Golden Oaks Enterprises Inc. v. Scott is a bankruptcy case in which the trustee successfully sued to set aside payments made to certain investors in a Ponzi scheme. The appeal was dismissed. The Court made it clear that claims initiated by trustees to set aside transfers under value under the Bankruptcy and Insolvency Act arise, for limitation period purposes, when the trustee is appointed, and not before. The knowledge and acts of the fraudster operating the bankrupt corporation are not to attributed to the bankrupt corporation for the purpose of having the limitation period running earlier than the date of bankruptcy. To do otherwise would be to defeat the purpose of the transfer under value sections in the BIA and would permit fraudsters to get away with their actions.

In Karkhanechi v Connor, Clark & Lunn Financial Group Ltd, another limitation period case, the Court found that the motion judge did not err in finding that the appellant’s request for declaratory relief was statute-barred, as it was tied to consequential relief. The Court also agreed with the motion judge that  there was no “rolling” limitation period in this case just because the disputed payments to the retired partner were being made over time.

Other topics included two insurance coverage decisions and stay pending appeal in the residential tenancies context.

Wishing everyone an enjoyable weekend.

John Polyzogopoulos
Blaney McMurtry LLP
416.593.2953 Email

Table of Contents

Civil Decisions

Golden Oaks Enterprises Inc. v. Scott , 2022 ONCA 509

Keywords:Bankruptcy and Insolvency, Transactions Under Value, Ponzi Schemes, Corporation Attribution Doctrine, Piercing of Corporate Veil, Unjust Enrichment, Set-off, Civil Procedure, Limitation Periods, Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, s 95(1), s 96, s 97, s 178 (1) Criminal Code, R.S.C. 1985, c. C-46, s 347, Limitations Act, 2002, s 5, s 12, Securities Act, R.S.O. 1990, c. S.5, Doyle Salewski Inc. v. Scott, 2019 ONSC 5108, Housen v. Nikolaisen, 2002 SCC 33, Canada v. McLarty, 2008 SCC 26, Montor Business Corporation v. Goldfinger, 2016 ONCA 406, Canadian Dredge & Dock Co. v. The Queen, [1985] 1 S.C.R. 662, ChristineDeJong Medicine Professional Corp. v. DBDC Spadina Ltd., 2019 SCC 30, Deloitte & Touche v. Livent Inc. (Receiver of), 2017 SCC 63, R. v. McNamara, [1985] 1 S.C.R. 662 (S.C.C.), Singularis Holdings Ltd. v. Daiwa Capital Markets Europe Ltd., [2019] UKSC 50, Holt v. Telford, [1987] 2 S.C.R. 193, Youyi Group Holdings (Canada) Ltd. v. Brentwood Lanes Canada Ltd., 2020 BCCA 130, Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. (1996), 28 O.R. (3d) 423 (Gen. Div.)

Pannone v. Peacock, 2022 ONCA 520

Keywords:Real Property, Residential Tenancies, Eviction, Sale of Property, Administrative Law, Landlord and Tenant Board, Civil Procedure, Appeals, Stay Pending Appeal, Residential Tenancies Act, 2006, SO 2006 c. 17,Courts of Justice Act, RSO 1990, c. C.43, Belton v. Spencer, 2020 ONCA 623; Bernard Property Maintenance v. Taylor, 2019 ONCA 830; and Bernard v. Fuhgeh, 2020 ONCA 529, RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311, Circuit World Corp. v. Lesperance (1997), 33 O.R. (3d) 674 (C.A.), BTR Global Opportunity Trading Ltd. v. RBC Dexia Investor Services Trust, 2011 ONCA 620, Overseas Missionary Fellowship v. 578369 Ontario Ltd. (1990), 73 O.R. (2d) 73 (C.A.),Coote v. Ontario (Human Rights Commission), 2010 ONCA 580, Alliance to Protect Prince Edward County v. wpd White Pines Inc., 2018 ONCA 576, Fontaine v. Canada (Attorney General), 2018 ONCA 749, Bernard v. Fuhgeh, 2020 ONCA 529, Gill v. Laframboise, Board file CEL-00894-21

EPCOR Electricity Distribution Ontario Inc. v. Municipal Electric Association Reciprocal Insurance Exchange, 2022 ONCA 514

Keywords: Contracts, Insurance, Commercial General Liability, Coverage, Interpretation, Contra Proferentem, Municipal Act, 2001, S.O. 2001, c. 25, s 274(1), Business Corporations Act, R.S.O. 1990, c. B.16, s 136(5), Insurance Act, R.S.O. 1990, c. I.8, Rules of Civil Procedure, Rules 14.05(3)(d),(h), Le Treport Wedding & Convention Centre Ltd. v. Co-operators General Insurance Company, 2020 ONCA 487, Markevich v. Canada, 2003 SCC 9, Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, 2010 SCC 33, Non-Marine Underwriters, Lloyd’s of London v. Scalera, 2000 SCC 24, Douglas v. Stan Fergusson Fuels Ltd., 2018 ONCA 192, Godonoaga (Litigation guardian of) v. Khatambakhsh (2000), 50 O.R. (3d) 417 (C.A.), M.(E.) v. Reed (2003), 49 C.C.L.I. (3d) 57 (Ont. C.A.), Insurance Law in Canada, 2nd ed. (Scarborough: Carswell, 1991), John Birds, Ben Lynch and Simon Milnes, MacGillivray on Insurance Law, 13th ed. (London: Thomson Reuters (Professional) UK Ltd., 2015)

Northbridge General Insurance Company v. Aviva Insurance, 2022 ONCA 519

Keywords: Contracts, Insurance, Interpretation, Professional Liability Insurance, Commercial General Liability Policy, Primary Coverage, Excess Coverage, Equitable Contribution, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, Family Insurance Corp. v. Lombard Canada Ltd., 2002 SCC 48, McKenzie v. Dominion of Canada General Insurance Company, 2007 ONCA 480, Lawyers’ Professional Indemnity Company (LPIC) v. Lloyd’s Underwriters, 2016 ONSC 6196

Karkhanechi v. Connor, Clark & Lunn Financial Group Ltd., 2022 ONCA 518

Keywords: Contracts, Partnership Agreements, Civil Procedure, Limitation Periods, Rolling Limitation Periods, Declarations, Limitations Act, 2002, S.O. 2002, c. 24, s. 16(1)(a), Marvelous Mario’s Inc v St Paul Fire and Marine Insurance Co, 2019 ONCA 635, Pedersen v Soyka, 2014 ABCA 179, Pickering Square Inc v Trillium College Inc, 2016 ONCA 179, Richards v Sun Life Assurance Company of Canada, 2016 ONSC 5492, York Condominium Corp No 382 v Jay-M Holdings Ltd et al, 2007 ONCA 49, Fram Elgin Mills 90 Inc v Romandale Farms Limited, 2021 ONCA 201, Hamilton (City) v Metcalfe & Mansfield Capital Corporation, 2012 ONCA 156, Bonilla v Preszler, 2016 ONCA 759, Beccarea v Canadian National Railway Company, 2018 ONSC 630, Kyle v Atwill, 2020 ONCA 476, Alguire v The Manufacturers Life Insurance Company (Manulife Financial), 2018 ONCA 202

Short Civil Decisions

Salehi v. Association of Professional Engineers of Ontario, 2022 ONCA 511

Keywords: Civil Procedure, Orders, Varying or Setting Aside, Rules of Civil Procedure, s. 59.06(2)(a), R. v. Moura, 172 C.C.C. (3d) 340 (Ont. C.A.), Aristocrat v. Aristocrat (2004), 73 O.R. (3d) 275 (C.A.), leave to appeal to S.C.C. refused (2005), 207 O.A.C. 399, Mehedi v. 2057161 Ontario Inc.(Job Success), 2014 ONCA 604

Render v. ThyssenKrupp Elevator (Canada) Limited, 2022 ONCA 512

Keywords: Civil Procedure, Orders, Varying or Setting Aside, Rules of Civil Procedure, s. 59.06, Employment Standards Act, 2000, S.O. 2000, c. 41, s. 8(2), McDowell v. Barker, [2014] O.J. No. 2363 (C.A.), Hoang v. Mann Engineering Ltd., 2015 ONCA 838

Capone v. Fotak, 2022 ONCA 521

Keywords: Family Law, Appeals, Costs, Family Law Rules, Rule 24(12), Selznick v. Selznick, 2013 ONCA 35, Beaver v. Hill, 2018 ONCA 840

CIVIL DECISIONS

Golden Oaks Enterprises Inc. v. Scott, 2022 ONCA 509

[Strathy C.J.O., Roberts and Sossin JJ.A.]

Counsel:

A. Tomkins, for the appellants/respondents by way of cross-appeal

H. Chaiton and D. Bourassa, for the respondent/appellant by way of cross-appeal

Keywords: Bankruptcy and Insolvency, Transactions Under Value, Ponzi Schemes, Corporation Attribution Doctrine, Piercing of Corporate Veil, Unjust Enrichment, Set-off, Civil Procedure, Limitation Periods, Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, s 95(1), s 96, s 97, s 178 (1) Criminal Code, R.S.C. 1985, c. C-46, s 347, Limitations Act, 2002, s 5, s 12, Securities Act, R.S.O. 1990, c. S.5, Doyle Salewski Inc. v. Scott, 2019 ONSC 5108, Housen v. Nikolaisen, 2002 SCC 33, Canada v. McLarty, 2008 SCC 26, Montor Business Corporation v. Goldfinger, 2016 ONCA 406, Canadian Dredge & Dock Co. v. The Queen, [1985] 1 S.C.R. 662, Christine DeJong Medicine Professional Corp. v. DBDC Spadina Ltd., 2019 SCC 30, Deloitte & Touche v. Livent Inc. (Receiver of), 2017 SCC 63, R. v. McNamara, [1985] 1 S.C.R. 662 (S.C.C.), Singularis Holdings Ltd. v. Daiwa Capital Markets Europe Ltd., [2019] UKSC 50, Holt v. Telford, [1987] 2 S.C.R. 193, Youyi Group Holdings (Canada) Ltd. v. Brentwood Lanes Canada Ltd., 2020 BCCA 130, Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. (1996), 28 O.R. (3d) 423 (Gen. Div.)

facts:

This appeal arose out of a failed financial company and the attempt of a trustee in bankruptcy to recover the funds lost to a Ponzi scheme called Golden Oaks Enterprises Inc. (“Golden Oaks”), founded by JL. The scheme operated in Ottawa from 2009 and 2013, during which Golden Oaks issued 504 promissory notes to 153 investors. The company charged interest rates in excess of 60%, which is considered usurious and criminal: s. 347 of the Criminal Code. Both Golden Oaks and JL, Golden Oaks’ principal and directing mind, went into receivership and had made assignments in bankruptcy.

Doyle Salewski Inc. was appointed as trustee in bankruptcy (the “Trustee”). It began over 80 separate legal actions against creditors in 2015. Seventeen of these actions were brought against individuals and companies who received payments from Golden Oaks in 2012 and 2013, which included commission payments and interest on promissory notes. The 17 actions were heard together in a summary trial. The trial judge granted a claim under s. 95(1)(b) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (“BIA”) against the appellant LS for repayment of $72,575 in preferences (“LS Action”).

With respect to the other investor appellants, the trial judge had granted claims for repayment of interest in varying amounts between $4,000 and $67,500 (“Usurious Interest Action”). The trial judge had found that the appellant investors in this action knew or ought to have known that the returns promised on their investment were too good to be true.

While the investments and interest payments that gave rise to the Ponzi scheme took place well outside of the two-year limitation period under the Limitations Act, 2002, the trial judge had found that the Trustee’s claims against the appellants were not statute‑barred, as the claims were only discoverable once the Trustee was installed, and it received legal authority to bring the actions.

issues:

(1) Did the trial judge make a palpable and overriding error in finding that LS and Golden Oaks were not dealing at arm’s length for the purpose of s. 95(1)(b) of the BIA?

(2) With respect to the Usurious Interest Action, did the trial judge err in law in concluding that the claim was not discoverable within the meaning of s. 5(1)(a)(iv) of the Limitations Act, 2002?

(3) With respect to the Usurious Interest Action, did the trial judge err in law in applying the incorrect test for set-off under s. 97(3) of the BIA?

(4) Did the trial judge err in dismissing the Trustee’s claims pursuant to s. 95(1)(b) against all but LS and another individual and in dismissing the Trustee’s claims pursuant to s. 96 on the ground they were not properly pleaded?

(5) Did the trial judge err in dismissing the Trustee’s claims for unjust enrichment by receipt of commission payments for the referral of investors?

(6) Did the trial judge err in dismissing the Trustee’s claim, which had been withdrawn prior to trial, for a declaration that any judgment against LS or H is not released by a discharge in bankruptcy of either party under s. 178 of the BIA?

(7) Did the trial judge err in rejecting the Trustee’s request for an order declaring that LS and H would not be entitled to a dividend from the estate until all claims of other creditors were satisfied?

(8) Did the trial judge err in refusing to pierce the corporate veil with respect to RL for the amounts ordered against his company, 204475 Ontario Inc?

holding:

Appeal dismissed. Cross-appeal allowed in part.

reasoning:

(1) No.

The Court first noted the determination that the parties were not dealing at arm’s length was a finding of mixed fact and law that was reviewable on a deferential standard. The Court identified the indicia of a non-arm’s-length transaction as the following: (1) a common mind directing the bargaining for both parties of a transaction; (2) parties to a transaction acting in concert without separate interests; and (3) de facto control: Canada v. McLarty at para 43; Montor Business Corporation v. Goldfinger at para 68. The appellants argued that the trial judge misinterpreted the test under s. 95(1)(b) of the BIA as one focused on relationships between parties at large rather than relationships with respect to specific transactions. The Court agreed that in applying these criteria, it was important to focus on the transactions at issue, but necessarily within the overall context of the relationship between the parties and the fraudulent Ponzi scheme in which those transactions occurred and were advanced. The Court accepted the trial judge’s conclusion that the relationship between LS and Golden Oaks with respect to the commission payments and loans could not be disentangled from their collaboration in furtherance of the Ponzi scheme, as both parties were acting in concert.

(2) Not decided.

The Court agreed with the trial judge in the result that the action was not statute-barred, but through a completely different path. The appellants argued that the trial judge erred in her application of the discoverability principle and that the two-year limitation period on the claims had expired prior to 2015. The Court noted s 5(1)(a) of the Limitations Act, 2002  provides that a claim is not discoverable until the person with the claim knew or ought to have known that (i) an injury, loss, or damage had occurred; (ii) it was caused by a particular act or omission; (iii) the act or omission was that of the person against whom the claim is made; and (iv) a proceeding would be an appropriate means to seek to remedy the injury, loss, or damage.

The Court listed 3 considerations regarding the corporate attribution doctrine and its application to this case, pursuant to Livent: 1) courts should be sensitive to the context and field of law in which corporate attribution arises; 2) the exercise of this discretion was grounded in public policy and the social implications of holding a corporation accountable; and 3) uses of corporate attribution which encouraged victims of fraud to enlarge their recovery at the expense of other victims, or which permit those who have benefitted from fraud to insulate themselves from accountability against other parties who are victim of the fraud are to be avoided.

In applying these considerations, the Court stated that there were strong public policy grounds to resist permitting those who benefited from the usurious interest scheme perpetrated by JL from avoiding liability in the Trustee’s unjust enrichment action through the application of the corporate attribution doctrine, at the expense of other creditors to Golden Oaks.

The Court stated that the trial judge’s reasons had not considered the implications of Golden Oaks as a one-person corporation in this case, nor did they advert to the discretion recognized in Livent not to apply corporate attribution on public interest grounds. The Court further noted that the trial judge erred by failing to consider the discretion not to apply the corporate attribution doctrine on public interest grounds. Considering those public interest grounds, the Court stated that it was clear that this discretion should have been exercised in this case so as not to attribute the knowledge of JL to Golden Oaks. For these reasons, the attribution of JL’s knowledge to Golden Oaks during the period that the Ponzi scheme was in operation was not appropriate. Without the application of the corporate attribution doctrine, Golden Oaks would have lacked the requisite knowledge to bring the Usurious Interest Action until the appointment of the Trustee.

The Court noted that in light of this conclusion with respect to the corporate attribution doctrine, it was not necessary to consider the trial judge’s analysis of whether the Trustee was properly found to be a “successor” for purposes of s. 12 of the Limitations Act, 2002, or whether the Usurious Interest action was discoverable prior to the appointment of the Trustee on the basis that this action was not “appropriate” within the meaning of s.5(1)(a)(iv) of the Limitations Act, 2002. The Court made it clear that it should not be taken as necessarily agreeing with the trial judge’s reasons.

(3) No.

The appellants argued that the amounts they had been ordered to repay in interest payments should be set off against the principal amounts of their outstanding loans to Golden Oaks. The appellants based their argument on the doctrine of equitable set-off.

The appellants relied on the trial judge’s finding that depriving them of the principal of their loans would be “unduly harsh” as a basis for their claim of equitable set-off. Further, the appellants argued that s. 97(3) of the BIA preserved any set-off rights that the appellants would have had against Golden Oaks notwithstanding the bankruptcy. Therefore, according to the appellants, the trial judge erred in denying their equitable set off claims on the basis that it would give them priority over other creditors in recovering the principal of their loans.

The Court disagreed and stated that the party relying on a set‑off must show some equitable ground for being protected against the other party’s demands: Holt v. Telford, at p. 212. The Court agreed with the trial judge’s finding that the appellants lacked the “clean hands” required to take advantage of an equitable remedy. The appellants had not conducted themselves in a manner consistent with above‑board dealings and knew or ought to have known the usurious interest promised on their loans was illegal.

(4) No.

The Trustee argued that the trial judge erred in failing to read the pleadings generously as required, including its reply. The Trustee submitted that the claims were properly pleaded and that the defendants knew the case that they had to meet as they were able to defend the claims and never sought particulars or to strike the claims before trial.

The Court stated that given the defendants had not incurred the expense of a motion to strike and delivered a general denial of baldly pleaded claims, it did not cure these pleading deficiencies. As the trial judge noted, the pleadings, including the reply, remained deficient notwithstanding that the Trustee had amended them. The Trustee did not seek a further amendment at trial.

Moreover, although the trial judge had not found it necessary to address the limitation period issue with respect to the s. 96 claims because of their particular deficiencies, with respect to the preference claims, she determined that, had she accepted that they did meet the requirements of r. 25.06(2), these amendments would be statute-barred as they would have introduced a new cause of action more than two years after the Trustee was appointed. The Trustee had not taken issue on appeal with this finding.

(5) Yes.

The Trustee argued that the trial judge misinterpreted the doctrine of unjust enrichment regarding the receipt of commission payments for the referral of investors. The trial judge had not addressed the Trustee’s argument that the referral agreements were illegal contracts at common law (as opposed to breaching the Securities Act). The Court stated that contracts are considered illegal where they are either criminal on their face or, while facially legitimate, are entered into for the purpose of perpetrating a criminal act: Youyi Group Holdings (Canada) Ltd. v. Brentwood Lanes Canada Ltd., at paras. 47-48. The Trustee alleged the referral agreements were illegal in this latter sense.

The appellants as respondents in the cross-appeal argued that the Trustee’s claims alleged only that the referral agreements breached the Securities Act and not that the referral agreements were unlawful at common law, and it is for this reason that the trial judge canvassed only whether the agreements breached the Securities Act.

The Court stated that while the Trustee’s claims had not expressly pleaded that the agreements were unlawful at common law, they had alleged that the agreements were unlawful and contrary to the Securities Act. The Court concluded that the trial judge erred in considering only one basis on which the referral agreements could be treated as unlawful for the purposes of unjust enrichment and that, based on her other findings regarding the conduct of the defendants, the referral contracts were illegal contracts at common law and could not be the basis of a juristic reason for payments enriching the defendants.

(6) Yes.

The trial judge had dismissed the Trustee’s claim for a declaration that any judgment against LS or H would survive bankruptcy. However, the Trustee had withdrawn this claim prior to trial and reserved the right to make such a claim in the event of the bankruptcy of LS or H. Consequently, the trial judge should not had dealt with the claim and erred in doing so. The appellants, as respondents on the cross-appeal, had not contested this ground of appeal. The Court concluded that the Trustee is not precluded from raising this claim in the future.

(7) Yes.

In rejecting the Trustee’s claim that certain named defendants were not entitled to any dividend until all other claims against Golden Oaks were satisfied, the trial judge stated that the only provision of the BIA addressing this issue was s. 140.1.

As the Trustee argued on appeal, however, s. 137(1) of the BIA also addressed withholding the payment of dividends where parties were not acting at arm’s length. The trial judge found that the relevant parties in this case indeed were not acting at arm’s length, and, therefore, s. 137(1) applied.

LS (an appellant and respondent on the cross-appeal) conceded that if his argument that he was acting at arm’s length from Golden Oaks failed in the main appeal, then s. 137(1) of the BIA would have applied to him. The Court noted that this provision would apply to H because he was found by the trial judge to have been acting at arm’s length in his transactions with Golden Oaks. The Court concluded that s. 137(1) of the BIA applied to both LS and H.

(8) Yes.

The trial judge had concluded with respect to JL that it was a numbered company, and not JL personally, that received the interest payments from Golden Oaks.

On appeal, the Trustee argued that JL had personally received the benefit of the interest payments and that the trial judge misapprehended the evidence in this regard. The Trustee pointed to the fact that JL was named personally, together with the numbered company 204475 Ontario Inc., on the promissory note.

JL as respondent argued the corporate veil should not be pierced. However, the Court stated the Trustee’s action was against both the numbered company and JL personally, and the defendants’ statement of defence dated October 23, 2017, made no attempt to distinguish between the numbered company and JL personally in stating that certain amounts were loaned to Golden Oaks by the numbered company and JL as defendants and certain funds were received by them as interest payments on those loans. Therefore, the Court concluded that there was no need to pierce the corporate veil in order to determine that JL participated in these transactions in his personal capacity.

Pannone v. Peacock, 2022 ONCA 520

[Simmons J.A. (Motions Judge)]

Counsel:

P. A. R., acting in person

M.J. Hodgson (for submissions) and J. Valler (for decision), for the responding party

V. Crystal, for the Landlord and Tenant Board

Keywords: Real Property, Residential Tenancies, Eviction, Sale of Property, Administrative Law, Landlord and Tenant Board, Civil Procedure, Appeals, Stay Pending Appeal, Residential Tenancies Act, 2006, SO 2006 c. 17,Courts of Justice Act, RSO 1990, c. C.43, Belton v. Spencer, 2020 ONCA 623; Bernard Property Maintenance v. Taylor, 2019 ONCA 830; and Bernard v. Fuhgeh, 2020 ONCA 529, RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311, Circuit World Corp. v. Lesperance (1997), 33 O.R. (3d) 674 (C.A.), BTR Global Opportunity Trading Ltd. v. RBC Dexia Investor Services Trust, 2011 ONCA 620, Overseas Missionary Fellowship v. 578369 Ontario Ltd. (1990), 73 O.R. (2d) 73 (C.A.),Coote v. Ontario (Human Rights Commission), 2010 ONCA 580, Alliance to Protect Prince Edward County v. wpd White Pines Inc., 2018 ONCA 576, Fontaine v. Canada (Attorney General), 2018 ONCA 749, Bernard v. Fuhgeh, 2020 ONCA 529, Gill v. Laframboise, Board file CEL-00894-21

facts:

Ms. R and Mr. P (the “tenants”) were tenants of the responding party (the “landlord”). On March 21, 2022, the landlord obtained an order from the Landlord and Tenant Board (the “Board”) terminating the tenancy and evicting the tenants because of a pending sale of the property to purchasers intending to occupy it. The sale was originally scheduled to close on January 5, 2022, but as of the February 3, 2022, hearing date before the Board, the closing had been extended to February 8, 2022. The Board’s order required the tenants to move out as of April 11, 2022, failing which the eviction order could be enforced.

Following unsuccessful Board reviews, the tenants appealed to the Divisional Court. On a motion brought by the landlord, a single judge of the Divisional Court quashed the tenants’ appeal and ordered them to vacate by June 28, 2022, failing which the eviction could proceed. Pursuant to the terms of the single judge’s order, the eviction is currently scheduled for July 6, 2022.

Ms. R brought an urgent motion on short notice requesting a stay of an order of a single judge of the Divisional Court pending determination of her motion for leave to appeal and, if leave be granted, her appeal.

issues:

Should the stay motion be granted and the request to transfer Ms. R’s motions to the Divisional Court be granted?

holding:

Motion dismissed.

reasoning:

The motion judge was of the view that Ms. R’s appeal route was by way of review motion to a panel of the Divisional Court under s. 21(5) of the CJA. Under s. 21(5) of the CJA, a panel of the Divisional Court may, on motion, set aside or vary the decision of a judge who hears and determines a motion to that court.

The test on a motion for a stay pending appeal or leave to appeal is well‑established:

i. Is there a serious question to be determined on appeal;

ii. Will the moving party suffer irreparable harm if the stay is not granted; and

iii. Does the balance of convenience favour granting a stay?

(i) The low threshold of determining a serious issue was not met in this case.

(ii) The landlord opposes the transfer request contending that there is no merit and that he will suffer prejudice due to several factors, including the following:

• the tenants continuing failure to pay rent (the single judge determined rental arrears amounted to $9,200 as of June 16, 2022);
• the fact that his original real estate transaction was terminated because of the tenants’ persistent refusal to vacate despite the eviction order; and
• further delay may jeopardize the new sale scheduled to close on July 20, 2022.

(iii) The balance of convenience does not favour granting a stay. There was merit in the landlord’s argument and the landlord had already suffered considerable prejudice through the actions of the tenants, as he lost the benefit of his original sale agreement through the tenants’ failure to comply with the original eviction order and the tenants have continued to occupy the premises without paying rent.

EPCOR Electricity Distribution Ontario Inc. v. Municipal Electric Association Reciprocal Insurance Exchange, 2022 ONCA 514

[Strathy C.J.O., Sossin and Favreau JJ.A.]

Counsel:

A. Mark and K. Cohen, for the appellant

W. Scott and G. Schachter, for the respondents

Keywords: Contracts, Insurance, Commercial General Liability, Coverage, Interpretation, Contra Proferentem, Municipal Act, 2001, S.O. 2001, c. 25, s 274(1), Business Corporations Act, R.S.O. 1990, c. B.16, s 136(5), Insurance Act, R.S.O. 1990, c. I.8, Rules of Civil Procedure, Rules 14.05(3)(d),(h), Le Treport Wedding & Convention Centre Ltd. v. Co-operators General Insurance Company, 2020 ONCA 487, Markevich v. Canada, 2003 SCC 9, Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, 2010 SCC 33, Non-Marine Underwriters, Lloyd’s of London v. Scalera, 2000 SCC 24, Douglas v. Stan Fergusson Fuels Ltd., 2018 ONCA 192, Godonoaga (Litigation guardian of) v. Khatambakhsh (2000), 50 O.R. (3d) 417 (C.A.), M.(E.) v. Reed (2003), 49 C.C.L.I. (3d) 57 (Ont. C.A.), Insurance Law in Canada, 2nd ed. (Scarborough: Carswell, 1991), John Birds, Ben Lynch and Simon Milnes, MacGillivray on Insurance Law, 13th ed. (London: Thomson Reuters (Professional) UK Ltd., 2015)

facts:

The appellant, Municipal Electric Association Reciprocal Insurance Exchange (“MEARIE”), is an insurance reciprocal. In 2018, MEARIE issued the Comprehensive Liability Insurance Policy (the “Policy”) at issue in this appeal. The respondent, EPCOR Electricity Distribution Ontario Inc. (“EPCOR”), is an electricity distributor that provides electrical supply to municipalities. The respondent, EH was the former President and CEO of the utility company acquired by EPCOR.

The Town of Collingwood was the sole shareholder of Collingwood Utility Services Corporation. EH was the President and CEO of the utility. In March 2012, Collingwood sold 50% of its shares to PowerStream Holdings Inc. EPCOR Utilities Inc. indirectly acquired 100% of the shares of CPS, and CPS changed its name to EPCOR. Collingwood passed a resolution requesting a public judicial inquiry. EH participated in two phases of the Inquiry. By the end of his involvement in the process, he had incurred $591,115.31 in legal fees.

MEARIE denied insurance coverage to EH for those fees. EH sought to recoup these fees from EPCOR, citing a corporate Bylaw. responded that the Inquiry did not fall within the scope of the Bylaw. EH successfully sued EPCOR, which was required to indemnify him for his legal costs in respect of the Inquiry pursuant to the Bylaw.

EPCOR sought to recover its legal fees incurred in defending EH’s court application. MEARIE denied coverage to EPCOR on two bases: the application had incorrectly named EPCOR, and that the exclusion found in the Policy excluded coverage where an Insured is subject to a “[c]laim for expenditures, compensation, damages or any other amounts that are payable pursuant to statute or regulation”.

Pursuant to a settlement agreement dated December 6, 2019, EPCOR paid EH $400,000 for his costs for the Inquiry and $75,000 for his costs for the Bylaw application. As part of the settlement agreement between EPCOR and EH, EH agreed to assign to EPCOR all claims which he might have against MEARIE or Liberty Mutual Insurance Company.

“Coverage E”, and “Coverage G”, are at issue. The application judge found that Coverage G covered the legal expenses incurred by EH and accepted EPCOR’s argument that its denial of indemnity to EH under the Bylaw was an “error” and a “Wrongful Act” within the meaning of Coverage E.  MEARIE was therefore found liable to indemnify EPCOR for the legal fees it was required to reimburse to EH under both Coverage G and Coverage E. MEARIE appealed.

issues:

(1) Is correctness the proper standard of review?

(2) What principles of interpretation should be used?

(3) Did the application judge err in his interpretation of coverage G?

(4) Did the application judge err in his interpretation of coverage E?

(5) Should EH’s recovery be limited to his actual loss ($191,115.31)?

(6) Did the application judge err in his decision regarding costs?

holding:

Appeal allowed in part.

reasoning:

(1) Yes.

The parties agreed that the Policy is a contract of adhesion, and a correctness standard of review applies to its interpretation.

(2) Not in dispute.

When the language of the policy is unambiguous, the court should give effect to the clear language, reading the insurance contract as a whole. Where the language of the policy is ambiguous the general rules of contract interpretation come into play.

(3) No.

Coverage G contained an undertaking by MEARIE to pay the Insured’s costs or expenses in defence of a “proceeding” brought “against the Insured … under any statute”. The appellant submitted that the trial judge erred in finding that Coverage G insured EH’s costs of participating in the Inquiry. The Court agreed with the application judge’s analysis in rejected the appellant’s interpretation of Coverage G. The Court also agreed with the application judge’s observations with respect to the role of the reasonable expectations of the parties in the interpretation of the Policy, to the extent there was ambiguity. MEARIE had an obligation to indemnify EH for his Inquiry costs under Coverage G.

(4) Yes.

The Bylaw provided that EPCOR would indemnify a director or officer “against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by him in respect of any civil, criminal or administrative action or proceeding to which he is made a party by reason of being or having been a director or officer of the Corporation”. It contained a proviso that the director or officer must have been acting honestly and in good faith with a view to the best interests of the corporation. Had EPCOR indemnified EH for his Inquiry costs, as it was legally bound to do, it would have had no claim to recover those costs from MEARIE under the Policy, because the Policy did not insure EPCOR for the performance of its legal obligations. There was no coverage under “Coverage E” for EH’s claim under the Bylaw, there was also no coverage for EPCOR’s costs of defending that claim.

(5) No.

$191,115.31 is the difference between what EH received from EPCOR as indemnity for his Inquiry costs ($400,000) and his total legal fees of $591,115.31.

When EH settled the Bylaw application with EPCOR, he assigned his claim against MEARIE to EPCOR. EPCOR was free to advance the full amount of EH’s claim against MEARIE. EPCOR was therefore entitled to recover $591,115.31 from MEARIE. There was no overcompensation because EPCOR had no claim for indemnity under the Policy for the amounts it paid EH pursuant to the Bylaw or for its costs of the Bylaw proceedings. The judgment found that EH was entitled to indemnity for his legal costs. EPCOR, as his assignee, was entitled to enforce and collect the judgment.

(6) No.

In the court below, the respondents had claimed costs of $291,052.22 on a full indemnity basis. The application judge found that this amount was unreasonable to the unsuccessful party. The Court did not understand why the application judge used the words “on a full indemnity basis”. The costs ultimately awarded were less than half the amount claimed on a full indemnity basis. However, the award of costs did not reflect an error in principle. In awarding enhanced costs, the application judge cited authority that provides “where an insurer denies coverage and the insured is successful in its claim for indemnity under the insurance policy, then the insured is entitled to full indemnity costs”. Even if the application judge awarded “full indemnity” costs, there was a firm basis for the award and the amount was reasonable in all the circumstances. Therefore, the costs appeal was also dismissed.

Northbridge General Insurance Company v. Aviva Insurance Company, 2022 ONCA 519

[Benotto, Zarnett and Sossin JJ.A.]

Counsel:

D. Berlach and M. Connolly, for the appellant

D. Dacquisto and J. Tausendfreund, for the respondent

Keywords: Contracts, Insurance, Interpretation, Professional Liability Insurance, Commercial General Liability Policy, Primary Coverage, Excess Coverage, Equitable Contribution, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, Family Insurance Corp. v. Lombard Canada Ltd., 2002 SCC 48, McKenzie v. Dominion of Canada General Insurance Company, 2007 ONCA 480, Lawyers’ Professional Indemnity Company (LPIC) v. Lloyd’s Underwriters, 2016 ONSC 6196

facts:

This was an appeal from the judgment of the application judge granting a declaration sought by the respondent, Northbridge General Insurance Company (“Northbridge”) that the appellant, Aviva Insurance Company (“Aviva”), be required to contribute equally to the defence and indemnification of an insured party who is being sued in an underlying action. The Northbridge and Aviva Policies each included “other insurance” clauses that provide that their policies are excess to any other valid and collectible insurance. The application judge found the two policies were irreconcilable and applied the doctrine of equitable contribution, as they covered the same loss and each had an equivalent “other insurance” clause.

issues:

Did the application judge err in his interpretation of the Northbridge and Aviva Policies as irreconcilable?

holding:

Appeal dismissed.

reasoning:

No.

The Court disagreed that the “other insurance” and other relevant provisions of the policies at issue were “standard form contracts” or contracts with significant precedential value. Rather, the wording of these provisions and interplay of the two policies made the application judge’s interpretive decisions distinct. Accordingly, the standard of palpable and overriding error applied.

The applicable legal standard for equitable contribution was set out in Family Insurance Corp. v. Lombard Canada Ltd., 2002 SCC 48, and is based on the principle that parties under “coordinate liability,” to make good a loss, must share that burden on a pro rata basis. The policies must cover the same risk for the same insured and must not exclude one another. In short, the policies must both apply to an insured’s loss and be irreconcilable. The Court was satisfied that both policies provided coverage at the same layer of coverage. The Court agreed with the application judge’s conclusion that the “other insurance” clause in both the Northbridge and Aviva Policies was intended to achieve the same goal.

The Court did not accept the appellant’s argument that the reference in the Aviva Policy’s “other insurance” clause to the coverage being in excess of any valid and collectable policy available to “individual pharmacists” transformed the Aviva Policy into a secondary insurance policy. The application judge’s interpretations of the Aviva and Northbridge Policies were open to him, and the appellant showed no error with his analysis or conclusion.

Karkhanechi v. Connor, Clark & Lunn Financial Group Ltd., 2022 ONCA 518

[Brown, Roberts and Paciocco JJ.A.]

Counsel:

P. Bates and S. Kalloghlian, for the appellants

B. Kolenda and V. Mishra, for the respondents

Keywords: Contracts, Partnership Agreements, Civil Procedure, Limitation Periods, Rolling Limitation Periods, Declarations, Limitations Act, 2002, S.O. 2002, c. 24, s. 16(1)(a), Marvelous Mario’s Inc v St Paul Fire and Marine Insurance Co, 2019 ONCA 635, Pedersen v Soyka, 2014 ABCA 179, Pickering Square Inc v Trillium College Inc, 2016 ONCA 179, Richards v Sun Life Assurance Company of Canada, 2016 ONSC 5492, York Condominium Corp No 382 v Jay-M Holdings Ltd et al, 2007 ONCA 49, Fram Elgin Mills 90 Inc v Romandale Farms Limited, 2021 ONCA 201, Hamilton (City) v Metcalfe & Mansfield Capital Corporation, 2012 ONCA 156, Bonilla v Preszler, 2016 ONCA 759, Beccarea v Canadian National Railway Company, 2018 ONSC 630, Kyle v Atwill, 2020 ONCA 476, Alguire v The Manufacturers Life Insurance Company (Manulife Financial), 2018 ONCA 202

facts:

In late 2014, the appellant, S.K, was recruited to work in an asset management business operating under the umbrella of the Connor, Clark & Lunn Financial Group. His compensation package was structured in a partnership agreement (the “Partnership Agreement”) that he entered into with the respondent Connor, Clark & Lunn Financial Group Ltd. (“CCL FG Ltd.”). The Partnership Agreement between S.K and CCL FG Ltd. established the Connor, Clark & Lunn Financial Group Investment Partnership (“CCL IP”), which was also named as a respondent in the appeal.

In late 2016, S.K’s employment was terminated and a compulsory retirement provision in the Partnership Agreement was triggered, forcing him into retirement. It soon became evident that the post-retirement payments that S.K was receiving were less than he believed he was entitled to. It also became clear that the respondents disagreed with S.K’s claimed entitlement to receive permanent post-retirement payments based on a 3% interest in CCL IP. In the respondent’s view, the Partnership Agreement provided only for declining payments over a nine-year period based on a 1.2% interest in the partnership as of October 31, 2016, when S.K was removed as a partner.

In December 2019, S.K sued the respondents, alleging that they were in breach of the post-retirement compensation agreement. In September 2021, a motion judge granted summary judgment against S.K after finding that his claims were statute barred under the Limitations Act, 2002. S.K appealed the order arguing that the motion judge erred by failing to apply a rolling limitation period, and by finding his request for a declaration to be statute-barred, contrary to s. 16(1)(a) of the Limitations Act, 2002, which provides that there is no limitation period for the seeking of a declaration.

issues:

(1) Did the motion judge err by failing to apply a rolling limitation period?

(2) Did the motion judge err by finding that the request for declaratory relief was statute-barred, contrary to s. 16(1)(a) of the Limitations Act, 2002?

holding:

Appeal dismissed.

reasoning:

(1) No.

The term “rolling limitation period” is used where a new limitation period arises with each breach of an ongoing or recurring contractual obligation. Not all breaches that lead to the failure to make ongoing or recurring payments provided for in a contract will give rise to rolling limitation periods.

The appellants argued that the motion judge erred by failing to apply a rolling limitation period that would enable them to sue for: (1) the deficient payments made in the two years prior to the launch of their action on December 10, 2019, and (2) the assessed value of Equestrian’s interest in CCL IP. The Court disagreed and found that the motion judge was correct in concluding that a single breach with continuing consequences occurred on March 27, 2017, when the respondents unequivocally rejected the appellants’ claim to a permanent 3% interest in CCL IP, thereby making a rolling limitation period inapplicable. By March 27, 2017, the appellants had all of the material facts required to initiate an action relating to the ongoing damage that would arise from the respondents’ denial that they owed Equestrian the obligation that the appellants were claiming.

(2) No.

In arguing that the motion judge did err in finding that the appellants’ request for a declaration is statute-barred, the appellants relied on s. 16(1)(a) of the Limitations Act, 2002. They argued that in applying s. 16(1)(a), the motion judge mistakenly followed the concurring decision instead of the majority decision in Kyle v Atwill which they interpreted as holding unequivocally that no limitation periods applied to declarations, such that where a party seeks both consequential and declaratory relief, the consequential relief was subject to the Limitations Act, 2002, but the declaratory relief was not.

The Court found that the appellants overread the majority decision in Kyle. Both the majority and concurring decisions in that case agreed that if a pleaded claim for a declaration was, in substance, a request for a remedy against the other party and not really a request for declaratory relief, s. 16(1)(a) would not operate and a limitation period would apply. It was therefore necessary to look at the substance rather than the form of the claim so that plaintiffs cannot circumvent a limitation period by joining a statute-barred remedial claim with a declaration claim that has no legitimate declaratory purpose beyond attempting to circumvent the expiry of a limitation period. In Kyle, the majority and concurring judgments simply disagreed on whether the declaratory relief requested in that case was, in substance, a compensatory claim or not. The motion judge therefore correctly stated the principles that he was to apply.

The motion judge also correctly noted that declaratory relief should be narrowly construed to ensure that s. 16(1)(a) was not used as a means to circumvent limitation periods. Having found that the compensatory claim the appellants were advancing was statute-barred, the motion judge was correct in closely examining whether the related request for declaratory relief was added in an attempt to avoid that limitation period.

SHORT CIVIL DECISIONS

Salehi v. Association of Professional Engineers of Ontario, 2022 ONCA 511

[Feldman, Brown and Huscroft JJ.A.]

Counsel:

B. S., acting in person

B. C. LeBlanc and N. S. Danson, for the responding party

Keywords: Civil Procedure, Orders, Varying or Setting Aside, Rules of Civil Procedure, s. 59.06(2)(a), R. v. Moura, 172 C.C.C. (3d) 340 (Ont. C.A.), Aristocrat v. Aristocrat (2004), 73 O.R. (3d) 275 (C.A.), leave to appeal to S.C.C. refused (2005), 207 O.A.C. 399, Mehedi v. 2057161 Ontario Inc.(Job Success), 2014 ONCA 604

Render v. ThyssenKrupp Elevator (Canada) Limited, 2022 ONCA 512

[Feldman, Pepall and Tulloch JJ.A.]

Counsel:

C. Foulon and B. Hassibi, for the moving party

D. G. Cowling and A. J. Sinclair, for the responding party

Keywords: Civil Procedure, Orders, Varying or Setting Aside, Rules of Civil Procedure, s. 59.06, Employment Standards Act, 2000, S.O. 2000, c. 41, s. 8(2), McDowell v. Barker, [2014] O.J. No. 2363 (C.A.), Hoang v. Mann Engineering Ltd., 2015 ONCA 838

Capone v. Fotak , 2022 ONCA 521

[Strathy C.J.O., Sossin and Favreau JJ.A.]

Counsel:

Z.F., acting in person

H. Niman and J-Y. Liew, for the respondent (C70124) / responding party (M53395)

Keywords: Family Law, Appeals, Costs, Family Law Rules, Rule 24(12), Selznick v. Selznick, 2013 ONCA 35, Beaver v. Hill, 2018 ONCA 840

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