COURT OF APPEAL SUMMARIES (March 25 – March 29)

By John Polyzogopoulos on March 29, 2024

Good Friday.

Following are our summaries of the civil decisions of the Court of Appeal for Ontario for the week of March 25, 2024.

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Palmer v. Teva Canada Limited was a proposed class action against several pharmaceutical companies for negligently manufacturing contaminated valsartan, a medication for high blood pressure. The plaintiffs sought damages for potential increased cancer risk, medical costs, refunds, and psychological harm. The motion judge dismissed the certification motion, finding that the claims lacked viability due to speculative harm and failed on the commonality and preferability tests for certification. The appeal was dismissed, affirming that without tangible harm, such as physical injury, psychological distress, or economic loss, the claims were not compensable in tort law. The appellants’ assertions of genotoxic injury and psychological harm lacked material facts supporting compensable damages. Moreover, claims for economic loss were deemed insufficient due to the absence of imminent danger and failure to address potential harm from the contaminated product. Other claims under consumer protection and competition legislation were dismissed for lacking factual support. Additionally, the Court found insufficient evidence to support common issues among class members, ultimately denying certification.

Smith v Taylor, is a case involving the availability of “inadequately insured motorist” coverage under an Ontario auto policy.

Colonna v Fellin was a breach of contract case regarding a joint venture, with the issue being the calculation of expectation damages. The Court dismissed the appeal

Amtim Capital Inc. v. Appliance Recycling Centers of America was another breach of contract case. The Court dismissed the appeal from the dismissal of the action by the trial judge.

In Campbell v. Toronto Standard Condominium Corporation No. 2600, a condo case, the application judge had set aside an arbitral award under section 46 of the Arbitration Act, 1991, on the basis of “constructive fraud”. The Court allowed the appeal. The ground of fraud under that section does not encompass the equitable concept of “constructive fraud”, which is something which “does not necessarily involve dishonesty or moral fraud in the ordinary sense, but [is] a breach of [the] sort that would be enforced by a court of conscience”.

Wishing everyone celebrating a Happy Easter.

John Polyzogopoulos
Blaney McMurtry LLP
416.593.2953 Email

Civil Decisions

Campbell v. Toronto Standard Condominium Corporation No. 2600, 2024 ONCA 218

Keywords: Real Property, Condominiums, Civil Procedure, Mandatory Mediation, Mandatory Arbitration, Arbitral Awards, Setting Aside, Fraud, Constructive Fraud, Arbitration Act, 1991, S.O. 1991, c. 17, s.46(1) and s.47(2), Condominium Act, 1998, S.O. 1998, c.19, Holley v. The Northern Trust Company, Canada, 2014 ONSC 889, TELUS Communications Inc. v. Wellman, 2019 SCC 19, Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27, Uber Technologies Inc. v. Heller, 2020 SCC 16, Ontario Hydro v. Denison Mines Ltd., [1992] O.J. No. 2948 (Gen. Div.), Teal Cedar Products Ltd. v. British Columbia, 2017 SCC 32, Alectra Utilities Corporation v. Solar Power Network Inc., 2019 ONCA 254, Tall ShipsDevelopment Inc. v. Brockville (City), 2022 ONCA 861, Mensula Bancorp Inc. v. Halton Condominium Corporation No. 137, 2022 ONCA 769, R & G Draper Farms (Keswick) Ltd. v. 1758691, 2014 ONCA 278, Toronto Standard Condominium Corporation No. 1466 v. Weinstein, 2021 ONSC 1306, 1323257 Ontario Ltd. v. Hyundai Auto Canada Corp. (2009), 55 B.L.R. (4th) 265 (Ont. S.C.)., R. v. D.L.W., 2016 SCC 22, Mattamy (Downsview) Limited v. KSV Restructuring Inc. (Urbancorp), 2023 ONSC 3013, Ruth Sullivan, Construction of Statutes, 7th ed. (Markham, ON: LexisNexis, 2022), at § 2.01

Amtim Capital Inc. v. Appliance Recycling Centers of America, 2024 ONCA 225

Keywords: Breach of Contract, Damages, Civil Procedure, Documentary Discovery

Smith v. Taylor, 2024 ONCA 223

Keywords: Contracts, Interpretation, Insurance, Automobile, Coverage, Inadequately Insured Motorists, Rules of Civil Procedure, rr. 20, 21.01(1)(a), Kahlon v ACE INA Insurance, 2019 ONCA 774, Trillium Mutual Insurance Company v Emond, 2023 ONCA 729, Sam’s Auto Wrecking Co Ltd (Wentworth Metal) v Lombard General Insurance Co of Canada, 2013 ONCA 186, Le Treport Wedding & Convention Centre Ltd v Co-operators General Insurance Co, 2020 ONCA 487, Keelty v Bernique (2002), 57 OR (3d) 803 (CA), Trenton Cold Storage Ltd v St. Paul Fire and Marine Insurance Co (2001), 199 DLR (4th) 654 (Ont CA), Cohn v Calovic, 2011 ONSC 1398, Suchan v Casella (2005), 81 OR (3d) 73 (Ont Sup Ct), R v Find, 2001 SCC 32

Palmer v. Teva Canada Limited, 2024 ONCA 220

Keywords: Torts, Negligence, Product Liability, Duty of Care, Duty to Warn, Battery, Competition Law, False or Misleading Advertising, Contracts, Consumer Protection, Unjust Enrichment, Damages, Mental Distress, Pure Economic Loss, Civil Procedure, Class Proceedings, Certification, No Reasonable Cause of Action, Common Issues, Preferable Procedure, Class Proceedings Act, 1992, S.O. 1992, c. 6, s. 5, Competition Act, R.S.C. 1985, c. C-34, s. 36 (1), 52(1), Consumer Protection Act, 2002, S.O. 2002, c. 30, Sched. A (CPA), ss. 14, 15, 18, Hollick v. Toronto (City), 2001 SCC 68, Pro-Sys Consultants Ltd. v. Microsoft Corporation, 2013 SCC 57, Bowman v. Ontario, 2022 ONCA 477, R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42, Mustapha v. Culligan of Canada Ltd., 2008 SCC 27, Atlantic Lottery Corp. Inc. v. Babstock, 2020 SCC 19, 1688782 Ontario Inc. v. Maple Leaf Foods Inc., 2020 SCC 35, Setoguchi v. Uber BV, 2023 ABCA 45, leave to appeal refused, [2023] S.C.C.A. No. 190, Dow Chemical Company v. Ring, Sr., 2010 NLCA 20, othwell v. Chemical & Insulating Co. Ltd., [2007] UKHL 39, Saadati v. Moorhead, 2017 SCC 28, Anderson v. Wilson (1999), 44 O.R. (3d) 673 (Ont. C.A.), Capelet v. Brookfield Homes (Ontario) Limited, 2018 ONCA 742, Healey v. Lakeridge Health Corp., 2011 ONCA 55, McCreight v. Canada (Attorney General), 2013 ONCA 483, Winnipeg Condominium Corp. No. 36 v. Bird Construction Co., [1995] 1 S.C.R. 85, Non-Marine Underwriters, Lloyd’s of London v. Scalera, 2000 SCC 24, Barker v. Barker, 2022 ONCA 567, Ramdath v. George Brown College of Applied Arts and Technology, 2015 ONCA 921, WN Pharmaceuticals Ltd. v. Krishnan, 2023 BCCA 72, leave to appeal refused, [2023] S.C.C.A. No. 152, WN Pharmaceuticals Ltd. v. Krishnan, 2023 BCCA 72, leave to appeal refused, [2023] S.C.C.A. No. 152, Arora v. Whirlpool Canada LP, 2013 ONCA 657, Moore v. Sweet, 2018 SCC 52, Peel (Regional Municipality) v. Canada; Peel (Regional Municipality) v. Ontario, [1992] 3 S.C.R. 762, Boulanger v. Johnson & Johnson Corp., 174 O.A.C. 44 (C.A.), Spring v. Goodyear Canada Inc., 2021 ABCA 182, Nissan Canada Inc. v. Mueller, 2022 BCCA 338, leave to appeal refused, [2022] S.C.C.A. No. 446, Fehr v. Sun Life Assurance Company of Canada, 2018 ONCA 718, leave to appeal refused, [2018] S.C.C.A. No. 489, Lewis Klar and Cameron Jefferies, Tort Law, 7th ed. (Toronto: Thomson Reuters, 2023), Allen M. Linden, et al., Canadian Tort Law, 12th ed. (Toronto: LexisNexis, 2022)

Colonna v. Fellin, 2024 ONCA 224

Keywords: Contracts, Real Property, Joint Venture Agreements, Breach of Contract, Defences, Frustration, Damages, Expectation Damages, Punitive Damages, Civil Procedure, Summary Judgment, Fresh Evidence, Rules of Civil Procedure, r. 20.04(2)(a), Palmer v. The Queen, [1980] 1 S.C.R. 759, Naylor Group Inc. v. Ellis-Don Construction Ltd., 2001 SCC 58, Sweda Farms Ltd. v. Egg Farmers of Ontario, 2014 ONSC 1200

Short Civil Decisions

FCP (BOPC) Ltd. v. Suzy Shier (Canada) Ltd., 2024 ONCA 227

Keywords: Contracts, Real Property, Commercial Leases, Rent, Arrears, COVID-19, Courts of Justice Act, RSO 1990, c C 43, s 129

CIVIL DECISIONS

Campbell v. Toronto Standard Condominium Corporation No. 2600, 2024 ONCA 218

[Simmons, Harvison Young and George JJ.A.]

Counsel:

D. Marks and F. Burnett, for the appellant

W.C. and O.S, acting in person

facts:

The respondents were owners of a unit in a condominium since August 2017. From about December 2018 to February 2021, various disputes arose between the respondents and Toronto Standard Condominium Corporation No, 2600 (the “Condo Corp.”), initially due to complaints received about excessive noise, and subsequently regarding the use of the unit as a short-term rental after the Condo Corp. made a new rule in April 2019 prohibiting any such use.

The Condo Corp. sent a number of letters to the respondents about the complaints between December 2018 and July 2019. The letters concerned the noise complaints, many of which came from one other unit owner in particular. One of these letters was a “cease and desist” letter, and another also complained about short-term rentals.

In June 2019, the respondents entered into a one-year lease with another couple. After another noise complaint in mid-July 2019, the Condo Corp. sent a notice of mediation, which alleged that the respondents had breached the declaration, by-laws and rules of the corporation and that pursuant to s. 132(4) of the Condominium Act, the disagreement would be submitted to a mediator.

However, the Respondents having previously consented to a mediation withdrew their consent to a mediation. As such, no mediation was arranged. As a result, in November 2020, the Condo Corp. delivered a notice of arbitration.

By February 2021, the respondents retained counsel and agreed that MB would be appointed arbitrator. At that point, counsel for the Condo Corp. learned that a status certificate had been requested for the unit, suggesting that the respondents could be intending to sell the unit. The sale of the unit could effectively resolve the substantive issues raised in the arbitration, but the issue around costs would remain unresolved.

On March 4, 2021, the respondents signed a conditional agreement for the sale of their unit, and on the same day signed an arbitration agreement with the Condo Corp. The agreement specified that the arbitrator was to make “a final and binding decision” on the specified issues. It also specified that the parties “irrevocably agree not to appeal or attempt to set aside any aspect of the Arbitration Award”.

The arbitrator released his lengthy decision on September 6, 2021, awarding the Condo Corp. $30,641.72 in costs on a partial indemnity basis.

The respondents commenced an application to set aside the arbitrator’s award on November 2, 2021, which was nearly two months after the release of the award.

The application judge acknowledged that no appeal was available to the respondents as the parties had agreed that the arbitrator’s decision would be final and that there would be no right of appeal. Moreover, even if an appeal were available, the respondents were out of time and, in any event, would require leave to appeal on a question of law, which would not be available in this case.

While there was no appeal available, the application judge granted the respondents’ application to set aside the arbitral award, which alleged both fraud on the part of the Condo Corp. and constructive fraud on the part of the arbitrator.

The application judge correctly held that there was no actual fraud in this case. However, the judge held that it was appropriate to set aside the award on the basis of s. 46(1)9 of the Arbitration Act since, in his view, the word “fraud” in that provision includes “constructive fraud” and the respondents were “victims of constructive fraud”.

issues:

Did the application judge err in reading “constructive fraud” into s.46 (1) and s.47(2) of the Arbitration Act, 1991, and accordingly err in setting aside the arbitral award?

holding:

Appeal allowed.

reasoning:

Yes.

The application judge erred in his interpretation of “fraud”. The application judge’s decision to set aside the arbitral award rested on his incorrect reading that “fraud” under s. 46(1)9 and s. 47(2) of the Arbitration Act included constructive fraud.

In this case, as the application judge explained, no appeal was available, and so the issue was whether there was a basis for setting aside the award under s. 46.

Under s. 47(1), an appeal of an award or application to set aside an award “shall be commenced” within 30 days after the decision. The Court affirmed that there is no judicial discretion to extend the 30-day time limit. Section 47(2) recognizes two exceptions to the 30-day time limit: there is no such limit if the appellant or applicant alleges corruption or fraud.

The Court’s recent trilogy of cases, in Alectra Utilities Corporation v. Solar Power Network Inc., 2019 ONCA 254, Mensula Bancorp Inc. v. Halton Condominium Corporation No. 137, 2022 ONCA 769, and Tall Ships Development Inc. v. Brockville (City), 2022 ONCA 861, made it clear that the grounds for setting aside an arbitral award listed in s. 46 are narrow and that s. 46 is not an alternate appeal route. This interpretation gives effect to the Act’s objectives of efficiency and finality.

The application judge described constructive fraud as something which “does not necessarily involve dishonesty or moral fraud in the ordinary sense, but [is] a breach of [the] sort that would be enforced by a court of conscience”. Similarly, he explained that constructive fraud “focuses on unfairness more than it does on deceit.” The application judge erred by giving the word “fraud” in s. 46 of the Arbitration Act, 1991 such an expansive interpretation, including not only fraud but also the equitable concept of constructive fraud. Reading “fraud” to include the concept of “constructive fraud” was out of step with appellate case law.

Expanding the meaning of “fraud” risked inviting strategic enlargement of the grounds for setting aside an arbitral award, as illustrated by this case. In this case, had the parties applied to set aside the arbitral award within the 30-day period set by s. 47(1), their claims might have fallen within some of the other grounds enumerated in s. 46 for setting aside an award. Instead, the respondents sought to circumvent the time limit by alleging fraud and constructive fraud.

Amtim Capital Inc. v. Appliance Recycling Centers of America, 2024 ONCA 225

[Pepall, Lauwers and Monahan JJ.A.]

Counsel:

J. Figliomeni, J. Leon, and E, Schiff, for the appellant

J. Rosenstein, for the respondent

Keywords: Breach of Contract, Damages, Civil Procedure, Documentary Discovery

facts:

The parties entered into two agreements (“Agreements”): a Sales Agreement, under which Amtim Capital Inc. (“Amtim”) would facilitate and assist with the solicitation of contracts in Canada and represent the interests of Appliance Recycling Centers of America (“ARCA”) in connection with its Canadian customers, and a General Management Agreement, under which Amtim would manage ARCA Canada’s operations with some assistance from ARCA. The appeal turned on the facts as found by the trial judge, who dismissed Amtim’s claim as unproven.

issues:

Did the trial judge err in finding that Amtim had not discharged its onus of proving that ARCA had underpaid Amtim by allocating its head office expenses to its Canadian subsidiary in a manner that did not relate properly to the “supply of services in Canada” and that was “not in accordance with U.S. GAAP, consistently applied”?

holding:

Appeal dismissed.

reasoning:

No.

The Court agreed with the trial judge’s analysis. The trial judge noted that the onus of proving that ARCA breached the Agreements in its allocation of head office expenses to ARCA Canada rested on Amtim. The trial judge noted that Amtim had not utilised its right to access ARCA’s documents provided in the Agreements. The trial judge indicated that there was no indication, following production by ARCA of “raw data” at trial, that Amtim took any steps to make enquiries or render the data production useful. The trial judge accepted the evidence of ARCA’s controller on the accuracy of the financial records, a factual finding to which appellate deference was due. The trial judge found that based on the expert evidence, alterations in the allocation method were permitted, provided that the result was “rational, reasonable and consistent.” He declined to fix damages since insufficient facts were proven to estimate damages.

As a practice note, the Court did not condone inadequate document production under the Rules of Civil Procedure. However, the act of setting an action down for trial signals a party’s willingness to proceed on the record and the evidence that it has, and to forego other procedural remedies. The appellant made the strategic decision to rest its case on the potential use of an adverse inference and bore its consequences.

Smith v. Taylor, 2024 ONCA 223

[Gillese, Trotter and Coroza JJ.A.]

Counsel:

N. de Koning, for the appellant

S. Stieber, for the respondent

facts:

On August 18, 2017, K.Sc suffered fatal injuries in an accident involving R.T, who failed to stop at a stop sign. K.Sm, K.Sc’s common-law spouse, had an automobile insurance policy with Aviva, and K.Sc had a homeowners insurance policy; both were covered under each other’s policies. K.Sm initiated an action against R.T and Aviva, claiming $3,500,000, including for substantial financial dependency losses. The motion judge interpreted the “Personal Excess Liability Policy” endorsement as not providing K.Sm coverage, reasoning that R.T was not an “inadequately insured motorist” and K.Sm had not exhausted the OPCF 44R limits. The action against Aviva was dismissed which K.Sm appealed.

issues:

Did the motion judge err in his interpretation of the relevant provisions of the Excess Endorsement?
Did the motion judge err in concluding that K.Sm had to exhaust the OPCF 44R limits before she could claim under the Excess Endorsement?
Should the Order be set aside on the basis that it nullified coverage and/or was commercially unreasonable?

holding:

Appeal allowed.

reasoning:

Yes.

The motion judge concluded that K.Sm could not claim indemnity under the Excess Endorsement because R.T was not an “inadequately insured motorist” as he interpreted the term within the first paragraph of the FPC provision. The interpretation was based on the definition of “inadequately insured motorist” in the OPCF 44R, which the Court found that the motion judge erroneously applied to the Excess Endorsement, effectively converting the Excess Endorsement into a duplicate of the OPCF 44R policy and denying K.Sm the additional coverage intended by the Excess Endorsement. The Court found this interpretation incorrect, as it undermined the purpose of the Excess Endorsement, which is to provide K.Sm with coverage in excess of that provided by the OPCF 44R.

Furthermore, the Court noted the incorrect application of the definition of “inadequately insured motorist” from the OPCF 44R to the Excess Endorsement. The misinterpretation led to a conclusion that conflicted with the intended additional layer of insurance provided by the Excess Endorsement. The correct interpretation of the FPC provision supported K.Sm’s eligibility for coverage under the Excess Endorsement, as it aimed to offer supplementary protection beyond the OPCF 44R limits, thereby enabling her to claim coverage under the Excess Endorsement, subject to the resolution of the issue of exhaustion.

2. Yes.

The motion judge provided three reasons for his decision that K.Sm must have exhausted the OPCF 44R limits before accessing family protection coverage under the Excess Endorsement: the wording of the OPCF 44R, the endorsement’s purpose not to increase OPCF 44R limits but to offer coverage after those limits are exhausted, and the Insuring Agreement provision stating the policy will not provide broader coverage than the Underlying Insurance. The Court found that all these reasons were incorrect. The first and third reasons were deemed irrelevant to the exhaustion issue, and the second reason was not supported by the wording of the Excess Endorsement. Furthermore, the motion judge’s reliance on the Court’s decision in Kahlon v ACE INA Insurance and the distinction between primary and excess insurance in Trenton Cold Storage Ltd v St Paul Fire and Marine Insurance Co was misplaced or taken out of context, leading to an erroneous conclusion about the necessity of exhausting OPCF 44R limits.

Correctly interpreting the issue of exhaustion, the Court determined that the FPC provision in the Excess Endorsement did not require K.Sm to exhaust the OPCF 44R limits before claiming under the Excess Endorsement. The first paragraph of the FPC provision extended coverage for amounts legally recoverable for bodily injury from an inadequately insured motorist, without engaging the concept of exhaustion. The ambiguity in the second paragraph’s “subject to” phrases led to two possible interpretations, but ambiguity must have been resolved in favor of the insured, meaning K.Sm could claim payment under the Excess Endorsement without exhausting OPCF 44R limits. The third paragraph, confirming the application of Excess Endorsement coverage when Family Protection Coverage was part of the motor vehicle liability policies, also did not entail exhaustion.

3. The Court did not address this issue.

The appellant had asked the Court to set aside the Order, arguing that the motion judge’s interpretation effectively nullified coverage under the Excess Endorsement in most cases, a result they considered commercially unreasonable. The request stemmed from their belief that the Court could judicially notice that the majority of Ontarians have $1 to $2 million in automobile liability coverage and that only a small fraction of drivers operate without automobile insurance. However, the Court declined to address this issue for two main reasons. Firstly, given the conclusions on Issues 1 and 2, it was deemed unnecessary. Secondly, the appellant failed to show that the criteria for judicial notice were met. Judicial notice can be taken of facts that are either widely recognized to the extent they are beyond dispute among reasonable people, or those that can be immediately confirmed through sources of unquestionable accuracy. The Court found that the appellant’s claims about the prevalence of automobile insurance coverage amounts in Ontario and the proportion of uninsured drivers did not meet such standards. Additionally, the Court noted that no indisputable source was presented to support the assertions, and if such a source existed, it was the appellant’s responsibility to have cited it both at the lower level and in the appeal.

Palmer v. Teva Canada Limited, 2024 ONCA 220

[Huscroft, Miller and Paciocco JJ.A.]

Counsel:

P. Bates, A. Leoni and C. Edwards, for the appellants

L. Fric, R. Carson and J. Habib, for the respondent Teva Canada Limited

P. Pliszka, Z. Maladwala and R. Aery, for the respondents Sandoz Canada Inc., Pro Doc Limitee, Sanis Health Inc., and Sivem Pharmaceuticals ULC

facts:

The plaintiffs sought to certify a class proceeding under s. 5 of the Class Proceedings Act, 1992, against Teva Canada Limited, Sandoz Canada Inc., Pro Doc Limitee, Sanis Health Inc., and Sivem Pharmaceuticals ULC (the “respondents” or “defendants”) for negligently manufacturing a medication used to treat high blood pressure, known as valsartan. The plaintiffs and proposed class members were persons who were prescribed and ingested valsartan.

Beginning in 2012, the defendants’ supplier of the active pharmaceutical ingredient for their generic valsartan changed its manufacturing process and as a result, certain lots of the valsartan were contaminated with N-nitrosodimethylamine (“NDMA”) and N-nitrosodiethylamine (“NDEA”), two contaminants that the appellants alleged are toxic carcinogens. In 2018, the defendants voluntarily recalled the contaminated lots.

The claim was for damages for the potential increased risk of being diagnosed with cancer in the future as a result of ingesting contaminated valsartan. The plaintiffs sought damages for costs of medical services and monitoring; refunds for the drugs consumed; costs for the drugs thrown away after the drugs were recalled; and psychological damages and punitive damages.

The motion judge dismissed the plaintiffs’ certification motion, finding the negligence claim for damages for psychological harm was non-compensable and dismissing the claims for toxic battery, breach of consumer protection laws, breach of competition laws, and unjust enrichment. The plaintiffs appealed.

issues:

Did the motion judge err in holding that the pleadings disclosed no viable cause of action?
Did the motion judge err in holding the proposed action did not meet the common issues and/or preferable procedure criteria and thereby err by not certifying the class action?

holding:

Appeal dismissed.

reasoning:

Section 5(1) of the Class Proceedings Act, 1992 sets out five statutory criteria that must be established for a claim to be certified as a class action: (a) the pleadings must disclose a cause of action; (b) there must be an identifiable class; (c) there must be common issues; (d) the class action must be the preferable procedure; and € the proposed representative plaintiff must be appropriate. For the first element, the court must ask whether it is plain and obvious that no claim exists, assuming the facts alleged in the pleadings are true. For all the other elements, the representative plaintiff must establish some basis in fact that the requirement is met.

The test to determine whether the pleadings disclose a cause of action for the purposes of s. 5(1)(a) of the Class Proceedings Act, 1992 is, assuming the facts as stated in the statement of claim can be proved, it is “plain and obvious” the claim cannot succeed. The motion judge’s reasons carefully indicated what stage of the analysis was underway and which standard was being applied. There was nothing in the motion judge’s reasons that supported the argument that he slipped from the “plain and obvious” standard to the “some basis in fact” standard, or that he relied on evidence rather than taking the pleadings as true.

A successful action in negligence requires plaintiffs to demonstrate that: (1) the defendants owed them a duty of care; (2) the defendants’ behaviour breached the standard of care; (3) the plaintiffs sustained damage; and (4) that the damage was caused, in fact and in law, by the defendants’ breach. Damage (injury) to a plaintiff is an essential element in a claim of negligence. It is the materialized loss that gives rise to a defendant’s obligation to compensate the plaintiff for the injury. Under s. 5(1)(a) of the Class Proceedings Act, 1992, there can be no viable cause of action in negligence without actual damage.

The claim for genotoxic injury, as pleaded by the appellants, had the same flaw as the claim for increased risk of cancer: damage had not materialized and may never materialize. It is not clear that genotoxic injury as pleaded would amount to injury or damage that would be more than negligible. No material facts were pleaded to support the claim that any class member had suffered loss as a result of molecular change. Even if the pleadings had alleged that changes at the cellular level can cause cancer, rather than the allegation that molecular change per se constitutes an injury, the claim would still amount to a claim for compensation for an increased risk of cancer. The motion judge appropriately drew support from other jurisdictions that have dealt with claims from asymptomatic claimants exposed to harmful substances. A physical change with no perceptible effect upon one’s health is not compensable in negligence.

As for the claim in psychological injury, the motion judge differentiated psychological harm from future harm. The motion judge explicitly acknowledged that the claim was for present anxiety resulting from notification that the appellants had ingested contaminated valsartan. To the extent that the motion judge reasoned there could be no cause of action for present psychological harm occasioned by the risk of future physical harm (i.e., a cancer diagnosis), this was an error. Psychological distress caused by even a speculative concern of an increased risk is still harm. Recoverability for mental injury depends upon the plaintiff satisfying the same elements required for any successful action in negligence. To qualify, they must be “serious and prolonged” and rise above the “ordinary annoyances, anxieties and fears.” The plaintiff must also address legal causation, an inquiry into remoteness or foreseeability of the injury. This threshold question asks “whether the occurrence of mental harm in a person of ordinary fortitude was the reasonably foreseeable result of the defendant’s negligent conduct.”

The appellants failed to plead the material facts needed to support damages recoverable in tort and to demonstrate that their mental injuries rise above the anxieties and fears commonly experienced from time to time by people living together in society. Bare assertions of prolonged mental distress must be supported by material facts detailing the injury. Even had the injuries pleaded met the threshold for recoverable damages, they would have foundered on the person of “ordinary fortitude” standard. The appellants pleaded that shock came from reading the recall announcement. The Court agreed with the motion judge’s assessment that the notices seemed intended to assuage concern and that the recall would not cause a person of reasonable fortitude to sustain a psychological injury at the level compensable in tort.

Without any viable negligence claim for physical or psychological harm damages, the damages sought were purely economic. The motion judge found that, once compensatory damages for physical and psychological injuries were removed, the claim for pure economic loss failed because the product was not imminently dangerous. The basis for recovery for pure economic loss from Maple Leaf Foods is that the plaintiff must take steps to prevent an imminent injury that it would otherwise suffer. The pleadings did not address the imminence (or latency) of the physical harm arising from ingesting valsartan contaminated with NDMA and NDEA. For the heads of damages pleaded by the plaintiffs: costs of medical services and medical monitoring, costs thrown away from discarding contaminated pills, and refunds, discarding the pills was feasible and sufficient to avert any danger. The liability rule did not extend to other loss, such as replacement value for the contaminated product (or refund). Medical monitoring costs did not fall within the Maple Leaf Foods liability rule.

A battery occurs when a defendant causes a direct, offensive, physical contact with the plaintiff, which is the immediate cause of the harm to the plaintiff. Nothing done directly by the respondents was alleged to be the immediate cause of the harm alleged by the appellants.

Under the Consumer Protection Act claim, the actual claim was a negligence claim for a contaminated product, not a deceptive misrepresentation. It was not obvious, and did not need to be decided, whether consumer protection legislation applied to the facts at all. It did not easily fit together with the examples of false, misleading, deceptive, or unconscionable representations set out in ss. 14 and 15 of the Consumer Protection Act. Asserting statutory breaches without pleading the underlying material facts necessary to support them was insufficient to cross the low hurdle present in s. 5(1)(a) of the Class Proceedings Act, 1992.

The motion judge did not err In finding that none of the pleaded misrepresentations were capable of sustaining a cause of action as a breach of s. 52(1) of the Competition Act. Section 52 requires that there be a “representation” and the Court had previously held that failure to disclose a non-dangerous defect cannot constitute a “representation.”

For a claim of unjust enrichment to succeed, the plaintiffs must establish three elements: (i) an enrichment of or benefit to the defendants; (ii) a corresponding deprivation of the plaintiffs, and (iii) the absence of a juristic reason for the enrichment. The appellants’ claim for unjust enrichment of the defendants failed because any benefit the defendants received from class members was indirect. The law of unjust enrichment does not permit recovery for incidental collateral benefits. The appellants did not plead a deprivation on the part of class members and the motion judge did not err in so concluding.

It was not necessary to address the remaining issues of commonality and preferability having disposed of the appeal under s. 5(1)(a) of the Class Proceedings Act, 1992, but the Court commented given the parties spent time reviewing the evidence.

The class representatives in a class action must show “some basis in fact” for each of the certification requirements set out in s. 5(1)(b) through (e) of the Class Proceedings Act, 1992. Certification will be denied if there is an insufficient evidentiary basis for the facts to establish the existence of common issues. The motion judge clearly understood the task before him and correctly applied the “some basis in fact” principle. While the motion judge found no basis in fact for the proposition that NDMA and NDEA cause cancer, he did find some basis in fact for the appellants’ allegation that NDMA and NDEA cause an increased risk for developing cancer.

Psychological injuries from the shock and stress caused by being notified of this increased risk of cancer also failed at s. 5(1)(a) of the Class Proceedings Act, 1992. An issue will be common “only where its resolution is necessary to the resolution of each class member’s claim.” For a claim to be certified, there must be a “methodology” through which the common issue may plausibly be proven at trial. Although he dismissed the claim for psychological distress for failing to disclose a viable cause of action, he went on to consider whether the damages for psychological harm would be certifiable as a common issue. He concluded that there was not a common issue because the plaintiffs had failed to show some basis in fact to meet this criterion. The motion judge found that the evidence of the psychological effect of the recall caused a minority of the class to have suffered the upsets and anxieties that would be compensable under tort law. The evidence indicated that the issue of psychological injury was not common to the class.

The Court declined to address the preferable procedure criterion.

Colonna v. Fellin, 2024 ONCA 224

[Pepall, Sossin and Dawe JJ.A.]

Counsel:

R.F., acting in person for the appellants

M. Bradley and K. Ferreira, for the respondents

facts:

The appellant R.F., is the sole officer and director of the other appellant 2243282 Ontario Inc. o/a Rossi Consulting Group (“Rossi”). The respondent, D.C, is an individual who conducts business by financing, developing, and selling real estate in Ontario. In 2018, D.C. signed a joint venture agreement with the appellants (the “JVA”), concerning the purchase and development of a property on 2355 Taylorwoods Blvd. in Innisfil (the “Property”).

The JVA stipulated that the appellant, Rossi, would purchase the Property through contributions from the respondent; the title to the Property would be held by Rossi; the contribution of the respondent would be secured with a no-interest mortgage against the Property; and the profit would be divided equally after repaying the parties’ contributions and addressing any tax liabilities. While R.F. had full authority to run the development project on the Property, the JVA required that he inform the respondent in writing of any decisions or plans on how it would proceed and seek written acknowledgment and consent for those decisions. The JVA also set out that Rossi acknowledged that the Property was currently approved for a severance, but that it would seek to obtain a further severance for a third lot on the Property. The clause further clarified that, if Rossi was unsuccessful in obtaining the third lot on the Property, then Rossi would proceed to develop the Property with only two lots commencing in March of 2019.

The Property was not developed, and the respondent sought summary judgment under r. 20.04(2)(a) of the Rules of Civil Procedure, arguing that the appellants had breached the JVA. The motion judge agreed and found: (1) the parties made a valid JVA; (2) the appellants breached the JVA; (3) the appellants owed the respondent $609,928.15 in expectation damages; and (4) punitive damages were not warranted.

The appellants appealed the motion judge’s findings of liability and calculation of expectation damages. Additionally, three days before the hearing of the appeal, the appellants brought a motion to file fresh evidence relating to the calculation of damages.

issues:

Should the motion to file fresh evidence relating to the calculation of damages be granted?
Did the motion judge err in finding that a term of the JVA was that the parties would “seek severance to build as many homes as permitted on the Property”?
Did the motion judge err in calculating expectation damages?

holding:

Appeal dismissed.

reasoning:

To adduce fresh evidence on appeal, the moving party must prove that the proposed evidence:

could not have been adduced at first instance through the exercise of reasonable diligence;
is relevant upon a decisive or potentially decisive issue;
is credible, and
if reasonably believed, when taken with the other evidence adduced at trial, could be expected to have affected the result.

In oral submissions, R.F. represented himself and Rossi, and stated that an important context of this appeal were key errors made by the appellants’ previous two counsel. R.F. did not suggest that the material filed as fresh evidence was not available at the time of the summary judgment motion (and, indeed, confirmed the documents were all publicly available), but rather that counsel failed to put these documents into evidence.

The respondent took issue with the late notice of the motion for fresh evidence and the fact that this evidence was available through the exercise of due diligence at the time of the motion. The respondent argued that these documents could have no reasonable bearing on the motion judge’s decision.

The Court held that these documents could have been obtained at the time of the summary judgment motion. The appellants failed to put their best foot forward at the summary judgment motion and were trying to remedy the shortcomings in their evidence. In any event, the fresh evidence would not have affected the motion judge’s decision.

In written submissions, the appellants argued that they should not be liable for the breach of the JVA because the development of the Property was frustrated by the Town’s decision to deny the severance. The respondent submitted that frustration was not raised on the motion and was being argued for the first time on appeal. Whether or not it was properly raised, the requirements of frustration were not met in this case. In this case, the denial of severance was not an unforeseeable event which radically altered the parties’ expectations. Rather, it was specifically adverted to in the JVA itself.

This argument was premised on the appellants’ claim that the motion judge erred in finding that a term of the JVA was that the parties would “seek severance to build as many homes as permitted on the Property.” The appellants claim that the motion judge implied this term when the express intent of the JVA was only to develop the Property if there were two or more lots.

The Court saw no error. The motion judge’s finding that the parties intended to develop the Property with as many homes as possible was supported on the evidence. The Court therefore rejected this ground of appeal. The Court found that there was no basis for appellate interference with the motion judge’s conclusion that there was a valid JVA and the appellants breached it.

The appellants argued that the motion judge’s error in calculating the construction costs, together with the errors in the imputed rental income and applicable taxes, led to an unfairly inflated finding with respect to expectation damages. In short, the appellants argued that the damages found by the motion judge put the respondent in a much better position than if the JVA had been performed. The Court disagreed.

The motion judge did not err in calculating the construction costs. The appellants did not adduce any expert evidence on damages. Instead, they provided only an affidavit from R.F. in which he gave his own assessment on construction costs. The Court held that the motion judge was correct to note that the obligation on the parties in a summary judgment motion is to “put their best foot forward”. The Court saw no error in the calculation of construction costs, based on expert evidence and public records such as building permits. In the Court’s view, the damages calculations of the motion judge were based on findings of fact that were available to her and rooted in the limited evidence in the record. These findings were entitled to deference.

The Court held that the motion judge did not err in finding that the parties would have been rented the Property prior to selling. The appellants asserted that “no evidence was adduced” to support this finding. In the alternative, the appellants argued that the rental income imputed by the motion judge should be reduced by $30,000 to account for income tax and property tax. The respondent submitted that the motion judge’s findings were well supported in the record. The Court agreed with the respondents. The Court saw no basis to interfere with the motion judge’s finding that the parties would have rented the Property. This finding was open to her on the record.

The Court further held that the motion judge did not err by failing to assess tax consequences. The motion judge reduced damages payable to the respondent to account for the management fee that Rossi might have obtained if it performed the JVA. The appellants argued that the motion judge should have further reduced the respondent’s damages to account for HST on the management fee. At the summary judgment motion, however, the appellants led no evidence to show that HST would have applied to the management fee or that such HST would have reduced the parties’ net profit. The motion judge assessed expectation damages for lost opportunity on a before-tax basis.

The Court noted that the motion judge did not have evidence in the record which could have clarified the tax consequences of the development for the parties. To the extent that the appellants, on appeal, raised specific issues that might have altered the motion judge’s calculation, such as with respect to potential tax liability and indeed development fees, this information was not put before her, and it was not an error for the motion judge to focus on the record as it stood. The Court therefore held that this ground of appeal failed.

SHORT CIVIL DECISIONS

FCP (BOPC) Ltd. v. Suzy Shier (Canada) Ltd., 2024 ONCA 227

[Roberts, George and Monahan JJ.A.]

Counsel:

M. Mednick and J. Earle, for the appellant

Brendan Jones, for the respondents

Keywords: Contracts, Real Property, Commercial Leases, Rent, Arrears, COVID-19, Courts of Justice Act, RSO 1990, c C 43, s 129

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.

John Polyzogopoulos Blaney McMurtry LLP 416.593.2953 Email

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SHORT CIVIL DECISIONS

Counsel:

John Polyzogopoulos
Blaney McMurtry LLP
416.593.2953 Email