed.

The police made inquiries about testing the needle in 2009 and 2012, and the universal reply from all the sources was that such testing was not possible or was unreliable. Given the evidence that testing the needle was not possible or would lead to misleading results, the police failure to test could not form the basis for negligence because no damages flowed from it.

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