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Good afternoon.

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

Topics covered included insurance coverage and the duty to defend a data breach class action, contempt in a commercial lease/subdivision control matter, the striking of a claim as an abuse of process in a child protection context, the revival of a claim of malicious prosecution against the OSC that had been struck and security for costs in a family law/constructive trust claim.

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

2020 Update from the Bench

The Honourable Benjamin Zarnett, Court of Appeal for Ontario

Panel 1 – Advocacy Practice Tips from the Court

Girao v. Cunningham, 2020 ONCA 260

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

Welton v. United Lands Corporation Limited, 2020 ONCA 322

Jordan Goldblatt, Adair Goldblatt Bieber LLP

Sara Erskine, Weintraub Erskine Huang LLP

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

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

Seumas Woods, Blake, Cassels & Graydon LLP

Alistair Crawley, Crawley MacKewn Brush LLP

Elizabeth Bowker, Stieber Berlach LLP

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

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

7636156 Canada Inc. (Re), 2020 ONCA 681

Ken Kraft, Dentons LLP

Kevin Sherkin, Miller Thomson LLP

D.J. Miller, Thornton Grout Finnigan LLP

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

Wishing everyone an enjoyable weekend.

John Polyzogopoulos
Blaney McMurtry LLP
416.593.2953 Email


Table of Contents

Civil Decisions

Family and Children’s Services of Lanark, Leeds and Grenville v. Co-operators General Insurance Company , 2021 ONCA 159

Keywords: Contracts, Interpretation, Insurance, Coverage, Exclusions, Duty to Defend, Duty to Indemnify, Civil Procedure, Applications, Class Proceedings, Child and Family Services Act, R.S.O. 1990, c. C.11, Child, Youth and Family Services Act, 2017, S.O. 2017, c. 14, Class Proceedings Act, 1992, S. O. 1992, c. 6, Rules of Civil Procedure, Rules 14.05(3)(d), 29.01, Fort William Band v. Canada (Attorney General), 76 O.R. (3d) 228 (S.C.), Hanis v. Teaven, 2008 ONCA 678, Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, 2010 SCC 33, Simpson Wigle Law LLP v. Lawyers’ Professional Indemnity Co., 2014 ONCA 492, Nichols v. American Home Assurance Co., [1990] 1 S.C.R. 801, Tedford v. TD Insurance Meloche Monnex, 2012 ONCA 429, Monenco Ltd. v. Commonwealth Insurance Co., 2001 SCC 49, Alie v. Bertrand & Frère Construction Co. (2002), 222 D.L.R. (4th) 687 (Ont. C.A.), Derksen v. 539938 Ontario Ltd., 2001 SCC 72, St. Paul Fire & Marine Insurance Co. v. Durabla Canada Ltd. (1996), 137 D.L.R. (4th) 126 (Ont. C.A.), NonMarine Underwriters, Lloyd’s London v. Scalera, 2000 SCC 24, Allstate Insurance Co. of Canada v. Aftab, 2015 ONCA 349, CUMIS General Insurance Co. v. 1319273 Ontario Ltd., 2008 ONCA 249, Zurich Insurance Co. v. 686234 Ontario Ltd. (2002), 62 O.R. (3d) 447 (Ont. C.A.), G & P Procleaners and General Contractors Inc. v. Gore Mutual Insurance Co., 2017 ONCA 298, Brockton (Municipality) v. Frank Cowan Co., 57 O.R. (3d) 447 (Ont. C.A.), Markham (City) v. AIG Insurance Company of Canada, 2020 ONCA 239, 445 D.L.R. (4th) 405, Wal-Mart Canada Corp. v. Intact Insurance Co., 2016 ONSC 4971, Brookfield Johnson Controls Canada LP v. Continental Casualty Company, 2017 ONSC 5978

P.Y. v. Catholic Children’s Aid Society of Toronto , 2021 ONCA 164

Keywords: Civil Procedure, Frivolous and Vexatious Claims, Child Protection, Rules of Civil Procedure, Rules 2.1.01, 2.1.01(2), 2.1.01(3), and 2.1.01(3)1, Catholic Children’s Aid Society of Toronto v. A.M.Y., 2013 ONCJ 585, CCAS Toronto v. AMY and PY, 2014 ONSC 6526, Catholic Children’s Aid Society of Toronto v. A.Y., 2015 ONCA 493, Y. v. The Catholic Children’s Aid Society of Toronto, 2018 ONSC 7097, P.Y. v. Catholic Children’s Aid Society of Toronto, 2020 ONCA 98, P.Y. v. The Catholic Children’s Aid Society of Toronto, 2020 ONSC 1396, P.Y. v. The Catholic Children’s Aid Society of Toronto, 2020 ONSC 6660, Simpson v. The Chartered Professional Accountants of Ontario, 2016 ONCA 806

Ross v. Canada Trust Company , 2021 ONCA 161

Keywords: Wills and Estates, Interpretation, Armchair Rule, Presumption of Early Vesting, Civil Procedure, Appeals, Standard of Review, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, Trezzi v. Trezzi, 2019 ONCA 978, Dice v. Dice, 2012 ONCA 468, R. v. Sheppard, 2002 SCC 26

North Elgin Centre Inc. v. McDonald’s Restaurants of Canada Limited , 2021 ONCA 173

Keywords: Municipal Law, Subdivision Control, Real Property, Commercial Leases,  Civil Procedure, Appeals, Orders, Enforcement, Contempt, Planning Act, R.S.O. 1990, c. P.13, s. 50(3)(f), Courts of Justice Act, R.S.O. 1990, c. C.43, Rules of Civil Procedure, Rules 1.02(1) & 60.11(1), Carey v. Laiken, 2015 SCC 17, United Nurses of Alberta v. Alberta (Attorney General), [1992] 1 S.C.R. 901, Chiang (Re), 2009 ONCA 3, Bell ExpressVu Limited Partnership v. Corkery, 2009 ONCA 85, Rocca Dickson Andreis Inc. v. Umberto Andreis, 2013 ONSC 5508 (Div. Ct.), Dare Foods (Biscuit Division) Ltd. v. Gill, [1973] 1 O.R. 637 (H.C.)

Qin v. Ontario Securities Commission , 2021 ONCA 165

Keywords: Securities Regulation, Offences, Enforcement, Mareva Injunctions/Asset Freezes, Torts, Malicious Prosecution, Civil Procedure, Striking Pleadings, Frivolous, Vexatious, Abuse of Process, Issue Estoppel, Reasonable or Probable Cause, Serious Issue to be Tried, Securities Act, R.S.O., 1990, c. S.5, Rules of Civil Procedure, Rule 21.01(3)(d), OSC v. Future Solar, 2015 ONSC 2334, Future Solar Developments Inc. et al., 2016 ONSEC 17, Future Solar Developments Inc. et al., 2015 ONSEC 25, Qin v. Ontario Securities Commission, 2020 ONSC 1145, Winter v. Sherman Estate, 2018 ONCA 703, Danyluk v. Ainsworth Technologies Inc., 2001 SCC 44, RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311, American Cyanamid v. Ethicon Ltd., 1975 A.C. 396, Miazga v. Kvello Estate, [2009] 3 S.C.R. 339

Tsai v. Dugal , 2021 ONCA 170

Keywords: Family Law, Property, Constructive Trust, Civil Procedure, Appeals, Security of Costs, Frivolous, Vexatious, Rules of Civil Procedure, Rule 61.06(1)(a) and (c), Yaiguaje v. Chevron Corporation, 2017 ONCA 827, Perron v. Perron, 2011 ONCA 776, Henderson v. Wright, 2016 ONCA 89, Combined Air Mechanical Services Inc. v. Flesch, 2010 ONCA 633, Foodinvest Limited v. Royal Bank of Canada, 2020 ONCA 387

Campbell v. 1493951 Ontario Inc. , 2021 ONCA 169

Keywords: Contracts, Real Property, Commercial Leases, Illegal Use, Termination, Notice, Waiver, Remedies, Relief from Forfeiture, Cannabis Control Act, 2017, S.O. 2017, c. 26, Sched. 1, Cannabis Licence Act, 2018, S.O. 2018, c. 12, Sched. 2, Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co., [1994] 2 S.C.R. 490


CIVIL DECISIONS

Family and Children’s Services of Lanark, Leeds and Grenville v. Co-operators General Insurance Company, 2021 ONCA 159

Hoy, Brown and Thorburn JJ.A.

Counsel:

D. Marks, K. Gerry and R. Dowhan for the appellant, Co-operators General Insurance Company

T. Hill and B. Chung for the respondent, Laridae Communications Inc.

D. Boghosian for the respondent, Family and Children’s Service of Lanark, Leeds and Grenville

Keywords: Contracts, Interpretation, Insurance, Coverage, Exclusions, Duty to Defend, Duty to Indemnify, Civil Procedure, Applications, Class Proceedings, Child and Family Services Act, R.S.O. 1990, c. C.11, Child, Youth and Family Services Act, 2017, S.O. 2017, c. 14, Class Proceedings Act, 1992, S. O. 1992, c. 6, Rules of Civil Procedure, Rules 14.05(3)(d), 29.01, Fort William Band v. Canada (Attorney General), 76 O.R. (3d) 228 (S.C.), Hanis v. Teaven, 2008 ONCA 678, Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, 2010 SCC 33, Simpson Wigle Law LLP v. Lawyers’ Professional Indemnity Co., 2014 ONCA 492, Nichols v. American Home Assurance Co., [1990] 1 S.C.R. 801, Tedford v. TD Insurance Meloche Monnex, 2012 ONCA 429, Monenco Ltd. v. Commonwealth Insurance Co., 2001 SCC 49, Alie v. Bertrand & Frère Construction Co. (2002), 222 D.L.R. (4th) 687 (Ont. C.A.), Derksen v. 539938 Ontario Ltd., 2001 SCC 72, St. Paul Fire & Marine Insurance Co. v. Durabla Canada Ltd. (1996), 137 D.L.R. (4th) 126 (Ont. C.A.), NonMarine Underwriters, Lloyd’s London v. Scalera, 2000 SCC 24, Allstate Insurance Co. of Canada v. Aftab, 2015 ONCA 349, CUMIS General Insurance Co. v. 1319273 Ontario Ltd., 2008 ONCA 249, Zurich Insurance Co. v. 686234 Ontario Ltd. (2002), 62 O.R. (3d) 447 (Ont. C.A.), G & P Procleaners and General Contractors Inc. v. Gore Mutual Insurance Co., 2017 ONCA 298, Brockton (Municipality) v. Frank Cowan Co., 57 O.R. (3d) 447 (Ont. C.A.), Markham (City) v. AIG Insurance Company of Canada, 2020 ONCA 239, 445 D.L.R. (4th) 405, Wal-Mart Canada Corp. v. Intact Insurance Co., 2016 ONSC 4971, Brookfield Johnson Controls Canada LP v. Continental Casualty Company, 2017 ONSC 5978

facts:

A confidential portal on the website of the respondent, Family and Children’s Services of Lanark, Leeds and Grenville (“FCS”), was hacked and a confidential report was shared online. A class action was brought against FCS alleging the leaked report contained defamatory material, and that FCS was negligent. FCS then commenced a third-party claim against Laridae Communications Inc. (“Laridae”) alleging negligence and breach of contract. FCS had retained Laridae to provide a range of communications and marketing services including website security. Laridae was insured by the appellant, Co-operators General Insurance Company, under a commercial general liability policy (the “CGL Policy”) and a Professional Liability Policy. Laridae added FCS as an additional insured under the CGL Policy. FCS and Laridae requested that the appellant defend and indemnify it in the class action and third-party claim, respectively. The appellant denied the requests, citing an exclusion in both policies for “data” and any personal injury arising from the distribution or display of data. All parties brought applications to interpret the policies.

The application judge found that the appellant had a duty to defend both claims. She held that: (a) the applicability of the data exclusion clauses was a novel interpretation issue and thus the duty to defend should only be denied on a full record, not on an application; (b) the data exclusion clause did not exclude the duty to defend the class action nor the third-party claim; (c) neither respondent had any reporting obligations to the appellant, in light of the conflict of interest between the two insured and the insurer. The appellant claimed these conclusions were wrong, arguing that the duty-to-defend issue could properly be determined on the application, and that the data exclusion clauses precluded coverage of both claims. The appellant also argued that, even if there was duty to defend, it would have the right to participate in the insured parties’ defences.

issues:
  1. Could the duty to defend be addressed by way of application?
  2. Did the appellant have a duty to defend?
    • Were the exclusion clauses ambiguous?
    • Were all claims asserted in the proceedings covered by the clear language of the exclusion clauses?
    • Would a denial of coverage nullify the policies?
  3. If the appellant had a duty to defend, would it have the right to participate in the defence?
holding:

Appeal allowed.

reasoning:
  1. Could the duty to defend be addressed by way of application?

Yes. The Court held that the application judge erred in concluding that it would be improper to deny the duty to defend on the materials before her. All parties elected to proceed by way of application. The application judge remarked that the “novel interpretive issue” of data exclusion clauses had not yet been judicially considered and should be considered on a full record instead of application. She agreed with the respondents that it would be “improper” to uphold the appellant’s denial of the duty to defend until the courts have had the opportunity to adjudicate the complex issues raised by these broadly worded data exclusion clauses. Thus, she held that the appellant had a duty to defend as it had not discharged its onus of establishing that the substance of the claims clearly fell within the data exclusion clause.

The Court found that there was no basis for the application judge’s acceptance of this asymmetrical treatment of the respondents and the appellant. Rule 14.05(3)(d) of the Rules provides that a proceeding may be brought by application where the relief claimed is the determination of rights that depend on the interpretation of a contract. An application will however be converted to an action where there are material facts in dispute, complex issues requiring expert evidence or the weighing of evidence, or other need for discoveries or further pleadings. This application involved interpretation and application of provisions to the claims as pleaded to see if there is a possibility that some of the claims may be covered by the policy. The agreements, describing the services that Laridae was to provide FCS, were in the record as were the two policies. There were no material facts requiring a trial. The policy provisions were clear and unambiguous and the application judge is presumed to know the law – even if the law is, in her view, unclear or unsettled. She could, and should, have addressed both (i) the scope and effect of the data exclusion clauses in the policy, and (ii) the respondent’s argument that giving effect to the exclusion clauses would nullify coverage under the policies. She erred in failing to do so and the Court therefore conducted that analysis.

  1. Did the appellant have a duty to defend?

No, the Court found that the appellant owed no duty to defend because (i) the exclusion clauses were unambiguous, (ii) all claims asserted in the proceedings were covered by the clear language of the exclusion clauses, and (iii) denial of coverage would not nullify the policies.

  • Were the exclusion clauses ambiguous?

No. The Court first looked at the principles applicable on a duty-to-defend application, starting with the role of the insurance policy and its interpretation. The insured and insurer have a contractual relationship governed by the policy. The policy is construed in accordance with the usual rules of contract construction. Where the language is unambiguous, the court gives effect to that language, reading the policy as a whole. Where there is ambiguity, the courts rely on general rules of contract construction and should prefer interpretations of the policy that are consistent with the reasonable expectations of the parties. Only when the rules of contract construction fail to resolve the ambiguity, courts will construe the policy against the insurer. This means that coverage provisions are interpreted broadly, and exclusion clauses narrowly.

The Court then looked at the insurer’s duty to defend against claims. Whether there is a duty to defend is determined by the allegations pleaded read together with the terms of coverage in the policy. The duty to defend is broader than the duty to indemnify. The court must try to ascertain the substance and true nature of claims pleaded. If the pleadings allege facts which, if true, would require the insurer to indemnify, the insurer is generally obliged to provide a defence. The insurer’s defence obligation is not governed by facts outside of the pleaded allegations. Where a loss arises from several causes, some of which fall within coverage and some of which are not covered, there is a duty to defend absent clear exclusory language denying coverage for multiple independent concurrent causes or ‘mixed claims’. In the event of mixed claims, the insurer has a duty to defend against the entire claim, subject to an entitlement to recover all or an appropriate portion of their costs of the defence from the insured following the ultimate disposition of the underlying actions.

The Court then applied these principles. The first step in the coverage analysis is to review the policy to determine whether it is ambiguous, since the application judge did not engage in such an analysis. She cited Tedford to apply the contra proferentem rule. However, the contra proferentem rule only applies to resolve ambiguities. It does not apply where the insurance policy is clear and unambiguous on its face. The Court held that the policy provisions and the exclusions were clear and unambiguous. Thus, the Court did not need to consider the reasonable expectations of the parties in interpreting the exclusion provision in the policy, nor was it necessary to make recourse to extraneous sources.

  • Were all claims asserted in the proceedings covered by the clear language of the exclusion clauses?

Yes. The second step is to apply the policy provisions to the claims to see if there is a possibility that some of the claims may be covered by the policy. This is determined by ascertaining the substance and true nature of the claims pleaded. The application judge characterized the class action and third-party claims as broad and comprehensive. She did not consider these claims at length in her analysis. On appeal, the respondents argued that the application judge was correct in holding that some claims extended beyond the policy exclusion and, thus, the appellant had a duty to defend both because (a) the link to the Report was not a display of ‘data’ within the meaning of the exclusion clauses; and (b) the damages sought were broad enough to include physical, not just electronic, distribution of the personal information. In the alternative, (c) they renewed their argument before the application judge that the data exclusion clauses were unenforceable.

The Court held that the link was not a display of ‘data’ within the meaning of the policy exclusion. The definition of ‘data’ was clear and unambiguous. Both a hyperlink and an image of a link constituted “representations of information” within the meaning of the policy exclusions. The Court also did not agree that the damages sought were broad enough to include a physical distribution. The respondents relied on Derksen for an example of a case where the Court found that the underlying cause of bodily injury from an unsecured item flying off a truck was due to the negligent clean-up of the work site, not the operation of the vehicle. The court in that case held that a duty to defend arose because, although the policy excluded coverage for the operation of the vehicle, the underlying cause was the failure to clean up the work site. However, in CUMIS, an exclusion of bodily injury arising out of the use of a vehicle was held to exclude all claims for damages arising from an incident in which a motorcyclist was struck by a ladder that fell off a truck. The motorcyclist claimed that the defendant’s employee negligently loaded the ladder onto the truck. This case was distinguished from Derksen as the ‘substance and true nature’ of the claim involved the allegations of negligently loading the ladder, not a negligent cleanup of a worksite.

In this case, there was no claim in the class action that there was a physical distribution of the report. The pleading was that the damages arose from posting the report on the internet. This was sufficient for the Court to conclude that there was no duty to defend as this allegation fit squarely within the exclusion. Moreover, even if it did plead that physical copies were created, the substance and true nature of the claim for damages arose from posting the report on the internet. There was only one chain of causation as all injury that could have flowed from distribution of physical copies flowed from the first wrongful act. This is also true in the case of the third-party claim. The substance and true nature of the claim for damages arose from the wrongful appropriation of confidential information and posting it on the internet. Accordingly, the data exclusion clause excluded coverage for the defence of both the class action and the third-party claim and, on the facts as pleaded, there was no possibility that a claim within the policy could succeed.

  • Would a denial of coverage result in nullification of coverage under the policy?

No. In Zurich, the Court explained that even a clear and unambiguous exclusion clause will not be applied where it is inconsistent with the main purpose of the insurance coverage, the result would effectively nullify coverage, and to apply the exclusion would be contrary to the reasonable expectations of the ordinary insured. However, this case was distinguishable from Zurich. First, unlike Zurich, the exclusion was entirely consistent with the main purpose of the insurance coverage. Second, given that the appellant’s policies provided coverage for a range of services which extended beyond the terms of this policy exclusion, the exclusion clause would not nullify the coverage provided under the policy. Third, exclusion of these claims would not be contrary to the reasonable expectation of the parties. The potential effect of the data exclusion clauses was apparent on the face of the policies.

  1. If the appellant had a duty to defend, would it have the right to participate in the defence?

Given the Court’s conclusion that the appellant had no duty to defend, it was unnecessary to address the third issue. However, the Court noted that the parties agreed that if the appellant did have a duty to defend, it should have received reports from respondent’s counsel and have the ability to jointly instruct counsel. They also agreed that, should the appellant have a duty to defend, it would be appropriate to establish a joint protocol for the management of documents and the litigation. The establishment of such a protocol reflected the balance between the insured’s right to a full and fair defence of the civil action and the insurer’s right to control that defence because of its potential ultimate obligation to indemnify.


P.Y. v. Catholic Children’s Aid Society of Toronto, 2021 ONCA 164

[Fairburn A.C.J.O., Tulloch and Miller JJ.A.]

Counsel:

P.Y., acting in person

A.Y., acting in person

C. Jenkins, for the respondents The Catholic Children’s Aid Society of Toronto, M.M., J.B. and R.K

D. Polla, for the respondents Her Majesty the Queen in Right of Ontario, The Office of the Children’s Lawyer of Toronto and K.K.

S. Dewart and R. Lindy, for the respondent F.A.G.

S.M. Sack, for the respondent F.A.K.

C. Sinclair, for the respondent H.G-K.

L. Crowell, for the respondent The Hospital for Sick Children

D. Bassili, for the respondent Conseil Scolaire Catholique Mon Avenir

Keywords: Civil Procedure, Frivolous and Vexatious Claims, Child Protection, Rules of Civil Procedure, Rules 2.1.01, 2.1.01(2), 2.1.01(3), and 2.1.01(3)1, Catholic Children’s Aid Society of Toronto v. A.M.Y., 2013 ONCJ 585, CCAS Toronto v. AMY and PY, 2014 ONSC 6526, Catholic Children’s Aid Society of Toronto v. A.Y., 2015 ONCA 493, Y. v. The Catholic Children’s Aid Society of Toronto, 2018 ONSC 7097, P.Y. v. Catholic Children’s Aid Society of Toronto, 2020 ONCA 98, P.Y. v. The Catholic Children’s Aid Society of Toronto, 2020 ONSC 1396, P.Y. v. The Catholic Children’s Aid Society of Toronto, 2020 ONSC 6660, Simpson v. The Chartered Professional Accountants of Ontario, 2016 ONCA 806

facts:

The appellants’ four children became Crown wards without access to their parents. Appeals to the Superior Court of Justice and the Court of Appeal were dismissed, and leave to appeal to the Supreme Court of Canada was refused. Once the litigation surrounding the child protection order was complete, the appellants commenced an action against multiple defendants who were involved in the child protection proceedings. In 2018, the appellants’ action was dismissed as frivolous and vexatious against two of the defendants pursuant to Rule 2.1.01 of the Rules of Civil Procedure. Shortly thereafter, the decision was amended to reflect the dismissal of the action against all remaining defendants.

The appellants appealed and attempted to present fresh evidence. The Court of Appeal upheld the dismissal against the two defendants on the basis that it was an attempt to re-litigate issues previously decided in the child protection proceedings. The appeal was allowed in respect of the remaining defendants because the procedures set out in Rules 2.1.01(2) and (3) had not been followed before the order was made. The remaining defendants pursued the same relief before a different judge of the Superior Court of Justice. This time, notice was given to the appellants as required by Rule 2.1.01(3)1. The appellants’ action against the remaining defendants was dismissed as, again, the court found the appellants attempted to re-litigate previously-decided issues.

issues:

Did the motion judge err by dismissing the appellants’ action as frivolous and vexatious?

holding:

Appeal dismissed.

reasoning:

No. The Court found no error in the decision below, and was satisfied that all the requisite procedural steps had been taken including notice by the Registrar to the appellants pursuant to Rule 2.1.01(3)1. Upon review of the materials produced by both parties, the Court concluded it was appropriate to dismiss the appeal. The appellants’ appeal from the dismissal of the action against the remaining defendants was a clear attempt to re-litigate the child protection proceedings, and was therefore a frivolous and vexatious claim.


Ross v. Canada Trust Company, 2021 ONCA 161

[van Rensburg, Hourigan and Brown JJ.A.]

Counsel:

L.S. Toner, for the appellant/respondent by cross-appeal

M.A. Radulescu, for the respondents/appellants by cross-appeal

J. Gallichan, for the respondent, The Canada Trust Company, Executor and Trustee of the Estate of S.M.G., deceased

Keywords: Wills and Estates, Interpretation, Armchair Rule, Presumption of Early Vesting, Civil Procedure, Appeals, Standard of Review, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, Trezzi v. Trezzi, 2019 ONCA 978, Dice v. Dice, 2012 ONCA 468, R. v. Sheppard, 2002 SCC 26

facts:

The issue in this appeal was the interpretation of a will with respect to the disposition of a cottage property. The testator’s four surviving grandchildren, and ultimate beneficiaries under her will, disagreed as to how the proceeds of the sale of the cottage property should be distributed. As a result, the estate trustee moved for an interpretation of the will.

The testator died in 1971, and under her will, her two daughters were given life interests in the cottage property, before ultimately directing that the cottage property be transferred to the testator’s grandchildren as joint tenants. Both daughters have since passed away, and the cottage property was sold in 2013.

The motion judge interpreted the will to direct the proceeds to be distributed equally amongst the four surviving beneficiaries. One of the beneficiaries, the appellant in this appeal, instead argued that the proper interpretation required the proceeds to be divided into five equal shares, with two of the five shares being distributed to him. The justification behind this argument was based on the consequences of one of the testator’s grandchildren failing to survive the expiration of the life estate granted to the testator’s daughters, and the corresponding estate beneficiary designations stemming therefrom.

The respondents cross-appealed on the basis that they agreed with the motion judge’s judgment, but disagreed with his reasons.

issues:

(1) Did the motion judge err in resorting to the “armchair rule” in interpreting certain clauses of the will?

(2)Did the motion judge err by failing to apply the presumption of early vesting to the grandchildren’s interests in the cottage property?

holding:

Appeal and cross-appeal dismissed.

reasoning:

(1) Did the motion judge err in resorting to the “armchair rule” in interpreting certain clauses of the will?

No. Before this issue was addressed directly, the Court noted that the Supreme Court of Canada decision in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 changed the standard of review for written contracts to direct that a deferential standard be applied rather than a standard of correctness. This deferential standard has since been applied the context of will interpretation in Trezzi v. Trezzi, 2019 ONCA 978, as well as in other appellate courts.

A court’s function in interpreting a will is simply to determine what the testator’s actual or subjective intention was, and how the testator intended to dispose of his or her property. In the past, courts have resorted to the “armchair rule” where these intentions cannot be readily ascertained from the plain meaning of the will’s language (Dice v. Dice, 2012 ONCA 468). The armchair rule essentially puts the court in the position of the testator when he or she made the will, and construes the will from that vantage point in light of the surrounding facts and circumstances. However, more recently, courts have begun treating the “armchair rule” as an overarching framework within which a judge may apply the various tools of interpretation.

In any event, the Court concluded that the interpretive methodology applied by the motion judge was sound. The motion judge correctly attempted to discern the testator’s intentions from the plain meaning of the will’s language, and when unable to do so, took a step back to look at the “bigger picture”. The Court could not find any reason to justify appellate intervention as permitted by the applicable standard of review, as the motion judge’s conclusion did not reveal any palpable and overriding error.

The Court also dismissed the cross-appeal on the basis that an appeal lies from the order or judgment itself, not on the reasons for them (R. v. Sheppard, 2002 SCC 26). Accordingly, the cross-appeal was without merit, and the respondents could have taken issue with the reasoning of the motion judge in their factum, while clarifying that the alleged error did not affect the ultimate conclusion.

(2) Did the motion judge err by failing to apply the presumption of early vesting to the grandchildren’s interests in the cottage property?

No. The law presumes that a testator intends for interests to vest at his or her death, or at the earliest moment thereafter in accordance with the terms of the will. However, the Court reiterated that this presumption, as is the case with any other presumption, is susceptible to be displaced – specifically, by a converse finding from the actual intentions of the testator. In short, the motion judge found such an intention in the testator’s will, and there was no need to resort to the presumption of early vesting.


North Elgin Centre Inc. v. McDonald’s Restaurants of Canada Limited, 2021 ONCA 173

[Brown J.A. (Motions Judge)]

Counsel:

A. Parley, M. Robbins and S. Blakeley, for the moving party/appellant, McDonald’s Restaurants of Canada Limited

J.E. Streisfield, for the moving party on the cross-motion/respondent, North Elgin Centre Inc.

Keywords: Municipal Law, Subdivision Control, Real Property, Commercial Leases,  Civil Procedure, Appeals, Orders, Enforcement, Contempt, Planning Act, R.S.O. 1990, c. P.13, s. 50(3)(f), Courts of Justice Act, R.S.O. 1990, c. C.43, Rules of Civil Procedure, Rules 1.02(1) & 60.11(1), Carey v. Laiken, 2015 SCC 17, United Nurses of Alberta v. Alberta (Attorney General), [1992] 1 S.C.R. 901, Chiang (Re), 2009 ONCA 3, Bell ExpressVu Limited Partnership v. Corkery, 2009 ONCA 85, Rocca Dickson Andreis Inc. v. Umberto Andreis, 2013 ONSC 5508 (Div. Ct.), Dare Foods (Biscuit Division) Ltd. v. Gill, [1973] 1 O.R. 637 (H.C.)

facts:

The respondent owned a parcel of land in which it operated a shopping plaza (“the Property”). In March of 1997, it leased part of the Property to the appellant, which operated a restaurant on the leased premises (the “Lease”). The initial term of the Lease was for 20 years, expiring in March of 2017, with the appellant having options to extend the term for two additional consecutive terms of ten years each. The Lease was subject to the Planning Act, R.S.O. 1990, c. P.13.

In 2016, a dispute arose over the appellant’s exercise of its first right to renew the term of the Lease. Ultimately, the Court of Appeal declared the Lease had been renewed for the first 10-year renewal term. Since the Lease was extended past 21 years, the appellant required consent approval pursuant to s. 50(3)(f) of the Planning Act, and the Court of Appeal ordered the respondent to provide all reasonable cooperation to obtain consent (the “Order”).

The Town of Richmond Hill (the “Town”) required a Planning Justification Report, as it was concerned that a long-term lease might freeze development where the Property was located. In September of 2019, the appellant filed a Planning Justification Report with the Town. The respondent disputed the temporal and spatial extent of the Report filed by the appellant and later filed its own report to the Town (the “Report”). In response, the Town advised that the Consent Application had been deferred until the parties could agree on the actual request and the respondent being satisfied.

Pursuant to Rule 60.11(1) of the Rules of Civil Procedure, where the order to be enforced was one made by the Court of Appeal, a contempt motion must also be brought in the Court of Appeal.

issues:

Was the respondent in contempt of the Order, which required it to provide all reasonable cooperation for the Consent Application, by filing the Report?

holding:

Motion dismissed.

reasoning:

No. The appellant did not satisfy the Court, beyond a reasonable doubt, that the respondent’s filing of the Report constituted a failure by it to provide all reasonable cooperation to obtain Planning Act consent.

The Report did not oppose the Consent Application

A plain reading of the Report revealed that it supported a consent application. The filing of the Report was an attempt to draw to the Town’s attention certain aspects of the Consent Application that it thought affected its interest as owner of the Property, of which the leased premises formed only a small part. The respondent had a legitimate interest in proposing conditions of approval and did not breach its obligation to provide all reasonable cooperation by doing so.

The Report did not improperly propose a temporal limit on the consent

The Order only declared that the lease had been renewed for the first 10-year renewal term, and the respondent’s obligation to provide reasonable co-operation only extended to an application that sought approval for the first renewal period. Since the appellant sought approval in its Planning Justification Report beyond the first-10 year renewal term, the respondent did not improperly impose a temporal limit on the consent in its Report.

The Report did not improperly propose a geographical limit on the consent

The three conditions of approval proposed in the Report reflected legitimate concerns of the respondent, as owner of the Property, about relevant issues that the appellant had not identified in its Consent Application. On their face, the proposed conditions were not designed to defeat the Consent Application, but to support the granting of consent approval that took into account the respondent’s legitimate concerns. In fact, the respondent proposed that consent approval be given to an area larger than the leased premises at the time.

The mere filing of the Report did not breach the Order

The Order did not sanction a process in which the appellant was permitted to proceed with its Consent Application on a kind of ex parte basis, with no ability for the respondent to raise legitimate planning issues or point out inaccuracies in the appellant’s application. It was understandable that the respondent wanted to bring information it thought relevant to a complete consideration of the Consent Application and its approval on a basis that was fair to the legitimate interests of both tenant and landlord.


Qin v. Ontario Securities Commission, 2021 ONCA 165

[Doherty, Pepall and Thorburn JJ.A.]

Counsel:

A. Ostrom, for the appellants

P. Le Vay and F.R. Schumann, for the respondents

Keywords: Securities Regulation, Offences, Enforcement, Mareva Injunctions/Asset Freezes, Torts, Malicious Prosecution, Civil Procedure, Striking Pleadings, Frivolous, Vexatious, Abuse of Process, Issue Estoppel, Reasonable or Probable Cause, Serious Issue to be Tried, Securities Act, R.S.O., 1990, c. S.5, Rules of Civil Procedure, Rule 21.01(3)(d), OSC v. Future Solar, 2015 ONSC 2334, Future Solar Developments Inc. et al., 2016 ONSEC 17, Future Solar Developments Inc. et al., 2015 ONSEC 25, Qin v. Ontario Securities Commission, 2020 ONSC 1145, Winter v. Sherman Estate, 2018 ONCA 703, Danyluk v. Ainsworth Technologies Inc., 2001 SCC 44, RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311, American Cyanamid v. Ethicon Ltd., 1975 A.C. 396, Miazga v. Kvello Estate, [2009] 3 S.C.R. 339

facts:

In 2015, the Ontario Securities Commission (“OSC”) froze the assets of the appellant and related companies and commenced a proceeding against them under s. 127 of the Securities Act, R.S.O., 1990, c. S.5 (the “Act”). In May 2015, Pattillo J. continued the freeze order imposed on the basis that there was a serious issue to be tried in respect of the alleged breaches of the Act (“2015 decision”). In May 2016, a panel of the OSC dismissed the regulatory proceeding against the appellants and directed that the freeze order be lifted. The appellants then sued the OSC for malicious prosecution.

The respondents moved under r. 21.01(3)(d) to strike the statement of claim on the basis that the 2015 decision estopped the appellants from proving the respondents acted without reasonable and probable cause when they commenced proceedings against the appellants. The respondents argued that since proof of the absence of reasonable and probable cause is an essential element of the tort of malicious prosecution, the appellants’ claim could not succeed if they were estopped from proving the absence of reasonable and probable cause. The motion judge accepted the respondent’s submissions and struck the appellants claim. The motion judge held that the 2015 decision had determined essentially the same question and so the appellants were estopped from re-litigating the issue in the malicious prosecution lawsuit. The appellants then appealed.

issues:

Based on the 2015 decision, does the doctrine of issue estoppel apply?

holding:

Appeal allowed.

reasoning:

No, issue estoppel does not apply in this case.

The purpose of the doctrine of issue estoppel is to preclude re-litigation when an issue or material fact that must be decided in the second proceeding raises the same question that was decided in the previous proceeding. Issue estoppel also extends to findings that are “necessarily bound up” in the findings made in the prior proceeding. Therefore, the Court held that the outcome of this appeal turned on whether a determination the OSC had reasonable and probable cause to commence proceedings against the appellants was “necessarily bound up” in the 2015 decision’s finding that the OSC allegations raised “a serious issue to be tried”.

In the 2015 decision, the court determined that the freeze order made by the OSC should be continued based on three criteria, one of which was whether there was a serious issue to be tried. The “serious issue to be tried” standard and the reasonable and probable cause standard are qualitatively different. The reasonable and probable cause standard involves scrutiny of the record to determine the likelihood or probability that at the time the proceedings were commenced, a party can ultimately establish the allegations. On the other hand, the “serious question to be tried” standard addresses the preliminary question of whether the party has provided a sufficient basis upon which it could be said the allegations had some merit warranting the continuation of the freeze orders and related investigative steps. Thus, the Court found that the presence of reasonable and probable cause does not flow from a finding of a “serious issue to be tried” and therefore they cannot be considered “necessarily bound up”.

Further, in the 2015 decision, the matter was still in the investigative stage and the court did not assess the merits of the exculpatory material placed before the court on the motion. However, a broader inquiry is required when assessing whether the respondents had reasonable and probable cause. Reasonable and probable cause in the context of prosecutions initiated by public prosecutors requires a determination of whether, objectively viewed, the facts known to the prosecution when it was undertaken, provided reasonable and probable cause to initiate the proceeding (Miazga v. Kvello Estate, [2009] 3 S.C.R. 339, at 375-76). The totality of the facts known to the prosecution must be measured, not against the “serious issue to be tried” standard, but against the more demanding reasonable and probable cause standard.

The Court found that nothing in the criteria used in the 2015 decision required the OSC to demonstrate reasonable and probable grounds to take proceedings against the appellants. Therefore, the Court held that there was nothing decided in the 2015 decision that would preclude the appellants from arguing the OSC did not have reasonable and probable grounds to believe the appellants had breached the Act, either when they initiated the freeze order, or when they commenced proceedings.


Tsai v. Dugal, 2021 ONCA 170

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

Counsel:

A. Carr, for the moving party

M.S. Deverett, for the responding party

Keywords:Family Law, Property, Constructive Trust, Civil Procedure, Appeals, Security of Costs, Frivolous, Vexatious, Rules of Civil Procedure, Rule 61.06(1)(a) and (c), Yaiguaje v. Chevron Corporation, 2017 ONCA 827, Perron v. Perron, 2011 ONCA 776, Henderson v. Wright, 2016 ONCA 89, Combined Air Mechanical Services Inc. v. Flesch, 2010 ONCA 633, Foodinvest Limited v. Royal Bank of Canada, 2020 ONCA 387

facts:

The appellant appealed a judgment dismissing her claim for a constructive trust in a property owned by L.D., her common law spouse. They lived there for nine years. The appellant commenced proceedings following their separation in 2014. L.D died in 2017 and the proceedings were continued against the estate. The appellant had registered a certificate of pending litigation (“CPL”) against the property. Before the action was tried, the CPL was discharged to permit the sale in exchange for a sum of the net proceeds being retained in the real estate lawyer’s trust account. A court order provided for the retention of the funds until further order or agreement of the parties. The appellant was unsuccessful at trial and appealed. The respondent estate moved for an order for security for costs of the appeal and in the court below and for an order permitting the release of the funds from the lawyer’s trust account.

issues:
  1. Should security of costs be awarded?
  2. Should the order for the release of funds held in trust be awarded?
holding:

Motion granted in part.

reasoning:
  1. Should security of costs be awarded?

Yes. The motion was brought under r. 61.06(1)(a) and (c) of the Rules. The test under (a) is conjunctive. The moving party must prove the appeal is frivolous and vexatious, and that the appellant has insufficient assets in Ontario. Under r. 61.06(1)(c), security for costs may be ordered “for other good reason”. The Court first looked at r. 61.06(1)(a). The estate argued the appeal was frivolous based on the notice of appeal, which listed 36 grounds of appeal, and vexatious based on her conduct. The estate also argued there was no evidence that the appellant had sufficient assets in Ontario. The appellant argued her appeal was meritorious and provided evidence of her equity in property (the “Condo”). There was also a second mortgage on the Condo in favour of her lawyer. The appellant stated that, if security for costs were awarded, she proposed to sign a direction to her lawyer to use the second mortgage as security for costs, and that she would be prejudiced if she were forced to sell the Condo in order to pay funds into court as security for costs.

The Court held that the estate did not meet the test for security for costs under r. 61.06(1)(a). The Court was unable to conclude that the appeal was frivolous, that is, that it was obviously devoid of merit, or that it was vexatious in the sense that it was brought to annoy or harass the estate. As for the second requirement of r. 61.06(1)(a), the Court was satisfied that the appellant had equity and therefore sufficient assets in Ontario to pay the costs, in the event of an unsuccessful appeal.

The Court then turned to whether there were “other good reason” to award security for costs under r. 61.06(1)(c). The Court noted that the “other good reason” should be compelling and must be related to the purpose of ordering security: that a respondent is entitled to a measure of protection for costs in appeal proceedings. Security for costs has been awarded under this rule where an appeal has a low prospect of success and where it would be nearly impossible to collect costs. The Court awarded security for costs under r. 61.06(1)(c) due to the low prospect of success, the appellant’s pattern of conduct, the very limited information she provided about her ability to pay costs, the fact that she had recently encumbered the Condo as security for legal costs, and the assertion that she would need to sell it to pay security for costs. There was a real risk the estate would have difficulty collecting its costs in the event of an unsuccessful appeal. As for the amount, the estate sought security for the costs awarded by the trial judge, in addition to the appeal. Such orders are not granted routinely: some justification is required when the amount includes security for the costs awarded in the court below. The estate did not provide any reasonable basis for such. Thus, the estate was entitled to security for costs of the appeal, but not of the trial.

  1. Should the order for the release of funds held in trust be awarded?

No. The estate sought an order for the release of funds which had been held in trust from the net proceeds of sale of the property in which the appellant claimed a constructive trust. The funds were put in trust as a condition of the discharge of the appellant’s CPL as a result of a motion brought by the estate. The estate argued that, although there was no specific request for an order dealing with the funds in trust, the trial judge’s conclusion that the estate trustees are allowed to distribute the assets in accordance with the deceased’s will would permit the distribution of the funds held in trust. After filing her notice of appeal, however, the appellant wrote to the real estate lawyer to ensure that the funds would not be released pending court order or agreement between the parties until after appeals. According to the affidavit of L.D., the concern was that the funds were earning a very low rate of interest, while the appellant was pursuing a meritless appeal. L.D. deposed that the estate trustees wished to distribute the estate, including the amount in trust, to the beneficiaries. He proposed that the estate trustees keep a sum in a joint investment account to be available in the event that the appellant was successful in her appeal. At the hearing of this motion, however, the estate’s lawyer indicated that the estate trustees intended to invest the funds. Thus, the Court refused to make the order. The order sought in the estate’s notice of motion was inconsistent with the intention of the order of Akbarali J. that the funds in trust stand in place of the CPL which was registered against the property to which the appellant asserted a claim. The appellant had a right to appeal. The fact that the appeal appeared to be weak was not sufficient reason to permit the funds to be released.


Campbell v. 1493951 Ontario Inc., 2021 ONCA 169

[Lauwers, Trotter and Zarnett JJ.A.]

Counsel:

Z. Parrott and R. Bennett, for the appellant

R. Sharda, for the respondent 1493951 Ontario Inc.

R. Wilson, for the respondent Tri-Echo Restaurants Inc.

Keywords: Contracts, Real Property, Commercial Leases, Illegal Use, Termination, Notice, Waiver, Remedies, Relief from Forfeiture, Cannabis Control Act, 2017, S.O. 2017, c. 26, Sched. 1, Cannabis Licence Act, 2018, S.O. 2018, c. 12, Sched. 2, Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co., [1994] 2 S.C.R. 490

facts:

The appellant sub-leased a commercial premises from the respondent tenant. The terms of the sub-lease required the appellant to operate any business on the premises in compliance with municipal, provincial and federal laws. The appellant operated a cannabis store on the premises without a licence and without any valid licence exemption under the Cannabis Control Act, 2017, S.O. 2017, c. 26, Sched. 1 and the Cannabis Licence Act, 2018, S.O. 2018, c. 12, Sched. 2.

When the respondent landlord purchased the property from the previous landlord, it gave notice to the respondent tenant that it was in breach of its lease. The notice provided for ten days to rectify the breach, failing which the landlord would repossess the premises. Although the cannabis store continued to operate, the landlord did not act on the notice until more than six months later. Before finally enforcing the original notice, the landlord did not issue a fresh notice, and continued to accept rent payments in the interim.

issues:

(1) Did the application judge err in dismissing the appellant’s claim that the lease was improperly terminated?

(2) Did the application judge err in dismissing the appellant’s request for relief from forfeiture?

holding:

Appeal dismissed.

reasoning:

(1) Did the application judge err in dismissing the appellant’s claim that the lease was improperly terminated?

No. The application judge concluded that following the original notice of breach, the landlord was mislead by information provided by the appellant that he had a valid exemption from licensing requirements. The appellant submitted on appeal that the application judge’s finding rested on the premise that he intentionally misled the landlord. The Court of Appeal rejected this argument, concluding that the true issue before the application judge was whether, by reason of the delay in enforcement, the landlord had waived the breach of the lease. To establish waiver, the evidence must demonstrate that the waiving party had: (1) full knowledge of its rights; and (2) an unequivocal and conscious intention to abandon them (Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co., [1994] 2 S.C.R. 490). Based on the misunderstanding between the parties, it was open to the application judge to find that the evidence did not meet the requirements of a waiver, regardless of whether the appellant intentionally misled the landlord or not.

(2) Did the application judge err in dismissing the appellant’s request for relief from forfeiture?

No. Again, the appellant argued that the application judge’s denial in granting him relief from forfeiture was based on a finding that the appellant intentionally misled the landlord. Again citing Saskatchewan River Bungalows, the Court concluded that the application judge was entitled to reject the request for relief from forfeiture based on the factors set out therein. These factors include: (1) the seriousness of the breach; (2) the reasonableness of the defaulting party’s conduct; and (3) the disparity between the value of the forfeited property and the damage caused by the breach. The application judge’s finding was not dependent on a finding that the appellant was knowingly deceptive.


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.