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Good afternoon.

This past week, the Court of Appeal for Ontario provided us with several substantive and interesting civil decisions.

The Court of Appeal released two related decisions in Subway Franchise Systems of Canada, Inc. v. Canadian Broadcasting Corporation. Subway sued the CBC and Trent University, which conducted DNA testing for the CBC, after the CBC broadcasted a widley publicized story that Subway’s chicken sandwiches only contained 50% of actual chicken. Both decisions dealt with Anti-SLAPP provisions in s.137.1 of the Courts of Justice Act, which were recently considered by the Supreme Court of Canada companion decisions in 1704604 Ontario Ltd. v. Pointes Protection Association (“Pointes”) and Bent v. Platnick (“Bent”). Both appeals were allowed.

In the first decision, the Court of Appeal found that the motion judge erred in reaching the conclusion that the claim by Subway against Trent University in negligence in its DNA testing methods did not arise from an expression that related to a matter of public interest and it was an error of law to view s. 137.1 as aimed at a limited category of torts like defamation. Further, the Court of Appeal noted that the motion judge did not have the benefit of the Pointes decision, which described the applicable standard as one that is more demanding than the one applicable on a motion to strike. In the result, the negligence claim against Trent was dismissed (a defamation claim against Trent remains).

In the second decision, the Court of Appeal found that the motion judge erred in law by applying the wrong test in deciding whether there were grounds to believe CBC had no valid defence, and assessing the claim as though he were the ultimate trier of fact, not a motion judge making a preliminary assessment. The Court of Appeal held that the motion judge erred in law in the manner in which he considered the harm the appellant likely suffered, and in his approach to weighing the public interest. The defamation claim against the CBC was revived and allowed to proceed.

In Kaynes v. BP p.l.c., the Court of Appeal dealt with one of numerous class proceedings commenced throughout Canada and the US, which arose from the Deepwater Horizon explosion in 2010, wherein one of the BP’s oil rigs exploded in the Gulf of Mexico.The plaintiff’s claims had been previously dismissed for various reasons, including being out of time. He brought yet another claim, reframing it in fraudulent misrepresentation in order to try to beat the limitation period. The Court dismissed the appeal, finding the newly framed claim was still statute-barred.

In Carroll v Toronto-Dominion Bank, the Court of Appeal dealt with another decision under rule 21.01 of the Rules of Civil Procedure, where it was found that the appellant, a former employee, lacked standing to bring the application. The appellant had initially sought multiple orders that would result in the disclosure, discovery, and redress for alleged financial irregularities and misconduct by TD relating to its role as Trustee of certain mutual funds. However, the Court of Appeal dismissed the appeal and upheld the motion judge’s decision, finding that the appellant did not qualify for private interest or public interest standing.

Finally, in BMW Canada Inc. v. Autoport Limited the Court of Appeal addressed the proper test to employ in considering whether to make an order for the interim preservation of property that is evidence in litigation, pursuant to Rule 45.01 of the Rules of Civil Procedure. BMW sued Autoport for $175 million for damage to almost 3,000 new cars stored by Autoport that allegedly made them unsellable. BMW had conducted its testing and wished to destroy the vehicles. However, it had not provided Autoport with the results of its testing. The Court sided with the appeal judge, and disagreed with the master and Divisional Court in the result, who had permitted BMW to destroy the vehicles. The Court ordered BMW to hold onto the vehicles for 90 days while it provided Autoport with its testing results so that Autoport could determine what further testing of its own to conduct and which vehicles it wished to preserve and take custody of.

John Polyzogopoulos
Blaney McMurtry LLP
416.593.2953 Email

Table of Contents

Civil Decisions

BMW Canada Inc. v. Autoport Limited , 2021 ONCA 42

Keywords: Civil Procedure, Interim Preservation of Property, Evidence, Spoliation, Rules of Civil Procedure, Rules 45.01, 32.01, Taribo Holdings Ltd. v. Storage Access Technologies Inc., [2002] O.J. No. 3886 (S.C.), McDougall v. Black & Decker Canada Inc., 2008 ABCA 353

Carroll v Toronto-Dominion Bank , 2021 ONCA 38

Keywords: Equity, Trusts, Inherent Jurisdiction, Beneficiary Principle, Civil Procedure, Striking Pleadings, Standing, Private Interest Standing, Public Interest Standing, Rules of Civil Procedure, Rule 21.01, Crociani v. Crociani, [2014] UKPC 40, McLean v. Burns Philp Trustee Co. Pty. Ltd. (1985), 2 N.S.W.L.R. 637 (S.C.), MF Global UK Ltd. (In Special Administration), Re, [2013] EWHC 1655 (Ch.), Morice v. Bishop of Durham (1804), 32 E.R. 656 (Ch.), aff’d (1805) 32 E.R. 947 (Ch.), Campisi v. Ontario (Attorney General), 2018 ONCA 869, leave to appeal refused, [2019] S.C.C.A. No. 52., Landau v. Ontario (Attorney General), 2013 ONSC 6152, Canada (Attorney General) v. Downtown Eastside Sex Workers United Against Violence Society, 2012 SCC 45, The Polish National Catholic Church of Canada v. Polish National Church, 2014 ONSC 4501, Air Canada v. M & L Travel Ltd., [1993] 3 S.C.R. 787, Donovan W.M. Waters, Q.C., Mark R. Gillen & Lionel D. Smith, eds., Waters’ Law of Trusts in Canada, 4th ed. (Toronto: Thomson Reuters, 2012)

Hilton v. Hilton , 2021 ONCA 29

Keywords: Family Law, Property, Matrimonial Home, Civil Procedure, Noting in Default, Uncontested Trial, Setting Aside, Fraud, Misrepresentation, Family Law Rules, O. Reg. 114/99, ss. 25(19), 25(19)(a), Ketelaars v. Ketelaars, 2011 ONCA 349, Gray v. Gray, 2017 ONCA 100

Kaynes v. BP p.l.c. , 2021 ONCA 36

Keywords: Securities Law, Misrepresentation, Fraudulent Misrepresentation, Civil Procedure, Striking Pleadings, Determination of Legal Issue, Limitations Periods, Discoverability, Limitations Act, 2002, s. 2(1), s. 4, s. 5(1)(a), Rules of Civil Procedure, Rule 21.01(1)(a), r. 25.06(1), r. 25.06(8), Securities Act, RSO 1990 c. S.5, s. 138.14, s. 138.3, Kaynes v BP, P.L.C., 2018 ONCA 337, Beardsley v. Ontario (2001), 57 OR (3d) 1 (CA), Hamilton (City) v. Metcalfe & Mansfield Capital Corp., 2012 ONCA 156, Lawless v Anderson, 2011 ONCA 102, Midland Resources Holding Limited v. Shtaif, 2017 ONCA 320, leave to appeal refused, [2017] S.C.C.A. No. 246, Unisys Canada Inc. v. York Three Associates Inc. (2001), 150 O.A.C. 49 (C.A.), 1100997 Ontario Ltd. v. North Elgin Centre Inc., 2016 ONCA 848, Davidoff v. Sobeys Ontario, 2019 ONCA 684, Brozmanova v. Tarshis, 2018 ONCA 523, Justice Graeme Mew, Debra Rolph & Daniel Zacks, The Law of Limitations, 3rd ed. (Toronto: LexisNexis, 2016)

Subway Franchise Systems of Canada, Inc. v. Canadian Broadcasting Corporation , 2021 ONCA 25

Keywords: Torts, Defamation, Negligence, Pure Economic Loss, Anns/Cooper Test, Duty of Care, Proximity, Reasonable Foreseeability, Civil Procedure, Strategic Litigation Against Public Participation Suit (Anti-SLAPP), Courts of Justice Act, R.S.O. 1990, c. C.43, s. 137.1, 1704604 Ontario Ltd. v. Pointes Protection Association, 2020 SCC 22, Bent v. Platnick, 2020 SCC 23, 1688782 Ontario Inc. v. Maple Leaf Foods Inc., 2020 SCC 35, Deloitte & Touche v. Livent Inc. (Receiver of), 2017 SCC 63, Bella v. Young, 2006 SCC 3, Cooper v. Hobart, 2001 SCC 79, Botiuk v. Toronto Free Press Publications Ltd., [1995] 3 S.C.R. 3, Hill v. Church of Scientology, [1995] 2 S.C.R. 1130, Shtaif v. Toronto Life Publishing Co. Ltd., 2013 ONCA 405, 1688782 Ontario Inc. v Maple Leaf Foods Inc., 2018 ONCA 407, Cleveland (Litigation Guardian of) v. Hamilton Health Sciences Corp., 2009 CanLII 70130, aff’d 2011 ONCA 244, Correia v. Canac Kitchens, 2008 ONCA 506, Bertin v. Kristofferson, 2000 CanLII 1109, (NB QB), rev’d 2001 NBCA 118, Neufville v. Sobers, 1983 CarswellOnt 2621 (Ont. H.C.), Lavender v. Miller Bernstein LLP, 2018 ONCA 729, leave to appeal refused, [2018] S.C.C.A. No. 488, Haskett v. Trans Union of Canada Inc., (2003), 63 O.R. (3d) 577 (C.A.), leave to appeal refused, [2003] S.C.C.A. No. 208, Green v. The Hospital for Sick Children, 2017 ONSC 6545, aff’d 2018 ONSC 7058 (Div. Ct.), Lowe v. Guarantee Co. of North America, (2005), 80 O.R. (3d) 222 (C.A.), Elliott v. Canadian Broadcasting Corp., (1993), 16 O.R. (3d) 677 (Gen. Div.), aff’d (1995), 25 O.R. (3d) 302 (C.A.), leave to appeal refused, [1995] S.C.C.A. No. 393, Avalon Rare Metals Inc. v. Hykawy, 2011 ONSC 5569, Roy v. Ottawa Capital Area Crime Stoppers, 2018 ONSC 4207, Guergis v. Hamilton, 2015 ONSC 4915, Fulton v. Globe & Mail, (1997), 207 A.R. 374 (Alta. Q.B.), Rubens v. Sansome, 2017 NLCA 32, Spring v. Guardian Assurance plc, [1994] 3 All E.R. 129 (HL (Eng))

Subway Franchise Systems of Canada, Inc. v. Canadian Broadcasting Corporation , 2021 ONCA 26

Keywords: Torts, Defamation, Strategic Litigation Against Public Participation Suit (Anti-SLAPP), Courts of Justice Act, R.S.O. 1990, c. C. 43, s. 173.1, 1704604 Ontario Ltd. v. Pointes Protection Association, 2020 SCC 22, Bent v. Platnick, 2020 SCC 23, Level One Construction Ltd. v. Burnham, 2018 BCSC 1354, Mugesera v. Canada (Minister of Citizenship and Immigration), 2005 SCC 40, Bondfield Construction Company Limited v. The Globe and Mail Inc., 2019 ONCA 166, Hamlin v. Kavanagh, 2019 ONSC 5552, Grant v. Torstar Corp., 2009 SCC 61, Casses v. Canadian Broadcasting Corporation, 2015 BCSC 215, Platnick v. Bent, 2018 ONCA 687


CIVIL DECISIONS

BMW Canada Inc. v. Autoport Limited, 2021 ONCA 42

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

Counsel:

R. B. Bell, E.Y. Fan and J. Boddy, for the appellant

E. Machum, K. Ereaux, M.D. Isaacs and M. Staples, for the respondent

Keywords: Civil Procedure, Interim Preservation of Property, Evidence, Spoliation, Rules of Civil Procedure, Rules 45.01, 32.01, Taribo Holdings Ltd. v. Storage Access Technologies Inc., [2002] O.J. No. 3886 (S.C.), McDougall v. Black & Decker Canada Inc., 2008 ABCA 353

facts:

The appellant operates vehicle processing and trans-loading facilities at several locations across Canada, including one in Halifax. The respondent contacted the appellant to provide vehicle handling and storage services for vehicles imported to Canada from Germany. In 2017, the respondent commenced an action alleging that as a result of the appellant’s negligence, 2,966 of its vehicles sustained damage due to exposure to excessive water and corrosive substances, including salt, while stored at the respondent’s facility. The claim was for the amount of $175 million, which included the full value of all 2,966 vehicles.

The respondent’s statement of claim referred to its inspection of the vehicles when they were in the possession of the appellant, and to inspections between May 2015 and July 2016. The respondent pleaded that the vehicles were recalled beginning in July 2015, and were to be returned to the respondent for disposal. The respondent’s claim of damages included its loss in respect of the vehicles, the costs of transportation and storage of the vehicles, the costs of investigating the source, nature and extent of the damage, and the disposal or destruction costs.

In November 2017, the appellant brought a motion under Rule 45.01 of the Rules of Civil Procedure for an interim preservation order, for particulars of certain pleadings in the statement of claim (especially in respect of the results of the various inspections conducted by the respondent), and for an order under Rule 32.01 for a court-supervised inspection process. The evidence on the appellant’s motion included a sworn affidavit from a National Claims Manager with the appellant’s parent company, noting, among other things, that the respondent had alleged defects to all of the vehicles, but had refused to provide documentation detailing the alleged defects and its own inspection results.

The respondent did not file any evidence on the motion, but argued it had no further use for the vehicles and noted the ongoing estimated cost of their storage. The respondent further took the position that while all of the vehicles were exposed to unacceptable conditions giving rise to serious risk of material damage, the extent of such damage to any particular vehicle could not be determined without extensive destructive testing. In short, while the respondent acknowledged that it was up to the trial judge to determine which party should pay the storage costs after trial, it argued that the interim obligation to pay storage costs was a burden it should no longer be obligated to bear. As a result, the respondent offered to either relinquish custody of the vehicles to the appellant, or otherwise require that the appellant assume the ongoing storage costs as it was the only party with an interest in the continued preservation of the vehicles.

In determining whether to grant the interim preservation order under Rule 45.01, the Master referred to and applied the three-part test set out in Taribo Holdings Ltd. v. Storage Access Technologies Inc., [2002] O.J. No. 3886 (S.C.): (1) the asset sought to be preserved constitutes the very subject matter of the dispute; (2) there is a serious issues to be tried regarding the plaintiff’s claim to that asset; and (3) the balance of convenience favours granting the relief sought by the applicant or moving party.

Ultimately, the Master concluded that the balance of convenience favoured the respondent, observing that it was “unreasonable and…manifestly unfair to require [BMW] to continue to bear the financial burden in circumstances where [Autoport] [wanted] preservation of the vehicles pending inspection and/or trial, but [was] unwilling to take possession of them”. The Master’s order provided for the interim preservation of the vehicles subject to terms that the appellant, within ten business days, elected whether to take physical custody of the vehicles or to assume the costs of their ongoing storage, failing which the respondent could deal with the vehicles as it deemed appropriate.

On appeal to a single judge of the Superior Court, the Master’s order was set aside, based on a finding that the Master erroneously applied the Taribo test. Specifically, the appeal judge gave effect to the appellant’s argument that the Taribo test was not applicable because the issue in this case was not the ownership or entitlement to the property. Nevertheless, the appeal judge proceeded to outline a substantially similar test, requiring the moving party to establish that: (1) the assets sought to be preserved constitute the subject matter of the dispute or a right to a specific fund or are relevant to an issue in the proceeding; (2) there is a serious issue to be tried regarding the plaintiff’s claim; and (3) the balance of convenience favours granting the relief sought by the applicant or moving party. The appeal judge found in favour of the appellant on all three components, and especially noted that the balance of convenience favoured the appellant due to the fact that if the vehicles were not preserved, there would be no means for either party to inspect or test them.

On a further note, the appeal judge also noted that the respondent, as the party in possession of the subject matter, and as the party with the obligation to preserve such property in the interest of justice and to ensure fairness of the trial process, ought to bear the cost of the preservation.

On a further appeal to the Divisional Court, the Master’s order was restored. The Divisional Court disagreed with the appeal judge’s conclusion that the Master’s error in applying the Taribo test had informed her analysis. Nevertheless, the Divisional Court did agree that the Taribo test was not appropriate in these circumstances, and once again proceeded to outline its own test consisting of the following elements: (1) the property sought to be preserved is the property in question in a proceeding or relevant to an issue in the proceeding; (2) there is a serious issue to be tried with regard to the property; (3) the interim preservation or custody of the property is necessary to enable a party to advance or defend its claim; and (4) the balance of convenience favours granting the relief sought by the applicant or moving party. The Divisional Court also rejected the appeal judge’s conclusion that there is a prima facie obligation to preserve property that is the subject matter of litigation. Ultimately, the Divisional Court agreed with the Master that the balance of convenience favoured the appellant, and that the Master’s order met the principle of proportionality.

issues:

(1) What is the test for making an order under Rule 45.01 when the property to be preserved is evidence, and what factors need be considered?

(2) Did the Master err in refusing to make an interim order for preservation until the respondent disclosed the details and results of its inspections and destructive testing?

(3) If the Master erred, should such an order be made?

holding:

Appeal allowed.

reasoning:

(1) What is the test for making an order under Rule 45.01 when the property to be preserved is evidence, and what factors need be considered?

The Court began its analysis by noting that it is fundamentally inappropriate to prescribe a single test for Rule 45.01 motions, including a “Taribo-style” test that focuses on the “balance of convenience”. In a case such as this, where the condition of the property is at issue in the action and its preservation is sought for the purposes of inspection, the primary goal is to ensure fairness in the litigation process. This conclusion is meant to speak to the discretionary nature of a Rule 45.01 order. Further, Rule 45.01, as it is set out in the Rules, prescribes no criteria to be considered, and no limitation on the terms and conditions that may be imposed. The only precondition for preservation is that the property is “in question in a proceeding or relevant to an issue in a proceeding”.

The Court accepted that the Taribo test is appropriate where the property sought to be preserved is being claimed in the litigation. However a Taribo-style test that focuses on issues of whether there is a “serious issue to be tried” and the “balance of convenience” is inappropriate in a case like the present, where the motion seeks to preserve evidence to permit inspection. In making or refusing an order based on the correct standard of fairness, the court should have regard to: the issues in dispute in the litigation, the relevance and materiality of the property as evidence, the purpose for which interim preservation is sought and its proposed duration, and the benefits and harm or prejudice to the interests of each party.

Further, while the Court concluded that it was unnecessary to determine whether there is a prima facie obligation to preserve evidence, it also went on to add that it disagreed with the Divisional Court’s unqualified rejection of the duty of litigants to preserve evidence. Instead, the courts have long recognized the doctrine of spoliation of evidence (McDougall v. Black & Decker Canada Inc., 2008 ABCA 353). Underlying that doctrine is the trial fairness principle that parties to litigation are expected not to destroy important evidence, at least until the opposing party has had a fair opportunity to examine it.

(2) Did the Master err in refusing to make an interim order for preservation until the respondent disclosed the details and results of its inspections and destructive testing?

Yes. In making her order, the Master only considered the cost of continued storage of the vehicles and the appellant’s delay in inspecting when she concluded that the balance of convenience clearly favoured the respondent. However, the Master failed to consider the appellant’s evidence that it needed information from the respondent before the appellant could conduct its own inspections appropriately. The Divisional Court’s conclusion similarly failed to give effect to the appellant’s evidence that the need to first receive information was necessary before embarking on its own inspection and testing program. The Court then proceeded to consider the various factors outlined above in relation to the paramount principle of consideration in this case: fairness in the litigation process.

(a) The Issues in Dispute in the Action and the Vehicles as Evidence

On this point, the Court noted that the respondent preserved the vehicles for almost two years before it commenced its action, and it invited the appellant to conduct its inspections when it gave notice of its intention to destroy the vehicles. This led the Court to conclude that the respondent’s actions, contrary to its arguments, were consistent with the recognition that it could not simply destroy all of the vehicles because it had no further use for them, and that the appellant should have access to the vehicles for the purposes of inspection.

(b) The Purpose and Proposed Duration of the Interim Preservation Order

Again, the Court noted the appellant’s evidence on the motion that it could not conduct an informed inspection of the vehicles before it received necessary information from the respondent about the defects it had identified and the inspections it had already undertaken. The respondent did not provide any evidence to challenge this assertion. It was a fundamental error of the Master and the Divisional Court to fail to consider the evidence to this effect.

(c) Hardship or Prejudice to the Appellant

The Court accepted that it may be inappropriate for a party to preserve property when the cost of doing so is disproportionate to the value of the evidence to the party seeking its preservation. However, in this case, the cost of ongoing preservation was claimed to be $10,000 (although the respondent filed no evidence about the actual cost of storage). Thus, the court was not persuaded that the ongoing cost of preservation, in the context of the respondent’s total claim of $175 million, could constitute hardship or prejudice that would reasonably justify shifting the costs of interim preservation to the appellant, especially considering the appellant had not actually been given a reasonable opportunity to conduct its own inspection and testing.

(d) Impact of a Preservation Order on the Duty to Mitigate Damages

This consideration was in response to the respondent’s claim that an order requiring preservation of the vehicles would be inconsistent with its duty to mitigate damages. However, the Court noted that the respondent did not attempt to mitigate its damages in any other way, such as repairing the vehicles, salvaging their parts, or selling them at discounted prices. Rather, given the respondent’s plans of destruction, only the claim for storage costs would be avoided if the vehicles were destroyed, but at the cost of the loss of the vehicles before the appellant had an opportunity to conduct an informed inspection. In any event, the appellant is entitled to seek and develop evidence that some or all of the vehicles could have been repaired and sold or their parts salvaged. Destruction of the vehicles before proper inspection would consequently impair the appellant’s ability to advance this type of argument.

(3) If the Master erred, should an order be made?

Yes. The Court set aside the order of the Divisional Court and ordered: (1) the respondent shall continue to preserve the vehicles until 90 days after it provides to the respondent the details of any and all destructive testing it had performed; (2) within that 90-day period, unless extended on motion, the appellant shall notify the respondent of the vehicles it wishes to preserve for its own purposes and take custody of such vehicles; (3) after the appellant has taken custody of such vehicles, the respondent shall be at liberty to dispose of the remaining vehicles as it sees fit; and (4) the cost of the interim preservation for each party, as applicable, will remain an issue for trial.


Carroll v Toronto-Dominion Bank, 2021 ONCA 38

[Tulloch, Miller and Paciocco JJ.A.]

Counsel:

J. Groia, D. Sischy and D. Debssou, for the appellant

L. Fuerst and E. Anschuetz, for the respondents

Keywords: Equity, Trusts, Inherent Jurisdiction, Beneficiary Principle, Civil Procedure, Striking Pleadings, Standing, Private Interest Standing, Public Interest Standing, Rules of Civil Procedure, Rule 21.01, Crociani v. Crociani, [2014] UKPC 40, McLean v. Burns Philp Trustee Co. Pty. Ltd. (1985), 2 N.S.W.L.R. 637 (S.C.), MF Global UK Ltd. (In Special Administration), Re, [2013] EWHC 1655 (Ch.), Morice v. Bishop of Durham (1804), 32 E.R. 656 (Ch.), aff’d (1805) 32 E.R. 947 (Ch.), Campisi v. Ontario (Attorney General), 2018 ONCA 869, leave to appeal refused, [2019] S.C.C.A. No. 52., Landau v. Ontario (Attorney General), 2013 ONSC 6152, Canada (Attorney General) v. Downtown Eastside Sex Workers United Against Violence Society, 2012 SCC 45, The Polish National Catholic Church of Canada v. Polish National Church, 2014 ONSC 4501, Air Canada v. M & L Travel Ltd., [1993] 3 S.C.R. 787, Donovan W.M. Waters, Q.C., Mark R. Gillen & Lionel D. Smith, eds., Waters’ Law of Trusts in Canada, 4th ed. (Toronto: Thomson Reuters, 2012)

facts:

The appellant was a highly placed manager employed by the respondent. In her role, the appellant was responsible for TD Bank and a group of its subsidiaries’ compliance with regulatory obligations relating to the management of mutual funds. In that capacity, the appellant contends she exposed several instances of non-compliance and unjust enrichment. She was ultimately terminated and claimed that it was a wrongful termination effected to silence her.

In the following years, the appellant sued for wrongful termination (which is still pending resolution) and began making whistleblower complaints to several regulators and government bodies. In September 2019, approximately five years after her dismissal, the appellant also launched the civil proceedings that are the subject of this appeal. Specifically, she issued an application seeking orders that would result in the disclosure, discovery, and redress of financial irregularities and misconduct, if any, by TD relating to its role as Trustee of designated mutual funds.

The 2019 application requested several grounds of relief, namely: a passing of accounts of designated mutual fund trusts without notice to the unitholders, the appointment of an independent accountant to investigate the trusts, an order directing the respondent to disclose any breaches of trust or non-compliance, an order for accounting and payment to the beneficiaries for the respondent’s wrongful gains and a declaration that TD had been unjustly enriched.

This civil suit was ultimately dismissed under rule 21.01 of the Rules of Civil Procedure because the appellant lacked standing to bring the application. The appellant appeals this decision.

issues:

(1) Did the motion judge err by failing to invoke the court’s inherent jurisdiction to supervise trusts?
(2) Did the motion judge err by applying the wrong standing test?
(3) Did the motion judge err by finding that the appellant had not pleaded facts establishing a prima facie case of standing?
(4) Did the motion judge err by failing to consider all aspects of the relief sought when determining the appellant’s standing?

holding:

Appeal dismissed.

reasoning:

(1) Did the motion judge err by failing to invoke the court’s inherent jurisdiction to supervise trusts?

No. The appellant argued that the inherent jurisdiction of courts to administer trusts makes standing “subordinate, and largely irrelevant, where allegations of fraudulent or improper misconduct are made against a trustee.” Essentially, the appellant said that once a breach of trust is alleged, the court’s inherent jurisdiction is triggered and that the motion judge erred in requiring the appellant to show standing. The Court rejected this submission as it misconceived the nature of inherent jurisdiction.

Courts assumed inherent jurisdiction to supervise and administer trusts so that trusts could be given legal force. The enforcement of trusts was not achieved by empowering courts to act as roving commissions of inquiry into their proper performance, but by empowering courts to assist those with an interest in trusts in enforcing and compelling the performance of those trusts. Inherent jurisdiction was developed to protect beneficiaries as beneficiaries would be unable to enforce trusts since trustees are the legal owners of the property. The courts took jurisdiction in the matters so they could impose personal obligations on trustees: McLean v. Burns Philp Trustee Co. Pty. Ltd. (1985), 2 N.S.W.L.R. 637 (S.C.). In essence, courts of equity claimed inherent jurisdiction to supervise and intervene in the administration of trusts where no trustee existed or where the trustee acted contrary to their obligations. Courts also retain inherent jurisdiction to assist trustees in complicated situations of administrations: MF Global UK Ltd. (In Special Administration), Re, [2013] EWHC 1655 (Ch.).

While there have been instances of inherent jurisdiction being extended to people other than beneficiaries who have interests in the trust, such as creditors, it is entirely consistent with the role of inherent jurisdiction that those seeking to invoke it have an interest in the trust they seek to enforce.

Turning to the case at hand, the Court found that the appellant had offered no support for her position that inherent jurisdiction ousted considerations of standing. To the contrary, the authorities discussed above include illustrations of courts considering whether litigants have the standing required to raise such claims. The court also held that the appellant’s position was contrary to basic trust principles, such as the “beneficiary principle”. The beneficiary principle holds that to be valid, a trust must have a beneficiary capable of enforcing it: Morice v. Bishop of Durham (1804), 32 E.R. 656 (Ch.), aff’d (1805) 32 E.R. 947 (Ch.). If a non-beneficiary could step in and enforce the trust when a capable beneficiary existed but had chosen not to act, the beneficiary principle would never have come into existence. Thus, the motion judge did not err in not invoking the inherent jurisdiction of the court.

(2) Did the motion judge err by applying the wrong standing test?

No. The appellant argued that if standing is required, the motion judge was obliged to apply a flexible, discretionary, purposive approach to standing that asks whether there is a “real and legitimate basis for asking the court to adjudicate legal issues”. The appellant submits that as a whistleblower who has sacrificed a great deal, that the appellant has acquired a genuine interest.

The Court rejected this submission as it confused the two paths available to standing. There are two distinct paths to securing standing to initiate proceedings, “private interest standing” and “public interest standing”. The appellant did not argue for public-interest standing as it was clearly inapplicable, but argued that public interest considerations should guide the inquiry of whether a private interest exists. The Court also rejected this submission as the two tests for standing are completely distinct.

To have private interest standing, a person must have a personal and direct interest in the issue being litigated: Campisi v. Ontario (Attorney General), 2018 ONCA 869. As it is sometimes put, to have private interest standing, a person must have a “personal legal interest” in the outcome: Landau v. Ontario (Attorney General), 2013 ONSC 6152. In contrast, public-interest standing has a more flexible and discretionary approach to ensure legislation is not immune from challenge.

Private-interest standing should not be granted to someone outside the dispute, as this would grant them the capability of deciding the rights of other people. For example, if the appellant was granted standing, she would have authority to settle the case even though she has no legal interest in the trusts involved.

The Court also acknowledged that while this was not a purely private dispute, because the actions of a regulated industry do attract the concern of the public, adequate regulatory avenues existed, and were in fact pursued by the appellant. The Court was satisfied that the motion judge articulated and applied the correct test for standing, and went on to consider whether the motion judge erred in its application of that test.

(3) Did the motion judge err by finding that the appellant had not pleaded facts establishing a prima facie case of standing?

No. The party initiating civil proceedings has the burden of establishing their standing by pleading facts that would support standing: The Polish National Catholic Church of Canada v. Polish National Church, 2014 ONSC 4501. As the motion judge found, the appellant was not a unitholder in the trust and had no financial interest in the outcome of the litigation she commenced, and, despite her role as a whistleblower, she lacked a direct personal interest in the litigation. She pleaded no facts that could disclose a personal legal interest in the trusts that were allegedly breached.

While the appellant argued that she could be found to be a constructive trustee and thus exposed to liability because of her high ranking position in the respondent’s business, the court gave no effect to this submission. To be a found a constructive trustee, one of three circumstances must exist:

  1. As a “knowing assister”, who knowingly or wilfully blindly encouraged or assisted in a dishonest and fraudulent breach of trust: Air Canada v. M & L Travel Ltd., [1993] 3 S.C.R. 787;
  2. As a “knowing receiver”, who knowingly, or wilfully blindly, or with knowledge of facts which would put an honest person on inquiry, received trust property in their own capacity in breach of trust; or
  3. As a trustee de son tort, who assumed the role of trustee without proper appointment and then breached the trust.

The appellant only pleaded the first ground, however, on all the evidence, the appellant actively tried to prevent and uncover the wrongful acts, and so there was no basis to find she was a knowing assister.

(4) Did the motion judge err by failing to consider all aspects of the relief sought when determining the appellant’s standing?

No. While the Court disagreed that the motion judge did not consider all aspects of the relief sought, as the record showed, the motion judge did consider several of them. In any event, the issue of standing was a preliminary matter and without standing, the appellant could not seek any relief. Thus, it was unnecessary for the motion judge to have considered all of the other relief sought.


Hilton v. Hilton, 2021 ONCA 29

[Tulloch, Miller and Paciocco JJ.A]

Counsel:

M.J. Stangarone and S.P. Kirby, for the appellant

D.A. Turner, for the respondent

Keywords: Family Law, Property, Matrimonial Home, Civil Procedure, Noting in Default, Uncontested Trial, Setting Aside, Fraud, Misrepresentation, Family Law Rules, O. Reg. 114/99, ss. 25(19), 25(19)(a), Ketelaars v. Ketelaars, 2011 ONCA 349, Gray v. Gray, 2017 ONCA 100

facts:

The respondent initiated divorce proceedings in September 2018. By the time of the first case conference in March 2019, the appellant had not filed an Answer. The appellant was noted in default and ordered to deliver his Answer, disclosure, financial statements, and Notices of Assessment within 30 days. The appellant did not comply with the order. By the second case conference in July 2019 he had still had still not filed an Answer or any materials. Fryer, J confirmed the appellant’s noting in default, scheduled an uncontested trial, and ordered the partition and sale of the matrimonial home.

At the trial, held November 2019, Fryer, J made orders in favour of the respondent, giving her exclusive possession of the matrimonial home, facilitating the sale of the home and division of sale proceeds, and granting her temporary spousal support. In February 2020, the appellant brought a 14B motion seeking to set aside all orders made to date, granting leave to serve and file an Answer and financial statements, and granting leave to dispense with the requirement to serve and file his Notices of Assessment, which he alleged were unavailable. The appellant’s motion was dismissed by Nicholson, J on the basis that he had not appealed any of Fryer, J’s orders.

issues:

Did the motion judge err by dismissing the appellant’s 14B motion?

holding:

Appeal allowed in part.

reasoning:

Yes. Although not specified in his Notice of Motion, the appellant argued that his 14B motion was brought under r. 25(19) of the Family Law Rules. He argued that the respondent committed a fraud on the court through misrepresentations and material omissions in her evidence at the hearing of the uncontested trial. As a result, the interim order granted in favour of the respondent was too high and the division of proceeds from the sale of the matrimonial home was unfair. The motion judge appeared to have held that Fryer, J’s orders could not be set aside as the appellant had not appealed them. The appellant argued that an appeal would have been premature, and a motion to change under r. 25(19) was the appropriate step.

The Court agreed with the appellant to an extent. The Court emphasized that some of the orders the appellant sought to set aside were made as a result of his own failure to provide the required disclosure. However, while the Court found the motion judge was correct to say an appeal would have been needed to set aside those orders, the appellant’s assertions regarding the respondent’s misrepresentations at trial ought to have been decided on the merits. The Court directed the matter be returned to the Superior Court on that basis under r. 25(19)(a), expressing no opinion on the merits of that motion. It remained for the trial judge to determine the extent of the appellant’s participatory rights at the continuation of the trial, including whether the appellant would be permitted to give evidence that the respondent misled the court.


Kaynes v. BP p.l.c., 2021 ONCA 36

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

Counsel:

E. Karp and H. Davarinia, for the appellant

L.K. Fric, K. O’Brien and K. Sachar, for the respondent

Keywords: Securities Law, Misrepresentation, Fraudulent Misrepresentation, Civil Procedure, Striking Pleadings, Determination of Legal Issue, Limitations Periods, Discoverability, Limitations Act, 2002, s. 2(1), s. 4, s. 5(1)(a), Rules of Civil Procedure, Rule 21.01(1)(a), r. 25.06(1), r. 25.06(8), Securities Act, RSO 1990 c. S.5, s. 138.14, s. 138.3, Kaynes v BP, P.L.C., 2018 ONCA 337, Beardsley v. Ontario (2001), 57 OR (3d) 1 (CA), Hamilton (City) v. Metcalfe & Mansfield Capital Corp., 2012 ONCA 156, Lawless v Anderson, 2011 ONCA 102, Midland Resources Holding Limited v. Shtaif, 2017 ONCA 320, leave to appeal refused, [2017] S.C.C.A. No. 246, Unisys Canada Inc. v. York Three Associates Inc. (2001), 150 O.A.C. 49 (C.A.), 1100997 Ontario Ltd. v. North Elgin Centre Inc., 2016 ONCA 848, Davidoff v. Sobeys Ontario, 2019 ONCA 684, Brozmanova v. Tarshis, 2018 ONCA 523, Justice Graeme Mew, Debra Rolph & Daniel Zacks, The Law of Limitations, 3rd ed. (Toronto: LexisNexis, 2016)

facts:

This appeal arose from the Deepwater Horizon explosion in 2010 wherein one of the respondent company’s oil rigs exploded in the Gulf of Mexico. The appellant was a resident of Alberta and had purchased securities of the respondent on the New York Stock Exchange around August of 2008. In the wake of the explosion, BP made several revisions to its disclosure documents correcting misrepresentations it had made over the previous years. The appellant alleged that these misrepresentations as to the safety protocols of BP had artificially inflated their stock price and in fact, when the representations were corrected, the stock price plummeted.

In the following years, the appellant attempted to commence numerous class proceedings against BP, seeking compensation for losses suffered. The proceedings are summarized as follows:

  1. A class action commenced in 2012 in Alberta alleging statutory secondary market misrepresentation under Alberta’s Securities Act and common law negligent misrepresentation. However, this proceeding did not proceed, as the required leave to serve a defendant outside of Canada was refused because the claim had no real and substantial connection to Alberta.
  2. A class action commenced in 2012 in Ontario alleging a statutory cause of action for secondary market misrepresentation provided for in Part XXIII.1, s. 138.3 of Ontario’s Securities Act, R.S.O. 1990, c. S.5, and common law negligent misrepresentation. This proceeding was largely dismissed as being forum non conveniens and only plaintiffs who had purchased BP securities on a Canada stock exchange were permitted to continue.
  3. In the background of the appellant’s legal challenges in Canada, several legal battles over the same facts were occurring in the US. Notably, in September 2014, a Louisiana court held that BP had acted with conscious disregard, was primarily responsible for the oil spill and was guilty of gross negligence and willful misconduct. BP appealed this decision but ultimately settled the claims in July 2015 and abandoned the appeal. This meant that the finding of gross negligence and willful misconduct survived.
  4. Instead of appealing the decision in proceeding (2), the appellant commenced new litigation in Texas for misrepresentations under Ontario’s Securities Act, however, this proceedings was dismissed, in part because the three-year limitation period under the Securities Act had lapsed.
  5. In June 2017, the appellant commenced yet another class action in Ontario claiming solely for statutory misrepresentations under the Securities Act in Ontario. This proceeding added additional allegations of misrepresentation and for the first time, alleged that BP knew that its misrepresentations were false when it made them. The vast majority of these allegations were statute-barred under the three-year limitation period in the Securities Act, and because the appellant had purchased his securities in 2008, all his personal claims were dismissed.
  6. In September of 2019, the appellant commenced a final proceeding that ultimately led to this appeal. The proceeding advanced the same allegations as the previous Ontario based proceedings, but, for the first time, pleaded that BP made some of the representations with “knowledge of the falsities contained therein or with a reckless disregard to learning the accuracy of the representation” and appended particulars of allegations of fraudulent misrepresentation.

BP challenged the 2019 proceedings under Rule 21.01(1)(a). seeking a declaration that the claims were statute-barred. The motion judge granted the motion, holding that all misrepresentations were discovered in March and June 2010 when BP revised their disclosure documents and essentially admitted to the misrepresentations. In the alternative, the motion judge found that the appellant could have discovered the fraudulent misrepresentations when the US litigation in 2010 contained pleadings of scienter (intent or knowledge of wrongdoing), meaning it was alleged that BP had fraudulently misrepresented its securities to secondary market purchasers. The motion judge concluded that a reasonable person with the abilities and in the circumstances of the appellant would have discovered that his cause of action in fraudulent misrepresentation had accrued, and that a proceeding would be appropriate.

Finally, while the motion judge acknowledged that limitations issues should only be decided under rule 21.01(1)(a) in the rarest of occasions, this was one such case. Where it is plain and obvious from a review of a statement of claim that no additional facts could be asserted that would alter the conclusion that a limitation period had expired, a rule 21.01(1)(a) motion is an appropriate method through which to decide a limitation issue because it is a question of law, not of fact.

issues:

(1) Did the motion judge err in finding that the claim for fraudulent misrepresentation was discovered when BP admitted there were misrepresentations, rather than when BP admitted to knowingly making the misrepresentation?
(2) Did the motion judge err in relying on pleadings from the US Proceedings to establish discoverability of fraudulent circumstances?
(3) Did the motion judge err in finding the 2019 amendment was statute-barred?
(4) Did the motion judge err in deciding a limitation period issue under rule 21.01(1)(a) of the Rules of Civil Procedure?

holding:

Appeal dismissed.

reasoning:

(1) Did the motion judge err in finding that the claim for fraudulent misrepresentation was discovered when BP admitted there were misrepresentations, rather than when BP admitted to knowingly making the misrepresentation?

Yes, but that did not change the result. The question under this issue was essentially whether a potential plaintiff needs to have discovered each element of a cause of action for the basic limitation period to commence. Under s. 5(1)(a) of the Limitations Act, a claim is discovered when the person first knew (or reasonably ought to have known) the following four elements: (i) the occurrence of the injury, loss or damage, (ii) that it was caused by or contributed to by an act or omission, (iii) that the act or omission was by the defendant, and (iv) based on the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek a remedy.

The confusion arises from the changes made when the former Limitations Act was replaced with the current one in 2002. The former act said the limitation period beings to run once a cause of action was discovered, whereas the Limitations Act, 2002 as it reads today says the limitation period begins when a claim is discovered (as determined under s. 5(1)(a)). Despite this change in language, many Ontario judgements have considered when a claim is discovered under the Limitations Act, 2002 have done so with reference to when the cause of action arose.

Under s. 5(1)(a)(ii) of the Limitations Act, 2002, one of the matters that is required for the discovery of a “claim” is: “that the injury, loss or damage was caused by or contributed to by an act or omission” (emphasis added). Because a claim necessarily involves seeking a legal remedy in a court proceeding, the act or omission that must be discovered is one that will give rise to a legal remedy, i.e., a cause of action. In the case of a fraudulent misrepresentation, the act or omission is a knowing misrepresentation.

The Court held that a person who seeks to commence a timely proceeding for a claim must have discovered facts to substantiate each element of the particular cause of action. Rule 25.06 requires a pleading to contain “the material facts on which the party relies for the claim or defence”. Further, where conditions of mind such as fraud and misrepresentation are alleged, Rule 25.06(8) requires that full particulars must be pleaded except that knowledge may be alleged as a fact. There is also the well-established common law principle that a party must only plead fraud when they can substantiate the claim, or risk an award of substantial indemnity costs: Unisys Canada Inc. v. York Three Associates Inc. (2001), 150 O.A.C. 49 (C.A.) Further still, under s. 5(1)(a)(iv), for the limitation period to commence, a proceeding must be an appropriate means to seek a remedy. That will only be the case when the claimant is able to plead a cause of action that gives rise to a remedy.

While the point in time at which a plaintiff had sufficient knowledge to trigger the limitation will always be a factual dispute, the Court held that this knowledge must contain sufficient information to form the basis of their allegation.

Turning to the appeal at hand, the Court found that the motion judge erred in their assessment of discoverability. In 2010, when BP amended their disclosure, they effectively admitted to making misrepresentations. However, there was no acknowledgement of their intentions or fraud. For fraudulent misrepresentation, the act or omission that the claimant must discover is that the misstatement that caused the damage was made with knowledge that the representation was false, an absence of belief in its truth or recklessness as to its truth: Midland Resources Holding Limited v. Shtaif, 2017 ONCA 320.

Ultimately, the Court held that the appellant had not discovered their claim for fraudulent misrepresentation in 2010 as the motion judge found, but that the admission of fraud came in June 2015, when BP abandoned the appeal of such finding. However, the claim was still out of time.

(2) Did the motion judge err in relying on pleadings from the US Proceedings to establish discoverability of fraudulent circumstances?

Yes. While a pleading of scienter means that a plaintiff is alleging knowing falsehoods, it was not an available finding of fact to the motion judge that because the pleading was made, that the appellant ought to have known that BP knew its misrepresentations were false. In fact, BP maintained their denial of knowledge until July 2015. The scienter pleading on its face was not determinative of the knowledge issue, a factual inquiry was required. In holding otherwise, the motion judge committed an error. Again, however, this did not affect the result.

(3) Did the motion judge err in finding the 2019 amendment was statute barred?

No. The appellant submitted that his pleading of fraud is not a new claim but an alternative theory of liability based on facts pleaded in prior statements of claim, particularly in the 2017 amendment, filed June 7, 2017. This was within the two year limitation from July 2, 2015 when BP settled its US claims and abandoned its appeal of a decision finding BP had acted with “conscious disregard of known risks” and was guilty of gross negligence and willful misconduct.

The Court of Appeal dismissed this submission. While the appellant did plead knowledge and awareness of certain misrepresentations in the 2017 pleadings, those pleadings were made entirely in the context of a statutory cause of action. Further, the 2017 pleadings did not plead all material facts to make out fraudulent misrepresentation, such as the plaintiff’s reliance. The 2019 pleading claiming fraudulent misrepresentation was not simply an alternative theory of liability based on the same facts, or a claim for different relief based on the same factual matrix as what was pleaded in the 2017 amended claim. Rather, it asserted a “fundamentally different claim”: 1100997 Ontario Ltd. v. North Elgin Centre Inc., 2016 ONCA 848.

(4) Did the motion judge err in deciding a limitation period issue under rule 21.01(1)(a) of the Rules of Civil Procedure?

No. While the general rule is that until pleadings are closed and the material facts are undisputed, Rule 21.01(1)(a) should not decide limitations issues, since the rule is meant to determine issues of law and limitations issues necessarily involve issues of fact. However, where the facts regarding discovery of the claim are undisputed so that the determination of the issue is “plain and obvious”, then whether the action is statute-barred is considered a question of law that can be determined on a Rule 21.01(1)(a) motion. The Court of Appeal referred to one of its earlier decisions in this matter (an appeal of an issue in the 2017 proceedings), Kaynes v. BP, P.L.C., 2018 ONCA 337, in support this proposition.

Turning to the case at hand, BP had not yet delivered a statement of defence and the appellant had not received the necessary leave to issues its pleadings under the Securities Act and so pleadings were still open. Further, the appellant had alleged several different dates of possible discoverability. However, the latest of such possible dates was July 2, 2015, which was more than two years prior. Therefore, since the July 2015 date was not in dispute, it was plain and obvious that the appellant’s claim was statute-barred. Thus, a Rule 21.01(1)(a) motion was an appropriate way to decide the limitation period issue in this case.


Subway Franchise Systems of Canada, Inc. v. Canadian Broadcasting Corporation, 2021 ONCA 25

[Brown, Zarnett and Thorburn JJ.A.]

Counsel:

A. D. Pettingill, J. Tam and N. O’Toole, for the appellant

W. C. McDowell, S. Halwani, P. E. Veel and B. F. Morrison, for the respondents

Keywords: Torts, Defamation, Negligence, Pure Economic Loss, Anns/Cooper Test, Duty of Care, Proximity, Reasonable Foreseeability, Civil Procedure, Strategic Litigation Against Public Participation Suit (Anti-SLAPP), Courts of Justice Act, R.S.O. 1990, c. C.43, s. 137.1, 1704604 Ontario Ltd. v. Pointes Protection Association, 2020 SCC 22, Bent v. Platnick, 2020 SCC 23, 1688782 Ontario Inc. v. Maple Leaf Foods Inc., 2020 SCC 35, Deloitte & Touche v. Livent Inc. (Receiver of), 2017 SCC 63, Bella v. Young, 2006 SCC 3, Cooper v. Hobart, 2001 SCC 79, Botiuk v. Toronto Free Press Publications Ltd., [1995] 3 S.C.R. 3, Hill v. Church of Scientology, [1995] 2 S.C.R. 1130, Shtaif v. Toronto Life Publishing Co. Ltd., 2013 ONCA 405, 1688782 Ontario Inc. v Maple Leaf Foods Inc., 2018 ONCA 407, Cleveland (Litigation Guardian of) v. Hamilton Health Sciences Corp., 2009 CanLII 70130, aff’d 2011 ONCA 244, Correia v. Canac Kitchens, 2008 ONCA 506, Bertin v. Kristofferson, 2000 CanLII 1109, (NB QB), rev’d 2001 NBCA 118, Neufville v. Sobers, 1983 CarswellOnt 2621 (Ont. H.C.), Lavender v. Miller Bernstein LLP, 2018 ONCA 729, leave to appeal refused, [2018] S.C.C.A. No. 488, Haskett v. Trans Union of Canada Inc., (2003), 63 O.R. (3d) 577 (C.A.), leave to appeal refused, [2003] S.C.C.A. No. 208, Green v. The Hospital for Sick Children, 2017 ONSC 6545, aff’d 2018 ONSC 7058 (Div. Ct.), Lowe v. Guarantee Co. of North America, (2005), 80 O.R. (3d) 222 (C.A.), Elliott v. Canadian Broadcasting Corp., (1993), 16 O.R. (3d) 677 (Gen. Div.), aff’d (1995), 25 O.R. (3d) 302 (C.A.), leave to appeal refused, [1995] S.C.C.A. No. 393, Avalon Rare Metals Inc. v. Hykawy, 2011 ONSC 5569, Roy v. Ottawa Capital Area Crime Stoppers, 2018 ONSC 4207, Guergis v. Hamilton, 2015 ONSC 4915, Fulton v. Globe & Mail, (1997), 207 A.R. 374 (Alta. Q.B.), Rubens v. Sansome, 2017 NLCA 32, Spring v. Guardian Assurance plc, [1994] 3 All E.R. 129 (HL (Eng))

facts:

In 2017, the Canadian Broadcasting Corporation (“CBC”) aired an episode of its television show, “Marketplace”. It featured an investigative report comparing the contents of chicken sandwiches sold by five fast food chains in Canada. The chicken sandwiches sold by the respondents (“Subway”) were reported to be made of “only slightly more than 50% chicken”, substantially below the chicken content of sandwiches sold by the other chains.

Prior to the Marketplace broadcast, CBC contracted with a laboratory of the appellant, Trent University (“Trent”), to test the chicken content of the sandwiches. The results of that testing were, in part, the basis for the statements made on the broadcast. Trent personnel also participated in the broadcast.

Subway, alleging that the statements on the broadcast were false and that the testing by Trent was inaccurate and carelessly done, launched an action against CBC and Trent. The action against Trent asserted two causes of action—defamation and negligence.

Trent moved under s. 137.1 of the CJA to dismiss the part of Subway’s action that made a claim against Trent in negligence. Section 137.1 contemplates that if a defendant satisfies an initial threshold of showing that the claim against it arises out of an expression it made on a matter related to the public interest, the claim is to be dismissed unless the plaintiff satisfies certain requirements under s. 137.1(4), including showing that there are grounds to believe the claim has substantial merit.

Trent’s motion failed. The motion judge held that the negligence claim did not arise from an expression by Trent on a matter related to the public interest, since the negligence claim was focused on the quality of the testing, rather than the communication of the results. As the initial threshold for a s. 137.1 motion was not met, the negligence claim could proceed. In any event, applying the standard that would apply on a motion to strike under Rule 21 of the Rules of Civil Procedure, the motion judge held that the negligence claim had sufficient merit to proceed and the harm suffered by Subway (which the continuance of the claim sought to remedy) outweighed the public interest in protecting Trent’s expression.

issues:

(1) Did the motion judge err in finding that the negligence claim did not arise from an expression that related to a matter of public interest?

(2) Did the motion judge err in finding that the negligence claim had substantial merit?

holding:

Appeal allowed.

reasoning:

(1) Yes. The motion judge erred in reaching the conclusion that the claim in negligence did not arise from an expression that related to a matter of public interest. It was an error of law to view s. 137.1 as aimed at a limited category of torts like defamation. It was also an error of law not to appreciate the centrality of expression to this negligence claim.

In Pointes (SCC), the claim was not for defamation; it alleged that the defendant had breached a contract by making certain statements and offering certain opinions at an Ontario Municipal Board hearing. Section 137.1 was held to apply to that claim. As the Court explained in Pointes (ONCA), the requirement that the proceeding arise from an expression is met where the expression “grounds” the claim. Putting it another way, the requirement is met if the claim “targets” the expression. The negligence claim arose from an expression, in the sense described both by this court and by the Supreme Court in Pointes. The expression is causally connected to the claim; there is a nexus between them; the expression grounds the claim; and the claim targets the expression. The expression or communication of or about the test results is integral to all aspects of Subway’s negligence claim: the existence of a duty of care, whether the duty was breached, and damages.

Although in important ways the negligence action was concerned with the quality of Trent’s testing, in equally important and fundamental ways it was concerned with Trent’s knowledge that it was doing the testing to provide information to be broadcasted; it was concerned with what Trent communicated about its tests; and it was concerned with the harm that resulted from the communication of, about, and based on, its test results. That was sufficient to satisfy the initial threshold of being a claim that arises out of an expression. A claim in an action that complains about these matters falls within the category of litigation that could unduly limit such expression.

The expression clearly related to a matter of public interest, as the very essence of Subway’s claim was that the purpose of Trent’s testing was for it to be the basis of conclusions that would be broadcasted about the chicken content of sandwiches sold by Subway and certain of its competitors, and that this is what occurred. Accordingly, the motion judge erred in finding that Trent’s motion did not pass the initial threshold requirement. Contrary to the motion judge’s conclusion, the negligence claim had to be dismissed unless Subway satisfied the relevant criteria in s. 137.1(4) of the CJA.

(2) Yes. The motion judge did not have the benefit of the Pointes decision, which described the applicable standard as one that is more demanding than the one applicable on a motion to strike, which requires that the claim have some chance of success under the ‘plain and obvious’ test.

Subway’s negligence claim lacked a real prospect of success. It was not legally tenable. Subway’s negligence claim did not have a real prospect of success of establishing a relationship of proximity analogous to any established category of proximity, nor could Subway establish a novel proximate relationship.

The decisions cited in support of Subway’s analogous relationship argument regarding proximity were all distinguished. These cases were distinguished based on the nature of the loss at issue. The nature of the loss was a necessary consideration given the different framework for assessing proximity in claims of pure economic loss. Such claims warrant more rigorous examination than in other claims for negligence. First, proximity is distinct from reasonable foreseeability of harm. Parties are not in a proximate relationship simply because it is reasonably foreseeable that carelessness by one will harm the other economically. Proximity is a “distinct and more demanding hurdle than reasonable foreseeability”. Second, the proximity analysis takes place against the backdrop of the fundamental principle that a plaintiff must have a right, or legally cognizable interest that would be vindicated by recognizing a duty of care on the part of the defendant. This is particularly important in cases of pure economic loss because there “is no general right, in tort, protecting against the negligent or intentional infliction of pure economic loss”. Third, the proper identification and assessment of all relevant factors arising from the relationship between the parties, in order to determine whether their relationship can truly be called proximate, furnishes a “principled basis” to determine to whom duties are owed and to whom they are not, as well as the scope of the duties.

There was neither the presence of an undertaking nor reliance in the present case. Nor, like a case in the shoddy goods category, did Subway’s claim seek to impose a duty correlative to what is seen, in the eyes of the law, as a legally cognizable right in a person or property. These absences were considered by the Court in assessing whether Subway could establish proximity for its negligence claim through either two of the routes it argued for, analogous relationship or novel proximate relationship through a full proximity analysis. The three current categories of the type of cases in which pure economic loss could arise between private parties were described as (i) negligent misrepresentation or performance of a service; (ii) negligent supply of shoddy goods or structures; and (iii) relational economic loss.

Subway could not explain, or justify, why a laboratory hired by the media was in a relationship of proximity with the subject of the media report, while investigative journalists were not. In Shtaif, the Court of Appeal rejected the notion that reporters investigating a story for publication were in a relationship of proximity with the subject of the story solely by reason of conducting the investigation. The existence of an analogy running counter to the one Subway contended for was important, since the purpose of a proximity analysis is to provide a principled basis for imposing a duty and determining its scope.

The constellation of factors to which Subway pointed were primarily about foreseeability of harm, not proximity. They did not show a close and direct relationship. They did not show any expectations, representations, reliance, or statutory obligations as between Trent and Subway. They did not show anything that fulfilled the purpose served by the requirement for an undertaking and reliance in a negligent misrepresentation or performance of services case, that is, something that showed a legally cognizable right of the plaintiff was affected. Nor did they show interests affected akin to rights in person or property. Subway’s negligence claim was only about the pure economic harm it suffered.

In the result, the appeal was allowed, and the motion judge’s order was set aside and replaced by an order dismissing Subway’s negligence claim against Trent.


Subway Franchise Systems of Canada, Inc. v. Canadian Broadcasting Corporation, 2021 ONCA 26

[Brown, Zarnett and Thorburn JJ.A.]

Counsel:

W. C. McDowell, S. Halwani, P. E. Veel and B. F. Morrison, for the appellants

C. Lonsdale, G. Kerr and W. Main, for the respondents Canadian Broadcasting Corporation, C. A., K. C. and E. S.

Keywords: Torts, Defamation, Strategic Litigation Against Public Participation Suit (Anti-SLAPP), Courts of Justice Act, R.S.O. 1990, c. C. 43, s. 173.1, 1704604 Ontario Ltd. v. Pointes Protection Association, 2020 SCC 22, Bent v. Platnick, 2020 SCC 23, Level One Construction Ltd. v. Burnham, 2018 BCSC 1354, Mugesera v. Canada (Minister of Citizenship and Immigration), 2005 SCC 40, Bondfield Construction Company Limited v. The Globe and Mail Inc., 2019 ONCA 166, Hamlin v. Kavanagh, 2019 ONSC 5552, Grant v. Torstar Corp., 2009 SCC 61, Casses v. Canadian Broadcasting Corporation, 2015 BCSC 215, Platnick v. Bent, 2018 ONCA 687

facts:

The Canadian Broadcasting Corporation (the “CBC”) represented on television and online that only approximately 50% of the DNA in Subway chicken was chicken DNA. The report was based on test samples conducted by Trent University’s Natural Resources DNA Profiling and Forensic Centre (“Trent”). The appellant brought an action against the CBC and Trent for defamation, and a claim against Trent only, for negligence. CBC and Trent each brought a motion pursuant to the Anti-SLAPP provisions in s.137.1 of the Courts of Justice Act (“CJA”). CBC sought to dismiss the appellant’s entire action against it, while Trent sought to dismiss the negligence claim. The motion judge dismissed the action against the CBC but allowed the negligence claim against Trent. Both Subway and Trent appealed. These reasons only addressed the appellant, Subway’s, appeal of the dismissal of the action against CBC. The Trent appeal is addressed in a separate decision released concurrently.

CBC took the position that the lawsuit against it was aimed, not at vindicating the appellant’s reputation or recovering losses, but rather, at shutting down discussion about issues of public interest. CBC claimed that the appellant’s action amounted to a Strategic Litigation Against Public Participation (“SLAPP”) suit. The appellant claimed the motion judge erred in dismissing its defamation claim against the CBC. The motion judge held that the subject-matter involved issues of public interest and that the claim had substantial merit.

After this appeal was heard, the Supreme Court of Canada released its companion decisions on the interpretation of s. 137.1 of the CJA in 1704604 Ontario Ltd. v. Pointes Protection Association (“Pointes”) and Bent v. Platnick (“Bent”). Counsel were permitted to file supplementary facta to address the effect of these decisions on this case. Both parties agreed that the Court’s prior approach in Pointes was largely affirmed by those decisions, with minor modifications.

issues:

Did the motion judge err in deciding that the appellant had not satisfied its onus to establish that:

(1) there were grounds to believe CBC had no valid defence? and
(2) the public interest in protecting the expression outweighed the appellant’s likely harm?

holding:

Appeal allowed.

reasoning:

The Test on a Section 137.1 Motion

The Court first considered at the objective of the legislation. Section 137.1 of the CJA addressed the concern that participation in public interest matters may be hampered by fear of legal reprisals. The provision encourages expression on matters of public interest and discourages the use of litigation to unduly limit such expression. The objective of the legislation is to quickly identify and deal with strategic lawsuits, minimizing the emotional and financial strain on defendants and strike a balance that ensures abusive litigation is stopped but legitimate actions continue. Consistent with these objectives, the motion judge need only conduct a preliminary assessment of the merits.

The Court then considered the wording of the provision. At the first stage, the defendant must demonstrate that the litigation arises out of an expression that relates to a matter of public interest. Section 137.1 provides that, if a judge is satisfied that the proceeding arises from an expression made that relates to a matter of public interest, the judge shall dismiss the action. However, a judge shall not dismiss a proceeding if the responding party satisfies the judge that the proceeding has substantial merit, the moving party has no valid defence in the proceeding, and the harm is sufficiently serious that the public interest in permitting the proceeding to continue outweighs the public interest in protecting that expression.

(1) Did the motion judge err in deciding that the appellant had not satisfied its onus to establish that there were grounds to believe CBC had no valid defence?

Yes. The appellant claimed that the motion judge erred in law by applying the wrong test in deciding whether there were grounds to believe CBC had no valid defence, and assessing the claim as though he were the ultimate trier of fact, not a motion judge making a preliminary assessment.

(a) The Threshold to be Applied to Establish Grounds to Believe no Defence

Pointes and Bent had not yet been released when the motion judge delivered his reasons. Those cases clarified the threshold to be met by a plaintiff in respect of s. 137.1(4)(a) of the CJA. Pointes stood for the proposition that findings of ‘substantial merit’ and ‘no valid defence’ should be seen as constituent parts of an overall assessment of the prospect of success of the underlying claim. Bents clarified that the plaintiff is only required to show that there is a basis in the record and the law — taking into account the stage of the proceeding — to support a finding that the defences do not tend to weigh more in the defendant’s favour.

(b) What Constitutes “Grounds to Believe”

The Court noted that “grounds to believe” meant something more than mere suspicion, but less than proof on the balance of probabilities. Given the early stage of the proceeding, that damage assessment can be an ongoing process, and that such motions are meant to weed out clearly defective claims, there is only a limited assessment of the evidence from the motion judge’s perspective according to Pointes. If the motion record raises serious credibility issues or inferences to be drawn from competing primary facts, the motion judge must avoid taking a “deep dive” into the ultimate merits and instead, engage in a much more limited analysis.

(c) The Defence of Responsible Communication

The defence of responsible communication will apply where the publication is on a matter of public interest, and the publisher diligently tried to verify the allegation taking into account: the seriousness of the allegation, the public importance and urgency of the matter, the reliability of the source, whether the plaintiff’s side of the story was sought and accurately reported, whether the inclusion of the defamatory statement was justifiable, and any other relevant circumstances. Ultimately, responsible efforts must be made to take reasonably diligent steps to validate the accuracy of the statements made.

(d) The Court of Appeal’s Analysis and Conclusion of the First Issue

It was agreed that the claim had substantial merit. Moreover, CBC conceded that a high degree of diligence was required, given the severity of the allegations and their likely impact on the appellant. The motion judge held that the CBC exercised due diligence before publishing the findings and that the appellant did not establish grounds to believe the CBC had no valid defence of responsible communication. The Court held that the motion judge erred in law by applying a standard that was higher than the standard articulated by the Supreme Court in its recent decisions.

In Bent, the Supreme Court held that a plaintiff need only demonstrate “that there is a basis in the record and the law — taking into account the stage of the proceeding — to support a finding that the defences the defendant put in play do not tend to weigh more in the defendant’s favour. The Court found that the appellant demonstrated that there was a basis in the record to support a finding that the defence of responsible communication at this stage, did not tend to weigh more in CBC’s favour. That evidence included the fact that CBC knew that accreditation of a laboratory by the International Organization for Standardization (“ISO”) was important, but declined to have an ISO-accredited laboratory conduct the testing. CBC knew that Trent was not an ISO certified laboratory and that it had not done this type of testing before. Additionally, the appellant disputed Trent’s results and the supplier of the product did not corroborate the results of the Trent tests. Later in the legal proceeding, the appellant’s expert on DNA methods and food testing, testified that there were serious flaws in the tests leading to inaccurate results. Questions were raised about the reliability of the findings and the results. The Court found that, had more due diligence been conducted before its dissemination, the information could have been verified.

Therefore, the Court held that there was a basis to support a finding that the defence of responsible communication did not tend to weigh more in CBC’s favour at this stage of the proceeding. The Court found that the motion judge erred in law by applying a standard higher than the standard articulated in the recent Supreme Court cases in Pointes and Bent.

(2) Did the motion judge err in deciding that the appellant had not satisfied its onus to establish that the public interest in protecting the expression outweighed the appellant’s likely harm?

Yes. To satisfy the public interest factor, the appellant had to establish that the suffered harm as a result of the CBC’s expression was sufficiently serious that the public interest in permitting the proceeding to continue outweighed the public interest in protecting that expression.

The appellant claimed that the motion judge did not appreciate the harm suffered, improperly weighed the extent of the appellant’s damages and considered the scope of the appellant’s loss not in terms of the estimates of damages but only in the context of the appellant’s overall business. Additionally, the appellant argued that the motion judge failed to consider that this case did not bear the four hallmarks of a SLAPP suit including evidence of a history of attempts to silence critics, financial power imbalance, a punitive purpose, and minimal damages suffered. The CBC questioned the extent of the harm suffered, noted the appellant’s extensive resources, and contended that the appellant brought its substantial financial clout to bear on pursuing a damage claim that is out of all proportion to its realistic losses, with the aim of silencing its critics.

(a) The Objectives of s.137.1(4)(b): Weighing the Public Interest

As noted above, the objective of s. 137.1(4)(b) is to quickly identify and deal with strategic lawsuits, and ensure abusive litigation is stopped but legitimate actions continue. Summary procedures such as this, are intended to avoid the need for a trial where it is clearly unnecessary to achieve a fair result. They are not meant to duplicate a trial at the outset of the proceeding. Pointes and Bent articulated that summary procedures allow motion judges to assess how allowing a party to vindicate their rights through a lawsuit affects, in turn, freedom of expression and its corresponding influence on public discourse and participation in a pluralistic democracy.

(b) Assessing the Harm Suffered & the Public Interest

In assessing the harm likely to be suffered by a plaintiff, both monetary and non-monetary harm are relevant as the court in Pointes stated. The Court recognized that reputation is one of the most valuable assets a person or a business can possess. A plaintiff must simply provide evidence for the motion judge to draw an inference of likelihood in respect of the existence of the harm and the relevant causal link. In citing Pointes, the Court noted the factors that may be relevant in weighing the public interest in allowing a proceeding to continue, including a history of attempts to silence critics, financial power imbalance, punitive purpose, and damages suffered. The potential chilling effect on future expression and the defendant’s history of advocacy in the public interest may also be relevant.

(c) The Motion Judge’s Decision

The motion judge noted the broad dissemination of the CBC report and accepted that the controversy became well known. The motion judge noted however that CBC’s scepticism that a Canadian broadcast would have such an impact in the United States, was bolstered by transcripts of conference calls between the appellant and its franchisees. CBC claimed they disclosed that the appellant concluded the broadcast and online publication had some small impact on sales in Canada, but that bad weather was the primary factor affecting Canadian sales. In the U.S., a much bigger market, it did not appear to the appellant representatives on those calls that the CBC’s Report had any noticeable impact on sales.

The motion judge concluded that in assessing the public interest in protecting the expression, the interest touched on food products and truth in labelling food products, which is a consumer protection issue of the highest order. Therefore, the motion judge found that the public purposes were fulfilled by dismissing the action as against CBC. They outweighed any potential impact that this may have had on the private interest of the appellant.

(d) The Court of Appeal’s Analysis of the Motion Judge’s Assessment of the Public Interest

The Court held that the motion judge erred in law in the manner in which he considered the harm the appellant likely suffered, and in his approach to weighing the public interest. The motion judge failed to appreciate the reputational harm and likelihood of serious financial harm to the appellant, and that the proceeding did not bear the indicia of a SLAPP suit.

The Court found that the broad dissemination of defamatory statements was evidence from which one could infer that the appellant likely suffered significant reputational harm. Moreover, while some Subway representatives may have told franchisees that financial losses were smaller than the losses subsequently calculated by the appellant’s expert, the disconnect between that evidence was not a matter to be determined on this type of motion. At this early stage, there was evidence of significant reputational and financial harm. As the court stated in Pointes, if the motion record raises serious questions about the credibility of affiants and the inferences to be drawn from competing primary facts, the motion judge must avoid taking a ‘deep dive’ into the ultimate merits of the claim under the guise of the much more limited merits analysis required by s. 137.1(4)(a).

Although the motion judge held he could not “dismiss out of hand” the possibility that this was a SLAPP suit, the decisions of the Supreme Court in Bent and Pointes held that the s. 137.1(4)(b) stage involves a public interest weighing exercise and not simply an inquiry into the hallmarks of a SLAPP. Whether a party is attempting to vindictively or strategically silence another party or is attempting to legitimately recover for harm arising from a defamatory statement may form part of the public interest weighing inquiry. The Court held that here, there was no evidence of ulterior motive, abuse of power or other improper purpose. The Court also emphasized that the continuation of the action should not deter others from expression, but should deter others from making remarks without first taking reasonable steps to substantiate the veracity of those remarks particularly where, as in this case, there was no urgency to the dissemination of that information.

For these reasons, the Court found that the motion judge erred in law by engaging in an assessment of damages as though he were the trial judge, in failing to appreciate that damage assessment may be an ongoing process, and in failing to appropriately weigh the public interest. Therefore, the Court held that the public interest in allowing the action against the CBC and its named employees to be determined on the merits outweighed the public interest in protecting this expression from being adjudicated.


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Photo of John Polyzogopoulos John Polyzogopoulos

John has been the editor of Blaneys Appeals since the inception of the blog in the Summer of 2014. He is a partner at the firm with almost two decades of experience handling a wide variety of litigation matters. John assists clients with…

John has been the editor of Blaneys Appeals since the inception of the blog in the Summer of 2014. He is a partner at the firm with almost two decades of experience handling a wide variety of litigation matters. John assists clients with matters ranging from appeals, to injunctions, to corporate, breach of contract, construction, environmental contamination, product liability, debtor-creditor, insolvency and other business litigation. He also handles professional discipline and professional negligence matters, as well as complex estates and matrimonial litigation. In addition, John represents amateur sports organizations in contentious matters, and advises them in matters of internal governance. John can be reached at 416-593-2953 or jpolyzogopoulos@blaney.com.