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Following are our summaries of the civil decisions of the Court of Appeal for Ontario for the week of February 12, 2024.

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In Ontario English Catholic Teachers Association v. Ontario (Attorney General), the 2019 enactment of Bill 124, the Protecting a Sustainable Public Sector for Future Generations Act by the Ontario legislature, sparked significant controversy. This Act limited compensation increases for public sector employees to 1% per year over a three-year period, applying to both represented and non-represented employees. Various public sector employee organizations successfully challenged the legislation, arguing it violated rights to freedom of expression, association, and equality under the Canadian Charter of Rights and Freedoms. In a split decision, the Court upheld the finding that, as it related to unionized employees, the Act breached the freedom of association protected by section 2(d) of the Charter and could not be justified under section 1. However, the Act was not invalid in relation to unrepresented ones, so it allowed the provincial government’s appeal in part.

In Drywall Acoustic Lathing and Insulation (Pension Fund, Local 675) v. Barrick Gold Corporation, the dismissed an appeal from the motion judge’s order denying leave to commence a secondary market misrepresentation class action against Barrick Gold in relation to a mine in the Andes straddling the border between Chile and Argentina.

In Reddick v. Robinson, the Court dealt with the interpretation of an easement regarding pedestrian access to shores of Lake Ontario. The Court allowed the appeal of the application judge’s decision, highlighting errors in interpreting the terms of the easement, specifically the definition of “shores of Lake Ontario” and the scope of permissible activities. There was a dissenting opinion in this case as well.

In Royal Bank of Canada v. Cutler Forest Products Inc, the Court dismissed the appeal regarding whether a truck leasing company lost its purchase money security interest priority over a bank’s GSA for failure to perfect the PMSI (it did lose priority).

In Cohen v. Cohen, the Court allowed the appeal finding that trial judge erred in ordering an equalization payment in favour of the respondent despite a lack of disclosure by the respondent.

Other topics covered included dissent rights and a unanimous shareholder agreement, the amendment of pleadings in a professional negligence claim against personal injury lawyers, striking claims as an abuse of process and vexatious litigation.

Wishing everyone an enjoyable weekend.

John Polyzogopoulos
Blaney McMurtry LLP
416.593.2953 Email

Table of Contents

Civil Decisions

Rebello v. Canada (Attorney General), 2024 ONCA 112

Keywords: Civil Procedure, Vexatious Litigation, Rules of Civil Procedure, r. 2.1, Ahmed v. Ontario (Attorney General), 2021 ONCA 427

Ontario English Catholic Teachers Association v. Ontario (Attorney General), 2024 ONCA 101

Keywords: Labour and Employment, Collective Bargaining Rights, Public Service Employees, Wage Restraint, Constitutional Law, Equality, Freedom of Association, Oakes Test, Canadian Charter of Rights and Freedoms, ss.1, 2(b), 2(d), 15, Protecting a Sustainable Public Sector for Future Generations Act, 2019, S.O. 2019, c. 12, Expenditure Restraint Act, S.C. 2009, c. 2, s. 393, The Public Services Sustainability Act, S.M. 2017, c. 24, Canada (Attorney General) v. Bedford, 2013 SCC 72, Carter v. Canada (Attorney General), 2015 SCC 5, Health Services and Support – Facilities Subsector Bargaining Assn. v. British Columbia, 2007 SCC 27, British Columbia Teachers’ Federation v. British Columbia, 2015 BCCA 184,  Manitoba Federation of Labour et al. v. The Government of Manitoba, 2021 MBCA 85, Mounted Police Association of Ontario v. Canada (Attorney General), 2015 SCC 1, Meredith. v. Canada (Attorney General), 2015 SCC 2, Saskatchewan Federation of Labour v. Saskatchewan, 2015 SCC 4, Gordon v. Canada (Attorney General), 2016 ONCA 625,  Association of Justice Counsel v. Canada (Attorney General), 2012 ONCA 530, Canada (Procureur général) c. Syndicat canadien de la function publique section 675, 2016 QCCA 163, Federal Government Dockyard Trades and Labour Council v. Canada (Attorney General), 2016 BCCA 156,  Reference re Bill 148, An Act Respecting the Sustainability of Public Services, 2022 NSCA 39, R v Oakes, [1986] 1 SCR 103, RJR-MacDonald Inc v Canada (Attorney General), [1995] 3 SCR 199, R v Moriarity, 2015 SCC 55, Frank v Canada (Attorney General), 2019 SCC 1, Thomson Newspapers Co v Canada (Attorney General), [1998] 1 SCR 877, R v Big M Drug Mart Ltd, [1985] 1 SCR 295, Harper v Canada (Attorney General), 2004 SCC 33, PSAC v Canada, [1987] 1 SCR 424, Nova Scotia (Workers’ Compensation Board) v Laseur, 2003 SCC 54, Newfoundland (Treasury Board) v NAPE, 2004 SCC 66, Conseil scolaire francophone de la Colombie-Britannique v British Columbia, 2020 SCC 13, Alberta v Hutterian Brethren of Wilson Colony, 2009 SCC 37, Canada v Taylor, [1990] 3 SCR 892, Canada v Taylor, [1990] 3 SCR 892, Little Sisters Book and Art Emporium v Canada (Minister of Justice), 2000 SCC 69, UFCW, Local 1518 v KMart Canada Ltd, [1999] 2 SCR 1083, R v KRJ, 2016 SCC 31, Protecting a Sustainable Public Sector for Future Generations Act, 2019, S.O. 2019, c. 12, Expenditure Restraint Act, S.C. 2009, c. 2, s. 393, Public Services Sustainability Act, S.M. 2017, c. 24, Management Board of Cabinet Act, R.S.O. 1990, C. M.1, Director of Public Prosecutions of Jamaica v. Mollison, [2003] UKPC 6; [2003] 2 A.C. 411, R. (Anderson) v. Secretary of State for the Home Department [2002] 3 WLR 1800, at 1821-1822, Newfoundland (Treasury Board) v. N.A.P.E., 2004 SCC 66, Anderson v. Alberta, 2022 SCC 6, Ontario v. Criminal Lawyers’ Association of Ontario, 2013 SCC 43, Nelson (City) v. Marchi, 2021 SCC 41, Doucet-Boudreau v. Nova Scotia (Minister of Education), 2003 SCC 62, R. v. Chouhan, 2021 SCC 26, Manitoba Federation of Labour et al. v. The Government of Manitoba, 2021 MBCA 85, Health Services and Support – Facilities Subsector Bargaining Assn. v. British Columbia, 2007 SCC 27, Dunmore v. Ontario (Attorney General), 2001 SCC 94, Health Services, and Ontario (Attorney General) v. Fraser, 2011 SCC 20, Mounted Police Association of Ontario v. Canada (Attorney General), 2015 SCC 1, Meredith v. Canada (Attorney General), 2015 SCC 2, Saskatchewan Federation of Labour v. Saskatchewan, 2015 SCC 4, Canada (Procureur général) c. Syndicat canadien de la fonction publique, section locale 675, 2016 QCCA 163, Gordon v. Canada (Attorney General), 2016 ONCA 625, References re Greenhouse Gas Pollution Pricing Act, 2021 SCC 11, Canada (Attorney General) v. Bedford, 2013 SCC 72, Frank v. Canada (Attorney General), 2019 SCC 1, Little Sisters Book and Art Emporium v. Canada (Minister of Justice), 2000 SCC 69, Carter v. Canada (Attorney General), 2015 SCC 5, RJR-MacDonald Inc. v. Canada (Attorney General), [1995] 3 S.C.R. 199, Canada (Human Rights Commission) v. Taylor, [1990] 3 S.C.R. 892, Alberta v. Hutterian Brethren of Wilson Colony, 2009 SCC 37, R. v. Lucas, [1998] 1 S.C.R. 439, Libman v. Quebec (Attorney General), [1997] 3 S.C.R. 569, Nova Scotia (Workers’ Compensation Board) v. Laseur, 2003 SCC 54, Canada (Attorney General) v. JTIMacdonald Corp., 2007 SCC 30

Drywall Acoustic Lathing and Insulation (Pension Fund, Local 675) v. Barrick Gold Corporation, 2024 ONCA 105

Keywords: Securities, Secondary Market Liability, Secondary Market Misrepresentations, Public Correction, Civil Procedure, Class Proceedings, Leave to Commence Proceeding, Certification, Securities Act, R.S.O. 1990, c. S.5, Part XXIII.1, Peters v. SNC-Lavalin Group Inc., 2023 ONCA 360, 166 O.R. (3d) 756, Wong v. Pretium Resources Inc., 2022 ONCA 549, Green v. Canadian Imperial Bank of Commerce, 2015 SCC 60, Theratechnologies Inc. v. 121851 Canada Inc., 2015 SCC 18, Badesha v. Cronos Group Inc., 2022 ONCA 663, Rahimi v. SouthGobi Resources Ltd., 2017 ONCA 719, Mask v. Silvercorp Metals, 2016 ONCA 641, Markowich v. Lundin Mining Corp., 2023 ONCA 359, Bayens v. Kinross Gold Corporation, 2014 ONCA 901, Goldsmith v. National Bank of Canada, 2016 ONCA 22, Nseir v. Barrick Gold Corporation, 2022 QCCA 1718, R. v. Sheeller, 2014 ONCA 867, R. v. Curry, 2019 ONCA 754, leave to appeal denied, [2014] S.C.C.A. No. 185,  R. v. K.C., 2015 ONCA 39, Kerr v. Danier Leather Inc., 2007 SCC 44, Baldwin v. Imperial Metals Corporation, 2021 ONCA 838, Drywall Acoustic Lathing and Insulation, Local 675 Pension Fund (Trustees of) v. SNC-Lavalin, 2016 ONSC 5784

Cashin Mortgages Inc. (Verico Cashin Mortgages) v. 2511311 Ontario Ltd. (Mortgages Alliance – Main Street Mortgages), 2024 ONCA 103

Keywords: Abuse of Process, Motion, Capacity, Rules of Civil Procedure, R.R.O. 1990, Reg 194, r 23.01(3)(b), 23.01(3)(c), 23.01(3)(d), Western Delta Inc. v. Zurich Indemnity Company of Canada, 1999 CanLII 2386, Goldentuler v. Simmons Dasilva LLP, 2021 ONCA 219, Housen v. Nikolaisen, 2002 SCC 33, Toronto (City) v. C.U.P.E., Local 79, 2003 SCC 63, Behn Moulton Contracting Ltd., 2013 SCC 26, Birdseye Security Inc. v. Milosevic, 2020 ONCA 355

Lepan Estate v. Lofranco Chagpar Barristers, 2024 ONCA 110

Keywords: Torts, Professional Negligence, Solicitor and Client, Civil Procedure, Amending Pleadings

Husack v. Husack, 2024 ONCA 117

Keywords: Wills and Estates, Contracts, Interpretation, Ontario Business Corporations Act, R.S.O. 1990, c. B.16, ss. 184 and 185, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53

Reddick v. Robinson, 2024 ONCA 116

Keywords: Real Property, Easements, Interpretation, Yekrangian v. Boys, 2021 ONCA 629, Owners, Strata Plan LMS 3905 v. Crystal Square Parking Corp., 2020 SCC 29, Fallowfield v. Bourgault (2003), 68 O.R. (3d) 417 (C.A.), Sattva Capital Corp. v. Creston Moly Corp, 2014 SCC 53, Herold Estate v. Canada (Attorney General), 2021 ONCA 579, 2484234 Ontario Inc. v. Hanley Park Developments Inc., 2020 ONCA 273, Housen v. Nikolaisen, 2002 SCC 33, Gibbs v. Grand Bend (Village) (1995), 26 O.R. (3d) 644, Ontario (Attorney General) v. Walker (1970), [1971] 1 O.R. 151, Niagara River Coalition v. Niagara-on-the-Lake (Town), 2010 ONCA 173, Freeborne Developments Ltd. v. Corman Park (Rural Municipality), 2021 SKCA 48, Raimondi v. Ontario Heritage Trust, 2018 ONCA 750, Robb v. Walker, 2015 BCCA 117, Wesley v. Iles, 2013 ONCA 8, One West Holdings Ltd. v. Greata Ranch Holdings Corp., 2014 BCCA 67, Fallowfield v. Bourgault (2003), 68 O.R. (3d) 417, Thunder Bay (City) v. Canadian National Railway Company, 2018 ONCA 517

Cohen v. Cohen, 2024 ONCA 114

Keywords: Family Law, Property, Equalization of Net Family Property, Matrimonial Home, Family Law Act, R.S.O. 1990, c. F.3, s.4,7,8, Hamilton v. Hamilton (1996), 92 O.A.C. 103 (C.A.), Roberts v. Roberts, 2015 ONCA 450

Tewari v. Sekhorn, 2024 ONCA 123

Keywords: Civil Procedure, Appeals, Vexatious Litigation, Rules of Civil Procedure, r.2.1.01, Salasel v. Cuthbertson, 2015 ONCA 115, 1522491 Ontario Inc. v. Stewart, Esten Professional Corporation, 2010 ONSC 727, Scaduto v. The Law Society of Upper Canada, 2015 ONCA 733, Tewari v. McHenry, 2022 ONCA 335, Tewari v. Sachdeva and Miller Thomson LLP, Lochner v. Ontario Civilian Police Commission, 2020 ONCA 720

Royal Bank of Canada v. Cutler Forest Products Inc., 2024 ONCA 118

Keywords: Commercial Law, Contracts, General Security Agreements, Security Interests, Purchase Money Security Interests, True Leases, Bankruptcy and Insolvency, Receiverships, Priorities, Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, Courts of Justice Act, R.S.O. 1990, c.C.43, Personal Property Security Act, R.S.O. 1990, c. P.10, Ministry of Government Services Consumer Protection and Service Modernization Act, 2006, S.O. 2006, c. 34 (Bill 152), Personal Property Security Act, S.B.C. 1989, c. 36 (BC PPSA), International Harvester Credit Corp of Canada v Bell’s Dairy Ltd (Trustee of), (1986), 30 D.L.R. (4th) 387 (Sask. C.A.), Giffen (Re), [1998] 1 S.C.R. 91, International Harvester Credit Corp. of Canada v Bell’s Dairy Ltd. (Trustee of), (1986), 30 D.L.R. (4th) 387 (Sask. C.A.)


CIVIL DECISIONS

Rebello v. Canada (Attorney General), 2024 ONCA 112

[Benotto, Roberts and Sossin JJ.A.]

Counsel:

T. Rebello, acting in person

J. Stuckey, for the respondent Attorney General of Canada

S. Kissick, for the respondent Attorney General of Ontario

Keywords: Civil Procedure, Vexatious Litigation, Rules of Civil Procedure, r. 2.1, Ahmed v. Ontario (Attorney General), 2021 ONCA 427

facts:

The appellant brought an application against Canada and Ontario seeking: (1) a declaration that the respondents created a justice system that is in disrepute and have breached ss. 7 and 15 of the Canadian Charter of Rights and Freedoms; (2) a declaration that the respondents have obligations to implement a court system that prevents breaches of Charter rights and denials of access to justice; and (3) an order requiring the respondents to implement an effective justice system.

Ontario moved to dismiss the application.  The motion judge found that the application had no merit and was frivolous, vexatious, and an abuse of process. The appellant appealed, with the respondents requesting that the appeal be dismissed pursuant to r. 2.1.01(1) of the Rules of Civil Procedure.

issues:
  1. Did the motion judge err in ruling that the application be dismissed on r. 2.1.01 without a hearing?
  2. Did the motion judge err in dismissing the application against Canada, because it did not request the dismissal or file a notice of appearance?
holding:

Appeal dismissed.

reasoning:
  1. No

Rule 2.1.01 sets out a summary procedure, and the court has the power to proceed without submissions. Subrule 2.1.01(3) specifically states that an order shall be made on written submissions “unless the court orders otherwise.” Given the multiple cases referred to by the motion judge where the same allegations were raised in other proceedings commenced by the appellant, she did not err in exercising her discretion to proceed without submissions.

  1. No

Although a party may request an order, the court has the power “on its own initiative” to stay or dismiss the proceeding.


Ontario English Catholic Teachers Association v. Ontario (Attorney General), 2024 ONCA 101

[Doherty, Hourigan and Favreau JJ.A]

Counsel:

P. Griffin, N. Bombier and S. Hale, for the appellants His Majesty the King in Right of Ontario et al.

P. Cavalluzzo and B. Dosanjh, for the respondents Ontario English Catholic Teachers Association et al.

S. Ursel, K. Ensslen and E. Home, for the respondents Ontario Secondary School Teachers’ Federation et al.

H. Goldblatt and B. Piper, for the respondents Elementary Teachers’ Federation of Ontario et al.

J. Borowy and D. Bisnar, for the respondents Ontario Nurses’ Association et al.

D. R. Wright, M. J. Nam and R. Jones, for the respondents Ontario Public Service Employees Union et al.

S. Barrett and M. Anderson, for the respondents Ontario Federation of Labour et al.

A. Dale, D. Simonovic and J. Meguid, for the respondents Unifor et al.

C. Bauman, for the respondents Carleton University Academic Staff Association et al.

M. Wright, A. St. John and N. Parker, for the respondents Society of United Professionals et al.

A. Lokan and S. Talukdar, for the respondents Power Workers’ Union et al.

G. Avraam and A. Anandarajah, for the intervener Canadian Association of Counsel to Employers

T. Gleason and A. Lei, for the intervener Canadian Civil Liberties Association

C. Davies, D. Sandhu and K. Owens, for the intervener Women’s Legal Education and Action Fund Inc.

Keywords: Labour and Employment, Collective Bargaining Rights, Public Service Employees, Wage Restraint, Constitutional Law, Equality, Freedom of Association, Oakes Test, Canadian Charter of Rights and Freedoms, ss.1, 2(b), 2(d), 15, Protecting a Sustainable Public Sector for Future Generations Act, 2019, S.O. 2019, c. 12, Expenditure Restraint Act, S.C. 2009, c. 2, s. 393, The Public Services Sustainability Act, S.M. 2017, c. 24, Canada (Attorney General) v. Bedford, 2013 SCC 72, Carter v. Canada (Attorney General), 2015 SCC 5, Health Services and Support – Facilities Subsector Bargaining Assn. v. British Columbia, 2007 SCC 27, British Columbia Teachers’ Federation v. British Columbia, 2015 BCCA 184,  Manitoba Federation of Labour et al. v. The Government of Manitoba, 2021 MBCA 85, Mounted Police Association of Ontario v. Canada (Attorney General), 2015 SCC 1, Meredith. v. Canada (Attorney General), 2015 SCC 2, Saskatchewan Federation of Labour v. Saskatchewan, 2015 SCC 4, Gordon v. Canada (Attorney General), 2016 ONCA 625,  Association of Justice Counsel v. Canada (Attorney General), 2012 ONCA 530, Canada (Procureur général) c. Syndicat canadien de la function publique section 675, 2016 QCCA 163, Federal Government Dockyard Trades and Labour Council v. Canada (Attorney General), 2016 BCCA 156,  Reference re Bill 148, An Act Respecting the Sustainability of Public Services, 2022 NSCA 39, R v Oakes, [1986] 1 SCR 103, RJR-MacDonald Inc v Canada (Attorney General), [1995] 3 SCR 199, R v Moriarity, 2015 SCC 55, Frank v Canada (Attorney General), 2019 SCC 1, Thomson Newspapers Co v Canada (Attorney General), [1998] 1 SCR 877, R v Big M Drug Mart Ltd, [1985] 1 SCR 295, Harper v Canada (Attorney General), 2004 SCC 33, PSAC v Canada, [1987] 1 SCR 424, Nova Scotia (Workers’ Compensation Board) v Laseur, 2003 SCC 54, Newfoundland (Treasury Board) v NAPE, 2004 SCC 66, Conseil scolaire francophone de la Colombie-Britannique v British Columbia, 2020 SCC 13, Alberta v Hutterian Brethren of Wilson Colony, 2009 SCC 37, Canada v Taylor, [1990] 3 SCR 892, Canada v Taylor, [1990] 3 SCR 892, Little Sisters Book and Art Emporium v Canada (Minister of Justice), 2000 SCC 69, UFCW, Local 1518 v KMart Canada Ltd, [1999] 2 SCR 1083, R v KRJ, 2016 SCC 31, Protecting a Sustainable Public Sector for Future Generations Act, 2019, S.O. 2019, c. 12, Expenditure Restraint Act, S.C. 2009, c. 2, s. 393, Public Services Sustainability Act, S.M. 2017, c. 24, Management Board of Cabinet Act, R.S.O. 1990, C. M.1, Director of Public Prosecutions of Jamaica v. Mollison, [2003] UKPC 6; [2003] 2 A.C. 411, R. (Anderson) v. Secretary of State for the Home Department [2002] 3 WLR 1800, at 1821-1822, Newfoundland (Treasury Board) v. N.A.P.E., 2004 SCC 66, Anderson v. Alberta, 2022 SCC 6, Ontario v. Criminal Lawyers’ Association of Ontario, 2013 SCC 43, Nelson (City) v. Marchi, 2021 SCC 41, Doucet-Boudreau v. Nova Scotia (Minister of Education), 2003 SCC 62, R. v. Chouhan, 2021 SCC 26, Manitoba Federation of Labour et al. v. The Government of Manitoba, 2021 MBCA 85, Health Services and Support – Facilities Subsector Bargaining Assn. v. British Columbia, 2007 SCC 27, Dunmore v. Ontario (Attorney General), 2001 SCC 94, Health Services, and Ontario (Attorney General) v. Fraser, 2011 SCC 20, Mounted Police Association of Ontario v. Canada (Attorney General), 2015 SCC 1, Meredith v. Canada (Attorney General), 2015 SCC 2, Saskatchewan Federation of Labour v. Saskatchewan, 2015 SCC 4, Canada (Procureur général) c. Syndicat canadien de la fonction publique, section locale 675, 2016 QCCA 163, Gordon v. Canada (Attorney General), 2016 ONCA 625, References re Greenhouse Gas Pollution Pricing Act, 2021 SCC 11, Canada (Attorney General) v. Bedford, 2013 SCC 72, Frank v. Canada (Attorney General), 2019 SCC 1, Little Sisters Book and Art Emporium v. Canada (Minister of Justice), 2000 SCC 69, Carter v. Canada (Attorney General), 2015 SCC 5, RJR-MacDonald Inc. v. Canada (Attorney General), [1995] 3 S.C.R. 199, Canada (Human Rights Commission) v. Taylor, [1990] 3 S.C.R. 892, Alberta v. Hutterian Brethren of Wilson Colony, 2009 SCC 37, R. v. Lucas, [1998] 1 S.C.R. 439, Libman v. Quebec (Attorney General), [1997] 3 S.C.R. 569, Nova Scotia (Workers’ Compensation Board) v. Laseur, 2003 SCC 54, Canada (Attorney General) v. JTIMacdonald Corp., 2007 SCC 30

facts:

In 2019, the Ontario legislature passed Bill 124, the Protecting a Sustainable Public Sector for Future Generations Act, 2019, S.O. 2019, c. 12 (“Bill 124” or the “Act”). The Act imposed a three-year “moderation” period on compensation, including salary rates, for all employees in the broader public sector. For those three years, compensation increases were not to exceed 1% per year. The Act applied to represented and non-represented employees.

The respondents, which included organizations that represented employees in the broader public sector, brought applications challenging the Act on the basis that it violated their members’ rights to freedom of expression (s. 2(b)), freedom of association (s. 2(d)) and equality (s. 15) under the Canadian Charter of Rights and Freedoms.

The application judge granted the applications, finding that the Act violated the respondents’ freedom of association under s.2(d) of the Charter, and that this violation was not saved by s. 1 of the Charter. The application judge did not accept the arguments that the Act violated the respondents’ s. 2(b) or s. 15 rights.

Based on the application judge’s conclusion that that the Act violated s. 2(d) and was not saved by s. 1 of the Charter, the application judge declared the entire Act void and of no effect. In doing so, he stated that there was no purpose in going through the Act section by section. In addition, the application judge deferred the issue of any further remedies to a later hearing.

issues:
  1. Does the Act infringe on s. 2(d) of the Charter?
  2. Did the application judge err in his s. 1 Charter analysis?
  3.  Did the application judge err in striking down the statute?
holding:

Appeal allowed, in part.

reasoning:

Majority Decision:

  1. Yes.

General principles regarding protection of collective bargaining under s. 2(d) of the Charter

Section 2(d) of the Charter ensures the freedom of association as a fundamental right. The Supreme Court, starting with Health Services in 2007, recognized this freedom within the labor context to include collective bargaining rights under s. 2(d). However, it clarified that s. 2(d) does not protect all collective bargaining aspects, but only against “substantial interference” with this activity. The “substantial interference” test involves assessing the importance of the affected matter to collective bargaining and the impact of the measure on the collective right to negotiate and consult in good faith.

Previous wage restraint decisions

Canadian courts, including the Supreme Court and Court of Appeal, have evaluated the constitutional validity of various wage restraint laws, generally finding these laws do not significantly interfere with the collective bargaining right under s. 2(d) of the Charter. Ontario cited these precedents to argue the Act in question did not violate s. 2(d). However, the Court highlighted that assessing the Act’s infringement on s. 2(d) rights requires more than comparing it to previous wage restraint laws. Instead, following the Supreme Court’s guidance in Health Services and the 2015 trilogy, it necessitated a contextual analysis of the Act’s enactment and its impact on collective bargaining.

The Court emphasized the need to review previous appellate decisions on wage restraint to identify key factors influencing their findings that the laws did not violate s. 2(d) rights. This included examining decisions related to the federal Expenditure Restraint Act (ERA) and the Manitoba Federation decision on Manitoba’s wage restraint legislation.

(a)         Decisions challenging the Expenditure Restraint Act

The decisions in Meredith, Gordon, Dockyard and Procureur général all dealt with challenges to the ERA.  The legislation was enacted in response to the 2008 worldwide financial crisis. The ERA applied to over 400,000 unionized and non-unionized employees who worked for the federal Crown and approximately 48,000 employees who worked for federal Crown corporations. The ERA limited wage increased by specified percentages over a five-year period.

There were four common threads between the decisions dealing with the constitutional validity of the ERA: 1) the measures were imposed in the context of the 2008 global economic crisis; 2) multiple bargaining units had reached agreements about wage increases similar to those that were legislated before the ERA was enacted; 3) the legislation was imposed after a relatively long period of negotiation; and, 4) in some cases, following the enactment of the ERA, bargaining units were nevertheless able to reopen their collective agreements to negotiate for wage increases (Meredith) or other matters of interest, including matters related to compensation (Procureur général).

(b)         Manitoba wage restraint legislation decision

Manitoba Federation challenged The Public Services Sustainability Act (the “PSSA”), which set wage caps for both represented and non-represented employees in Manitoba’s public sector, affecting nearly 20% of the province’s workforce. The trial judge ruled the PSSA violated the collective bargaining rights under s. 2(d) of the Charter, and this infringement was not justifiable under s. 1 of the Charter.

Ontario referenced this case to contest a similar finding against an Act, arguing the PSSA, with harsher wage caps, was comparable to the Act under scrutiny. Despite the trial judge’s error in the s. 2(d) analysis, a fresh court analysis found the PSSA’s provisions functionally equivalent to those in the constitutional ERA. It highlighted that, despite wage caps, bargaining on other workplace conditions remained possible and noted the PSSA’s unique exemption clause allowing government discretion for exemptions, which unions could influence through striking.

The court acknowledged that removing wages from negotiation met the initial test set by Health Services for substantial interference but concluded the PSSA did not substantially interfere with collective bargaining rights due to preserved processes of consultation and negotiation, deeming such legislative interference temporary and broad-based as non-substantial.

(c)         General principles that arise from prior wage restraint legislation decisions

Ontario argued that the application judge erred in failing to follow previous wage restraint legislation decisions. Ontario pointed to the similarities between the legislation in these other cases and the Act.

However, this argument failed to have regard to the contextual analysis mandated by the Supreme Court in deciding whether legislation substantially interferes with the right to collective bargaining.

There is no formula for assessing whether the degree of interference reaches the level of substantial interference. Rather, the courts look at a set of factors to assess the degree of interference, and whether the measures imposed leave room for a meaningful process of good faith negotiation and consultation.

Application of s. 2(d) Jurisprudence

The Supreme Court outlined a two-step process to assess if a law significantly impacts collective bargaining rights, focusing on the issue’s relevance to collective bargaining and the law’s effect on the right to bargain and consult in good faith. In the current case, it was uncontested by Ontario that wages are crucial to collective bargaining, with evidence showing their significance to the respondents’ bargaining goals. The core question was whether the Act maintained a meaningful consultation and negotiation process. The analysis, which included ten factors, failed to conclusively prove that the Act ensured good faith negotiation and consultation, with some factors considered extraneous or irrelevant.

The Act’s Impact on Collective Bargaining

The government passed the Act without significant collective bargaining or consultation, a departure from previous practices of engaging in meaningful dialogue before introducing wage restraint legislation. Bill 124 was introduced without substantial prior collective bargaining with the affected units, and meaningful consultation with the respondents was absent before the Act’s enactment. The Act’s wide definition of “compensation” significantly limited negotiation opportunities, affecting salaries and other compensable benefits, thus restricting the respondents’ leverage in negotiations. Furthermore, the Act’s exemption process, despite being outlined in s. 27, proved to be ineffective for negotiation, characterized by delays and unaddressed requests, reducing its utility as a bargaining tool.

Conclusion on s. 2(d) Interference

The Act significantly infringed upon the respondents’ rights to collective bargaining by affecting a critical aspect—wages—and undermining the capacity for genuine collective bargaining and consultation. This infringement was due to the absence of substantial collective bargaining or meaningful consultation before the Act’s implementation, a broad definition of compensation that restricted negotiation scope, and an ineffective exemption process. Moreover, the 1% salary and compensation cap diverged from results in other public sector negotiations. Collectively, these elements highlighted the Act’s substantial interference with the ability to conduct negotiations and consultations in good faith.

  1. No.

Section 1 of the Charter allows for the imposition of reasonable limits on rights and freedoms, but such limits must be demonstrably justified in a free and democratic society. The Oakes test applied, requiring the government to demonstrate a pressing and substantial objective for the law and that the means chosen to achieve this objective are proportional. This includes a rational connection to the objective, minimal impairment of rights, and a balance between the law’s salutary and deleterious effects.

Pressing and Substantial Objective

The Act aimed to moderate compensation growth for public sector employees to manage the province’s finances responsibly and ensure the sustainability of public services. The Court found that moderating public-sector wages was more a means to achieve financial management than an objective. The Act’s objective was redefined as the responsible management of Ontario’s finances and the protection of sustainable public services.

Rational Connection

The Act was generally found to be rationally connected to the government’s objectives, except in its application to workers in the electricity and university sectors. For these sectors, there was no rational connection between the Act’s objectives and its application due to the self-funding nature of these sectors and the fixed funding agreements with universities.

Minimal Impairment

The Act did not minimally impair the right to collective bargaining. There was no evidence that the province could not achieve its objectives through collective bargaining or that it attempted to negotiate agreements with wage increases capped at 1% per year.

Proportionality

The deleterious effects of the Act on collective bargaining rights were not proportional to its salutary effects on fiscal management and public service sustainability. The Act’s infringement on Charter rights was not justifiable due to the lack of urgency or evidence that the same goals could not be achieved through collective bargaining.

Conclusion on s. 1 of the Charter

The Court found that the Act was not saved by s. 1 of the Charter. While it pursued a pressing and substantial objective and the means were generally rationally connected to its goals, it failed the minimal impairment test, and its detrimental effects outweighed its salutary effects.

  1. Yes.

The application judge found the Act violated s. 2(d) of the Charter and was not saved by s. 1, leading to the entire statute being struck down, which the Court considered an error. The Act’s application to represented and non-represented employees differed, making it unconstitutional only regarding represented employees. Despite suggestions that non-represented employees might wish to organize in the future, the Act was deemed not unconstitutional as it applied to them.

Dissenting Decision:

  1. Yes.

The Dissent argued that Bill 124, the Protecting a Sustainable Public Sector for Future Generations Act, 2019, did not breach s. 2(d) of the Charter, as it did not substantially interfere with associational rights. The Majority’s breach finding, according to the Dissent, was flawed for overemphasizing the absence of pre-legislation consultation and misinterpreting economic conditions, thereby improperly shifting the burden of proof onto the Province and neglecting evidence of ongoing collective bargaining under Bill 124.

Despite wage caps under Bill 124, unions successfully negotiated other significant benefits, maintaining the right to strike and achieving workplace goals. The Dissent highlighted that workers retained the ability to collectively represent their interests and to have those interests considered in good faith, affirming there was no violation of s. 2(d).

  1. Yes.

The Dissent noted that in the alternative to the first issue, if Bill 124 breached s. 2(d), it was a reasonable limit prescribed by law and is demonstrably justified in a free and democratic society.

The Dissent agreed with the Majority’s conclusion that Ontario has advanced a pressing and substantial objective in support of the Act. However, the Dissent disagreed with their findings regarding rational connection, minimal impairment, and proportionality.

It was uncontested that the government of Ontario enacted Bill 124 in response to what it perceived to be a pressing economic issue. The Dissent accepted the Majority’s finding that the legislation’s objective was the responsible management of the Province’s finances and protecting sustainable public services. There is no evidence that the government introduced the legislation in bad faith.

In applying the Oakes test, the Dissent argued that the application judge erred in law at each stage. The Dissent indicated that his reasons display a misunderstanding of the role of courts in reviewing government policy choices on resource distribution and the regulation of labour relations.

Pressing and Substantial

The application judge erred in applying too stringent a standard and went beyond the record to substitute his own opinion for the views of the elected government and financial experts.

Rational Connection

The application judge erred in finding that there was no rational connection regarding the energy and university sectors and only a remote connection to the long-term care sector. The Majority made the same errors regarding the energy and university sectors. Both failed to consider ways that wage control would benefit the responsible fiscal management of the Province and ignored the fact that the government had an interest in reducing wage growth in entities that are provincially funded or owned.

Minimal Impairment

The appellants submitted – and the Dissent agreed – that the application judge failed to adopt this deferential approach and erred in concluding that voluntary wage restraint – or hard bargaining – was the alternative that should have been pursued.

The Dissent argued that it was an error to fail to consider whether the legislature created a law that falls within a range of reasonable alternatives to respond to the policy problem. Instead, their analysis focuses exclusive on his erroneous conclusions that voluntary wage restraint or hard bargaining was a viable and better alternative to further the government’s policy objectives.

Balancing

The Dissent felt that the application judge chose to ignore the expert evidence and recast Ontario’s fiscal situation to fit his s. 1 analysis. The Dissent further noted that the Majority’s analysis of the balance stage was based on a misunderstanding of the operation of Bill 124.

Based on the above, the Dissent would find, in the alternative, that if Bill 124 breached s. 2(d), it was a reasonable limit prescribed by law and is demonstrably justified in a free and democratic society.

  1. Yes.

The Dissent agreed with the Majority in concluding that the application judge erred when he declined to consider the pertinent sections of Bill 124 and simply invalidated the whole Act.


Drywall Acoustic Lathing and Insulation (Pension Fund, Local 675) v. Barrick Gold Corporation, 2024 ONCA 105

[Roberts, Paciocco and Thorburn JJ.A.]

Counsel:

J.P. Rochon, P.R. Jervis, G. Nayerahmadi, and M. W. Taylor for the appellants

K.E. Thomson, S.G. Frankel, and M. O’Sullivan, for the respondents

Keywords: Securities, Secondary Market Liability, Secondary Market Misrepresentations, Public Correction, Civil Procedure, Class Proceedings, Leave to Commence Proceeding, Certification, Securities Act, R.S.O. 1990, c. S.5, Part XXIII.1, Peters v. SNC-Lavalin Group Inc., 2023 ONCA 360, 166 O.R. (3d) 756, Wong v. Pretium Resources Inc., 2022 ONCA 549, Green v. Canadian Imperial Bank of Commerce, 2015 SCC 60, Theratechnologies Inc. v. 121851 Canada Inc., 2015 SCC 18, Badesha v. Cronos Group Inc., 2022 ONCA 663, Rahimi v. SouthGobi Resources Ltd., 2017 ONCA 719, Mask v. Silvercorp Metals, 2016 ONCA 641, Markowich v. Lundin Mining Corp., 2023 ONCA 359, Bayens v. Kinross Gold Corporation, 2014 ONCA 901, Goldsmith v. National Bank of Canada, 2016 ONCA 22, Nseir v. Barrick Gold Corporation, 2022 QCCA 1718, R. v. Sheeller, 2014 ONCA 867, R. v. Curry, 2019 ONCA 754, leave to appeal denied, [2014] S.C.C.A. No. 185,  R. v. K.C., 2015 ONCA 39, Kerr v. Danier Leather Inc., 2007 SCC 44, Baldwin v. Imperial Metals Corporation, 2021 ONCA 838, Drywall Acoustic Lathing and Insulation, Local 675 Pension Fund (Trustees of) v. SNC-Lavalin, 2016 ONSC 5784

facts:

The appellants, the Trustees of the Drywall Acoustic Lathing and Insulation Local 675 Pension Fund and R.L. (collectively, “Drywall”), were proposed representative plaintiffs in an intended class action proceeding relating to a failed South American gold mining project, the Pascua-Lama project. The proposed class action was based on allegations that the respondents, Barrick Gold Corporation and some of its officers and directors (collectively, “Barrick”), made actionable misrepresentations about the project, contrary to s. 138.3(1) of the Ontario Securities Act, R.S.O. c. S.5 (“OSA”). Section 138.3(1) provides for one of several misrepresentation actions legislated in s.138.3 of the OSA.

Leave is required under s. 138.8 of the OSA to bring a s. 138.3 action, including an action pursuant to s. 138.3(1). Drywall achieved only limited success in its initial leave application. Drywall was successful on appeal in obtaining a second leave hearing on some of its misrepresentation allegations. Drywall appealed the motion judge’s decision in the second leave hearing.

issues:
  1. Did the motion judge commit an extricable error in denying leave to pursue the alleged October 27, 2011 misrepresentations?
  2. Did the motion judge commit an extricable error in concluding that the November 1, 2012, April 10, 2013, and June 28, 2013 disclosures were not relevant possible public corrections of the alleged misrepresentations made on February 16, 2012, and March 28, 2012?
holding:

Appeal dismissed.

reasoning:
  1. No

The statutory causes of action in s. 138.3, including s. 138.3(1), do not require the plaintiff to prove reliance on a misrepresentation. Subsection 138.3(1) presumes that fluctuations in value during this period are attributable to the misrepresentation.  It imposes two statutory prerequisites to obtaining leave: (a) the action being brought in good faith; and (b) a reasonable possibility that the action will be resolved at trial in favour of the plaintiff.

In order to satisfy the reasonable or realistic chance of success standard, a plaintiff must “offer both a plausible analysis of the applicable legislative provisions, and some credible evidence in support of the [plaintiff’s] claim.’ These conditions must be satisfied plus the record before the leave judge must demonstrate that there is a realistic or reasonable chance that the action will succeed.  The “plaintiff must adduce ‘sufficient evidence to persuade the court that there is a reasonable possibility that the action will be resolved in the [plaintiff’s] favour.’”

The credibility of the evidence is to be assessed, including an assessment of the reliability of the evidence. If critical evidence offered by a plaintiff is shown by other evidence to be “completely undermined by flawed factual assumptions” a motion judge may choose not to act on that evidence. However, a s. 138.8 inquiry should not be treated as a “mini-trial” simply because their decision turned on considerations of the credibility and reliability or weight of the evidence.

It is the trial judge that is to determine whether the matter in issue has been proved on the balance of probabilities. If a motion judge attempts to resolve realistic and contentious issues arising from conflicting credible evidence they will be lapsing into a mini-trial. During the leave motion, judges must consider the evidence that is not before them and whether a lack of complete record leaves uncertainty about whether a realistic or reasonable chance of success exists.

The motion judge found there to be no realistic or reasonable possibility that a trial court could find that on October 27, 2011, Barrick was making actionable misrepresentations rather than expressing reasonably mistaken conclusions. In contrast, the motion judge found that there was evidence before her that could cause a trial court to conclude that after October 27, 2011, and before February 16, 2012, Barrick had acquired information that exposed its capex budget and production schedules as unreasonable, rendering the repetitions of the reasonableness of that same capex budget and projected production schedule on February 16, 2012 and March 27, 2012 misrepresentations. The motion judge engaged in an appropriate assessment of the whole of the record, and in effect concluded that given the strength of the case to the contrary, there was no such possibility of a reasonable or realistic chance of success at trial.

There was no basis for concluding that the motion judge failed to consider the evidentiary gaps in the record. Her obligation was to consider whether the record “was sufficient, even without the benefit of discoveries and production, to properly assess whether there was a reasonable possibility of the success of the appellants’ statutory action at trial”. The motion judge did this, concluding, as she was entitled to, that the record was adequate. Her reliance on the size of the record before her in making this determination was entirely appropriate.

Drywall placed heavy reliance on a July 25, 2012 presentation prepared by Barrick. The failure to mention evidence capable of supporting one of the parties can indicate a failure by a judge to consider that evidence, but “will depend on a number of factors, including the nature of the evidence itself, the entirety of the evidence, the issues raised and the arguments made.” The presentation was not compelling enough to support an inference that the motion judge must have missed it or missed its significance. In terms of the entirety of the evidence, the record was enormous, and the motion judge issued two lengthy judgments addressing multiple issues and submissions. Given the scope or her task, it was not surprising that the motion judge may not have explicitly mentioned all of the evidence that she considered.

Moreover, if a litigant does not consider a document to be sufficiently important to focus on in their submissions, an appeal court is not likely to infer that the document is of sufficient importance that it should have been referred to in the judge’s ruling. Drywall presented no confirmation that the document was featured, let alone referred to, in its written or oral submissions before the motion judge relating to the alleged October 27, 2011 misrepresentations that were under appeal. The motion judge did not fail to consider this document or the record before her.

The motion judge did not conduct a purely subjective inquiry. First, the motion judge considered whether there was any evidence on the record “to suggest” that “Barrick had any reason to be concerned”. This was an objective inquiry, and on its own, undermined Drywall’s submission. Second, since Drywall put Barrick’s subjective knowledge in issue, it could not fairly be inferred from the motion judge’s reference to Barrick’s subjective knowledge that she misconceived the law relating to misrepresentations.

  1. No

A “public correction” of an alleged misrepresentation will serve as a “necessary time-post for the proposed [s. 138.3(1) action] and any eventual damages calculation.” A motion judge considering whether leave should be granted pursuant to s. 138.8 must therefore determine “whether [an] alleged public correction was reasonably capable of being understood in the secondary market as correcting what was misleading in the impugned statement.”

The motion judge accepted Drywall’s submission that there was a reasonable possibility that Barrick’s disclosure made on July 26, 2012 was a public correction of these alleged misrepresentations, which was solidly grounded in the evidence. In the July 2012 public disclosure, Barrick described challenges it had encountered with the Pascua-Lama project, admitted that its earlier projections had proved incorrect, and disclosed that a detailed review of its schedule and costs estimate was required. Evidence showed that it was greeted with shock by analysts and the market given its magnitude. The motion judge concluded that the disclosure “put the market on notice that the forecasts were not reliable” and “[lead] inescapably to the conclusion that Barrick had accurately corrected any pre-existing misrepresentation about the schedule and capex budget by July 2012.”

In identifying possible public correction dates a motion judge’s ultimate task is to determine if there is a reasonable possibility that a trial court will find that a public disclosure was a public correction, an inquiry that requires a reasoned consideration of the evidence. The inquiry may alternatively be profitably framed by asking “whether the alleged public correction was reasonably capable of being understood in the secondary market as correcting what was misleading in the impugned statement.” Once Barrick disclosed on July 26, 2012, there was no longer a realistic or reasonable possibility that investors could credibly treat Barrick as continuing to represent that its February 16, 2012 and March 28, 2012 representations were reasonable or accurate. It followed that public disclosures made after July 26, 2012 were not reasonably capable of being understood in the secondary market as correcting the already completely corrected impugned statements that had been made on February 16, 2012 and March 28, 2012.

The “overarching question” was namely, “whether the alleged public correction [is] reasonably capable of being understood in the secondary market as correcting what was misleading in the impugned statement. It necessarily followed that a sufficient linkage or connection will exist if the alleged public correction can reasonably be taken as correcting the alleged misrepresentation, but not otherwise. A mere coincidence in subject matter will not suffice. The motion judge cited the linkage or connection inquiry and applied it correctly.

The motion judge did not encroach on the jurisdiction of the common issues judge administering the class action. The motion judge reasonably concluded that she could best achieve judicial economy and access to justice by using leave inquiry determinations to screen possible public corrections, thereby avoiding a duplication of efforts by the parties and the courts. She also did not confuse the misrepresentation and public correction issues.

Section 138.3(1) of the OSA was meant to provide generous access to justice to those whose trading decisions may have been tainted by misrepresentations. It would not be in keeping with the objective or with judicial economy to permit misrepresentation actions to be pursued on behalf of those who trade in securities after alleged misrepresentations have been completely publicly corrected, since a complete public correction will have removed any realistic prospect that those trading decisions may have been tainted.


Cashin Mortgages Inc. (Verico Cashin Mortgages) v. 2511311 Ontario Ltd. (Mortgages Alliance – Main Street Mortgages), 2024 ONCA 103

[Benotto, Roberts and Sossin JJ.A.]

Counsel:

P. N. Lermusieaux, for the appellants

C. C.G. Pye, for the respondent, Cashin Mortgages Inc., operating as Verico Cashin Mortgages

J. Sullivan, for the respondents, 2511311 Ontario Ltd. operating as Mortgage Alliance – Main Street Mortgages, and Roger Grubb

S. Campbell, for the respondent, The Mortgage Alliance Company of Canada Inc.

Keywords: Abuse of Process, Motion, Capacity, Rules of Civil Procedure, R.R.O. 1990, Reg 194, r 23.01(3)(b), 23.01(3)(c), 23.01(3)(d), Western Delta Inc. v. Zurich Indemnity Company of Canada, 1999 CanLII 2386, Goldentuler v. Simmons Dasilva LLP, 2021 ONCA 219, Housen v. Nikolaisen, 2002 SCC 33, Toronto (City) v. C.U.P.E., Local 79, 2003 SCC 63, Behn Moulton Contracting Ltd., 2013 SCC 26, Birdseye Security Inc. v. Milosevic, 2020 ONCA 355

facts:

The individual appellants were mortgage agents who worked under the trade name “Greenbrix”. From about June 2018 to April 2020, they worked as mortgage agents as independent contractors with the respondent, Cashin Mortgages Inc., operating as Verico Cashin Mortgages (“Cashin”), a mortgage brokerage. The appellants alleged that, from about January 1, 2019, they started using the name “Greenbrix” in connection with their services. On February 21, 2019, allegedly unknown to the appellants, Cashin registered “Greenbrix Capital” as a business name in Ontario. On June 21, 2019, the appellant, Krystian Catala, incorporated the appellant, Greenbrix Capital Inc.

The parties’ relationship ended in about April 2020. After this point, the appellants continued to work under the Greenbrix name in association with named defendants, Roger Grubb and 2511311 Ontario Ltd., another mortgage brokerage.

Cashin sent multiple warning letters to some of the defendants, advising them to cease using the “Greenbrix” name in association with their business activities and threatening legal action and disciplinary proceedings. Cashin’s principal also accused them of engaging in fraudulent actions by using the name.

On June 23, 2020, the appellants, Krystian Catala and Greenbrix Capital Inc., commenced an action in Toronto against Cashin and its principal (the “Toronto Action”). Cashin filed a statement of defence and counterclaim. The main dispute centred around the ownership of and right to use name, “Greenbrix”.

Following the completion of the discovery process in the Toronto Action, on March 1, 2022, Cashin commenced an action against some of the individual appellants and other named defendants in Milton (the “Milton Action”). The Milton Action also turned on the determination of the ownership of and right to use the name, “Greenbrix”. The defendants in the Milton Action had brought a motion under r. 21.01(3)(b), (c) and (d) of the Rules of Civil Procedure to have the Milton Action dismissed or stayed.

issues:
  1. Did the motion judge err in concluding that it was not plain and obvious that Cashin did not have legal capacity to bring the Milton Action?
  2. Did the motion judge err in finding that the action was an abuse of process and adjourning that part of the motion sine die?
holding:

Appeal allowed, in part.

reasoning:
  1. No.

The Court stated that the appellants’ argument conflated the question of legal standing with the question of whether or not Cashin’s claim to ownership had any merit. As the motion judge noted, the appellants did not bring a motion to strike Cashin’s statement of claim in the Milton Action as disclosing no reasonable cause of action, nor a motion for summary judgment, whereby the court could have possibly adjudicated the merits of the Milton Action. Whether or not Cashin ultimately prevailed on its assertion that it owned the Greenbrix name remained to be determined. The Court concluded that this was not a determination that could have been made on this motion or record. The Court ultimately dismissed this ground of appeal.

  1. Yes.

The motion judge made a reversible error by appearing to determine the issue of abuse of process but then adjourning the issue sine die such that it may or may not ever be dealt with.

The motion judge erred in not completing the motion. His failure to consider the issue before him resulted in a confusing order: the issued and entered order simply adjourned sine die the appellants’ motion under r. 21.01(3)(c) and (d), without any formal direction about next steps, such as a transfer motion, or clarification as to whether the return of the appellants’ motion was before the Toronto court or the motion judge.

The general principle of r. 1.04 ensured that the Rules were construed in the most expedient and economic way, having regard to the costs and delay to the litigants and the waste of precious judicial resources. Discoveries were complete in the Toronto Action but had not begun in the Milton Action at the time of the motion. The effect of the motion judge’s decision was to create additional delay and expense while the parties engaged in further motions that would have been unnecessary had the motion judge determined the issues before him.

The motion judge failed to recognize that the Milton Action was an abuse of process. His failure to grapple with this issue led him to treat the Milton Action as a mere procedural irregularity that could have been cured by its transfer to and joinder with the Toronto Action. As a result, he failed to give effect to his own findings that the Milton Action replicated the core issue and potentially the injunctive relief sought in the Toronto Action, and, importantly, that there was no “viable explanation” for the commencement of the Milton Action.

Ordinarily the discretionary decision of the motion judge to adjourn part of the appellants’ motion would attract deference from the Court. However, the Court noted that the motion judge’s errors were errors of law. As a result, the Court stated that no deference was owed to the motion judge’s adjournment decision and that it would consider this issue afresh: Housen at para 8.

Both r. 21.01(3)(c) and (d) invoke the doctrine of abuse of process. The doctrine of abuse of process has been applied to prevent a multiplicity of proceedings or the re-litigation of an issue, such as in the commencement of another proceeding that replicates the same or similar issues and is against some or all the same parties. It is a flexible doctrine that “evokes the ‘public interest in a fair and just trial process and the proper administration of justice’”, and, as a result, “engages the inherent power of the court to prevent the misuse of its procedure, in a way that would be manifestly unfair to a party to the litigation before it or would in some other way bring the administration of justice into disrepute”: Behn Moulton Contracting Ltd at paras 39 and 40.

Having regard to the relevant circumstances (including the motion judge’s findings), the Milton Action was clearly vexatious and an abuse of process. These circumstances included that the Milton Action replicated the Toronto Action in subject matter and, effectively, in the persons against whom relief was being sought; there was no “viable explanation” for the unnecessary commencement of the Milton Action following the close of pleadings and completion of the discovery process in the Toronto Action; the acrimonious relationship that existed between the parties; Cashin’s surreptitious registration of the business name; and its aggressive and threatening letters to the appellants.

Without any viable explanation and notwithstanding the state of the Toronto Action, Cashin deliberately commenced the Milton Action where the likelihood of inconsistent findings and of unnecessary delay and expense was inevitable. In the absence of any “viable explanation” and seen in the context already reviewed, the Court concluded that the only reasonable inference to be drawn from Cashin instigating a second action involving the same principal issue and effectively the same parties was to put the appellants to the inconvenience, delay and expense of a second action in order to intimidate them into submission. The appellants’ rights were clearly prejudiced. Allowing Cashin to seek to transfer the Milton Action condoned its vexatious actions and abuse of process. This prejudiced the due administration of justice. The appeal in respect of the Milton Action was therefore allowed and the Milton Action was dismissed.


Lepan Estate v. Lofranco Chagpar Barristers, 2024 ONCA 110

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

Counsel:

K. Arvai, for the appellant

J. Pedro, for the respondents

Keywords: Torts, Professional Negligence, Solicitor and Client, Civil Procedure, Amending Pleadings

facts:

The late IL was injured in a 2008 motor vehicle accident. IL brought an action against the respondents, who had represented him in the ensuing motor vehicle litigation. He claimed that they had improperly pressured him into accepting improvident settlements of his claim for statutory accident benefits under the Insurance Act, and his claim for long-term disability benefits. He also alleged that these improvident settlements adversely affected the settlement of his tort claim, and that the respondents improperly pressured him to accept an improvident settlement of the tort claim. The appellant’s counsel eventually settled the tort action for nearly twice the offer obtained by the respondents that IL rejected. IL died in 2017 and his Estate continued the action.

In 2018, the respondents moved to remove the appellant’s counsel as the Estate’s solicitor of record, on the basis that his involvement in the settlement of the tort action rendered him a necessary witness as to the effect of the other allegedly improvident settlements on the tort settlement. The respondents’ motion was dismissed as premature by McArthur J., with reasons reported at 2018 ONSC 5330. The Divisional Court dismissed their appeal, with reasons reported at 2021 ONSC 1757.

The Estate then moved for leave to further amend the statement of claim to effect appeal counsel’s advice to the Divisional Court, described below. The respondents had not opposed the amendment and made no submissions. Leave to amend was granted on December 16, 2021, and the Amended Amended Statement of Claim was issued on January 4, 2022.

During examinations for discovery on December 15, 2021, counsel for the Estate began asking questions about the statutory accident benefits claim and the tort claim. Respondents’ counsel objected. On January 7, 2022, the respondents delivered an Amended Amended Statement of Defence and pleaded that the Estate was estopped from claiming any damages other than those flowing from the settlement of the long-term disability claim.

The respondents then brought a motion to enforce the Estate’s statement that it would restrict its claim for damages.

issues:

Did the motion judge err in concluding any claim for non-pecuniary damages arising from the respondent’s conduct on and management of the accident benefits and tort claims were waived?

holding:

Appeal Allowed

reasoning:

Yes.

In our system of justice, there are two basic principles worth recalling. First, a plaintiff with a tenable claim is entitled to proceed with an action in the normal course as pleaded. Second, a party is entitled to counsel of the party’s choice. That choice is not one with which a court should lightly interfere.

A plaintiff can give up a claim by amending the Statement of Claim. In light of the plain language of the Amended Amended Statement of Claim, the clarifications of the appellant, and the focus of the motion to remove the appellant’s counsel, discussed below in their contexts, the Court found that the motion judge misapprehended the pleading and the statements of counsel for the Estate, as did counsel for the respondents.

First, and most obviously, it appeared to be common ground that the Estate was entitled under the Amended Amended Statement of Claim to pursue both pecuniary and non-pecuniary claims related to the settlement of the long-term disability claim and had done so in all of the iterations of its pleading. The most recent amendments, which maintained these claims, were made without opposition. The pleading also maintained a broader claim for non-pecuniary damages. It was clear from the three claims for which non-pecuniary damages were sought that the amendments to the Statement of Claim preserved the Estate’s broader claims for non-pecuniary damages.

Second, apart from the plain fact that the Amended Amended Statement of Claim was not amended to delete the non-pecuniary claims in relation to the settlement of the statutory accident benefits claim and to the proposed tort settlement, counsel for the Estate pointed to other exchanges with the respondents before the Statement of Claim was amended that made the Estate’s intentions clear.

Third, the Court observed that there was no common understanding between the parties as to what the Estate was giving up in the Amended Amended Statement of Claim and what was being preserved, nor could that have been clear to the Divisional Court. The uncertainty was in part the responsibility of counsel for the Estate, who did not use the terms “pecuniary” and “non-pecuniary” damages that he more recently used in explaining the Estate’s position. On the pleading, both were claimed. Similarly, it was noted that the respondents’ counsel could have been faulted for not noticing that the Amended Amended Statement of Claim had not deleted these claims. The Estate’s alleged failure to amend the Statement of Claim consistently with the withdrawal of non-pecuniary claims should have triggered an inquiry, but it did not.

Fourth, it was noted that the court must pay close attention to the context. Respondents’ counsel were anxious to remove the appellant’s counsel as solicitor of record for the Estate. They had brought the unsuccessful motion and the unsuccessful Divisional Court appeal for this purpose. To add detail, the basis for the motion was the claim in the old version of para. 23 that the improvident settlement of the long-term disability and accident benefits claims had a negative impact on the settlement of the tort claim, resulting in a further loss to the Estate. To prove that claim, the respondents argued that the appellant’s counsel, as the one who negotiated the ultimate tort settlement, would have been required to give evidence as to why the Estate got less than it was otherwise entitled to for the tort claim. He should, they argued, therefore be removed as counsel for the Estate. This had led to the amendments to the pleading to take the appellant’s counsel out of the line of fire. By these amendments, he avoided being a prospective witness by taking the quantum of the tort settlement out of contention.

The fifth reason was that there was no undertaking or representation concerning the non-pecuniary damages to the Divisional Court and no basis for estoppel by representation. The Estate had not represented that it waived its non-pecuniary claims. There was also no evidence that the respondents relied on the statements of the Estate’s counsel. While the motion judge noted that the respondents did not appeal the Divisional Court order, this fact was insufficient to show that the respondents changed their legal position in response to the statements. There was no indication that the respondents had intended to appeal, and leave to appeal was unlikely given that the Divisional Court’s order did not preclude the respondents from bringing the same motion later.

As a final note, the Court stated that it was striking that this litigation had been essentially stalled since 2018. The Court further iterated that it was time for the parties to attend to the merits of the case with the pleadings as drafted and counsel of the parties’ choice.


Husack v. Husack, 2024 ONCA 117

[Roberts, Sossin and Dawe JJ.A.]

Counsel:

D. Sayer and A. Stikuts, for the appellant

R. MacGregor, for the respondent, E.H.

D. Waldman, for the respondent, D. H.

J. Diacur, for the respondents, D.P. and D.Wills.

Keywords: Wills and Estates, Contracts, Interpretation, Ontario Business Corporations Act, R.S.O. 1990, c. B.16, ss. 184 and 185, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53

facts:

F.H. died on February 21, 2008. The Holding Company, formed by amalgamation of his two corporations after his death, held the remaining assets of his estate. The sole directors of the Holding Company were his widow, E.H., and her son, D.H. The estate held all of the Class A non-voting and Class B voting shares of the Holding Company. The Class A preferential shares, with priority distribution rights, were held by a spousal trust for E.H.’s benefit. Each of the Husacks’ four children – the appellant and the respondents held approximately 25% of the non-voting common shares of the Holding Company. E.H., her four children, and The Effort Trust Company were appointed estate trustees under F.H.’s last will and testament. Under his will, E.H. was granted a veto as estate trustee, over and above her children, so that she could maintain control over the Holding Company after F.H.’s death.

E.H. wished to complete the winding up and distribution of the Holding Company’s assets, pursuant to F.H.’s will, before she died. All of the estate trustees, except the appellant, voted in favour of the liquidation and winding-up of the Holding Company. The application judge’s dismissal of the appellant’s application principally turned on her interpretation of the USA. The USA was signed by all the shareholders; its validity and enforceability were not impugned.

issues:

Did the application judge err in concluding that the shareholders’ dissent rights were explicitly waived by the provisions of the USA signed by the Holding Company’s shareholders?

holding:

Appeal dismissed.

reasoning:

No

The application judge’s interpretation reflected the clear language of the USA.

The application judge concluded that the shareholders’ rights under s. 184(3) of the OBCA were triggered by the proposed liquidation and winding up. The application judge considered whether the dissent rights were waived by the USA. Having considered the relevant provisions of the OBCA, the factual matrix, including the estate planning purpose of the Holding Company, the articles of amalgamation that created the Holding Company (the “Articles”) and the USA, the application judge determined that s. 9.01 of the USA constituted a clear waiver of any dissent rights triggered by the sale and liquidation of the Holding Company.


Reddick v. Robinson, 2024 ONCA 116

[van Rensburg, Nordheimer and George JJ.A.]

Counsel:

J. Plotkin and R. Hassanzadeh, for the appellants

N. Sangrar and M. Khalid, for the respondents

Keywords: Real Property, Easements, Interpretation, Yekrangian v. Boys, 2021 ONCA 629, Owners, Strata Plan LMS 3905 v. Crystal Square Parking Corp., 2020 SCC 29, Fallowfield v. Bourgault (2003), 68 O.R. (3d) 417 (C.A.), Sattva Capital Corp. v. Creston Moly Corp, 2014 SCC 53, Herold Estate v. Canada (Attorney General), 2021 ONCA 579, 2484234 Ontario Inc. v. Hanley Park Developments Inc., 2020 ONCA 273, Housen v. Nikolaisen, 2002 SCC 33, Gibbs v. Grand Bend (Village) (1995), 26 O.R. (3d) 644, Ontario (Attorney General) v. Walker (1970), [1971] 1 O.R. 151, Niagara River Coalition v. Niagara-on-the-Lake (Town), 2010 ONCA 173, Freeborne Developments Ltd. v. Corman Park (Rural Municipality), 2021 SKCA 48, Raimondi v. Ontario Heritage Trust, 2018 ONCA 750, Robb v. Walker, 2015 BCCA 117, Wesley v. Iles, 2013 ONCA 8, One West Holdings Ltd. v. Greata Ranch Holdings Corp., 2014 BCCA 67, Fallowfield v. Bourgault (2003), 68 O.R. (3d) 417, Thunder Bay (City) v. Canadian National Railway Company, 2018 ONCA 517

facts:

A single six-acre parcel of land on Lake Ontario in Prince Edward County – formerly owned jointly by CM, MM, and the late PM – was subdivided into three two-acre properties. The parties in this appeal each own one of these properties.

At the time of the subdivision, CM and MM/PM also each owned properties situated between the six-acre parcel and the lake. A private road separated those properties and the six-acre parcel. CM and MM/PM worked with a planner to create a 20 ft. by approximately 300 ft. strip of land between their respective properties to connect what is now the appellants’ property (the “Re property”) to the shores of Lake Ontario. The other two subdivided parcels were owned by the respondents (respectively, the “Ro property” and the “B property”). Title to the strip of land was held by the appellants, subject to an easement in favour of the R and B properties as follows:

[F]or the purposes of pedestrian access only in order to use and enjoy the shores of Lake Ontario, such use and enjoyment shall not include camping or the use or operation of motorized vehicles.

issues:
  1. What is the standard of review?
  2. Did the application judge err in his interpretation of “shores of Lake Ontario”?
  3. Did the application judge err in his interpretation of the scope of the easement?
  4. If the appellants succeed, should the Court remit the application to the Superior Court for reconsideration, or does the record permit the Court to substitute its decision?
holding:

Appeal allowed.

reasoning:
  1. Correctness standard

The Court has directed that where, as here, “an easement is created by express grant, the nature and extent of the easement are to be determined by the wording of the instrument creating the easement, considered in the context of the circumstances that existed when the easement was created”: Fallowfield at para 10. The principles of contractual interpretation as set out by the Supreme Cour in Sattva also apply to the interpretation of an easement: Herold Estate at para 44.

The appellants submitted that the application judge’s interpretation of “shores of Lake Ontario” was reviewable on a correctness standard because “shores” is a legal term of art. The Court disagreed, stating that the easement as a whole – including the term “shores” – must be interpreted with regard to its text and the broader factual matrix. It is a question of mixed fact and law that typically attracts deference.

The application judge had made errors in principle in his interpretation of the easement. He also misapprehended critical evidence. The application judge further erred by relying on inadmissible subjective intent evidence from CM concerning the creation of the easement – an extricable error of law is reviewable on a correctness standard: 2484234 Ontario Inc. at para 54.

  1. Yes.

The meaning of “shores of Lake Ontario” in the easement is the land lying between the high and low water marks. The term “shores”, having regard to the language used in the easement and the surrounding circumstances, means the area between the low and high-water mark. This conclusion was grounded in the text of the easement and in the clear distinction it drew between “shores” and the strip of land which provided access to the shores. The application judge erred in finding that the shore in this case included the raised grassy piece of land abutting the limestone shore; that is, the land just above the high-water line.

Camping and Motor Vehicles

Photographs of the limestone shore were filed as exhibits on the application. These photographs showed that it was possible for one to erect a tent and camp, and operate a smaller motorized vehicle (such as a dirt bike or ATV) when the water level was at its lowest.

The Court agreed with the appellants that for the application judge to have arrived at his conclusion that the prohibitions were “effectively redundant”, he must have either 1) failed to consider the photographs, or 2) inferred that, for the prohibitions to have meaning, it had to be possible to camp or drive a motorized vehicle on the shore regardless of where the water meets land and irrespective of weather or water conditions.

The Court noted that to accept the appellants’ interpretation would not render the prohibitions “effectively redundant”. Based on the photographs and description of the limestone shore, depending of course on the water-level, it was clear that one could camp and also drive a motorized vehicle on the shores. Thus, to prohibit these activities, the easement needed to expressly so provide, as it did.

The Official Plan

The only evidence that spoke to the role the Official Plan played in the creation of the easement came from CM, who testified about his subjective intent at the time. This was an inadmissible consideration when interpreting an agreement such as an easement: Hanley Park at paras 51-54. The application judge erred by relying on this evidence. The application judge also overstated the significance of, and thereby gave undue weight to, the Official Plan, which was merely a “framework of goals, objectives and policies [of a municipality] to shape and discipline specific operative planning decisions”.

The appellants’ interpretation was aligned with the Counties’ planning priorities and the language used in the easement itself, which had made clear that the strip of land was for “pedestrian access only” in order to “use and enjoy the shores of Lake Ontario”. There was no ambiguity. The easement was addressing two separate things: 1) access to the shores via the strip of land, and 2) the use and enjoyment of the shores. The pedestrian access route was separate and distinct from the use of the “shores of Lake Ontario”. The easement gave the respondents the right to “use and enjoy” the latter but not the former.

  1. Yes.

Reading the application judge’s reasons as a whole, the Court noted that the only logical conclusion was that this determination – like the application judge’s definition of “shores” – rested on the subjective intent of CM and MM/PM. As discussed earlier, subjective intent evidence was not admissible when interpreting an easement. Only objective evidence that speaks to the factual matrix can be considered.

The most relevant objective evidence that informed the factual matrix came from the appellants, who filed on the application a copy of the County’s Notice of Decision (the “Notice”) approving the rezoning application, and the municipality’s Planning Staff Report (the “Report”), which tracked the language in the Notice.

The Notice and the Report were instructive in two main respects. First, they showed that the rezoning application was aimed specifically at providing the lot owners with access to Lake Ontario. The permitted uses under the amended zoning were not determinative of the easement’s scope. Zoning does not in and of itself establish interests or rights in land: 2022177 Ontario Inc. at para 35. Rather, the rezoning application must be considered as a whole to glean objective evidence of intent – in this case, unobstructed access to Lake Ontario – which in turn becomes part of the factual matrix: Freeborne Developments Ltd. at paras 42-45.

Second, the Notice and the Report indicated that two types of access to Lake Ontario were contemplated: direct access (for the appellants, who are titleholders) and legal access (for all landowners, including the respondents). Again, this was objective evidence that shed light on the surrounding circumstances at the time the easement was created, including the parties’ intentions. It should have informed the application judge’s consideration of the factual matrix, but it seemed that it did not. Without the subjective intent evidence of CM – and after considering only the language used in the easement and the objective evidence highlighted by the appellants – the inevitable conclusion was that the easement restricted the respondents to “pedestrian access only” for the purpose of ingress to and egress from the “shores of Lake Ontario”.

  1. The Court was of the view that it was in a position to decide the issue and dispose of the application, which it did.

Dissent (van Rensburg JA)

Justice van Rensburg noted that majority decision was an impractical and unsatisfactory result that was inconsistent with the plain and ordinary meaning of the words used in the easement and with the objective intentions of the parties who created the easement, which was, as the application judge reasonably concluded, to provide the owners of the dominant tenements (here, the respondents), with the same rights as the owners of the servient tenement (here, the appellants) in relation to the use and enjoyment of the shores of Lake Ontario.

Van Rensburg JA concluded that there were no reversible errors in the application judge’s decision. He understood and applied the correct legal principles, reasonably concluding that the appellants were not entitled to the declarations they sought: first, that the respondents were limited to using the easement to access Lake Ontario and second that “shores of Lake Ontario” referred to the lands lying between the actual waters of Lake Ontario and the “water’s edge” mark according to the Reference Plan. He rejected the appellants’ interpretation of the easement that would restrict the respondents to using and enjoying the uneven limestone rocks, and not the Grassy Area.


Cohen v. Cohen, 2024 ONCA 114

[Nordheimer, Copeland and Dawe JJ.A.]

Counsel:

A. Franks and A. Weinerman, for the appellant

No one appearing for the respondent

Keywords: Family Law, Property, Equalization of Net Family Property, Matrimonial Home, Family Law Act, R.S.O. 1990, c. F.3, s.4,7,8, Hamilton v. Hamilton (1996), 92 O.A.C. 103 (C.A.), Roberts v. Roberts, 2015 ONCA 450

facts:

The appellant and the respondent were married in 2005 and separated on August 17, 2021. The appellant commenced a proceeding on February 9, 2022.

In August 2022, the appellant brought a motion seeking to proceed with an uncontested trial in writing and an order permitting her to sell the matrimonial home without the respondent’s consent. The respondent filed materials in response to the appellant’s motion and brought a cross-motion for an extension of time to serve an answer to the appellant’s claim.

On August 29, 2022, Faieta J. dismissed the respondent’s cross-motion and granted the appellant’s motion. Faieta J. ordered that the respondent was not entitled to notice of any further steps in the proceeding except for service of an order. He permitted the appellant to proceed with an uncontested trial in writing. Faieta J. also granted the appellant permission to sell the matrimonial home without the respondent’s consent or signature. He ordered that the net proceeds of the sale be held in trust pending further direction from the court.

The appellant sought the release to her of all of the net proceeds from the sale of the matrimonial home.  Notwithstanding the lack of financial disclosure by the respondent, the trial judge held that he was entitled to an equalization payment.

issues:

Did the trial judge err in finding that the respondent was entitled to an equalization payment?

holding:

Appeal allowed. Motion to adduce fresh evidence dismissed.

reasoning:

Yes.

On the record before the trial judge, that finding was a palpable and overriding error. There was a wholly inadequate factual basis to assess the net family property of the respondent. Absent that information, there was no basis on which to order an equalization payment.

None of the information about the respondent’s assets and liabilities that would have been necessary to calculate his net family property was disclosed by the respondent or in the trial record. There was no evidence of the respondent’s assets or debts and liabilities at the date of the marriage or on the valuation date, and no evidence of any of the other financial information required to be disclosed under s. 8 of the FLA.

Further, ordering an equalization payment in favour of the respondent in the face of such non-disclosure created incentives that are contrary to the objectives of both the FLA and the Family Law Rules. It gives the non-disclosing spouse the benefit of a finding in their favour while denying the other spouse and the court any evidence to assess the assets of the non-disclosing spouse.


Tewari v. Sekhorn, 2024 ONCA 123

[van Rensburg, Roberts and Gomery JJ.A.]

Counsel:

G.T., acting in person

P.A. Downard, for the respondents

Keywords: Civil Procedure, Appeals, Vexatious Litigation, Rules of Civil Procedure, r.2.1.01, Salasel v. Cuthbertson, 2015 ONCA 115, 1522491 Ontario Inc. v. Stewart, Esten Professional Corporation, 2010 ONSC 727, Scaduto v. The Law Society of Upper Canada, 2015 ONCA 733, Tewari v. McHenry, 2022 ONCA 335, Tewari v. Sachdeva and Miller Thomson LLP, Lochner v. Ontario Civilian Police Commission, 2020 ONCA 720

facts:

Mr. T. was dismissed from his employment on February 1, 2019. He sued his former employer, Marcatus QED, as well as three of its employees or directors (the “Marcatus defendants”). He later began an action against the respondents, the lawyer and law firm who represented the Marcatus defendants in Mr. T.’s lawsuit. Mr. T. claimed that, in representing the Marcatus defendants, the respondents engaged in an illegal conspiracy, defamed him, and breached their fiduciary duties to him.

The motion judge granted the respondents’ motion to strike the statement of claim, without leave to amend.

issues:

Did the motion judge err in striking Mr. T’s statement of claim?

holding:

Appeal dismissed.

reasoning:

No.

Mr. T’s appeal was frivolous, vexatious and an abuse of the court’s process.  As held in Scaduto v. The Law Society of Upper Canada,, there are generally two conditions required for r. 2.1 to apply. First, the frivolous, vexatious, or abusive nature of the proceeding should be apparent on the face of the pleading. Second, there should be a reason for the court to dismiss the action in the absence of a motion. As noted in Scaduto, r. 2.1 is not for close calls.

This was not a close call. The grounds of appeal set out in the notice of appeal had no merit and no possibility of success. Furthermore, Mr. T. was aware of them having no merit, as he advanced the same legal theories unsuccessfully in other lawsuits against lawyers acting for parties he had sued. Mr. T. tried to relitigate claims that have been found untenable in law on five separate occasions by three judges of first instance and two panels of the Court. This was an abuse of the courts’ processes that justified recourse to r. 2.1.


Royal Bank of Canada v. Cutler Forest Products Inc., 2024 ONCA 118

[Miller, Harvison Young and Favreau JJ.A.]

Counsel:

C. Colraine and F. Choi, for the appellant Paccar Leasing Company Ltd.

T. C. Hogan and R. Danter, for the respondent Fuller Landau Group Inc., in its capacity as court-appointed receiver in the within proceeding

R. Jaipargas, for the respondent Royal Bank of Canada

Keywords:Commercial Law, Contracts, General Security Agreements, Security Interests, Purchase Money Security Interests, True Leases, Bankruptcy and Insolvency, Receiverships, Priorities, Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, Courts of Justice Act, R.S.O. 1990, c.C.43, Personal Property Security Act, R.S.O. 1990, c. P.10, Ministry of Government Services Consumer Protection and Service Modernization Act, 2006, S.O. 2006, c. 34 (Bill 152), Personal Property Security Act, S.B.C. 1989, c. 36 (BC PPSA), International Harvester Credit Corp of Canada v Bell’s Dairy Ltd (Trustee of), (1986), 30 D.L.R. (4th) 387 (Sask. C.A.), Giffen (Re), [1998] 1 S.C.R. 91, International Harvester Credit Corp. of Canada v Bell’s Dairy Ltd. (Trustee of), (1986), 30 D.L.R. (4th) 387 (Sask. C.A.)

facts:

The appellant, Paccar Leasing Company Ltd. (“Paccar”), appealed the motion judge’s order holding that the perfected security interest of Royal Bank of Canada (“RBC”) in the property of the debtor, Cutler Forest Products Inc. (“Cutler”), prevailed over Paccar’s unperfected security interest as the lessor and owner of the three commercial trucks that it had leased to Cutler, thus permitting the Fuller Landau Group Inc. (the “Receiver”) to take possession of and sell the trucks.

The heart of Paccar’s argument on appeal was that because it retained title over the trucks in the debtor’s possession pursuant to a “true” lease, its interest ranked in priority to the interests of either RBC or the Receiver, whose interests were derived from Cutler’s. The Receiver argued that Paccar’s position was incorrect and ignored the fundamental changes that came into effect with the reforms to the Personal Property Security Act, R.S.O. 1990, c. P.10 (“PPSA”), in 2007. RBC had a first in time registered security interest in Cutler’s present and after acquired personal property and undertaking pursuant to the GSA, which it entered into in April 2007. On October 22, 2020, Paccar and Cutler entered into a Canadian Vehicle Lease and Service Agreement (the “VLSA”), and pursuant to the VLSA, Paccar leased the three trucks in issue to Cutler. The VLSA provided that Paccar retained ownership of the trucks and was responsible for maintaining them in good repair.

issues:
  1. Can common law or any provision of federal or provincial law grant RBC or the Receiver greater property rights to the collateral than those possessed by Cutler, given that Paccar retained title under a “true lease” arrangement?
  2. Does subsection 20(1)(b) of the PPSA, which states that a security interest in collateral is not effective against a person representing the creditors of the debtor, serve as a specific legislative override that does not apply to the Receiver in this context?
  3. Did the motion judge err in rejecting Paccar’s submission that Section 57.1 of the PPSA exempts “true leases” from the operation of the priority system in the PPSA?
holding:

Appeal dismissed.

reasoning:

1. Yes.

The motion judge discussed the 2007 changes to the PPSA, noting they fundamentally changed the law around the preservation and priority of a lessor’s interest. The PPSA, as of 2007, provided Paccar with the means of preserving the priority of its interest in the trucks over the interest of RBC under the GSA, but Paccar failed to perfect its interest. Ontario and Manitoba were the last two common law provinces to include leases of more than one year in their secured interest and priority legislation, aiming to modernize and simplify the regime of secured interests and priorities. The Supreme Court in Giffen (Re) found that the trustee could obtain greater rights than the bankrupt had, setting aside traditional concepts of title and ownership to a certain extent. This principle applied in the case, where RBC’s perfected security interest prevailed over Paccar’s unperfected security interest. The legislation provided a mechanism for the lessor to protect its interest by adhering to statutory requirements for registration and perfection. Paccar’s argument that neither RBC nor the Receiver could claim a greater interest in the collateral than that possessed by the debtor was based on a faulty premise, as the legislature made a policy choice to displace the common law principle, recognizing that leases of more than one year are security interests and will be protected as PMSIs provided they are perfected as required by the PPSA.

2. No.

The relevant parts of section 20 of the PPSA stated that until a security interest is perfected, it is subordinate to any person who has a perfected security interest in the same collateral. Paccar relied on subsection 20(1)(b) to argue that the Receiver was subordinate to its unperfected security interest. However, this ignored the fact that an unperfected interest in collateral was subordinate to a perfected interest, meaning Paccar’s security interest was subordinate to RBC’s, which held a General Security Agreement (GSA). Paccar misconstrued the Receiver’s role, suggesting the Receiver fell outside the “person who represents the creditors of the debtor” category and thus was subordinate to Paccar’s interest. The Receiver, appointed at the instance of RBC, stood in the debtor’s shoes, not the creditors’, and properly sought court directions regarding the trucks. The interpretation of section 20 in its entirety provided no basis to support Paccar’s claims about the effect of the section.

3. No.

Paccar argued that true leases are excluded from Part V because they do not secure payment of an obligation. The motion judge found that Part V did not apply to true leases in the way Paccar suggested, as it established a scheme of “self-help” rights and remedies which operate without the need for court intervention. Furthermore, the motion judge concluded that interpreting Section 57.1 to give Paccar priority over a perfected security interest would defeat the purpose of the PPSA amendments made in 2007, which aimed to modernize and simplify the regime of secured interests and priorities. These amendments displaced common law title and ownership in favor of the priority system under the PPSA, intending to reduce litigation over whether a lease fell under the PPSA. The modern PPSA places the dispute as one of priority to the collateral and not ownership in it, indicating that true leases, while excluded from Part V, are still within the scope of the Act for conflicts, perfection, and priority portions, fundamentally altering how leases of more than one year are treated under the law.



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 over 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 over two decades of experience handling a wide variety of litigation matters. John assists clients with matters ranging from appeals, to injunctions, to corporate, partnership, breach of contract, construction, environmental contamination, product liability, debtor-creditor, insolvency and other business litigation. He also handles complex estates and matrimonial litigation involving disputes over property and businesses, as well as professional discipline and professional negligence matters for various types of professionals. In addition, John represents amateur sports organizations in contentious matters, and also advises them in matters of internal governance. John can be reached at 416-593-2953 or jpolyzogopoulos@blaney.com.