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Good afternoon.

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

Topics covered this week included striking jury notices, oppression in the context of a public company, specific performance of an agreement of purchase and sale of a condo, quantum meruit where a contingency fee agreement was found unenforceable under the Solicitors Act, and appeal routes in class proceedings.

In a decision that was telegraphed from its earlier decision in Louis v. Poitras just before Christmas,  the Court allowed the appeal from the Divisional Court decision which had set aside the motion judge’s decision to strike a jury notice in a personal injury case in order to permit the case to go to trial during the pandemic.

In Lucas, the builder of a new condo development terminated an agreement of purchase and sale because the purchaser had rented the unit during occupancy and prior to closing without the builder’s consent. The builder then sold the unit under value to relatives of the builder’s principal. The application judge granted relief and forfeiture and specific performance. The Court rightly upheld that decision. The decision illustrates that even in cases involving the purchase of condos in Toronto, which are a dime a dozen, a purchaser can still get specific performance.

In Beaudoin Estate, the Court allowed an appeal from a motion judge’s decision under Rule 21.02(1)(a) striking an action as being statute-barred under s. 38(3) of the Trustee Act, R.S.O. 1990, c. T.23. The plaintiff alleged fraudulent concealment as a basis to extend the hard two-year limitation period under the Trustee Act. The Court confirmed that the factual findings necessary to determine the fraudulent concealment issue should not have been made under Rule 21 in the absence of any evidence.

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

2020 Update from the Bench

The Honourable Benjamin Zarnett, Court of Appeal for Ontario

Panel 1 – Advocacy Practice Tips from the Court

Girao v. Cunningham, 2020 ONCA 260

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

Welton v. United Lands Corporation Limited, 2020 ONCA 322

Jordan Goldblatt, Adair Goldblatt Bieber LLP

Sara Erskine, Rueters LLP

 

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

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

Seumas Woods, Blake, Cassels & Graydon LLP

Alistair Crawley, Crawley MacKewn Brush LLP

Elizabeth Bowker, Stieber Berlach LLP

 

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

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

7636156 Canada Inc. (Re), 2020 ONCA 681

Ken Kraft, Dentons LLP

Kevin Sherkin, Levine, Sherkin, Boussidan

D.J. Miller, Thornton Grout Finnigan LLP

 

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

Wishing everyone an enjoyable weekend.

John Polyzogopoulos
Blaney McMurtry LLP
416.593.2953 Email


Table of Contents

Civil Decisions

Louis v. Poitras , 2021 ONCA 49

Keywords: Civil Procedure, Striking Jury Notices, COVID-19, Hryniak v. Mauldin, 2014 SCC 7, Re Sault Dock Co. Ltd. and City of Sault Ste. Marie, [1973] 2 O.R. 479 (C.A.), Kostopoulos v. Jesshope (1985), 50 O.R. (2d) 54 (C.A.), Louis v. Poitras, 2020 ONCA 815, Girao v. Cunningham, 2020 ONCA 260, MacLeod v. Canadian Road Management Company, 2018 ONSC 2186, Belton v. Spencer, 2020 ONSC 5327, Belton v. Spencer, 2020 ONCA 623, Passero v. Doornkempt, 2020 ONSC 6384, MacDougall v. Sisley, 2020 ONSC 6632, Higashi v. Chiarot, 2020 ONSC 5523

Baylin Technologies Inc. v. Gelerman , 2021 ONCA 45

Keywords: Corporations, Oppression, Securities, Issuers, Directors, Elections, Majority Voting Requirements, Contracts, Remedies, Set-Off, Civil Procedure ,Mootness, Public Importance, Mental Health Centre Penetanguishene v. Ontario, 2010 ONCA 197, Borowski v. Canada (Attorney General), [1989] 1 S.C.R. 342, BCE Inc. v. 1976 Debentureholders, 2008 SCC 69, Telford v. Holt, [1987] 2 S.C.R. 193, Caisse populaire Desjardins de l’Est de Drummond v. Canada, 2009 SCC 29

Fresco v. Canadian Imperial Bank of Commerce , 2021 ONCA 46

Keywords: Civil Procedure, Appeals, Jurisdiction, Final or Interlocutory, Class Proceedings, Class Proceeding Act, 1992, S.O. 1992, c. 6, ss. 24(1), 30(2), 30(3), Courts of Justice Act, R.S.O. 1990, c. C.43, s.6(1)(b), Fresco v. Canadian Imperial Bank of Commerce, 2012 ONCA 444, Fresco v. Canadian Imperial Bank of Commerce, 2020 ONSC 75, Fresco v. Canadian Imperial Bank of Commerce, 2020 ONSC 4288, Fresco v. Canadian Imperial Bank of Commerce, 2020 ONSC 6098, Fulawka v. Bank of Nova Scotia, 2012 ONCA 443, Pro-Sys Consultants Ltd. v. Microsoft Corporation, 2013 SCC 57, Bancroft-Snell v. Visa Canada Corporation, 2019 ONCA 822

Lima v. Kwinter , 2021 ONCA 47

Keywords:Contracts, Solicitor and Client, Contingency Fee Agreements, Unenforceability, Quantum Meruit, Solicitors Act, R.S.O. 1990, c. S.15, ss. 23-24, 28.1(8)-(9), Cohen v. Kealey and Blaney, [1985] O.J. No. 160 (C.A.), Almalki v. Canada (Attorney General), 2019 ONCA 26, Tri Level Claims Consultants Ltd. v. Koliniotis (2005), 257 D.L.R. (4th) 297 (Ont. C.A.), McIntyre Estate v. Ontario (Attorney General) (2002), 61 O.R. (3d) 257 (C.A.), Raphael Partners v. Lam (2002), 61 O.R. (3d) 417 (C.A.), Henricks-Hunter v. 814888 Ontario Inc. (Phoenix Concert Theatre), 2012 ONCA 496, Cookish v. Paul Lee Associates Professional Corporation, 2013 ONCA 278, Du Vernet v. 1017682 Ontario Limited and Victor Wong, 2009 ONSC 29191, Séguin v. Van Dyke, 2013 ONSC 6576, Chudy v. Merchant Law Group, 2008 BCCA 484, Hodge v. Neinstein, 2015 ONSC 7345 (Div. Ct.), aff’d in part, 2017 ONCA 294

Lucas v. 1858793 Ontario Inc. (Howard Park) , 2021 ONCA 52

Keywords: Contracts, Real Property, Agreements of Purchase and Sale of Land,  Duty of Good Faith and Fair Dealing, Repudiation, Acceptance of Breach, Termination, Remedies, Relief from Forfeiture, Specific Performance, Courts of Justice Act, R.S.O. 1990, c. C.43, s. 98, Place Concorde East Ltd. Partnership v. Shelter Corp. of Canada Ltd., (2006) 270 D.L.R. (4th) 181, Losenno v. Ontario Human Rights Commission, (2005) 78 O.R. (3d) 161 (C.A.), Bercovitch v. Resnick, 2011 ONSC 5082, leave to appeal refused, 2011 ONSC 6410 (Div. Crt.), Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co., [1994] 2 S.C.R. 490, Semelhago v. Paramadevan, [1996] 2 S.C.R. 415, Matthew Brady Self Storage Corp. v. InStorage Limited Partnership, 2014 ONCA 858, leave to appeal refused, [2015] S.C.C.A. No. 50, 1954294 Ontario Ltd. v. Gracegreen Real Estate Development Ltd., 2017 ONSC 6369, Adderley v. Dixon, (1824) 57 E.R. 239 (Ch.), Asamera Oil Corp. v. Seal Oil & General Corp., [1979] 1 S.C.R. 633, John E. Dodge Holdings Ltd. v. 805062 Ontario Ltd. (2001), 56 O.R. (3d) 341 (S.C.), aff’d (2003) 63 O.R. (3d) 304 (C.A.), leave to appeal refused, [2003] S.C.C.A. No. 145, Landmark of Thornhill Ltd. v. Jacobson (1995), 25 O.R. (3d) 628 (C.A.), Walker v. Jones (2008), 298 D.L.R. (4th) 344, Sivasubramaniam v. Mohammad, 2018 ONSC 3073, 98 R.P.R. (5th) 130, aff’d 2019 ONCA 242, 100 R.P.R. (5th) 1., Di Millo v. 2099232 Ontario Inc., 2018 ONCA 1051, leave to appeal refused, [2019] S.C.C.A. No. 55, Gillespie v. 1766998 Ontario Inc., 2014 ONSC 6952, UBS Securities Inc. v. Sands Brothers Canada Ltd., 2009 ONCA 328, Southcott Estates Inc. v. Toronto Catholic District School Board, 2012 SCC 51, Neighbourhoods of Cornell Inc. v. 1440106 Ontario Inc. (2003), 11 R.P.R. (4th) 294, aff’d (2004), 22 R.P.R. (4th) 176 (C.A.), leave to appeal refused, [2004] S.C.C.A. No. 390, Corporation v. Stilton Corp. Ltd., 2019 ONCA 746, leave to appeal to S.C.C. refused, 38927 (April 2, 2020), Louis v. Poitras, 2020 ONCA 815

Beaudoin Estate v. Campbellford Memorial Hospital , 2021 ONCA 57

Keywords: Civil Procedure, Striking Pleadings, Limitation Periods, Trustees, Discoverability, Fraudulent Concealment, Discoverability, Torts, Negligence, Medical Malpractice, Rules of Civil Procedure, Rules 21.01(1)(a), 20, Limitations Act, 2002, S.O. 2002, c. 24, Sched. B, Trustee Act, R.S.O. 1990, c. T.23, s. 38(3), Transamerica Life Canada Inc. v. ING Canada Inc. (2003), 68 O.R. (3d) 457 (C.A.), Paton Estate v. Ontario Lottery and Gaming Corporation (Fallsview Casino Resort and OLG Casino Brantford), 2016 ONCA 458, R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42, Levesque v. Crampton Estate, 2017 ONCA 455, Pioneer Corp. v. Godfrey, 2019 SCC 42, Colin v. Tan, 2016 ONSC 1187, McIlvenna v. 1887401 Ontario Ltd., 2015 ONCA 830, Kaynes v. BP p.l.c., 2021 ONCA 36, Giroux Estate v. Trillium Health Centre (2005), 74 O.R. (3d) 341 (C.A.), Clements v. Clements, 2012 SCC 32, Operation Dismantle v. The Queen, [1985] 1 S.C.R. 441, P.K. v. Desrochers (2001), 151 O.A.C. 341 (C.A.), Spar Roofing & Metal Supplies Ltd. v. Glynn, 2016 ONCA 296

Short Civil Decisions

Khader c. Mamache , 2021 ONCA 51

Keywords: Civil Procedure, Appeals, Perfection, Extension of Time, Family Law, Custody and Access, COVID-19, Courts of Justice Act, R.S.O. 1990, c. C.43, ss. 19(1)(b), Rules of Civil Procedure, Rule 62.02(3), Codina v. Canadian Broadcasting Corporation, 2020 ONCA 116, Issasi v. Rosenzweig, 2011 ONCA 112, Enbridge Gas Distribution Inc. v. Froese, 2013 ONCA 131, D.G. v. A.F., 2014 ONCA 436, Van de Perre c. Edwards, 2001 SCC 60

Webster v Groszman, 2021 ONCA 55

Keywords: Civil Procedure, Appeals, Jurisdiction, Partition Act, Partition Act, RSO 1990, c. P. 4, s. 7, Punit v Punit, 2014 ONCA 252


CIVIL DECISIONS

Louis v. Poitras, 2021 ONCA 49

[Watt, Lauwers and Hourigan JJ.A.]

Counsel:

J. Y. Obagi and E. A. Quigley, for the moving parties/ appellants

B. Marta, for the responding party/ respondent Security National Insurance Company

J. Griffiths, for the responding parties/ respondents TD Insurance Meloche Monnex and Security National Insurance Company

Keywords: Civil Procedure, Striking Jury Notices, COVID-19, Hryniak v. Mauldin, 2014 SCC 7, Re Sault Dock Co. Ltd. and City of Sault Ste. Marie, [1973] 2 O.R. 479 (C.A.), Kostopoulos v. Jesshope (1985), 50 O.R. (2d) 54 (C.A.), Louis v. Poitras, 2020 ONCA 815, Girao v. Cunningham, 2020 ONCA 260, MacLeod v. Canadian Road Management Company, 2018 ONSC 2186, Belton v. Spencer, 2020 ONSC 5327, Belton v. Spencer, 2020 ONCA 623, Passero v. Doornkempt, 2020 ONSC 6384, MacDougall v. Sisley, 2020 ONSC 6632, Higashi v. Chiarot, 2020 ONSC 5523

facts:

The appellants were involved in a motor vehicle collision in 2013. Jury notices were filed but COVID-19 intervened and the trial date was lost. But for the pandemic, the trial would have proceeded in Ottawa in April 2020 but civil jury trials were not being scheduled. In July 2020, the plaintiff moved for an order striking the jury notices, which the motion judge granted. The defendant insurers appealed to the Divisional Court. The Divisional Court allowed the appeal and held the motion judge’s decision was arbitrary because it was attributed solely to the presence of delay but lacked sufficient evidence of actual prejudice to the parties. It set aside the motion judge’s order and restored the jury notices.

The plaintiffs moved to stay the Divisional Court’s order pending appeal to the Court of Appeal. In granting the stay, the Court found the Divisional Court misapprehended relevant facts, particularly regarding uncertainty in Ottawa as to when or how a jury trial might proceed. Further, it was noted that pandemic-related delay affecting civil jury trial scheduling had been raised in several cases and would require consideration by the Court of Appeal. Upon granting the stay, the Court ordered that the motion for leave to appeal be expedited and heard together with the appeal if the panel entertained submissions on the appeal, as it did.

issues:
  1. Should leave to appeal be granted?
  2. Did the Divisional Court err in its analysis?
holding:

Leave to appeal granted.

reasoning:
  1. Should leave to appeal be granted?

Yes, the Court held that the decision below was flawed on its face, and the approach taken by the Divisional Court had to be discouraged if courts were going to properly manage their civil lists during the pandemic and beyond.

The Court will consider cases where special circumstances would make the matter sought to be brought before the Court a matter of public importance or would appear to require that in the interest of justice leave should be granted. The plaintiffs submitted that there were two grounds upon which leave to appeal ought to be granted: (i) the Divisional Court decision disclosed an obvious misapprehension of the relevant facts considered by the motion judge in granting the order to strike the jury notices; and (ii) there was a serious question raised by the appeal that engaged a matter of public importance that the court should consider in the interests of justice.

The Court was satisfied that the Divisional Court’s analysis showed an obvious misapprehension of the relevant facts. The Court noted that an obvious error was made in concluding that the motion judge made his decision without regard to evidence of the local conditions. The motion judge was explicit regarding the evidence he was relying on in making that order, evidence that went to the specifics of the situation then extant regarding jury trials in Ottawa and its impact on these proceedings. The Court also found that the appeal raised a matter of public importance regarding the administration of civil justice. Guidance was necessary regarding civil case management during the current pandemic crisis. The Court explained that guidance was necessary for intermediate courts of appeal to remind them of the minimal role they play in reviewing discretionary case management decisions.

  1. Did the Divisional Court err in its analysis?

Yes, its conclusion that the motion judge’s decision was arbitrary finds no support in the motion judge’s reasons or the record before him. While a court should not interfere with the right to a jury trial in a civil case without just cause or compelling reasons, a judge considering a motion to strike a jury notice has a broad discretion to determine the mode of trial. The Court also noted that an appellate court reviewing a decision to strike a jury notice has a very limited scope of review. It may only interfere where the decision to strike was exercised arbitrarily or capriciously or was based upon a wrong or inapplicable principle of law. An appeal court should not merely pay lip service to the concept of deference and then proceed to substitute its own view as to what the proper result should be for that of the lower court. With those principles in mind, the Court found that the Divisional Court’s findings were erroneous and reflected a fundamental misunderstanding of the role of appellate courts in considering appeals from orders striking jury notices.

First, the Divisional Court found that delay alone was not enough to strike a jury notice, as there must also be proof of some additional prejudice. The Court disagreed. The motion judge had found that the real and substantial prejudice arose simply by reason of delay as a result of the pandemic. The Court agreed with the statement of Brown J.A. in his decision on the stay motion that delay in obtaining a date of a civil jury trial can, by itself, constitute prejudice. Implicit in the Divisional Court’s reasoning is that delay is to be expected and tolerated; it is the ordinary course. That is precisely the type of complacency that has led to the civil justice system’s systemic delay and was subject to criticism by the Supreme Court of Canada in Hryniak v. Mauldin.

Second, in considering a request to strike a jury notice, the court may look beyond the parties’ interests and consider the broader interests of the administration of justice. While the Divisional Court purported to consider the administration of justice, the importance of the administration of justice in its analysis was almost totally discounted. A proper consideration of the administration of justice would recognize that local judges are best positioned to understand the availability of resources and the appropriate approach in the circumstances of a given case. An appeal court must respect the reasonable exercise of that discretion. It impedes the proper administration of justice by second-guessing the local court’s discretionary case management decisions under the pretext of an arbitrariness analysis.

Third, the Divisional Court undertook a comparison of the circumstances of the cases at bar to other cases where the pandemic was considered in the context of a motion to strike a jury notice. It concluded that while the courts in those cases were justified in striking the jury notice, there was an insufficient evidentiary basis in this case. The Divisional Court concluded that the motion judge relied only on the fact of delay without any evidence applicable to the specific situation. The Court found this analysis deeply flawed and set the bar regarding what constitutes an arbitrary decision at a dangerously low level. The Court found that it was clear from the motion judge’s reasons that he undertook a detailed analysis of Ottawa’s situation and reached his own conclusion regarding the status of civil jury trials in that city. Thus, contrary to the Divisional Court’s finding, the motion judge turned his mind to the local conditions and made an unassailable finding that it was unknown when or how a jury trial might be heard in these matters. In the circumstances of this case, including that the accident took place over seven years ago, the Court found that the motion judge was entirely justified in striking the jury notices.


Baylin Technologies Inc. v. Gelerman, 2021 ONCA 45

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

Counsel:

S.J. Tenai and M. Spence, for the appellants

J. Wadden and J.R. Cohen, for the respondents

L. Plumpton, J. Gotowiec and A. Oake, for the intervener, Toronto Stock Exchange

S. Kushneryk and E. Morgan, for the intervener, The Canadian Coalition for Good Governance

Keywords:Corporations, Oppression, Securities, Issuers, Directors, Elections, Majority Voting Requirements, Contracts, Remedies, Set-Off, Civil Procedure ,Mootness, Public Importance, Mental Health Centre Penetanguishene v. Ontario, 2010 ONCA 197, Borowski v. Canada (Attorney General), [1989] 1 S.C.R. 342, BCE Inc. v. 1976 Debentureholders, 2008 SCC 69, Telford v. Holt, [1987] 2 S.C.R. 193, Caisse populaire Desjardins de l’Est de Drummond v. Canada, 2009 SCC 29

facts:

Pursuant to an asset purchase agreement (the “APA”) dated January 2018, the appellant Baylin acquired from the respondent Spacebridge various assets. The individual respondent Gelerman was the founder of Spacebridge. Under the APA, Baylin agreed to nominate Gelerman for election to its board of directors for each of the 2018 and 2019 annual general meetings of shareholders, and would assist Gelerman, honestly and in good faith, to obtain the votes necessary for election.

It was also a condition of the APA that Baylin enter into a Consulting Agreement with Spacebridge, providing for consulting services to be provided by Gelerman. The Consulting Agreement provided for annual payments of $1.25 million over its two-year term, paid equally in instalments of cash and Baylin shares.

Baylin was also listed on the Toronto Stock Exchange (the “TSX”). In February 2014, the TSX issued a Notice of Approval for the mandatory Majority Voting Requirement, added as Section 461.3 to the TSX Manual. The section requires every issuer that does not have a majority shareholder to adopt a majority voting policy that provides, in part: (a) any director must immediately tender their resignation if they are not elected by at least a majority (50% + 1 vote) of the votes cast with respect to their election; and (b) the board shall determine whether or not to accept the resignation within 90 days after the date of the meeting, but the board shall accept the resignation absent exceptional circumstances.

The TSX did provide some guidance on what would constitute “exceptional circumstances” in a 2017 Staff Notice, but maintained that each situation would be reviewed on a case-by-case basis, taking into account the unique factors applicable to each issuer.

As a result of a further acquisition by Baylin in June 2018, Baylin ceased to have a majority shareholder. Accordingly, it was therefore required to adopt a Majority Voting Policy to comply with the TSX Manual. The policy eventually adopted by Baylin provided that, “if a director receives more “withheld” votes than “for” votes…the director must immediately submit to the Board his or her resignation…”. Further, Baylin’s policy also outlined the applicable “exceptional circumstances” pursuant to which a director’s resignation may not be accepted. These exceptional circumstances were purported to be an exhaustive list, and included: (i) if acceptance of the resignation would result in the corporation not being compliant with its constating documents or with securities laws; (ii) the resigning director being a key member of an established, active special committee with a defined term or mandate and accepting the resignation would jeopardize the mandate; or (iii) the majority voting was used for a purpose inconsistent with the policy objectives of the TSX. Of note was the fact that Baylin’s exceptional circumstances did not include “non-compliance with commercial agreements regarding the composition of the board” as an exception, notwithstanding the fact that the TSX had used the same exception as an illustrative example in its 2017 Staff Notice.

As time passed, difficulties arose between Gelerman and Baylin’s Chairman of the Board, who was also the sole director and officer of Baylin’s largest shareholder. In March 2019, Baylin wrote (in discharging its duties under the APA to assist Gelerman to continue as a director) advising him that he would be nominated for election at the upcoming 2019 General Meeting, but that Baylin’s largest shareholder did not intend to vote in his favour. The letter also advised Gelerman that he should seek to contact the shareholder in an effort to mend the relationship and secure its support. Gelerman said that he never received the letter, and as such never made any effort to contact the shareholder via its principal. At the 2019 General Meeting, Gelerman did not receive the requisite number of votes for re-election, but refused to resign. As a result, the appellants brought an application seeking Gelerman’s resignation, while Gelerman brought his own application alleging oppressive conduct.

As an additional issue, indemnity claims seeking damages under the APA were made by Baylin against Spacebridge. Baylin purported to exercise its right to set-off these amounts against “amounts otherwise payable” by Baylin to Spacebridge pursuant to the set-off provision of the APA. Specifically, Baylin sought to set-off these amounts against certain of the instalments of shares payable under the Consulting Agreement, which had not yet been delivered to Gelerman but were being held in trust.

The application judge ultimately found that Baylin’s majority voting policy did not comply with the TSX’s requirements. He also found that both Spacebridge and Gelerman had a reasonable expectation arising from the APA that Gelerman would be a director of Baylin for at least a two-year period. Accordingly, the application judge concluded that Baylin’s conduct was oppressive, unfairly prejudicial to, and disregarded Gelerman’s role as a director. Further, with respect to the set-off claim, the application judge found that the APA applied to “amounts otherwise payable” by Baylin to Spacebridge arising from the transaction, which included amounts payable under the Consulting Agreement. However, the application judge concluded that once the shares were delivered in trust, that portion of the fees under the Consulting Agreement was “paid”, therefore meaning that such amount was no longer “otherwise payable” in fact, and thus not subject to set-off.

issues:

(1) Is the matter rendered moot by reason of the fact that Gelerman remained a director of Baylin for the time he claimed he was entitled to while these proceedings were underway?

(2) Did the application judge err in holding that Baylin’s majority voting policy did not comply with the TSX’s requirements?

(3) Did the application judge err in finding that Baylin’s conduct was oppressive, unfairly prejudicial to, and disregarded Gelerman’s role as a director?

(4) Did the application judge err in finding that the share certificates held in trust were not subject to set-off?

holding:

Appeal allowed.

reasoning:

(1) Is the matter rendered moot by reason of the fact that Gelerman remained a director of Baylin for the time he claimed he was entitled to while these proceedings were underway?

No. The Court pointed out that the decision of the application judge was not strictly limited to determining whether Gelerman was entitled to remain a director of Baylin. Additionally, Baylin’s majority policy was set aside, and this latter determination remained binding on Baylin. Accordingly, Baylin’s rights continued to be affected, and the matter was not moot (Mental Health Centre Penetanguishene v. Ontario, 2010 ONCA 197). The Court also added that there is a recognized exception to the strict application of the mootness principle in cases of public importance (Borowski v. Canada (Attorney General), [1989] 1 S.C.R. 342). The Court noted that the presence of interveners in this case suggested that the issues were of sufficient public importance relating to corporate governance of public companies in Ontario generally.

(2) Did the application judge err in holding that Baylin’s majority voting policy did not comply with the TSX’s requirements?

Yes. The application judge found that Baylin’s majority voting policy violated the TSX’s requirements in three ways: (i) the TSX requirements refer to the majority of votes cast at the meeting whereas Baylin’s policy is not based on votes cast but rather on “withheld votes”; (ii) the TSX requirements do not limit what may constitute “exceptional circumstances” whereas Baylin’s policy restricts the consideration to three circumstances; and (iii) in restricting the consideration of exceptional circumstances, Baylin’s policy excludes the TSX’s specific example of “commercial agreements regarding the composition of the Board” as a possible exception.

Beginning with the application judge’s first point, the Court found that the application judge misunderstood the TSX policy. Not only was the TSX policy clear that withheld votes count as votes against a director, but to conclude otherwise would mean that any director who received even a single vote in favour would have achieved more than 50% + 1 of the votes cast. The express stated purpose of the TSX in adopting a majority voting policy for publicly traded companies was to provide “a meaningful way for security holders to hold directors accountable and remove underperforming or unqualified directors”, and in order to accomplish that purpose, the policy was designed to consider votes withheld as votes against a director.

Second, the application judge’s conclusion regarding the legality of limiting the “exceptional circumstances” was correspondingly flawed. There was clearly nothing in the TSX policy that precluded a corporation from stipulating, in advance, what it will or will not consider as exceptional circumstances. The TSX was rather clear that determinations would be undertaken on a case-by-case basis, having regard to the unique factors applicable to the particular issuer. The Court noted that it was in fact common practice of the TSX to review any corporation’s invocation of exceptional circumstances as justifying its refusal to accept a director’s resignation. The Court also concluded that advanced stipulation of specific exceptional circumstances gave effect to the stated purpose of the TSX’s initiative, by benefitting individual directors in knowing where they stand in terms of compliance.

Last, the application judge was mistaken that the “commercial agreements regarding the composition of the Board” example provided by the TSX was to be interpreted as applicable to any majority voting policy, regardless of the issuer’s intentions. The TSX’s 2017 Staff Notice was quite clear that such examples were only meant to illustrate situations that “may” constitute exceptional circumstances. Related to the above, there was nothing that obligated Baylin to include or exclude certain examples of exceptional circumstances. Accordingly, the Court concluded that the only proper conclusion to be drawn from the record was that Baylin’s majority voting policy was in compliance with the TSX’s requirements.

(3) Did the application judge err in finding that Baylin’s conduct was oppressive, unfairly prejudicial to, and disregarded Gelerman’s role as a director?

Yes. As mentioned above, the application judge concluded that Gelerman had a reasonable expectation that he would be a director for the two-year period, and that the majority voting policy was drafted for the true purpose of removing Gelerman as a director. The Court noted that such findings were findings of fact and therefore entitled to deference, subject only to palpable or overriding error. However, the Court found that such a degree of error was adequately demonstrated in this case.

The Court noted that, as stated in BCE Inc. v. 1976 Debentureholders, 2008 SCC 69, reasonable expectations are to be assessed on an objective, not subjective basis. The Court accepted that Gelerman may have certainly held a subjective expectation that he would remain a director for the two-year period. However, the Court did not agree that this expectation was objectively reasonable. In support of this conclusion, the Court noted that during the APA negotiations, Gelerman never actually obtained an undertaking from any of Baylin, or Baylin’s majority shareholder at the time, that they would support him as a director. Rather, the APA merely mentioned that Baylin would honestly and in good faith assist Gelerman in obtaining the necessary votes. In fact, the possibility of obtaining such an undertaking was raised during the negotiations, but expressly rejected. This should have served to put Gelerman on notice that there were no actual guarantees surrounding his election as a director of Baylin.

Further, Gelerman was aware that his relationship with Baylin’s largest shareholder was deteriorating ahead of the 2019 General Meeting, regardless of whether Gelerman actually received the letter sent by Baylin advising him that he did not have such shareholder’s support.  The Court also noted that it was somewhat telling that a follow-up letter was sent to Gelerman on this issue, and Gelerman likewise did not respond to or acknowledge that letter either. Moving on from the assessment of reasonable expectations, the Court also noted that the application judge’s conclusion that Baylin acted oppressively appeared to be based entirely on the adoption of the majority voting policy. The errors made by the application judge in analyzing this policy, as noted above, clearly drove the conclusion as to what he saw as oppressive conduct, and accordingly these fundamental flaws led to palpable and overriding error.

(4) Did the application judge err in finding that the share certificates held in trust were not subject to set-off?

Yes. As noted above, $1.25 million of the consulting fees were to be paid by way of eight share certificates that were held in trust, to be released in quarterly instalments over two years. Leading up to the dispute, only the share certificates to be released in March, June and September of 2018 had been released. The remainder continued to be held in trust, pending Baylin’s consent for their release. The Court agreed with the application judge’s conclusion that the words “amounts otherwise payable” were clearly broad enough to capture payments due under the Consulting Agreements, as it related to the set-off provision of the APA. However, the Court disagreed with the application judge’s conclusion that the delivery of the certificates in trust constituted payment, and thus, those amounts were no longer “amounts otherwise payable”. The Court found that it would be consistent with the terms and intent of the Consulting Agreement that the amounts payable under it were not actually paid until the share certificates were released, not simply when they were delivered.

Accordingly, the difficulty that then arose was whether the share certificates could actually, in the legal sense, be the subject of a set-off claim in these circumstances. The Court noted the principle in Telford v. Holt, [1987] 2 S.C.R. 193, which states that legal set-off requires mutual debts. Similarly, equitable set-off is only available in respect of “money sums”, which concept does not appear broad enough to include share certificates, or shares themselves, as the nature of a share is not a debt obligation owed to the shareholder.

However, the Court noted that Baylin did not assert legal or equitable set-off, but rather a contractual right of set-off arising from the APA. Such contractual rights of set-off are not limited by the requirements of debts and money sums, as parties are free to contract for whatever result they wish, as supported by case law in Caisse populaire Desjardins de l’Est de Drummond v. Canada, 2009 SCC 29. Because a contract can thus override legal and equitable set-off principles, the Court invoked the principles of contractual interpretation to determine whether the set-off provision of the APA actually accomplished this result. The Court relied on the fact that the shares were ascribed a value that comprised part of the total annual compensation payable under the Consulting Agreement as evidence that the parties intended them to represent amounts payable under the agreement. Therefore, Baylin should have been permitted to set-off against the share certificates that had not yet been released, as they represented amounts not yet paid but due.


Fresco v. Canadian Imperial Bank of Commerce, 2021 ONCA 46

[Doherty, Zarnett and Coroza JJ.A.]

Counsel:

L. Sokolov, J. Brown, and D. O’Connor, for the moving party

L. M. Plumpton, S Whitmore and J. C. Field, for the responding party

Keywords: Civil Procedure, Appeals, Jurisdiction, Final or Interlocutory, Class Proceedings, Class Proceeding Act, 1992, S.O. 1992, c. 6, ss. 24(1), 30(2), 30(3), Courts of Justice Act, R.S.O. 1990, c. C.43, s.6(1)(b), Fresco v. Canadian Imperial Bank of Commerce, 2012 ONCA 444, Fresco v. Canadian Imperial Bank of Commerce, 2020 ONSC 75, Fresco v. Canadian Imperial Bank of Commerce, 2020 ONSC 4288, Fresco v. Canadian Imperial Bank of Commerce, 2020 ONSC 6098, Fulawka v. Bank of Nova Scotia, 2012 ONCA 443, Pro-Sys Consultants Ltd. v. Microsoft Corporation, 2013 SCC 57, Bancroft-Snell v. Visa Canada Corporation, 2019 ONCA 822

facts:

The appellant appealed from all of the motion judge’s determinations. The respondent moved to quash two aspects of the appeals brought by the appellant from the judgment of the motion judge made in the context of his disposition of common issues in the action. Specifically, the respondent argued that although other aspects of the motion judge’s judgment were properly appealable to the Court of Appeal, those dealing with the effect of limitation periods and aggregate damages may only be appealed to the Divisional Court, with leave.

issues:
  1. Does the Court of Appeal have jurisdiction to hear the appeal on all issues?
holding:

Motion dismissed.

reasoning:

Yes. The respondent took the position that the motion judge’s decision to certify an additional common issue concerning aggregate damages, and his decision to refuse a class-wide limitations order and to defer limitations issues to individual hearings, could only be appealed to the Divisional Court with leave. The respondent argued that the appeal route was governed by s. 30(2) of the Class Proceeding Act, 1992 (“CPA”), which provided that “an order certifying a proceeding as a class proceeding” may only be appealed to the Divisional Court with leave. If s. 30(2) did not govern, the respondent argued that the appeal route was governed by the Courts of Justice Act (“CJA”). Under s. 6(1)(b) of the CJA, the Court of Appeal only has jurisdiction where the order of Superior Court judge sought to be appealed is final. The respondent submitted that as no decision to grant or award aggregate damages had yet been made, the motion judge’s determination was interlocutory. With respect to the limitations issue, the respondent argued that s. 6(1)(b) of the CJA governed the appeal route. She argued that, since the motion judge simply deferred limitations questions to the individual hearings stage, no final order was made, and the Court therefore lacked jurisdiction over the appeal on that issue.

The Court did not accept the respondent’s arguments. Whether the Court has jurisdiction over an appeal from a judgment or order in a class proceeding is a two-step analysis. The first question is whether the appeal is from a judgment or order covered by s. 30 of the CPA, and if so, whether s. 30 directs the appeal to the Court of Appeal. If the order is not one covered by s. 30 of the CPA, then whether the appeal lies to the Court is determined by the provisions of the CJA. In the latter circumstance, the primary determinant is whether the order is final, as opposed to interlocutory.

For efficiency, the motion judge held three hearings and issued three sets of reasons addressing a number of issues. The matters that the motion judge dealt with all arose on motions for judgment on the common issues. The determinations he made about limitations and aggregate damages were part of his judgment on the common issues. Section 30(3) of the CPA states that a party may appeal to the Court of Appeal from a judgment on common issues. The Court held that it therefore had jurisdiction over all aspects of the appeals under s. 30(3) of the CPA. It was not necessary to consider whether the determinations of these issues were final or interlocutory, a distinction that is not imported into s. 30(3) of the CPA.

The limitations and aggregate damages aspects of the motion judge’s judgment were all part of his judgment on the common issues. The limitations aspect was appealable for two reasons. First, the limitations issue was raised as a defence on a class-wide basis, and second, the motion judge rejected the defence as being applicable on a class-wide basis, in the context of his disposition of the common issues. As the defence on a class-wide basis was not accepted, the common issues judgment on liability and remedy reflected no class-wide restriction of claims. As in any appeal from a judgment, whether a defence should have been accepted and altered or restricted the judgment given is fair game for argument on the appeal. It is part of the appeal from the judgment itself. Answering common issues without giving effect to a defence that is asserted to be applicable on a class-wide basis, even while holding that the defence may be raised in individual hearings, is still a judgment on the common issues for appeal purposes.

With respect to aggregate damages, the motion judge relied on a power that permitted the judge deciding the common issues of liability and remedy to add aggregate damages as an additional common issue. The Court of Appeal had jurisdiction under s. 30(3) of the CPA over appeals from a judgment on the common issues, and thus over the aspects of these appeals.


Lima v. Kwinter, 2021 ONCA 47

[Doherty, Hoy and Jamal JJ.A.]

Counsel:

C.G. Paliare and L. Pearce, for the appellants/respondents in cross-appeal

P.I. Waldmann, for the respondent/appellant in cross-appeal

Keywords:Contracts, Solicitor and Client, Contingency Fee Agreements, Unenforceability, Quantum Meruit, Solicitors Act, R.S.O. 1990, c. S.15, ss. 23-24, 28.1(8)-(9), Cohen v. Kealey and Blaney, [1985] O.J. No. 160 (C.A.), Almalki v. Canada (Attorney General), 2019 ONCA 26, Tri Level Claims Consultants Ltd. v. Koliniotis (2005), 257 D.L.R. (4th) 297 (Ont. C.A.), McIntyre Estate v. Ontario (Attorney General) (2002), 61 O.R. (3d) 257 (C.A.), Raphael Partners v. Lam (2002), 61 O.R. (3d) 417 (C.A.), Henricks-Hunter v. 814888 Ontario Inc. (Phoenix Concert Theatre), 2012 ONCA 496, Cookish v. Paul Lee Associates Professional Corporation, 2013 ONCA 278, Du Vernet v. 1017682 Ontario Limited and Victor Wong, 2009 ONSC 29191, Séguin v. Van Dyke, 2013 ONSC 6576, Chudy v. Merchant Law Group, 2008 BCCA 484, Hodge v. Neinstein, 2015 ONSC 7345 (Div. Ct.), aff’d in part, 2017 ONCA 294

facts:

Mr. Lima’s home and other buildings on his property burned down in February 2011. An investigation revealed the fire was deliberately set. Mr. Lima’s insurer suspected him. Frustrated with the progress of his insurance claim, Mr. Lima retained Singer Kwinter (“SK”). Mr. Lima could not fund what was potentially long, complicated and expensive litigation on an ongoing basis, so he and SK negotiated a contingency fee agreement (“CFA”). In September 2011, Mr. Lima signed a retainer agreement with SK. SK was to receive a fee based on a percentage of any amount recovered. Mr. Lima agreed to pay a fee equal to 20% of all claims paid by the defendants up to $500,000, and 10% of all claims paid in excess of $500,000. In addition to the percentage fee, the CFA also entitled SK to costs paid by the defendants.

In October 2011, SK commenced an action on behalf of Mr. Lima against the insurer and the insurance broker. The insurer denied coverage in its statement of defence, and counterclaimed against Mr. Lima for amounts the insurer was obliged to pay to mortgagees under the terms of the policy. In May 2015, the broker agreed to settle the claims with a payment to Mr. Lima of $150,000 “all in”. The insurer settled in June 2015 with an “all in” payment of $1,250,000. Mr. Lima directed SK to make certain payments directly to third party creditors. The remaining settlement funds were paid into SK’s trust account.

In respect of the settlement with the broker, SK billed Mr. Lima $50,000 and unilaterally attributed $20,000 of that to costs. The remaining $30,000 represented SK’s fees calculated in accordance with the percentages set out in the CFA. In respect of the settlement with the insurer, SK took fees of $338,390.04, of which it unilaterally attributed $150,000 to costs, with the remainder representing the fees owed to SK under the percentages set down in the CFA. In total, SK took fees of $372,290.04, inclusive of HST, in connection with both settlements. One year after receiving SK’s final bill, Mr. Lima served a Notice of Assessment under the Solicitors Act. In July 2017, Mr. Lima commenced an application in the Superior Court challenging the legality of the CFA. The application was heard in early 2019.

On the application, SK conceded it knew the CFA they entered into with Mr. Lima contravened s. 28.1(8) of the Solicitors Act and was unenforceable by virtue of s. 28.1(9). SK argued that because the CFA was unenforceable, its fees should be calculated on a quantum meruit basis. SK further submitted, that in performing the quantum merit assessment, the court must look at Mr. Lima’s reasonable expectations and that these were reflected in the terms of the CFA. SK contended the amount it billed Mr. Lima pursuant to the CFA was reasonable and justifiable. On the application, Mr. Lima did not argue that SK should be required to return all of the funds it had taken due to deliberately entering into an unenforceable CFA, but instead argued SK’s bills should be reduced by subtracting the amounts SK had arbitrarily allocated to costs in the settlements with the insurer and broker. Prior to the application, Mr. Lima and SK agreed disbursements were not in issue and did not need to be proved.

The application judge agreed that SK’s fees should be assessed on a quantum meruit basis. Ultimately, she concluded SK was entitled to fees of $328,546.41 rather than the $372,290.04 SK had claimed. She ordered the difference, $43,743.63, returned to Mr. Lima. Despite the parties’ agreement that disbursements were not in issue, and absent any submissions from counsel, the application judge concluded SK had inadvertently double-billed disbursements of $16,100 and ordered payment of that amount by SK to Mr. Lima.

issues:

(1) Did the application judge err in failing to eliminate or at least substantially reduce SK’s fees on account of SK entering into a CFA it knew to be unenforceable under the Solicitors Act?

(2) Assuming the application judge was correct in assessing SK’s fees on a quantum meruit basis, did she make legal errors or material factual errors in her analysis?

(3) Should the application judge have reviewed the amounts attributed to disbursements, given the position of the parties on the application, and if so, did she correctly hold $16,100 in disbursements had been inadvertently double counted?

holding:

Appeal allowed in part.

reasoning:

(1) No. The application judge correctly held the CFA was unenforceable. She properly concluded SK’s fees should be assessed on a quantum meruit basis and correctly held that SK’s deliberate breach of s. 28.1(8) of the Solicitors Act was not a reason to eliminate or substantially discount fees otherwise earned by SK.

When read together, ss. 28.1(8) and (9) of the Solicitors Act provide that a CFA, which includes both a fee payable under the agreement and payment of costs, is unenforceable unless that agreement is approved by a justice of the Superior Court. A joint application by the lawyer and client is required, and the court must be satisfied there are “exceptional circumstances” warranting including payment of costs to the lawyer under the CFA. SK knew such an application was necessary, but did not make one. Also, SK did not tell Mr. Lima court approval was required.

Sections 28.1(8) and (9) are consumer protection legislation, designed to protect clients from excessive fees and fees determined by contractual provisions lacking in transparency and predictability. The CFA entered into by SK and Mr. Lima was not transparent. It was left to SK to unilaterally attribute a portion of the settlement amount to costs. It was impossible for Mr. Lima to know, from the terms of the CFA, what amount SK attributed to costs paid by the defendant which were then payable to SK as part of its total fee.

The remedy sought by Mr. Lima—either disentitlement of SK to any payment or substantial reduction of any payment to SK—would have been a windfall. Allowing Mr. Lima to reap the benefits of the settlements achieved by SK’s efforts without paying a fair and reasonable fee, would have gone well beyond any legitimate consumer protection goal, even as far as unjust enrichment. The statutory language of s. 28.1(9) does not support the contention that SK should have been disentitled to payment of reasonable fees for services rendered. Had the legislature intended to deny legal fees for services provided pursuant to an unenforceable CFA, or to compel a deduction in fees otherwise owed due to non-compliance with s. 28.1(8), the legislature would have said so.

Sections 23 and 24 of the Solicitors Act offer strong support for an interpretation of s. 28.1(9) that does not deny a lawyer a quantum meruit assessment of fees if the CFA is unenforceable under s. 28.1(8). Under s. 23, a client may challenge fees owing under any agreement, including a CFA, on the basis the terms of the agreement are not “fair and reasonable between the parties”. Section 24 provides that a CFA that is not fair and reasonable is “void” and “cancelled” and that fees are to be assessed by a determination of what is reasonable in the circumstances. The Court could find no principled reason distinguish between a CFA found “unenforceable” under s. 28.1(9) and a CFA found “void” or “cancelled” under s. 24. Additionally, the case law was against Mr. Lima’s position. In all cases reviewed by the Court, where a CFA was found to be invalid by virtue of s. 28.1(8) or s. 24, the lawyers were not disentitled to payment of reasonable fees for the services they provided.

Finally, the application judge had found the CFA reflected Mr. Lima’s agreement as to how SK’s fees would be calculated. Mr. Lima was a successful and experienced business person who negotiated the fee agreement with SK. The terms of the CFA provided insight into Mr. Lima’s reasonable expectations as to the fees he would eventually have had to pay, which were a significant factor in determining reasonable value for the service provided. However, based on the CFA’s terms, Mr. Lima could not have known how the costs component would be determined, or what the amount would be.

(2) No. None of the arguments advanced by SK or Mr. Lima gave cause to set aside or vary the application judge’s quantum meruit assessment. The application judge understood it was not her function to value the services according to the terms of the unenforceable CFA. Instead, she made a number of significant factual findings as part of her detailed consideration of the factors relevant to a quantum meruit assessment.

Neither SK nor Mr. Lima were happy with the application judge’s analysis. Both argued she was wrong about the level of success Mr. Lima realized through the settlements. SK argued the application judge understated the success by calculating SK’s fees at the low end of the suggested range. Mr. Lima submitted the application judge mischaracterized average results as “very good” or “excellent”. Evaluating the level of success achieved requires a holistic assessment which places the results in the context of the entirety of the relevant circumstances. An element of subjectivity is unavoidable. The Court found it was sufficient to hold that the application judge’s assessments were reasonable based on the record before her. Therefore, the Court declined to interfere with the application judge’s factual findings.

A witness provided evidence regarding the assessment of fees. He indicated that fees ranged from 25-35% of the recovery. The application judge determined SK should receive a fee of 25% of the settlement funds, less disbursements. SK argued the assessment should have been closer to 35%. Mr. Lima argued the witness was unqualified to give expert evidence, making his testimony inadmissible. The Court disagreed with both parties, and said the application judge made no error in her treatment of the witness’ evidence. A detailed explanation of how she arrived at 25% as the appropriate fee was contained within her written reasons.

SK then argued that the application judge wrongly considered Mr. Lima’s ability to pay his legal fees as at the time of the assessment. SK submitted that Mr. Lima’s ability to pay at the time of the retainer or the time of settlement may have been relevant to a quantum meruit assessment, but that his financial circumstances some four years after the settlement were irrelevant. While the Court found there was merit to SK’s argument, there was no apparent impact of Mr. Lima’s financial difficulties on the application judge’s ultimate assessment.

SK had also provided legal services in respect of ancillary claims made by Mr. Lima’s creditors. SK admitted they undertook to help Mr. Lima on these matters without charging him anything beyond the amounts payable under the CFA. However, SK boldly contended that its decision to not charge fees relating to the ancillary matters was predicated on the existence of the CFA, and that because the CFA was unenforceable they were entitled to a quantum meruit assessment of all services provided. In the Court’s view, Mr. Lima’s expectation that he was not required to pay for services in respect of the ancillary matters was reasonable. Additionally, the application record indicated that minimal work was done on these ancillary files. The Court found no reason to think this minimal additional work would have led to a different determination of the appropriate fee.

Mr. Lima also alleged several errors in the application judge’s assessment. He argued that a quantum meruit assessment cannot be based on a percentage of the settlement amount, and that if it is, it is simply a contingency fee under another name. The Court found no error in the application judge’s method of quantification. The Court found that the application judge did not base her quantum meruit assessment on a percentage, but on a thorough review of the relevant factors and a careful blending of those factors. Her reasons clearly set out the path to her decision. Furthermore, an assessment based on a percentage of the settlement amounts was clearly the mode of quantification contemplated by both SK and Mr. Lima.

Mr. Lima further submitted that time spent on the file was improperly considered, and that while the application judge referred to the hours spent, she largely ignored them in her assessment. The application judge decided that the nature of the retainer and the totality of the circumstances warranted giving prominence to factors other than the time spent on the file. She said:

Given the substantial risk assumed by [SK], it would be inequitable to compensate the solicitors in this case on an hourly basis for the services they provided on a percentage contingency fee basis…the clients benefitted from skilled legal representation at no costs to them with all the financial risk assumed by their solicitors.

The Court agreed that these observations explained why the hours spent on the file were less important in arriving at a quantum meruit assessment in these specific circumstances.

 (3) No. In her reasons, the application judge concluded SK had inadvertently included disbursements of $16,100 in its final bill that had already been claimed and paid in connection with the settlement with the broker. The application judge had discovered the apparent double-counting on her own review of the records during the preparation of her reasons. Neither party had any opportunity to address the issue, and only became aware when they read the application judge’s reasons.

The rules governing raising issues not properly pleaded are not necessarily applied as strictly in a proceeding involving assessment of lawyer’s fees as they would in regular civil litigation. However, the application judge erred in deciding that issue without giving the parties any opportunity to address the apparent double-counting she had discovered during her review of the evidence. Normally, the onus would be on SK to prove the disbursements. However, as the parties specifically agreed SK was entitled to its disbursements and did not need to prove them, it was unfair to deny SK its disbursements for want of proof.


Lucas v. 1858793 Ontario Inc. (Howard Park), 2021 ONCA 52

[Hoy, Brown and Thorburn JJ.A.]

Counsel:

W. Ribeiro, for the appellant, 1858793 Ontario Inc. o/a Howard Park

A. G. Seibert, for the appellants, S. Ribeiro and A. Ribeiro

L. J. Melconian, for the respondents

Keywords: Contracts, Real Property, Agreements of Purchase and Sale of Land,  Duty of Good Faith and Fair Dealing, Repudiation, Acceptance of Breach, Termination, Remedies, Relief from Forfeiture, Specific Performance, Courts of Justice Act, R.S.O. 1990, c. C.43, s. 98, Place Concorde East Ltd. Partnership v. Shelter Corp. of Canada Ltd., (2006) 270 D.L.R. (4th) 181, Losenno v. Ontario Human Rights Commission, (2005) 78 O.R. (3d) 161 (C.A.), Bercovitch v. Resnick, 2011 ONSC 5082, leave to appeal refused, 2011 ONSC 6410 (Div. Crt.), Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co., [1994] 2 S.C.R. 490, Semelhago v. Paramadevan, [1996] 2 S.C.R. 415, Matthew Brady Self Storage Corp. v. InStorage Limited Partnership, 2014 ONCA 858, leave to appeal refused, [2015] S.C.C.A. No. 50, 1954294 Ontario Ltd. v. Gracegreen Real Estate Development Ltd., 2017 ONSC 6369, Adderley v. Dixon, (1824) 57 E.R. 239 (Ch.), Asamera Oil Corp. v. Seal Oil & General Corp., [1979] 1 S.C.R. 633, John E. Dodge Holdings Ltd. v. 805062 Ontario Ltd. (2001), 56 O.R. (3d) 341 (S.C.), aff’d (2003) 63 O.R. (3d) 304 (C.A.), leave to appeal refused, [2003] S.C.C.A. No. 145, Landmark of Thornhill Ltd. v. Jacobson (1995), 25 O.R. (3d) 628 (C.A.), Walker v. Jones (2008), 298 D.L.R. (4th) 344, Sivasubramaniam v. Mohammad, 2018 ONSC 3073, 98 R.P.R. (5th) 130, aff’d 2019 ONCA 242, 100 R.P.R. (5th) 1., Di Millo v. 2099232 Ontario Inc., 2018 ONCA 1051, leave to appeal refused, [2019] S.C.C.A. No. 55, Gillespie v. 1766998 Ontario Inc., 2014 ONSC 6952, UBS Securities Inc. v. Sands Brothers Canada Ltd., 2009 ONCA 328, Southcott Estates Inc. v. Toronto Catholic District School Board, 2012 SCC 51, Neighbourhoods of Cornell Inc. v. 1440106 Ontario Inc. (2003), 11 R.P.R. (4th) 294, aff’d (2004), 22 R.P.R. (4th) 176 (C.A.), leave to appeal refused, [2004] S.C.C.A. No. 390, Corporation v. Stilton Corp. Ltd., 2019 ONCA 746, leave to appeal to S.C.C. refused, 38927 (April 2, 2020), Louis v. Poitras, 2020 ONCA 815

facts:

In January 2015, the appellant vendor, 1858793 Ontario Inc. o/a Howard Park (“185”), and the respondent buyers entered into an agreement, pre-construction, for the purchase and sale of a condominium unit in Toronto (the “Agreement”) for a price of $369,900. The Agreement set the purchase price at $369,900 and would have required the respondents to make five deposit payments totalling $73,980 by the occupancy date, which was yet to be determined.

In February 2019, just prior to the sale’s scheduled closing, 185 purported to terminate the Agreement and forfeit the respondents’ deposit of $73,980. 185 claimed that the respondents had breached the Agreement by leasing the unit to a tenant during the interim occupancy period without 185’s permission.

On March 12, 2019, 185 entered into an agreement to re-sell the unit to the appellants, S and A, who are the children of one of the shareholders of 185. In May 2019, during the interim occupancy period under that agreement, S and A leased the unit to two tenants with 185’s consent. The respondents registered a caution on title which prevented the sale to S and A from closing.

The respondents commenced an application seeking relief from forfeiture and, in effect, specific performance of the Agreement. The application judge granted both. He concluded that 185 had wrongfully terminated the Agreement, declared the sale to S and A null and void, and ordered 185 to close the sale of the property to the respondents.

issues:

(1) Did the application judge err in concluding that the vendor wrongfully terminated the agreement?

(2) Did the application judge err in granting the purchasers the remedy of specific performance?

holding:

Appeal dismissed.

reasoning:

(1) No. The record supported the application judge’s finding that 185 lost its right to terminate by declining to treat the Agreement at an end within a reasonable time following the respondents’ alleged breach. Even on the assumption, without deciding, that the respondents breached the Agreement by leasing the unit to two tenants without 185’s consent, 185 by its conduct lost the right to rely on the alleged breach by the respondents as a basis to terminate the Agreement.

Section 18 of the Agreement provided that if a purchaser leases a unit during the occupancy period without first securing the vendor’s written consent, a breach occurs and “such breach is or shall be incapable of rectification.” However, while the breach may be “incapable of rectification”, such a breach does not cause an immediate termination of the Agreement. As s. 18 went on to state, “in the event of such breach the Vendor shall have the unilateral right and option of terminating this Agreement and Occupancy License.”

Upon learning of the rental of the Unit, 185 did not exercise its termination rights under s. 18 of the Agreement. It waited many months before so doing. During that period, 185 accepted the respondents’ monthly interim occupancy payments and worked to remedy the bathtub deficiency.

Even if the respondents’ breach could be characterized as repudiatory, on the basis that s. 18 of the Agreement described that particular kind of breach as one “incapable of rectification”, an innocent party must elect to treat the contract at an end and communicate that election to the repudiating party “within a reasonable time”: Place Concorde East Ltd. Partnership v. Shelter Corp. of Canada Ltd. (2006), 270 D.L.R. (4th) 181, at para. 50.

The bathtub dispute emails were not privileged settlement communications. The emails focused on how the vendor would remedy a construction deficiency with the bathtub: the vendor wanted to patch the bathtub; the respondents wanted the bathtub replaced. The emails did not purport to compromise the dispute that is the subject-matter of this litigation – namely, whether 185 was entitled to terminate the Agreement because the respondents had permitted a tenant to occupy the Unit for a period of time.

(2) No. Rather than focusing solely on the uniqueness of the Unit itself, the application judge conducted a broad critical inquiry as to the adequacy of damages having regard to the circumstances of the transaction as a whole. Based on this inquiry, the application judge was entitled to conclude, as he did, that specific performance would best serve justice between the parties.

The application judge did not err in finding that the Unit was unique to the respondents.

Although he acknowledged that the Unit is one of many similar properties available in Toronto at any given time, there is no rigid rule requiring a court to decline specific performance to a prospective purchaser in the absence of physical or subjective uniqueness. In determining whether a substitute for the Unit was “readily available” within the meaning of Semelhago v. Paramadevan, [1996] 2 S.C.R. 415, a court may look beyond the physical attributes or location of a property to examine the features of the purchase transaction. Specific performance is available based on three factors: (1) the nature of the property, particularly its “uniqueness” within the meaning of Semelhago; (2) the related question of the inadequacy of damages as a remedy; and (3) the behaviour of the parties: Matthew Brady Self Storage Corp. v. InStorage Limited Partnership, 2014 ONCA 858. The Agreement locked in a home for the respondents at a favourable price, along with the ability to slowly build their deposit. As long as they made their payments, they were insulated from market fluctuation while their home was being constructed and fitted with custom upgrades. On this basis, the application judge found that the Agreement could not have been readily duplicated at the time of 185’s wrongful termination in February 2019.

The application judge did not err in finding that the respondents established the inadequacy of damages.

First, the application judge found damages inadequate because of delay, not quantum. He did not ignore the practice that damages generally are assessed as of the date of judgment (or trial); he held that it would be unfair to make the respondents wait any longer to be compensated for 185’s misconduct.

Second, the respondents were not required to specifically plead the “inadequacy of damages”, as the appellants contended. A claim for specific performance, by its nature, requires a court to inquire into whether damages would be an adequate remedy in the circumstances. While choosing not to plead damages as an alternative to specific performance may, in some circumstances, be a risky litigation strategy, it does not preclude a court from assessing the circumstances surrounding the transaction and subsequent litigation in exercising its remedial discretion. Accordingly, 185’s contention that it was “taken by surprise” when the application judge considered inadequacy of damages was not tenable given the respondents’ claim for specific performance.

Third, there was sufficient evidence to support the application judge’s finding that damages were inadequate to compensate the respondents. It is common ground that prices in the Toronto real estate market rose significantly over the past several years. The evidence before the application judge was that the Unit had increased in value by about 40% between the signing of the Agreement in 2015 and 185’s purported termination in 2019. Given that four years had elapsed between the execution of the Agreement and 185’s wrongful termination, it was reasonable for the application judge to infer that it would have been difficult for the respondents to find a property at a comparable price, particularly when 185 had seized their deposit.

Finally, in order to obtain specific performance the respondents were not required to prove they lacked the financial means to mitigate their loss. In their application, the Lucases claimed specific performance, not damages. In assessing whether the plaintiff’s refusal to purchase another property was reasonable, the defendant vendor bears the burden of proof. As the court went on to state in Southcott Estates Inc. v. Toronto Catholic District School Board, 2012 SCC 51, at para. 45: “[W]here it is alleged that a plaintiff has failed to mitigate damages, the onus of proof on a balance of probabilities lies with the defendant, who must establish not only that the plaintiff failed to take reasonable efforts to find a substitute, but also that a reasonable profitable substitute could be found.” The application judge obviously found that 185 had not discharged that onus.

185 behaved inappropriately, not the respondents.

It was open to the application judge to have found that 185 acted in bad faith in terminating the Agreement and to take that conduct into account in granting equitable relief to the respondents. There was no palpable or overriding error in his application of the doctrine of clean hands.

The equities in this case strongly favoured the respondents. The respondents upheld their end of the Agreement and expected 185 to do the same. Over the course of four years they made all required payments to secure ownership of the Unit. In September 2018, 185 took issue with the tenant’s occupancy. However, 185 did not promptly invoke any right to terminate under the Agreement. Instead, it did nothing for months, only raising the matter again in December as leverage in the Bathtub Dispute, long after the tenant had already vacated the Unit. When that tactic failed, 185 terminated the Agreement on the eve of closing, seized the respondents’ deposit, and re-sold the Unit to close relatives of the company’s principals on favourable terms.

The evidence certainly supported the application judge’s inference that 185 entered into the transaction for re-sale of the Unit to close relatives of the company’s principals in order to prevent the respondents from acquiring title to the Unit. Specifically, the evidence revealed that: (i) the purchasers were the children of one of 185’s principals; (ii) The re-sale price of $418,000 was far below the then market price for the Unit, which 185’s own experts valued at between $489,000 and $520,000; (iii) The required deposit of $5,000 was only 1% of the purchase price, far lower in proportion than the deposit required of the respondents on their purchase. Another $13,000, or 3%, was to be paid on closing, with the balance financed by a vendor take-back mortgage from 185, the company owned by the purchasers’ father and uncle; (iv) one of 185’s principals deposed that 185 offered the mortgage because he was aware that purchasers did not have the money to close the transaction; (v) The re-sale was not the result of listing the Unit on the open market. Instead, one of the purchasers deposed that her uncle approached her to advise that the sale of the Unit to the respondents was not proceeding; and (vi) one of the purchasers deposed that her uncle’s overture occurred in early March 2019, just three weeks after 185 purported to terminate the Agreement.


Beaudoin Estate v. Campbellford Memorial Hospital, 2021 ONCA 57

[MacPherson, Zarnett and Jamal JJ.A.]

Counsel:

I.A.C. MacKinnon, J.S. Linden and M. Lacy, for the appellants

C. Chant, for the respondent, Campbellford Memorial Hospital

B. Kolenda and J. Kras, for the respondent physicians

Keywords:Civil Procedure, Striking Pleadings, Limitation Periods, Trustees, Discoverability, Fraudulent Concealment, Discoverability, Torts, Negligence, Medical Malpractice, Rules of Civil Procedure, Rules 21.01(1)(a), 20, Limitations Act, 2002, S.O. 2002, c. 24, Sched. B, Trustee Act, R.S.O. 1990, c. T.23, s. 38(3), Transamerica Life Canada Inc. v. ING Canada Inc. (2003), 68 O.R. (3d) 457 (C.A.), Paton Estate v. Ontario Lottery and Gaming Corporation (Fallsview Casino Resort and OLG Casino Brantford), 2016 ONCA 458, R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42, Levesque v. Crampton Estate, 2017 ONCA 455, Pioneer Corp. v. Godfrey, 2019 SCC 42, Colin v. Tan, 2016 ONSC 1187, McIlvenna v. 1887401 Ontario Ltd., 2015 ONCA 830, Kaynes v. BP p.l.c., 2021 ONCA 36, Giroux Estate v. Trillium Health Centre (2005), 74 O.R. (3d) 341 (C.A.), Clements v. Clements, 2012 SCC 32, Operation Dismantle v. The Queen, [1985] 1 S.C.R. 441, P.K. v. Desrochers (2001), 151 O.A.C. 341 (C.A.), Spar Roofing & Metal Supplies Ltd. v. Glynn, 2016 ONCA 296

facts:

In January of 2015, the deceased represented by the appellant estate made numerous trips to the emergency room at Campbellford Memorial Hospital with complaints related to abdominal issues. After several misdiagnoses, the deceased was ultimately transferred to Peterborough Regional Health Centre for emergency surgery, and ultimately passed away four days later.

In March 2015, the appellants paid for and ordered the deceased’s complete medical records from both hospitals, which were provided in May and June 2015, but which were not complete. Specifically, the records excluded the imaging from the diagnostic tests performed, including the CT imaging. The CT imaging was not provided until May and June of 2017. Ultimately it became evident that the deceased succumbed because of the respondents’ failure to identify an obstruction of his mesenteric artery on the CT imaging. Had the obstruction not been ignored, the deceased would have received life-saving treatment.

The appellants issued a statement of claim in April of 2017, about two years and three months after the deceased’s death. The respondents delivered their statements of defence between July and October 2017, and asserted that the action was statute-barred because it had not been brought within the two-year limitation period under s. 38(3) of the Trustee Act, R.S.O. 1990, c. T.23. Section 38(3) of the Trustee Act prescribes that certain actions brought on behalf of a deceased person must be brought within two years of the person’s death. The respondents accordingly brought a motion under Rule 21.01(1)(a) of the Rules of Civil Procedure for an order dismissing the action as statute-barred.

The appellants responded by amending their statement of claim in July 2018 (the “July 2018 claim”) to plead that the respondents’ fraudulent concealment of the CT imaging tolled the limitation period by preventing them from knowing that they had a cause of action against the respondents.

The motion judge struck out the claims of the appellants under the Trustee Act as statute-barred, and ruled that the appellants could not rely on fraudulent concealment to toll the limitation period because there was no causal connection between the alleged concealment and the appellants’ failure to sue within the limitation period. On this point, the motion judge noted that the appellants’ original statement of claim was brought before the CT imaging was provided in any event.

issues:

(1) Did the motion judge err in deciding the question of fraudulent concealment as a question of law under r. 21.01(1)(a)?

(2) Was it open to the motion judge to find that the facts as pleaded in the July 2018 claim relating to causation were patently ridiculous or manifestly incapable of proof?

holding:

Appeal allowed.

reasoning:

(1) Did the motion judge err in deciding the question of fraudulent concealment as a question of law under r. 21.01(1)(a)?

Yes. Before undertaking its analysis of the issues, the Court elected to provide a helpful summary of the applicable legal principles. First, Rule 21.01(1)(a) allows a party to move for a determination, before trial, of “a question of law raised by a pleading in an action”, where such determination may dispose of all or part of the action, substantially shorten the trial, or result in a substantial saving in costs. No evidence is admissible on a motion under r. 21.01(1)(a). The applicable principles under a Rule 21.01(1)(a) motion are: (i) the test is whether the determination of the issue of law is “plain and obvious” (Transamerica Life Canada Inc. v. ING Canada Inc. (2003), 68 O.R. (3d) 457 (C.A.); (ii) the facts pleaded in the statement of claim are assumed to be true, unless they are patently ridiculous or manifestly incapable of proof (Paton Estate v. Ontario Lottery and Gaming Corporation (Fallsview Casino Resort and OLG Casino Brantford), 2016 ONCA 458); and (iii) the statement of claim should be read as generously as possible to accommodate drafting inadequacies, and if the claim has some chance of success, it should be permitted to proceed (R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42).

As noted above, s. 38(3) of the Trustee Act imposes a “hard” two-year limitation period that is not ameliorated by the discoverability principles under the Limitations Act, 2002. However, the harshness of this rule can be mitigated by common law principle, such as fraudulent concealment (Levesque v. Crampton Estate, 2017 ONCA 455).

The doctrine of fraudulent concealment was addressed by the Supreme Court of Canada in Pioneer Corp. v. Godfrey, 2019 SCC 42. In that decision, the Court stated that where the defendant fraudulently conceals the existence of a cause of action, the limitation period is suspended until the plaintiff discovers the fraud or ought reasonably to have discovered the fraud. Additionally, the concept of “fraud” under the doctrine of fraudulent concealment is not confined to the parameters of the common law action for fraud. The Pioneer decision corrected a previous misconception rooted in the Colin v. Tan, 2016 ONSC 1187 decision, which suggested that fraudulent concealment required the defendant and plaintiff to have a “special relationship” with one another. The Court in Pioneer instead held that fraudulent concealment can apply whenever it would be unconscionable for the defendant to rely on the advantage gained by having concealed the existence of a cause of action.

A motion under Rule 21.01(1)(a) is not the appropriate vehicle for weighing evidence and making findings of fact (McIlvenna v. 1887401 Ontario Ltd., 2015 ONCA 830). Accordingly, the use of Rule 21.01(1)(a) motions to determine limitation period issues is generally discouraged except for a very narrow list of exceptions (Kaynes v. BP p.l.c., 2021 ONCA 36). The Court advised that the preferable procedure in circumstances related to limitation period issues is perhaps a motion for summary judgment under Rule 20, in which case the court is empowered with fact-finding authority.

The Court also noted that Rule 21.01(1)(a) is similarly ill-suited to address issues related to fraudulent concealment (Giroux Estate v. Trillium Health Centre (2005), 74 O.R. (3d) 341 (C.A.)). Specifically, the causation arguments made by the respondents in response to the allegations of fraudulent concealment fundamentally involve a factual inquiry (Clements v. Clements, 2012 SCC 32), and such inquiry should not be determined on a motion to determine a question of law under Rule 21.01(1)(a).

(2) Was it open to the motion judge to find that the facts as pleaded in the July 2018 claim relating to causation were patently ridiculous or manifestly incapable of proof?

No. Aside from noting that a motion under Rule 21.01(1)(a) is not the proper vehicle for weighing evidence and making findings of fact, the Court noted a second issue with respect to the motion judge’s order. Assuming the facts pleaded in the July 2018 claim are true, which is required under a Rule 21.01(1)(a) motion, as noted above, the plea of fraudulent concealment was not patently ridiculous or manifestly incapable of proof.

The Supreme Court of Canada decision in Operation Dismantle v. The Queen, [1985] 1 S.C.R. 441 is noted as the leading case on allegations of “manifestly incapable of proof”. Essentially, pleaded facts are incapable of proof when proof is inherently impossible, not when they are merely difficult to prove (P.K. v. Desrochers (2001), 151 O.A.C. 341 (C.A.); Spar Roofing & Metal Supplies Ltd. v. Glynn, 2016 ONCA 296). In this case, the Court noted that the factual issue pleaded is the sort of issue that courts adjudicate regularly based on evidence when limitation period issues arise. The fact that the April 2017 statement of claim was issued before receiving the CT imaging might make the facts harder to prove, but such difficulty falls well short of being manifestly incapable of proof. The appellants should have a chance to support their allegations with evidence, rather than have it rejected on a motion under Rule 21.01(1)(a), which inherently prohibits the introduction of evidence.


SHORT CIVIL DECISIONS

Khader c. Mamache, 2021 ONCA 51

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

Counsel:

M. Khader, appellant, in person

K.M. Kilongozi, for the respondent

Keywords:Civil Procedure, Appeals, Perfection, Extension of Time, Family Law, Custody and Access, COVID-19, Courts of Justice Act, R.S.O. 1990, c. C.43, ss. 19(1)(b), Rules of Civil Procedure, Rule 62.02(3), Codina v. Canadian Broadcasting Corporation, 2020 ONCA 116, Issasi v. Rosenzweig, 2011 ONCA 112, Enbridge Gas Distribution Inc. v. Froese, 2013 ONCA 131, D.G. v. A.F., 2014 ONCA 436, Van de Perre c. Edwards, 2001 SCC 60

Webster v. Groszman, 2021 ONCA 55

[Roberts, Zarnett and Sossin JJ.A.]

Counsel:

G.G., acting in person

N. Read-Ellis, for the respondent

Keywords:Civil Procedure, Appeals, Jurisdiction, Partition Act, Partition Act, RSO 1990, c. P. 4, s. 7, Punit v Punit, 2014 ONCA 252


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

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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.