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Good afternoon.
Following are this week’s summaries of the Court of Appeal for Ontario for the week of April 3, 2023.
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Skymark Finance Corporation v. Ontario is the latest example of the application of the rule that an action will be stayed if there is any delay in the disclosure to the non-settling defendants of a settlement that changes the litigation landscape.
Boyer v. Callidus Capital Corporation is a wrongful dismissal claim that turned into an Anti-SLAPP case. The Court found that Callidus had counterclaimed against its former executive who had sued for wrongful dismissal in order to silence him and other employees regarding the allegedly “toxic work environment” at Callidus. The motion judge dismissed the plaintiff’s Anti-SLAPP motion to dismiss the counterclaim, but the Court of Appeal overturned that decision.
Other topics covered included dishonest lawyer coverage under LawPro’s policy, a claim on personal guarantees and the limitation period applicable to the enforcement of riparian rights under the Real Property Limitations Act.
Happy Easter, Passover and Ramadan to all those celebrating.
John Polyzogopoulos
Blaney McMurtry LLP
416.593.2953 Email
Ines Ferreira
Blaney McMurtry LLP
416.597.4895 Email
Table of Contents
Civil Decisions
Browne v. Meunier, 2023 ONCA 223
Keywords: Real Property, Riparian Rights, Statutory Interpretation, Civil Procedure, Limitation Periods, Discoverability, Real Property Limitations Act, S.O. 2002, c. 24, Limitations Act, 2002, S.O. 2002, c. 24, Pioneer Corp. v. Godfrey, 2019 SCC 42, Mihaylov v. Long Beach Residents’ Association, 2018 ONSC 14
Skymark Finance Corporation v. Ontario, 2023 ONCA 234
Keywords: Civil Procedure, Settlements, Disclosure, Change in Litigation Landscape, Stay of Proceeding, Abuse of Process, Handley Estate v. DTE Industries Limited, 2018 ONCA 324, Laudon v. Roberts, 2009 ONCA 383, Aecon Buildings v. Stephenson Engineering Limited, 2010 ONCA 898, Tallman Truck Centre Limited v. K.S.P. Holdings Inc., 2022 ONCA 66, Waxman v. Waxman, 2022 ONCA 311, Poirier v. Logan, 2022 ONCA 350, CHU de Québec– Université Laval v. Tree of Knowledge International Corp., 2022 ONCA 467, Pettey v. Avis Car Inc. (1993), 13 O.R. (3d) 725 (Gen. Div.), Performance Analytics v. McNeely, 2022 ONCA 731, Crestwood Preparatory College Inc v. Smith, 2022 ONCA 743
Castle Building Centres Group Ltd. v. The Rehill Company Limited, 2023 ONCA 237
Keywords:Contracts, Debtor-Creditor, Guarantees, Civil Procedure, Summary Judgment, No Genuine Issue Requiring Trial, Rules of Civil Procedure, r. 20.04(2)(a), Palmer v. The Queen, [1980] 1 S.C.R. 759, Hyrniak v. Mauldin, 2014 SCC 7, Sweda Farms Ltd. v. Egg Farmers of Ontario, 2014 ONCA 878, Housen v. Nikolaisen, 2002 SCC 33, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53
Boyer v. Callidus Capital Corporation, 2023 ONCA 233
Keywords:Employment Law, Wrongful Dismissal, Constructive Dismissal, Torts, Defamation, Civil Procedure, Anti-SLAPP, Amending Pleadings, Striking Pleadings, No Reasonable Cause of Action, Frivolous, Vexatious, Abuse of Process, Summary Judgment, Courts of Justice Act, R.S.O. 1990, c. C.43, s. 137.1, Rules of Civil Procedure, r. 21, The Catalyst Capital Group Inc. v. West Face Capital Inc., 2021 ONSC 125, Zoutman v. Graham, 2020 ONCA 767, Labourers’ International Union of North America, Local 183 v. Castellano, 2020 ONCA 71, 1704604 Ontario Ltd. v. Pointes Protection Association, 2020 SCC 22, Galambos v. Perez, 2009 SCC 48, Platnick v. Bent, 2018 ONCA 687, Park Lawn Corporation v. Kahu Capital Partners, 2023 ONCA 129, Ridel v. Cassin, 2014 ONCA 763, Britton v. Manitoba, 2011 MBCA 77, Farmers Oil and Gas Inc. v. Ontario (Natural Resources), 2016 ONSC 6359, Cahoon v. Franks, [1967] S.C.R. 455
1170650 Ontario Ihnc. V. McEnery, 2023 ONCA 238
Keywords: Contracts, Insurance, Lawyers’ Errors and Omissions, Coverage, Exclusions, Dishonest Conduct, Rules of Civil Procedure, r. 60.08(16), Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, Housen v. Nikolaisen, 2002 SCC 33
Short Civil Decisions
Libfeld v. Libfeld, 2023 ONCA 235
Keywords: Costs Endorsement, Corporations, Oppression
Skyline Real Estate Acquisitions (III) Inc. v. Peterborough Retail Portfolio LP, 2023 ONCA 236
Keywords: Contracts, Real Property, Agreements of Purchase and Sale of Land, Estoppel, Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District, 2021 SCC 7
CIVIL DECISIONS
Browne v. Menuier, 2023 ONCA 223
[Miller, Trotter and Favreau JJ.A.]
Counsel:
J. McCarthy, for the appellants/respondents by way of cross-appeal
M. Adams, for the respondents/appellants by way of cross-appeal
Keywords: Real Property, Riparian Rights, Statutory Interpretation, Civil Procedure, Limitation Periods, Discoverability, Real Property Limitations Act, S.O. 2002, c. 24, Limitations Act, 2002, S.O. 2002, c. 24, Pioneer Corp. v. Godfrey, 2019 SCC 42, Mihaylov v. Long Beach Residents’ Association, 2018 ONSC 14
facts:
In 2017, the appellants purchased their cottage, situated on an inlet of the St. Lawrence River. The respondents owned a neighbouring property, which they purchased in 2015. When the appellants purchased the cottage, they believed the property included a derelict boat house located in the foreshore, which they intended to demolish. It was later discovered that the boat house, which had been constructed in 1969 by the respondents’ predecessors in title, in fact belonged to the respondents.
In 2018, the appellants commissioned a survey that confirmed the boat house was located directly in front of their property.
In 2020, the appellants sought a declaration that the boat house interfered with their riparian rights of access to the St. Lawrence River. The trial judge found that the appellants had riparian rights of access to the waters and that the appellants had established a violation of their riparian rights. Nevertheless, the trial judge found that the appellants were time-barred from bringing an action against the respondents to enforce these rights by operation of ss. 4 and 15 of the Real Property Limitations Act (“RPLA”)
issues:
(1) Did the trial judge err in finding that the discoverability rule did not apply to s. 4 of the RPLA?
(2) Did the trial judge err in determining when the cause of action for infringement of riparian rights accrued?
holding:
Appeal and cross-appeal dismissed.
reasoning:
(1) Yes.
The Court held that the Supreme Court in Pioneer Corp. v. Godfrey (“Pioneer Corp.”) made it clear that the applicability of the discoverability rule to a statutory limitations provision is a matter of statutory interpretation, that is, of ascertaining how the legislature intended to change the law through the statutory text it enacted. The discoverability rule applies even where it is not expressly referenced in the provision. That is, “even where the statute does not explicitly state that the limitation period runs from ‘the accrual of the cause of action’, discoverability will apply if it is evident that the operation of a limitation period is, in substance, conditioned upon accrual of a cause of action or knowledge of an injury” (Pioneer Corp.). The trial judge erred in failing to consider how the common law rule of discoverability interacts with the provisions of the RPLA.
The Court found that s. 4 of the RPLA expressly references the accrual of the action and that s. 15 of the RPLA provides that at the end of the ten year period, the right to bring an action is extinguished. In the Court’s view, applying the proposition articulated in Pioneer Corp. to the interpretation of s. 4 of the RPLA led to the conclusion that discoverability must apply to that section. The trigger for bringing the action was the accrual of the action and not some external event. The running of the limitation period under s. 4 would therefore be tolled until the material facts constituting the infringement were discovered or were discoverable by a reasonably diligent person in the circumstances of the rights holder. Further, s. 28 of the RPLA, which explicitly provides for discoverability in cases of concealed fraud, was overcome by the strength of the competing interpretive principle articulated in Pioneer Corp., which presumed the application of the discoverability rule and required explicit language to oust its application.
(2) Yes.
The Court held that s. 4 of the RPLA referred to the time when the right of action first accrued “to some person through whom the person making it or bringing it claims.” Riparian rights run with the property, so an action for breach of such rights can “accrue” to the predecessor(s) in title at the time of the breach, and pass to a subsequent holder of title. The salient question was whether (and when) the breach of riparian rights was knowable by the appellants’ predecessors in title.
The Court held that the infringement of the riparian rights of the appellants’ predecessors in title would have had to have been obvious to those predecessors from the time the boat house was constructed in 1969. Once the predecessor’s right of action had been extinguished under s. 15, it could not be revived by transferring title. While the trial judge’s finding that the limitation period for bringing an action began to run from the time the boat house was built in 1969 and expired ten years later was inaccurate, the outcome that the claim was statute-barred persisted, albeit for different reasons.
Cross Appeal
On cross-appeal, the respondents’ argued that the trial judge made the error of concluding that the unsightliness of the boat house had some bearing on the analysis of whether there had been a breach of riparian rights. The Court disagreed, stating that the word “unsightly” used in the trial judge’s reasons was gratuitous. Lastly, the Court did not agree that the trial judge made any error in concluding that the breach of riparian rights had been established on the evidence.
Skymark Finance Corporation v. Ontario, 2023 ONCA 234
[Doherty, Lauwers and Trotter JJ.A.]
Counsel:
J. Katz and S. Bieber, for the appellant
D.M. Golden, for the respondents Kormans LLP and J.K.
P. Wardle, for the respondents Waterous Holden Amey Hitcheon LLP and D.C.
D. Salmon and M. Saad, for the respondent His Majesty the King in Right of Ontario
Keywords: Civil Procedure, Settlements, Disclosure, Change in Litigation Landscape, Stay of Proceeding, Abuse of Process, Handley Estate v. DTE Industries Limited, 2018 ONCA 324, Laudon v. Roberts, 2009 ONCA 383, Aecon Buildings v. Stephenson Engineering Limited, 2010 ONCA 898, Tallman Truck Centre Limited v. K.S.P. Holdings Inc., 2022 ONCA 66, Waxman v. Waxman, 2022 ONCA 311, Poirier v. Logan, 2022 ONCA 350, CHU de Québec– Université Laval v. Tree of Knowledge International Corp., 2022 ONCA 467, Pettey v. Avis Car Inc. (1993), 13 O.R. (3d) 725 (Gen. Div.), Performance Analytics v. McNeely, 2022 ONCA 731, Crestwood Preparatory College Inc v. Smith, 2022 ONCA 743
facts:
Two of the defendants, L.S. and H.S., owned and controlled Delhi Farm Equipment Ltd. (“Delhi”, and together, the “Delhi Defendants”). In 2015, Delhi sought to enter the tobacco business. The Ontario government required a license to operate this business, and as part of the application process, the Ministry of Finance (“MOF”) required a $1 million security bond. The appellant, Skymark Finance Corporation (“Skymark”), financed the transaction. The loan agreement included that: (1) L.S. would partially secure the loan by granting mortgages to Skymark on two properties she owned, and (2) the Delhi Defendants would sign an irrevocable Acknowledgment and Direction to the MOF that, when the $1 million security bond was no longer required, the $1 million would be returned directly to Skymark.
In October 2015, the MOF received the funds from Skymark’s counsel (the “Korman Defendants”), but claimed to have never received the Acknowledgement and Direction. By January 2016, L.S. defaulted on her mortgage obligations, and Skymark commenced an action (the “Mortgage Action”). On March 31, 2016, the Delhi Defendants signed a new Letter of Direction that was forwarded to the MOF, which directed that the funds be forwarded to their counsel (the “Clement Defendants”), who would in turn forward the funds to Skymark.
In August 2016, at the request of the Delhi Defendants, Delhi’s tobacco license was cancelled. Soon after, the Clement Defendants received the $1 million from the MOF, and forwarded it, less legal costs, to Delhi’s bank account. It was all subsequently gambled away by H.S. On July 20, 2017, Skymark commenced an action against the Delhi Defendants, the Korman Defendants, the Clement Defendants, and Ontario (the “Main Action”). The Main Action alleged a fraudulent course of conduct to deceive Skymark, as well as negligence against each defendant law firm in dealing with the directions and funds.
The Delhi Defendants pleaded that Skymark engaged in fraud in misusing the tobacco license, and did not crossclaim against any other defendant. The Korman Defendants denied negligence and crossclaimed against the Delhi Defendants and Ontario for contribution and indemnity. The Clement Defendants only crossclaimed against the Delhi Defendants for contribution and indemnity. In the Delhi Defendants’ defence to crossclaim, they denied responsibility and stated that the law firms acted independently and without coercion.
On June 6, 2019, Skymark and L.S. entered into Minutes of Settlement (the “Minutes”) in the Mortgage Action. However, the Minutes made note of the Main Action, and stated that it would “settle the Actions…” The relevant terms of the Minutes were that L.S. would: (1) give up vacant possession of the mortgaged properties and her liability would be limited to the proceeds of sale, (2) provide an affidavit that would be used as evidence by Skymark in the Main Action, (3) waive solicitor-client privilege for all communications with the Clement Defendants, (4) agree to cooperate during the Examination for Discovery of her in the Main Action, and (5) have the Main Action dismissed against her without costs.
In the affidavit, L.S. swore, among other things, that the Clement Defendants advised her husband to send the new direction to the MOF so that the funds could be used as leverage to settle Skymark’s claim. It further stated that the Clement Defendants advised to have the funds deposited in Delhi’s bank account, which was when her husband gambled away the money. A copy of the affidavit was sent to the non-settling defendants about three months later, but disclosure of the Minutes was refused.
Following the threat of an abuse of process motion, Skymark disclosed the Minutes on February 18, 2020. Skymark, however, represented that the Minutes were only entered into with respect to the Mortgage Action. A motion was brought to stay the Main Action as an abuse of process. The motion judge granted the motion to stay. He found that the Minutes changed the entire litigation landscape. Accordingly, Skymark was required to disclose immediately the Minutes to all non-settling parties. Skymark appealed.
issues:
(1) Did the motion judge err in determining that the Minutes changed the entire litigation landscape?
(2) Alternatively, did the motion judge err in staying the proceedings against Ontario?
holding:
Appeal dismissed.
reasoning:
(1) No.
The Court reiterated that settlement agreements reached between some parties, but not others, need to be immediately disclosed to non-settling parties if they entirely change the litigation landscape. Furthermore, the absence of prejudice does not excuse a breach of the obligation of immediate disclosure. The Court added that the purpose of this rule is not to discourage settlement. It exists because in certain circumstances the settlement agreement may have an impact on the strategy and line of cross-examination to be pursued and evidence to be led. In short, procedural fairness requires immediate disclosure. In this case, the defendants were forced to discover a party without knowing the terms of the Minutes. Further, a judge reading the pleadings in this case would have no idea of the seismic shift in the litigation caused behind the scenes by the Minutes.
Skymark argued that the landscape of the litigation had not entirely shifted because not all parties were impacted. The Court disagreed, noting that the Minutes did in fact alter the dynamics of the litigation. When Skymark settled with L.S., the claim against the Clement Defendants shifted from negligence to fraud. Furthermore, the added pressure on the Clement Defendants was arguably favourable to the position of the Korman Defendants. Lastly, the Delhi Defendants, who were originally adversaries of Skymark, were now allies, which was similar to the position that they once had with the Clement Defendants.
Lastly, the Court stated that the conclusion that the litigation landscape had entirely shifted was not undermined, as Skymark submitted, by the motion judge’s conclusion that Ontario was unaffected by the Minutes. Nonetheless, the Court agreed with the submissions of the Clement Defendants that, even if not to the same extent, the Minutes had some impact on all defendants.
(2) No.
The Court stated that all of the moving defendants were impacted by the Minutes, including Ontario. Accordingly, each was entitled to a remedy. Requiring Ontario to remain in litigation that was stayed against its co-defendants would result in a significant widening of Ontario’s exposure to damages. The Court held that to find that the immediate disclosure rule was breached, but then deny Ontario a stay, would lead to a perverse result.
Castle Building Centres Group Ltd. v. The Rehill Company Limited, 2023 ONCA 237
[Gillese, Benotto and Coroza JJ.A.]
Counsel:
C. Besant, for the appellants S.D.P. and J.A.P.
R. Kennedy and M. Freake, for the respondent Castle Building Centres Group Ltd.
Keywords: Contracts, Debtor-Creditor, Guarantees, Civil Procedure, Summary Judgment, No Genuine Issue Requiring Trial, Rules of Civil Procedure, r. 20.04(2)(a), Palmer v. The Queen, [1980] 1 S.C.R. 759, Hyrniak v. Mauldin, 2014 SCC 7, Sweda Farms Ltd. v. Egg Farmers of Ontario, 2014 ONCA 878, Housen v. Nikolaisen, 2002 SCC 33, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53
facts:
JP owned and operated the appellant, a building supply retailer, for many years before retiring and passing down the business to SP. After SP took over, the appellant ran into financial difficulties and was unable to pay its creditor and main wholesale supplier, the respondent. At different times throughout the appellant’s relationship with the respondent, SP and JP provided separate personal guarantees for the appellant’s debt in favour of the respondent. On April 24, 2020, the respondent attempted to enforce the personal guarantees of JP and SP totalling over $2 million.
The respondents commenced an action by way of Statement of Claim against the personal appellants, who defended and counterclaimed alleging that the respondent wrongfully issued demands against their guarantees, which harmed the corporate appellant, caused it to be put into a receivership, and thereby caused the appellants to lose the value of their equity in, and shareholder loans advanced to, the appellant. The respondents brought a motion for summary judgment. By the time the motion was heard, the appellant was forced into receivership and adjudged bankrupt. The motion judge found no genuine issues for trial regarding the appellant’s indebtedness to the respondent and JP and SP’s personal guarantees. The motion judge granted summary judgment and enforced the guarantees, totalling $2,229,710.06, and dismissed the appellants’ counterclaim.
The appellants appealed the summary judgment against them and sought leave to introduce fresh evidence in support of their appeal. The appellants’ motion to file fresh evidence was filed with the Court one day before the hearing of the appeal. The fresh evidence consisted of an affidavit by SP sworn on February 17, 2023, containing several documents that he asserted were discovered only recently from his own “personal records”. SP claimed that since the appellant was put into receivership in May 2021 and bankruptcy in November 2021, he was not the custodian of the corporate appellant’s records. SP further asserted that the fresh evidence should be admitted because it could not have been adduced earlier and could affect the result of the appeal.
issues:
(1) Should the appellant’s motion to introduce fresh evidence be granted?
(2) Did the motion judge err in law in by applying the test and procedure for summary judgment?
(3) Did the motion judge err in finding that the appellant’s debt was owed to the respondent and not its subsidiary, CBS?
(4) Did the motion judge err in finding that the appellant’s claim for rebates owing to it by the respondent was not a genuine issue for trial?
(5) Did the motion judge err in finding that the respondent’s breach of the Subordination Agreement caused no damage to the appellants?
(6) Did the motion judge err in concluding that the principal of the appellant’s personal guarantee was not waived by the respondent?
(7) Should the respondent have lifted the stay to proceed against the appellants because the corporate appellant’s receivership order stayed the action against the appellants?
holding:
Motion to adduce fresh evidence dismissed. Appeal dismissed.
reasoning:
(1) No.
The Court dismissed the appellants’ appeal to adduce fresh evidence, as it did not meet the test set out in Palmer v. The Queen. At the first stage of the Palmer test, the Court agreed with the respondent’s submission that the appellants had not shown why most of the documents they sought to admit could not have been made available before the motion judge. The Court further held that the fourth stage of the Palmer test was not met. This branch requires the court to consider whether the fresh evidence, if believed, could reasonably be expected to affect the result of the motion. The Court accepted the respondent’s argument that the inquiry was made as a part of the appellants’ appeal strategy and the document sought to be adduced bore no relevance to the motion and further that the admission of the fresh evidence would not have affected the result.
(2) No.
The Court found that the motion judge correctly noted and applied the governing legal principle on a summary judgment motion: whether there was a genuine issue that requires a trial. The Court saw no error in the motion judge’s decision to proceed with the summary judgment motion.
(3) No.
The Court found that the appellants had not shown any palpable and overriding error in the motion judge’s reasons. With respect to the argument that the appellant’s debt was owed to the respondent and not its subsidiary, CBS, the Court saw no basis to interfere with the motion judge’s rejection of the appellants’ argument that the debt was owed to CBS as there was no evidence that dispositively showed that the appellant had any membership agreement with CBS.
(4) No.
The Court upheld the motion judge’s rejection of the appellants’ argument that the appellant was entitled to rebates from the respondent, which could be set off against the debt claimed, as it was firmly grounded in the record. The motion judge considered the evidence provided by the appellant, but noted that any claim for rebates belong to the appellant and therefore belonged to the receiver/trustee, who confirmed it was not proceeding with a claim for the rebates. The Court further noted that the motion judge made a factual finding that SP did not raise the issue of the rebates with the respondent during their payment plan negotiations in 2017 and 2018 and that it would have been important to do so as the alleged rebates would have amounted to over $2,000,000. The Court held that it was open to the motion judge to find that the appellant acknowledged the amount of indebtedness to the respondent through its silence on the rebates issue while explicitly undertaking to make payments under the two payment agreements.
(5) No.
The Court saw no error in the motion judge’s rejection of the appellants’ argument that the respondent breached the terms of a Subordination Agreement because it had agreed to take no steps to collect its debt but did so when it made a demand on the personal guarantees provided by SP and JP. The motion judge correctly observed that the Subordination Agreement was a contract between the respondent and a third party governing that third party’s security in the corporate appellant’s assets. The Subordination Agreement did not apply to the enforcement of SP and JP’s personal guarantees.
(6) No.
The Court agreed with the motion judge’s determination that JP’s guarantee was continuing and enforceable and found no palpable and overriding error in the motion judge’s reasons on the issue. The Court agreed with the motion judge’s finding that the respondent did not waive JP’s personal guarantee when he retired and SP took over the business. JP admitted to signing his personal guarantee and its express terms noted that it was a “direct, absolute, unconditional, unlimited, continuing and irrevocable obligation” and cannot be altered or waived “unless made in writing.” As there was no evidence that the respondent agreed in writing (or otherwise) to assign or waive JP’s guarantee, it continued beyond his retirement and remained enforceable.
(7) No.
The Court saw no merit to the appellant’s argument that the respondent ought to have sought a lift of the stay order before proceeding with its motion and found that the motion judge correctly noted that the receivership order only applied to the corporate appellant and the summary judgment motion was to enforce SP and JP’s personal guarantees. Accordingly, a lift of the stay was not required as the stay did not apply to SP and JP’s personal guarantees.
Boyer v. Callidus Capital Corporation, 2023 ONCA 233
[Gillese, Benotto and Coroza JJ.A.]
Counsel:
P. Griffin and J. McDaniel, for the appellant
D. Moore and K. Jones, for the respondent
Keywords:Employment Law, Wrongful Dismissal, Constructive Dismissal, Torts, Defamation, Civil Procedure, Anti-SLAPP, Amending Pleadings, Striking Pleadings, No Reasonable Cause of Action, Frivolous, Vexatious, Abuse of Process, Summary Judgment, Courts of Justice Act, R.S.O. 1990, c. C.43, s. 137.1, Rules of Civil Procedure, r. 21, The Catalyst Capital Group Inc. v. West Face Capital Inc., 2021 ONSC 125, Zoutman v. Graham, 2020 ONCA 767, Labourers’ International Union of North America, Local 183 v. Castellano, 2020 ONCA 71, 1704604 Ontario Ltd. v. Pointes Protection Association, 2020 SCC 22, Galambos v. Perez, 2009 SCC 48, Platnick v. Bent, 2018 ONCA 687, Park Lawn Corporation v. Kahu Capital Partners, 2023 ONCA 129, Ridel v. Cassin, 2014 ONCA 763, Britton v. Manitoba, 2011 MBCA 77, Farmers Oil and Gas Inc. v. Ontario (Natural Resources), 2016 ONSC 6359, Cahoon v. Franks, [1967] S.C.R. 455
facts:
The appellant was an employee of the respondent in the position of Vice President. The appellant sued for wrongful dismissal, alleging constructive dismissal due to a toxic work environment. The respondent responded with a counterclaim for $150 million alleging that the appellant had breached fiduciary duties during his employment.
The respondent is a lender to distressed businesses in Canada and the United States. The appellant was responsible for underwriting new loans and assessing potential borrowers. If the credit committee approved the loan, the appellant would be responsible for the portfolio management. The appellant had no written employment contract.
In 2015, the appellant had become concerned about the direction the company was taking. This fact, together with personal health issues led the appellant, in July 2015, to give 18 months’ notice of his intention to retire at the end of 2016. By July 2016, all of the appellant’s files had been transferred from him. He left the company the following month, four months earlier than planned.
On February 6, 2017, the appellant commenced an action for wrongful dismissal. The appellant claimed vacation pay, stock options and the value of lost benefits. Fifteen days later, the respondent issued a counterclaim for $150 million alleging breaches of fiduciary duties relating to three borrower clients.
The appellant moved to strike or dismiss the counterclaim on the basis that it was a proceeding limiting freedom of expression on matters of public interest pursuant to the Anti-SLAPP provisions in s. 137.1 of the Courts of Justice Act (“CJA”). The appellant also alleged that the counterclaim should be dismissed pursuant to r. 21 of the Rules of Civil Procedure because it was frivolous and vexatious and disclosed no reasonable cause of action. At the same time, the appellant sought leave to amend his Statement of Claim to include a claim for deferred bonuses and sought summary judgment on the action. The parties and the court agreed that those motions should be heard together.
The motion judge dismissed the Anti-SLAPP motion; dismissed the motion for leave to amend the Statement of Claim; deferred the motion to dismiss the counterclaim until after the Anti-SLAPP motion was disposed of; and deferred the summary judgment motion in the main action until after a decision is made on the motions to dismiss the counterclaim.
issues:
(1) Did the motion judge err by not dismissing the counterclaim pursuant to s. 137.1?
(2) Did the motion judge err by deferring the r. 21 motion and the summary judgment motion?
(3) Did the motion judge err by refusing leave to amend the Statement of Claim?
holding:
Appeal allowed.
reasoning:
(1) Yes.
The Court reviewed the shifting burdens on a s.137.1 motion by stating that s. 137.1 places an initial burden on the moving party — the defendant in a lawsuit — to satisfy the judge that the proceeding arises from an expression relating to a matter of public interest. Once that showing is made, the burden shifts to the responding party — the plaintiff — to satisfy the motion judge that there are grounds to believe the proceeding has substantial merit and the moving party has no valid defence, and that the public interest in permitting the proceeding to continue outweighs the public interest in protecting the expression (1704604 Ontario Ltd. v. Pointes Protection Association).
The Court then discussed the threshold issues: (i) there must be an expression; (ii) the expression must relate to a matter of public interest; and (iii) the proceeding for which dismissal is sought must arise from the expression. The Court agreed with the motion judge’s finding that that the threshold issues of “expression” and “public interest” had been met. The Court found that whether the proceeding arose from the appellant’s expression was the only threshold requirement at issue.
The Court concluded that the motion judge had erred in law by interpreting “arises from” too narrowly by holding that “arises from” implies an element of causality such that the moving party must show that the expression is causally related to the proceeding. The Court instead held that a “broad and liberal” approach to the threshold burden was to be applied, and that the court should consider the context and not pursue a rigid, formalistic view of the pleadings. The Court held that once the context was considered, it became clear that the counterclaim arose from the expressions in the appellant’s claim.
The Court, in coming to this conclusion, held that the counterclaim only arose as a result of the appellant’s public allegations of a toxic work environment. Accordingly, the Court held that by interpreting s. 137.1(3) too narrowly, and by failing to consider the context of the counterclaim, the motion judge erred in law in his application of the test.
The Court then assessed the “substantial merits” burden to be met by the respondent. The Court, quoting Pointes, noted that this “necessarily entails an inquiry that goes beyond the parties’ pleadings to consider the contents of the record”, and it also involved “an assessment of the evidentiary basis for the claim — this is why the claim must be supported by evidence that is reasonably capable of belief”.
Applying these directives, the Court held that the respondent did not meet its burden regarding its counterclaim. The Court based this decision on the fact that the claims by the respondent stemmed from the allegation that the appellant was a fiduciary, but the respondent had failed to plead either the required elements at law or the details of fact to support the claim.
The Court also held that despite the counterclaim not pleading the elements of a fiduciary relationship, the appellant had clearly put valid defences in play. The Court held that the respondent’s failure to show that the defences were not valid led to the conclusion that the respondent had not discharged its burden under s.137.1(4)(a)(ii).
The Court then considered the “public interest hurdle”. The Court noted that the respondent was required to satisfy the Court that the harm suffered as a result of the expression was sufficiently serious that the public interest in permitting the proceeding to continue outweighed the public interest in protecting that expression.
The Court, in holding that the respondent had failed to meet the public interest hurdle, noted that the respondent had neither pleaded nor shown that the statements in the Statement of Claim against it had or would cause any harm, nor was there evidence from which harm could be inferred. The Court noted that what was “really going on” with the counterclaim was an attempt to silence a former employee seeking recovery in his wrongful dismissal claim and create a chilling effect for other employees.
(2) Yes.
The Court held that the motion judge had erred in holding that s. 137.1(5) precluded him from considering the motion to dismiss the counterclaim as frivolous and vexatious and the summary judgment motion. The Court held that the goals of efficiency and economy would be lost if the motions were not heard together.
(3) Yes.
The Court held that the motion judge erred when he dismissed the appellant’s motion to amend the Statement of Claim to add a claim for payment of deferred bonus payment on the ground that it was a new cause of action that was statute-barred. The Court held that in a wrongful dismissal action, the plaintiff claims the amounts owing as a result of the dismissal. A claim for deferred bonus payments falls squarely within the four corners of the claim. Accordingly, the Court granted the appellant leave to amend the Statement of Claim.
1770650 Ontario Inc. v. McEnery, 2023 ONCA 238
[Benotto, Trotter and Zarnett JJ.A.]
Counsel:
C. Carter and J. Papazian, for the appellants 1770650 Ontario Inc. and 1062484 Ontario Inc.
V. Edwards and C. Pike, for the respondent Lawyers’ Professional Indemnity Company
Keywords:Contracts, Insurance, Lawyers’ Errors and Omissions, Coverage, Exclusions, Dishonest Conduct, Rules of Civil Procedure, r. 60.08(16), Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, Housen v. Nikolaisen, 2002 SCC 33
facts:
During 2015, in unrelated transactions, each of the appellants advanced funds to PM, who was then a lawyer. They each gave PM specific instructions as to the use of their funds. PM did not follow the instructions, and instead intentionally misapplied or misappropriated the funds.
In February 2020 each of the appellants obtained a judgment against PM; the appellant 1770650 Ontario Inc.’s judgment was for $241,000 plus interest and costs, and the appellant 1062484 Ontario Inc.’s judgment was for $380,000 plus interest and costs.
PM did not pay the judgments. The appellants commenced garnishment proceedings. They moved, under r. 60.08(16) of the Rules of Civil Procedure, for a determination that the respondent Lawyers’ Professional Indemnity Company (“LawPRO”) owed money to PM under a policy of insurance (the “Policy”) that it had issued in 2015. PM was one of the insureds under the Policy. The appellants asked that the proceeds of the Policy be paid to them in satisfaction of PM’s judgment debts.
The motion judge found in favour of LawPRO. He concluded that, except for the sum of $27,123.63 that was paid by LawPRO to the appellants before the motion was heard, LawPRO owed nothing further under the Policy.
issues:
(1) Did the motion judge err in finding that coverage in the Policy for dishonest conduct of the type engaged in by PM (“dishonest lawyer coverage”) was subject to an aggregate limit of $500,000?
(2) Did the motion judge err in finding that LawPRO had properly spent the entire aggregate limit (less the $27,123.63) on defence and investigation costs relating to all of the claims arising from PM’s conduct to which it was required to respond under the dishonest lawyer coverage?
holding:
Appeal dismissed.
reasoning:
(1) No.
The motion judge’s interpretation that the $500,000 limit was the aggregate limit for claims falling within the dishonest lawyer coverage, regardless of the number of claims, was correct. The Court reviewed the Policy and found that the meaning of the provisions in the Policy were clear. Specifically, Item 8 of the Declarations stated that the $500,000 limit on claims falling within the dishonest lawyer coverage in Endorsement 5 is both per claim “and in the aggregate”. Accordingly, there was no ambiguity as the appellants claimed.
(2) No.
The Court found no palpable and overriding error in the motion judge’s primary factual determination that the amounts spent by LawPRO on investigating and defending the nine claims against PM and his Firm were reasonable. The Court agreed that there was no evidence that a settlement of all the claims against PM and the Firm was ever available within the Policy limits. Nor was there evidence that the appellants had ever made an offer to settle, before or after they attained judgments against PM and achieved “first past the post” status. The Court held that this was not a case of an insurer ignoring an opportunity to settle a claim within the policy limits or ignoring a request of an insured to do so.
SHORT CIVIL DECISIONS
Libfeld v. Libfeld, 2023 ONCA 235
[Roberts, Miller and Nordheimer JJ.A.]
Counsel:
P. Steep, H. Kallmeyer and I. Hull, for the appellants (C69714) and respondents (C69751, C70031 and C70032), C.L. and 1331078 Ontario Inc.
P.H. Griffin, K. Glowach and S. Bittman, for the appellants (C69751) and respondents (C69714, C70031 and C70032), M.L., 1331081 Ontario Inc., 2091170 Ontario Inc., and Vitanna Construction Ltd.
D. Chernos, P. Flaherty and B. MacLeese, for the appellants (C70031 and C70032) and respondents (C69714 and C69751), S.L. and 1331088 Ontario Inc.
G. Luftspring and A. Sanche, for the appellants (C70031 and C70032) and respondents (C69714 and C69751), J.L. and 1331091 Ontario Inc.
H. Chaiton, for the Court-Appointed Sales Officer
Keywords:Costs Endorsement, Corporations, Oppression
Skyline Real Estate Acquisitions (III) Inc. v. Peterborough Retail Portfolio LP, 2023 ONCA 236
[van Rensburg, Huscroft and George JJ.A]
Counsel:
M.L. Solmon and N.J. Tourgis, for the appellant
B. Berg and E. Leinveer, for the respondent
Keywords: Contracts, Real Property, Agreements of Purchase and Sale of Land, Estoppel, Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District, 2021 SCC 7
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