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Good afternoon.

Following are our summaries of the civil decisions of the Court of Appeal for Ontario for the week of April 19, 2021.

In Fercan Developments v Canada, the Court confirmed that the plaintiffs who waited until after criminal and civil forfeiture proceedings were concluded before suing the Crown for malicious prosecution and related torts were entitled to do so on the basis that their claims were not discoverable under the “appropriate means” branch of the discoverability test in ss. 5(1)(a)(iv).

In Law Society of Ontario v Diamond the Court upheld the Law Society’s finding of professional misconduct for failure to cooperate with its investigation.

Other topics covered this week included  a priority dispute to the proceeds of sale a matrimonial home between a spouse and a judgment creditor and occupational health and safety.

Our “Top Appeals” of 2020 CLE is finally upon us. Please join us this Tuesday evening, April 27, 2021, from 5:30 to 7:45 pm via Zoom. We are set to have a great turnout. Justice Benjamin Zarnett will be co-chairing the event with me and Chloe Snider. Following is our excellent slate of decisions and panelists:

2020 Update from the Bench

The Honourable Benjamin Zarnett, Court of Appeal for Ontario

Panel 1 – Advocacy Practice Tips from the Court

Girao v. Cunningham, 2020 ONCA 260

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

Welton v. United Lands Corporation Limited, 2020 ONCA 322

Jordan Goldblatt, Adair Goldblatt Bieber LLP

Sara Erskine, Weintraub Erskine Huang LLP

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

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

Seumas Woods, Blake, Cassels & Graydon LLP

Alistair Crawley, Crawley MacKewn Brush LLP

Elizabeth Bowker, Stieber Berlach LLP

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

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

7636156 Canada Inc. (Re), 2020 ONCA 681

Ken Kraft, Dentons LLP

Kevin Sherkin, Miller Thomson LLP

D.J. Miller, Thornton Grout Finnigan LLP

There is still time to register for the program by visiting the OBA’s website.

Wishing everyone an enjoyable weekend.

John Polyzogopoulos
Blaney McMurtry LLP
416.593.2953 Email

Continue Reading COURT OF APPEAL SUMMARIES (April 19 – April 23, 2021)

Jump To: Table of Contents | Civil Decisions | Short Civil Decisions |

Good evening.

Please find below our summaries of the civil decisions of the Court of Appeal for the week of April 12, 2021.

Continue Reading

Marshallzehr Group Inc. v. Ideal (BC) Developments Inc. addressed the interpretation of a commitment letter for a commercial loan cancelled by the lender as a result of the borrower’s failure to satisfy the conditions of financing (the postponement of a pre-existing mortgage). At trial, the respondent was awarded certain amounts for its fees and expenses, including the lender’s fee, which was payable out of the amount advanced. The Court of Appeal found for the lender on most issues, including its right to cancel the financing, but it sided with the borrower and determined the lender’s fee had not been earned because no funds were advanced. The result turned on the specific wording of the commitment letter.

Nemchin v. Green dealt with the statutory assignment and trust provisions of section 267.8 of the Insurance Act which required a plaintiff who had been compensated for their injuries by a defendant to assign collateral benefits they received to the defendant’s insurer. The purpose of these provisions is to avoid double-recovery.

Makeeva v. Makeev is a family law decision. The Court allowed the cross-appeal because the trial judge failed to deduct the value of the respondent’s date of marriage assets (a condo that was not a matrimonial home) when calculating the equalization payment to be made.

Please join us on April 27, 2021, from 5:30-7:45pm for our fifth annual “Top Appeals” CLE, which will take place via Zoom. We are set to have a great turnout. Justice Benjamin Zarnett will be co-chairing the event with myself and Chloe Snider of Dentons. Following is our excellent slate of decisions and panelists:

2020 Update from the Bench

The Honourable Benjamin Zarnett, Court of Appeal for Ontario

Panel 1 – Advocacy Practice Tips from the Court

Girao v. Cunningham, 2020 ONCA 260

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

Welton v. United Lands Corporation Limited, 2020 ONCA 322

Jordan Goldblatt, Adair Goldblatt Bieber LLP

Sara Erskine, Weintraub Erskine Huang LLP

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

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

Seumas Woods, Blake, Cassels & Graydon LLP

Alistair Crawley, Crawley MacKewn Brush LLP

Elizabeth Bowker, Stieber Berlach LLP

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

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

7636156 Canada Inc. (Re), 2020 ONCA 681

Ken Kraft, Dentons LLP

Kevin Sherkin, Miller Thomson LLP

D.J. Miller, Thornton Grout Finnigan LLP

There is still plenty of time to register for the program by visiting the OBA’s website.

Wishing everyone a safe and pleasant weekend.

John Polyzogopoulos
Blaney McMurtry LLP
416.593.2953 Email

Table of Contents

Civil Decisions

Marshallzehr Group Inc. v. Ideal (BC) Developments Inc., 2021 ONCA 229

Keywords: Contracts, Breach, Interpretation, Commercial Reasonableness, Duty of Good Faith and Fair Dealing, Debtor-Creditor, Commercial Lending, Commitment Letters, Conditions, Termination, Damages, Lender’s Fees, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, Ventas, Inc. v. Sunrise Senior Living Real Estate Investment Trust (2007), 85 O.R. (3d) 254 (C.A.), Deslaurier Custom Cabinets Inc. v. 1728106 Ontario Inc., 2017 ONCA 293, Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District, 2021 SCC 7, Chijindu v. Prudential Property Management, 2014 ONSC 4759

Makeeva v. Makeev , 2021 ONCA 232

Keywords: Family Law, Spousal Support, Child Support, Lump Sum Payments, Imputed Income, Equalization of Net Family Property, Date of Marriage Assets, Reopening of Case, Fresh Evidence, Divorce Act, section 15.3(1), Family Law Act, section 38.1(1)

Nemchin v. Green, 2021 ONCA 238

Keywords: Insurance, Subrogation, Collateral Benefits, Long-term Disability, Statutory Assignment of Rights and Benefits, Statutory Trusts, Civil Procedure, Procedural and Natural Justice, Insurance Act, R.S.O. 1990, c. I.8, Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), s. 267.8, Lewin on Trusts, 19th ed. (London: Sweet & Maxwell, 2015), Rodaro v. Royal Bank of Canada (2002), 59 O.R. (3d) 74 (C.A.), Kant v. The Queen, [2001] 2 C.T.C. 2703 (T.C.C.), Bapoo v. Co-Operators General Insurance Co. (1997), 154 D.L.R. (4th) 385 (Ont. C.A.), leave to appeal refused, [1998] S.C.C.A. No. 62, Cadieux v. Cloutier, 2018 ONCA 903, leave to appeal refused [2019] S.C.C.A. No. 63, Carroll v. McEwen, 2018 ONCA 902, Cobb v. Long Estate, 2017 ONCA 717, El-Khodr v. Lackie, 2017 ONCA 716, leave to appeal refused, [2017] S.C.C.A. No. 461, Re Scott, [1948] SASR 193, Frederick v. Aviation & Gen. Ins. Co., [1966] O.J. No. 1064 (C.A.), Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27, Pugh v. Canada, [2000] T.C.J. No. 585, Bouchard v. Canada, 2008 TCC 408.

Short Civil Decisions

Lengyel v. TD Home and Auto Insurance, 2021 ONCA 237

Keywords: Torts, Negligence, MVA, Civil Procedure, Settlements, Court Approval, Litigation Guardians, Appeals, Jurisdiction, Kavuru (Litigation guardian of) v. Heselden, 2014 ONSC 6718.


CIVIL DECISIONS

Marshallzehr Group Inc. v. Ideal (BC) Developments Inc., 2021 ONCA 229

[Rouleau, Brown and Miller JJ.A.]

Counsel:

M.A. Russell, for the appellants

S. Schwartz, for the respondents

Keywords: Contracts, Breach, Interpretation, Commercial Reasonableness, Duty of Good Faith and Fair Dealing, Debtor-Creditor, Commercial Lending, Commitment Letters, Conditions, Termination, Damages, Lender’s Fees, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, Ventas, Inc. v. Sunrise Senior Living Real Estate Investment Trust (2007), 85 O.R. (3d) 254 (C.A.), Deslaurier Custom Cabinets Inc. v. 1728106 Ontario Inc., 2017 ONCA 293, Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District, 2021 SCC 7, Chijindu v. Prudential Property Management, 2014 ONSC 4759

facts:

The respondents, Marshallzehr Group Inc. (“MZ”), agreed to advance funds to the appellants, Ideal (BC) Developments Inc. (“Ideal”), for a residential development project under a commitment letter (the “CL”). Under the terms of the CL, MZ was going to syndicate the loan but was not required to advance any funds to Ideal until Ideal had satisfied certain preconditions. Shortly after the CL was executed, the syndicated lenders began to advance funds, but because Ideal had not satisfied the preconditions, MZ transferred the funds to its counsel to be held in trust pending the satisfaction of the preconditions. MZ informed Ideal that interest was beginning to accrue on the funds.

Roughly one month later, MZ notified Ideal that it was terminating the CL because the funding conditions had not been met. One of the predominant issues was that MZ and Ideal could not agree on a postponement and standstill agreement for a pre-existing first mortgage. The pre-funding conditions required the execution of all ancillary agreements including postponements in a form satisfactory to MZ (the “Subordinate Financing Clause”). The parties could never agree on the form of these postponements. No funds were ever advanced to Ideal.

MZ brought this action to recover its fees and expenses and Ideal counter-claimed for damages caused by a wrongful termination of the CL by MZ. MZ moved for summary judgment which was granted in favour of MZ both on the main action and the counter-claim.

issues:

(1) Did the motion judge err in determining that MZ had the right to terminate the CL and thus dismissing the counter-claim?

(2) Did the motion judge err in calculating the fees and expenses to which MZ was entitled to upon cancellation of the CL?

holding:

Appeal allowed in part.

reasoning:

(1) Did the motion judge err in determining that MZ had the right to terminate the CL and thus dismissing the counter-claim?

No. This ground of appeal concerned the motion judge’s interpretation of the contract, the CL. The standard of review was that articulated in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53. Ideal submitted that the motion judge committed an error on an extricable question of law, namely that the motion judge failed to interpret the provisions of the CL as a whole and thus failed to assign meaning to all of the contested terms.

The CL covered two distinct time periods: i) the time between signing the CL and advancing the funds (the pre-closing period); and ii) the time from advancing the funds until the end of the 13 month term of the loan (the post closing period). The conditions to funding related to the pre-closing period whereas the section of the CL dealing with default by Ideal and termination for default (the “Demand and Default Provisions”) related to the post closing period. There was also a general cancellation right in the CL which gave MZ the right to cancel the undrawn portion of the loan at any time, for any reason and without notice.

The crux of Ideal’s arguments was that in order to terminate the CL, MZ needed to rely on the Demand and Default Provisions, which required MZ to notify Ideal of a default and give Ideal an opportunity to remedy the default. Ideal argued that since MZ never gave notice or an opportunity to cure, the termination of the CL was wrongful.

The motion judge held that the cancellation right required MZ to have a reason for cancelling and that MZ’s reason for doing so was that it became apparent that Ideal could not or would not satisfy the pre-funding conditions. Ideal argued on appeal that the Demand and Default Provisions needed to be given meaning and priority. However, the Court of Appeal rejected this submission because the Demand and Default Provisions only applied after funds had been advanced, which was not the case.

Ideal also argued that the cancellation language only entitled MZ to cancel the undrawn portion of the loan, not terminate the CL entirely. The Court rejected this argument as it was commercially unreasonable. At the time MZ advised Ideal it was terminating the CL, no funds had been advanced and so the full value of the loan was undrawn. The effect of cancelling this portion and terminating the CL were the same – Ideal would not receive any money. While the CL’s language may not have been clear, the motion judge’s finding that MZ could terminate the CL gave practical meaning to all the CL’s terms and was commercially reasonable.

Ideal further argued that the Subordinate Financing Clause treated the parties’ inability to resolve the dispute over standstill agreements as a default and thus MZ had to resort to the Demand and Default Provisions. The Court of Appeal rejected this submission as the Subordinate Financing Clause clearly defined two events of default – the failure to agree to resolve the dispute over the standstill was not one of them. The failure by Ideal to provide security documents in a satisfactory form to MZ materially altered the level of risk MZ was taking on and that gave MZ sufficient reason to rely on the cancellation provision.

Ideal’s last argument on this ground focused on good faith and the duty to exercise contractual discretion in good faith. Ideal argued that when MZ unreasonably demanded a permanent standstill agreement in excess of what was required under the CL and terminated the CL without notice, it breached its duty of good faith. Ideal did not advance this argument before the motion judge. On appeal, Ideal also sought to rely on Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District, 2021 SCC 7. The Court of Appeal refrained from commenting on the ability of an appellant to argue on appeal a pleaded defence it chose not to pursue at trial or the lateness of the hour at which the appellant raised the issue thus depriving the court of the parties’ submissions on the Wastetech decision.

The Court chose instead to address Wastech directly. The Court observed that while Wastech states that contractual discretion must be exercised reasonably, in light of the purpose for which it was conferred, the decision notes that such a duty of good faith “does not displace the detailed, negotiated bargain as the primary source of justice between the parties”. The Court went on to note that in the case at hand, the pre-conditions to financing and the cancellation right existed to define the level of risk that MZ was willing to take on. When Ideal did not or would not meet the conditions, the level of risk was materially altered and so MZ used the cancellation right for the exact purpose it was given for.

(2) Did the motion judge err in calculating the fees and expenses to which MZ was entitled to upon cancellation of the CL?

Yes, in part. The motion judge’s judgment consisted of three awards: i) standby interest; ii) expenses; and iii) a lender fee. The Court of Appeal addressed each of these awards in turn.

Standby Interest

The CL provided that interest would become payable, among other things, upon termination of the CL without any advances having been made. Ideal argued that since MZ had cancelled the CL, not terminated it under the Demand and Default Provisions, the standby interest was not payable. The Court of Appeal rejected this argument, as the practical effect of cancelling the CL under the cancellation provisions was to terminate the CL without advances having been made. The award for standby interest was affirmed.

Expenses and Good Faith Deposit

MZ was entitled to all reasonable expenses including all legal costs and to retain a $50,000 non-refundable good faith bonus regardless of whether Ideal proceeded with the transaction. Ideal submitted that MZ exercising the cancellation provisions did not constitute Ideal failing to proceed with the transaction. The motion judge held, and the Court of Appeal affirmed that the evidence amply supported the finding that Ideal could not or would satisfy the conditions and that the failure to meet the conditions was conduct sufficient to show that Ideal failed to proceed with the transaction. The award for expenses and the good-faith deposit were upheld.

Lender’s Fee

The CL provided that fees for MZ were to be $396,000 and were to be deducted from the initial advance of funds. The motion judge held that the lender’s fee was recoverable despite Ideal’s argument that the lender fee was clearly only payable once an advance was made. The Court of Appeal agreed with Ideal in that the language saying the fee shall be deducted from the initial advance indicates that the fee was not earned until funds were advanced. MZ relied on Chijindu v. Prudential Property Management, 2014 ONSC 4759, however, the Court of Appeal distinguished that case because it did not involve the same language that the lender’s fee was to be deducted from the advance of funds. As well, in Chijindu, the lender had actually advanced funds. The Court of Appeal held that the motion judge erred in awarding MZ its lender’s fee and thus reduced the damage award against Ideal accordingly.


Makeeva v. Makeev, 2021 ONCA 232

[Rouleau, Brown and Miller JJ.A.]

Counsel:

R. Korytko, for the appellant/respondent by way of cross-appeal

J.W. Bruggeman, for the respondent/appellant by way of cross-appeal

Keywords: Family Law, Spousal Support, Child Support, Lump Sum Payments, Imputed Income, Equalization of Net Family Property, Date of Marriage Assets, Reopening of Case, Fresh Evidence, Divorce Act, section 15.3(1), Family Law Act, section 38.1(1).

facts:

The parties separated after fifteen years of marriage and had two children. At trial, the judge ordered the appellant to pay $905 per month in spousal support to the respondent. The trial judge also ordered the appellant to make an equalization payment. After the judge issued her decision, the appellant attempted to reopen the trial and file fresh evidence. The trial judge dismissed this motion largely on the basis that this evidence would not change her original judgment.

The appellant appealed on several grounds. The respondent cross-appealed the equalization payment calculation.

issues:

(1) Did the trial judge err by allowing the interpreter to continue despite the appellant’s objections?

(2) Did the trial judge err by failing to order a lump sum child support payment?

(3) Did the trial judge err in imputing the respondent’s income at $28,000 per year?

(4) Did the trial judge err in awarding spousal support?

(5) Did the trial judge err by failing to admit the fresh evidence?

(6) Did the trial judge err by failing to deduct the value of a date of marriage asset from the respondent’s net family property?

holding:

Appeal dismissed, cross-appeal allowed.

reasoning:

(1) Did the trial judge err by allowing the interpreter to continue despite the appellant’s objections?

No. The appellant alleges that the incompetency of the interpreter led to inaccuracies and omissions in the translation at trial which were substantial and resulted in an unfair trial. The Court of Appeal rejected this. The appellant’s lawyer only raised the issue on the seventh day of the trial. The trial judge gave the appellant three options on how to proceed. The appellant chose to proceed with the interpreter and was therefore precluded from appealing from that choice.

(2) Did the trial judge err by failing to order a lump sum child support payment?

No. The appellant argued that lump sum child support should have been ordered as the respondent had regularly failed to make periodic payments since separation. The Court of Appeal rejected this argument. The issue was one of mixed fact and law. While lump sum payments are appropriate when there is a real risk that periodic payments will not be made, the appellant did not marshal any evidence to suggest that future non-payment of periodic payments was a risk.

(3) Did the trial judge err in imputing the respondent’s income at $28,000 per year?

No. The appellant argued that the respondent was intentionally underemployed and so greater income should have been imputed to him. The appellant argued that given factors such as age, education, experience and health, income should have been imputed to the respondent in the $60,000 range. Alternatively, since the respondent had previously been a truck driver, his previous income in that role of $50,000 should be imputed.

The Court of Appeal rejected this argument and affirmed the trial judge’s decision. The issue was one of mixed fact and law and the respondent could show no error, let alone a palpable and overriding error to justify intervention. There was no evidence indicating that the respondent could earn anything close to $60,000 as a self-employed electrician servicing only Russian speaking people in the GTA. Further, the respondent had to quit his trucking job in 2008 because of chronic back pain so there was no reason to impute that previous income.

(4) Did the trial judge err in awarding spousal support?

No. The appellant submitted that the trial judge did not give sufficient consideration to s. 15.3(1) of the Divorce Act or s. 38.1(1) of the Family Law Act requiring courts to prioritize child support over spousal support. The trial judge found that the respondent had foregone paid work and career opportunities so the appellant could pursue a nursing degree. The respondent was significantly older than the appellant and working a minimum wage job while the appellant had a prosperous career ahead of her. There was a substantial inequality between their incomes and so the trial judge’s decision to award spousal support in the mid-range of the advisory guidelines was reasonable and entitled to deference.

(5) Did the trial judge err by failing to admit the fresh evidence?

No. The appellant sought to adduce fresh evidence after the trial judge had given her decision but before the final order was given. The trial judge refused to admit the evidence because she was of the opinion that had it been before the court, it would not have changed the decision. The Court of Appeal saw no issue with the trial judge’s decision to reject the fresh evidence.

(6) Did the trial judge err by failing to deduct the value of a date of marriage asset from the respondent’s net family property?

Yes. The respondent owned a condo at the time of the marriage, which was sold and the proceeds reinvested. The trial judge found that the condo was not a matrimonial home, but refused to deduct the value of the date of marriage asset from the respondent’s net family property. The respondent submitted that the failure to deduct it was an error. The Court of Appeal agreed and allowed the cross-appeal. The trial judge ought to have deducted that value of the condo or its sale proceeds from the respondent’s net family property. While the trial judge correctly found that it was not a matrimonial home and addressed the proceeds, the trial judge failed to explain why she did not deduct the value, which was an error.


Nemchin v. Green, 2021 ONCA 238

[Roberts, Trotter and Thorburn JJ.A.]

Counsel:

J.Y. Obagi and E. A. Quigley for the appellant, T.N.

S.G. Ross, T. Macmillan and M. Rodrigues for the respondent, Y.G.

Keywords: Insurance, Subrogation, Collateral Benefits, Long-term Disability, Statutory Assignment of Rights and Benefits, Statutory Trusts, Civil Procedure, Procedural and Natural Justice, Insurance Act, R.S.O. 1990, c. I.8, Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), s. 267.8, Lewin on Trusts, 19th ed. (London: Sweet & Maxwell, 2015), Rodaro v. Royal Bank of Canada (2002), 59 O.R. (3d) 74 (C.A.), Kant v. The Queen, [2001] 2 C.T.C. 2703 (T.C.C.), Bapoo v. Co-Operators General Insurance Co. (1997), 154 D.L.R. (4th) 385 (Ont. C.A.), leave to appeal refused, [1998] S.C.C.A. No. 62, Cadieux v. Cloutier, 2018 ONCA 903, leave to appeal refused [2019] S.C.C.A. No. 63, Carroll v. McEwen, 2018 ONCA 902, Cobb v. Long Estate, 2017 ONCA 717, El-Khodr v. Lackie, 2017 ONCA 716, leave to appeal refused, [2017] S.C.C.A. No. 461, Re Scott, [1948] SASR 193, Frederick v. Aviation & Gen. Ins. Co., [1966] O.J. No. 1064 (C.A.), Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27, Pugh v. Canada, [2000] T.C.J. No. 585, Bouchard v. Canada, 2008 TCC 408.

facts:

This case arose out of a motor vehicle accident involving the appellant and respondent where the appellant sustained serious injuries and became totally disabled. As a result, the appellant was awarded substantial damages against the respondent at trial. The appellant’s injuries also triggered coverage for long-term disability income continuation benefits from Sun Life Assurance Company of Canada (“Sun Life”), her employer’s group benefits insurer. Both the appellant and her employer had contributed to the plan, and as a result, Sun Life deducted and remitted income taxes from its payments to the appellant under the plan.

Following the trial, the respondent brought a motion under s. 267.8(12) of the Insurance Act (the “Act”) to require the appellant to assign her rights to the Sun Life benefits to the respondent’s insurer from the date of the judgment. The trial judge granted the respondent’s request and included an additional order that the appellant “top up” any amount paid from Sun Life to the respondent’s insurer to account for the fact that Sun Life deducted applicable income taxes from its payments to the appellant.

The appellant then appealed the trial judge’s order requiring her to top up the amount of the long-term disability benefits that she assigned to the respondent’s insurer. The appellant did not contest the assignment of her benefits to the respondent’s insurer, rather the appellant argued that the trial judge’s order was contrary to the principles of natural justice and exceeded her jurisdiction because neither party sought the top up that she ordered. Further, the appellant argued that the trial judge erred in her interpretation of s. 267.8 of the Act.

issues:

(1) Was the trial judge’s top up order procedurally unfair and contrary to natural justice?

(2) Did the trial judge err in her interpretation and application of s. 267.8 of the Insurance Act?

holding:

Appeal allowed.

reasoning:

(1) Was the trial judge’s top up order procedurally unfair and contrary to natural justice?

Yes. The Court stated that neither party requested that the trial judge make the top up order, nor did the trial judge request submissions from the parties on the issue of top up. Instead, the Court held that the trial judge resolved the rights of the parties, imposed a burden on the appellant, and provided a remedy to the respondent, “on a theory never pleaded and with respect to which battle was never joined”. Therefore, the Court agreed with the parties’ request that it ought to look at the top up question and the underlying issue of the parties’ respective rights and obligations under the statutory assignment, rather than remitting it to the trial judge for a rehearing.

(2) Did the trial judge err in her interpretation and application of s. 267.8 of the Insurance Act?

Yes. The Court found that the trial judge misinterpreted ss. 267.8(9), (10), and (12)(a)(ii) of the Act and applied the trust and assignment provisions in a manner that was contrary to the plain meaning of the legislative text and its purposes. The trial judge also erred by failing to take into account Sun Life’s withholding and remittance of income tax as a statutory trust and its effect on the appellant’s rights under the plan. The legislative purpose of s. 267.8 is to promote fair compensation to injured plaintiffs and prevent double recovery. However, the Court stated that the effect of the trial judge’s order led to an unfair result for the appellant and ran counter to the principle of full compensation because it imposed a financial burden on the appellant that she would not have incurred if she did not have collateral benefits from Sun Life.

The trust provisions under ss. 267.8(9) and (10)

Subsections 267.8(9) and (10) of the Act impose a statutory trust on the payments that a plaintiff actually receives for the benefit of the defendant or the defendant’s insurer. The trust property in this case consisted of the net after-tax payments that the appellant received pre-assignment from Sun Life from the date of the judgment. The appellant, as trustee, was only required to hold in trust and then pay to the respondent’s insurer these actual payments from Sun Life, which were net of tax.

The Court stated that while the trial judge did not expressly address the application of the trust provisions under ss. 267.8(9) and (10) to the amounts received by the appellant pre-assignment, the effect of the order requiring the deduction of the gross amount of the payments to the appellant under the Sun Life plan since the date of judgment resulted in the deduction of more than the amount of the payments actually received and held in trust by the appellant post trial and pre-assignment. Thus, the Court held that the effect of the order was contrary to the provisions of ss. 267.8(9) and (10).

The assignment provisions under s. 267.8(12)(a)(ii)

Subsection 267.8(12)(a)(ii) of the Act permits a defendant to seek the assignment to its insurer of “all rights in respect of all payments to which the plaintiff who recovered damages is entitled in respect of the incident…under an income continuation benefit plan”. In the Court’s view, the trial judge conflated the entitlement of the respondent’s insurer to the rights to the plan benefits with the mechanism of a specific mode of payment (i.e. an assignment), and therefore failed to apply the assignment provisions under s. 267.8(12)(a)(ii) in a manner consistent with the trust provisions. Therefore, the trial judge effectively concluded that the respondent’s insurer was entitled to collect the appellant’s gross benefits as if they were not taxable or as if the appellant had elected to take the entire taxable sum in hand.

Instead, the Court stated that the correct interpretation is that the respondent’s insurer, as assignee, steps into the shoes of the appellant and acquires the entitlement to the rights to the appellant’s benefits subject to all the equities and obligations existing between the appellant and Sun Life under the plan (Frederick v. Aviation & Gen. Ins. Co., [1966] O.J. No. 1064 (C.A.)). Therefore, the assignment of the appellant’s rights under the plan means that the respondent’s insurer is entitled to a credit for the actual payments that the appellant receives under the plan, which in this case meant net of the taxes withheld by Sun Life. The respondent’s insurer is entitled to take whatever steps necessary, at its own expense and with the appellant’s co-operation, as required under s. 267.8(12)(b), to deal with the issue of the tax withholdings with Sun Life and the CRA. However, the respondent’s insurer is not entitled to receive payments greater than those the appellant received.

The trust and assignment provisions are complementary mechanisms

The Court held that the trial judge’s approach failed to take into account the complementary nature of the trust and assignment provisions in the context of s. 267.8 as a whole for two reasons. First, ss. 267.8(9), (10), and (12) provide for two different mechanisms that work together to achieve the same underlying aim of providing compensation without over-compensation. However, the trial judge’s approach instead introduced a discrepancy between the provisions by having the assignment apply to gross pre-tax amounts when the trust did not. Second, the word “payments” should be given the same meaning in each of ss. 267.8(9), (10) and (12). The “payments” referred to in ss. 267.8(9) and (10) are the payments actually received and held in trust by the appellant. Thus, the word “payments” in s. 267.8(12) must refer to the same payments but to be received under the mechanism of an assignment.

Sun Life’s statutory obligations

The Court held that due to the errors in the interpretation and application of the trust and assignment provisions, this led the trial judge to ignore the effect of Sun Life’s withholding and remittance of income taxes to the CRA from the plan payments pursuant to its statutory obligations. As the appellant’s assignee, the respondent’s insurer has all the same rights as against Sun Life as the appellant, and Sun Life has all the same defences, which may include any statutory obligation on the part of Sun Life to withhold and remit taxes to the CRA from the plan payments.

The Court stated that since Sun Life purports to withhold and remit income taxes pursuant to a statutory obligation to the CRA, this means that those monies are imposed with a statutory trust and do not form part of the payments made under the plan. Therefore, so long as Sun Life withholds and remits taxes pursuant to the statutory trust provisions of the Income Tax Act, the assigned rights of the respondent’s insurer are to the net after-tax payments. The Court held that the respondent and its insurer could not complain of this situation, because had they acceded to the appellant’s request to seek a ruling from the CRA on the tax issue, the issues of quantum and liability for taxes following the assignment could have been ascertained. Since they did not, the respondent’s insurer is only entitled to receive what Sun Life pays.

Further, the Court disagreed with the respondent’s submission that the trial judge’s order causes no prejudice to the appellant because she can simply apply for a tax refund and be in no worse position. The Court stated that it was by no means certain that the CRA would agree that the appellant was entitled to a refund of the taxes remitted by Sun Life, and that the appellant would likely be required to incur considerable expense to ascertain whether the CRA accepted this position. Thus, this would further undermine the purpose of full compensation for the appellant.

In conclusion, the Court held that the trial judge’s order should be amended to provide for the assignment from the date of judgment of the appellant’s rights in respect of all payments under the Sun Life plan to the respondent’s insurer, net of all income tax withholdings, so long as Sun Life continued to withhold and remit income taxes to the CRA from the payments made under its plan. This will continue until the appellant reaches the age of 65 or the respondent’s insurer has been fully reimbursed for its payment of the loss of income damages award, whichever event occurs first.


SHORT CIVIL DECISIONS

Lengyel v. TD Home and Auto Insurance, 2021 ONCA 237

[Tulloch, Nordheimer and Jamal JJ.A.]

Counsel:

G.L., in person/responding party

H. Hogan, for the Public Guardian and Trustee/moving party

No one appearing for the defendant

Keywords: Torts, Negligence, MVA, Civil Procedure, Settlements, Court Approval, Litigation Guardians, Appeals, Jurisdiction, Kavuru (Litigation guardian of) v. Heselden, 2014 ONSC 6718


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.

Jump To: Table of Contents | Civil Decisions | Short Civil Decisions |

Good evening.

Please find below our summaries of the civil decisions of the Court of Appeal for the week of April 5, 2021.

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In Farrell v Kavanagh, the Court dismissed a motion to grant a stay pending appeal in an action concerning the validity of two mortgages. Congratulations to Blaneys’ own Reeva Finkel, who acted for some of the successful respondents.

Atlas (Brampton) Limited Partnership involves the interpretation of the Personal Property Security Act. Specifically, the Court found that a pledge of shares accompanied by a term in a security agreement that doubled as a control agreement granting a power of attorney allowing the secured party to effect the transfer of the shares in the event of a default constituted “control” within the meaning of the PPSA generally, and s. 17.1 specifically. Further, the Court also concluded that s. 17.1(2) of the PPSA is not applicable to foreclosures on pledged shares, and that any purported foreclosures must still comply with the procedural notice requirements outlined in Part V of the PPSA, notwithstanding any agreement to the contrary between the parties. The Court found that the notice provided by the secured party in this case before foreclosing was sufficient and that, in any event, there was no evidence that the debtor was in a position to redeem.

Other topics covered this week included child protection, the enforcement of guarantees of debt, security for costs of an appeal in a mortgage enforcement case, and the striking of a claim on the basis that the named plaintiff did not have the legal capacity to sue.

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

2020 Update from the Bench

The Honourable Benjamin Zarnett, Court of Appeal for Ontario

Panel 1 – Advocacy Practice Tips from the Court

Girao v. Cunningham, 2020 ONCA 260

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

Welton v. United Lands Corporation Limited, 2020 ONCA 322

Jordan Goldblatt, Adair Goldblatt Bieber LLP

Sara Erskine, Weintraub Erskine Huang LLP

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

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

Seumas Woods, Blake, Cassels & Graydon LLP

Alistair Crawley, Crawley MacKewn Brush LLP

Elizabeth Bowker, Stieber Berlach LLP

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

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

7636156 Canada Inc. (Re), 2020 ONCA 681

Ken Kraft, Dentons LLP

Kevin Sherkin, Miller Thomson LLP

D.J. Miller, Thornton Grout Finnigan LLP

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

Wishing everyone an enjoyable weekend.

John Polyzogopoulos
Blaney McMurtry LLP
416.593.2953 Email

Table of Contents

Civil Decisions

Madison Joe Holdings Inc. v. Mill Street & Co. Inc., 2021 ONCA 205

Keywords: Contracts, Debtor-Creditor, Promissory Notes, Guarantees, Fair Protection Rule, Civil Procedure, Summary Judgment, Standard of Review, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, Heritage Capital Corp. v. Equitable Trust Co., 2016 SCC 19, Kevin McGuinness, The Law of Guarantee, 3rd ed. (Toronto: Lexis Nexis Canada, 2013)

Goldentuler v. Simmons Dasilva LLP , 2021 ONCA 219

Keywords: Torts, Professional Negligence, Lawyers, Wills and Estates, Civil Procedure, Striking Pleadings, Capacity, Rules of Civil Procedure, Rule 21.01(3)(b), Conveyancing and Law of Property Act, R.S.O. 1990, c. C.34

Farrell v. Kavanagh, 2021 ONCA 213

Keywords: Contracts, Real Property, Mortgages, Torts, Fraud, Civil Procedure, Appeals, Stay Pending Appeal, RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311, 2257573 Ontario Inc. v. Furney, 2020 ONCA 742, Circuit World Corp. v. Lesperance (1997), 33 O.R. (3d) 674 (C.A.), Starkman v. Home Trust Company, 2015 ONCA 436

Catholic Children’s Aid Society of Toronto v. V.R. (Publication Ban), 2021 ONCA 209

Keywords: Family Law, Child Protection, Crown Wardship, Access, Best Interests of the Child, Child, Youth and Family Services Act, 2017, S.O. 2017, c. 14, Sched. 1, ss. 74(3), 105(5)-(6).

Sub-Prime Mortgage Corporation v. Kaweesa, 2021 ONCA 215

Keywords: Contracts, Real Property, Mortgages, Civil Procedure, Settlements, Enforcement, Writs of Possession, Appeals, Security for Costs, Rules of Civil Procedure, Rule 61.06(1)(a), Rule 63.01(1), Rule 63.02(1), Courts of Justice Act, s. 7(2), s. 134(2), Heidari v. Naghshbandi, 2020 ONCA 757, Hakim Optical Laboratory Ltd. v. 1570710 Ontario Ltd., 2010 ONCA 627, Waxman v. Waxman (2003), 168 O.A.C. 217 (C.A.), Abuzour v. Heydary, 2015 ONCA 249, RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311

Atlas (Brampton) Limited Partnership v. Canada Grace Park Ltd.a, 2021 ONCA 221

Keywords: Contracts, Debtor-Creditor, Security Agreements, Control Agreements, Share Pledges, Enforcement, Foreclosure, Notice of Intention to Enforce Security, Right of Redemption, Statutory Interpretation, Principle of Implied Exclusion, Personal Property Security Act, R.S.O. 1990, c. P.10, ss. 17.1 and 63(4), Securities Transfer Act, 2006, S.O. 2006, c. 8, s. 24, Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27, University Health Network v. Ontario (Minister of Finance) (2001), 208 D.L.R. (4th) 459, Casse v. Credifinance Securities Ltd. (1999), 14 P.P.S.A.C. (2d) 352

Short Civil Decisions

Ritchie v. Castlepoint Greybrook Sterling Inc., 2021 ONCA 214

Keywords: Contracts, Real Property, Agreements of Purchase and Sale of Land, Exclusion of Liability Clauses, Allocation of Risk


CIVIL DECISIONS

Madison Joe Holdings Inc. v. Mill Street & Co. Inc., 2021 ONCA 205

[MacPherson, Gillese and Nordheimer JJ.A.]

Counsel:

M Simaan, for the appellants

J Berall, for the respondent

Keywords: Contracts, Debtor-Creditor, Promissory Notes, Guarantees, Fair Protection Rule, Civil Procedure, Summary Judgment, Standard of Review, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, Heritage Capital Corp. v. Equitable Trust Co., 2016 SCC 19, Kevin McGuinness, The Law of Guarantee, 3rd ed. (Toronto: Lexis Nexis Canada, 2013)

facts:

Madison Joe Holdings Inc. (“MJH”) was the 100% owner of All Source Security Container Mfg. Corp. (“All Source”). In 2014, Mill Street & Co. Inc. (“Mill Street”) purchased a 50% interest in All Source from MJH. Part of the payment was by way of promissory notes. Mill Street acquired the remaining 50% interest in All Source from MJH in 2016. At the time of the second 50% purchase, Mill Street still owed payments to MJH under the existing promissory notes it had issued in connection with the first 50% purchase. To restructure that debt, the existing promissory notes were extinguished and All Source executed two new promissory notes to MJH in their place. The new promissory notes were guaranteed by Mill Street, Noah Murad (“Noah”) and Roy Murad (“Roy”) (collectively, the “Guarantors”). In connection with the second 50% purchase, Noah, on behalf of All Source, entered into a Loan Agreement with TD Bank. All Source, MJH and TD Bank then entered into an Inter-Creditor Agreement.

After the promissory notes were executed in 2016, All Source paid the required monthly interest payments, but failed to pay the principal and outstanding interest owing under the promissory notes on their maturity dates. MJH commenced an action against All Source and the Guarantors. MJH then moved for summary judgment on the unpaid promissory notes. The motion judge found that the Inter-Creditor Agreement restricted All Source from repaying the principal but not the monthly interest under the promissory notes, which was payable before and after their maturity dates. She found that the Inter-Creditor Agreement did not shield the Guarantors from their joint and several obligations to pay the principal and monthly interest amounts under the promissory notes. Accordingly, the plaintiff was granted judgment against All Source and each of the Guarantors.

issues:
  1. Did the motion judge err in her interpretation of the guarantees in ignoring the “in accordance with its terms” language, which prevented enforcement of the guarantees on the same terms as enforcement could be made on the promissory notes?
holding:

Appeal dismissed.

reasoning:

No. The motion judge was required to interpret several commercial and contractual documents as part of her analysis. Contractual interpretation involves issues of mixed fact and law, meaning deference is owed to the court of first instance and the “palpable and overriding” standard applies on appellate review.

The guarantees stated that they were to be resorted to only if the debtor defaulted in making payments under a promissory note in accordance with its terms. The appellants argued that non-payment did not equal default in certain circumstances, and that without default there could be no enforcement on the guarantees. The appellants further submitted that their proposed interpretation was commercially reasonable and consistent with the Guarantors’ agreement to only be liable if the default was caused by events other than the financial situation of the debtor, which was inextricably linked to a formula under the Inter-Creditor Agreement.

The motion judge rejected the appellants’ argument. She stated that the alternative interpretation urged by the appellants would render the security of the guarantees illusory because it would mean that if All Source was not in a financial position to repay the promissory notes because of its other financial obligations, then the Guarantors would not have to pay either, whereas a guarantee would ordinarily be called upon in precisely that circumstance.

The Court agreed with the motion judge, and that she therefore had not committed any palpable and overriding error. The motion judge’s interpretation was consistent with legal scholarship on guarantees and the “Fair Protection Rule”. Guarantees are read so as to give effect to the apparent intent of the parties, so as to afford fair protection to a creditor in accordance with that apparent intent. The Court concluded that all the elements of the guarantee in this case had been satisfied. All Source defaulted in making payments due under the promissory notes. As a result, All Source owed money to MJH, and the guarantee was triggered as a result.


Goldentuler v. Simmons Dasilva LLP, 2021 ONCA 219

[Juriansz, Nordheimer and Jamal JJ.A.]

Counsel:

S. Dewart and A. Lei, for the appellants

E. Goldentuler, in person

Keywords: Torts, Professional Negligence, Lawyers, Wills and Estates, Civil Procedure, Striking Pleadings, Capacity, Rules of Civil Procedure, Rule 21.01(3)(b), Conveyancing and Law of Property Act, R.S.O. 1990, c. C.34

facts:

The respondent’s late brother, a lawyer in private practice, had commenced an action before he passed away. The respondent, also a lawyer, obtained an order to continue the action in the name of his late brother’s Estate. The Estate obtained judgment. In his capacity as Estate trustee, the respondent retained the appellants to pursue an appeal which was successful, resulting in the damages award in favour of the Estate being increased. A dispute arose concerning the appellant’s fees, regarding which the respondent commenced this solicitor’s negligence action in his own name and in his personal capacity. He sought damages, alleging that the appellants fell below the standard of care in conducting the appeal.

The appellants brought a motion to dismiss the action on the grounds that the respondent did not have legal capacity to sue them, as the appellants had acted for the Estate, not the respondent. The motion judge dismissed the motion to dismiss the action, finding that the appellants were aware that the respondent had purchased the law firm from his late brother’s wife, who was the executor of the Estate. The motion judge concluded that the respondent had capacity to bring the action because: (i) the account for legal fees was directed to the respondent and (ii) the respondent was the only party who could have been affected by the outcome of the appeal, since he had purchased the law firm.

issues:
  1. Did the motion judge err in dismissing the motion?
holding:

Appeal allowed.

reasoning:

Yes. The Court held that the motion judge made a palpable and overriding error. The crucial question was, who retained the appellants? It was clearly the Estate. It was the Estate in whose name the original litigation was continued, it was the Estate that was the party on the appeal and for whose benefit the damage award was increased. The Court noted that it was the Estate to whom payment was made on the ultimate judgment and on whose behalf the retainer agreement with the appellants was signed. The Court added that nothing of consequence turned on the fact that the account for legal fees was directed to the respondent. He was the individual who provided instructions to the appellants on behalf of the Estate. The addressee of the account ded not change on whose behalf the appellants were retained. The Court held that the respondent did not have a personal claim arising from the retainer of the appellants given the party on whose behalf the appeal was brought and on whose behalf the appellants were retained. He did not, therefore, have capacity to bring the solicitor’s negligence claim. As a result, the appeal was granted and the action was dismissed.


Farrell v. Kavanagh, 2021 ONCA 213

[Paciocco J.A. (Motion Judge)]

Counsel:

M. J. Neirinck for the moving parties

D. P. Preger, D. Seifer and Reeva M. Finkel for the responding parties

Keywords: Contracts, Real Property, Mortgages, Torts, Fraud, Civil Procedure, Appeals, Stay Pending Appeal, RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311, 2257573 Ontario Inc. v. Furney, 2020 ONCA 742, Circuit World Corp. v. Lesperance (1997), 33 O.R. (3d) 674 (C.A.), Starkman v. Home Trust Company, 2015 ONCA 436

facts:

The moving parties appealed a Judgment from December 2020 dismissing their action concerning the validity of a mortgage (the “Action”). The Action involved a mortgage debt of $5 million that was secured against two properties owned by the corporate moving party (the “Properties”).

In the Action, the moving parties claimed that the mortgages were fraudulent and sought a money judgment against the respondent, J.K. They also sought a declaration that the mortgage was invalid based on what they alleged the responding party mortgagee knew about the supposed fraud. After years of litigation, the trial judge in the Action ruled against the moving parties and declared the mortgage valid.

In this appeal, the moving parties sought a stay of that declaration of validity and of the enforcement of the mortgage pending the outcome of the appeal.

issues:
  1. Should the moving parties be granted a stay of the declaration of validity and of the enforcement of the mortgage pending the outcome of the appeal?
holding:

Motion dismissed.

reasoning:

No. The Court was not persuaded that a stay pending appeal was in the interests of justice. To obtain a stay pending appeal, a moving party must meet the three-part RJR-Macdonald test for an interlocutory injunction.

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

The threshold to establish a serious question on the appeal is low and courts must make a preliminary assessment of the merits of the case and determine whether the issues on appeal are either frivolous or vexatious. The Court in this case held that the serious issue to be determined on appeal criteria was met, however, the Court emphasized that it had barely been met.

In coming to this conclusion, the Court stated that it agreed with the responding parties that the grounds of appeal advanced did not identify any palpable or overriding errors and were largely an attempt by the moving parties to re-try factual findings and credibility determinations. However, the Court also stated that since it had not found that the grounds of appeal were frivolous or vexatious, they satisfied the low-threshold of whether there was a serious issue to be determined.

ii. Will the moving party suffer irreparable harm if the stay is denied?

The Court found that the moving parties would not suffer irreparable harm if the declaration of validity remained and enforcement efforts were permitted to proceed. Irreparable harm is a “harm which either cannot be quantified in monetary terms or which cannot be cured, usually because one party cannot collect damages from the other” (RJR-MacDonald). The Court found that there is nothing unique about the Properties at issue, and that the moving parties’ concerns that current poor market conditions would make a sale improvident were not supported by evidence. Further, any claims that market conditions would improve if a sale was delayed until the end of the appeal period were speculative. Thus, the Court held that even if the moving parties were successful in the appeal, any loss they incur as a result of the sale of the Properties prior to the appeal being heard could be compensated by a monetary award. As well, there was no suggestion that the responding party mortgagees could not pay a money judgment to compensate the moving parties, if required.

The Court also noted that the responding mortgagee had scheduled an upcoming hearing to seek the appointment of a receiver. If a receiver is appointed, the receiver will be obliged to consider the moving parties’ interests as well as any offers they have procured, as one of the purposes underlying court-supervised receivers is to avoid improvident sales. Therefore, any risk the Properties would be sold at less than market value was speculative.

iii. Which party does the balance of convenience favour if the stay is granted?

The Court found that the balance of convenience did not favor granting a stay pending appeal. The moving parties argued that they would be inconvenienced if the mortgage was enforced because they expected that enforcement would not be sought until the action was finally disposed of on appeal. The Court found that there was no clear agreement to this effect and no evident breach of such an undertaking. The moving parties also did not present evidence supporting their position that there was ample equity in the Properties to mitigate the risk to the responding parties if a stay was granted. While the Court accepted that there would be inconvenience to the moving parties to recover from the 13 responding party mortgagees if the appeal was successful, this inconvenience did not outweigh the continued costs to the responding parties.

Regarding the continued costs to the responding parties, the Court was not persuaded that the delay would benefit the responding parties. The responding party mortgagees had seen none of the interest owing under the mortgages and had enjoyed no benefits from their investment. Thus, the enforcement delay would only perpetuate this for what the moving parties estimate would be at least another year. Therefore, the Court found that the balance of inconvenience arising from the risk of financial shortfall favoured the responding party mortgagees.

Interests of Justice

The final submission by the moving parties was that the interests of justice required a stay in this case because they contested the validity of the mortgage debt. Although the moving parties were not seeking to stay enforcement measures they had agreed to accept when the mortgage was executed, the moving parties had benefited from a significant portion of the money advanced and had paid virtually nothing in return. Further, the trial judge had already found that the mortgage entered into was valid, both in fact and in law. Therefore, the Court held that it could not accept this submission.


Catholic Children’s Aid Society of Toronto v. V.R. (Publication Ban), 2021 ONCA 209

[Fairburn A.C.J.O., van Rensburg and Huscroft JJ.A.]

Counsel:

D. Miller, for the appellant

C. Andrikakis, for the respondent

Keywords: Family Law, Child Protection, Crown Wardship, Access, Best Interests of the Child, Child, Youth and Family Services Act, 2017, S.O. 2017, c. 14, Sched. 1, ss. 74(3), 105(5)-(6).

facts:

D.R. was seriously injured on two occasions in the first few months of her life. At a few weeks old, she suffered a fracture to her upper arm. At four months old, she suffered a head injury and seizures as a result of blunt force trauma and/or inertial forces. The trial judge found that D.R was injured in the care of her parents and that her injuries were intentionally inflicted by either or both parents. D.R. was placed in the extended care of the Catholic Children’s Aid Society with no parental access and with a view to adoption by her foster parents.

The appellant mother appealed. The appeal judge found that the trial judge wrongly put the onus on the appellant to demonstrate that access would be in the child’s best interests. Rather than remit the matter, the appeal judge assumed jurisdiction to determine the access question. The appeal judge concluded that access was not in the best interests of the child and made the “no access” order that was the subject of this appeal. D.R.’s father did not participate in any of the proceedings and he was deported to Portugal in 2018. The appellant was also deported to Portugal prior to this appeal being heard.

issues:
  1. Did the appeal judge err by determining the access question rather than remitting the matter?

holding:

Appeal dismissed.

reasoning:

No. The appellant argued that on any reasonable application of the best interests analysis on the evidence in this case, an access order should result. The appellant said she demonstrated normal, healthy parenting skills, D.R. enjoyed her access visits, and that access would not impair D.R.’s opportunities for adoption by her foster parents. The Court found that the appellant’s submission was effectively an attempt to retry the matter, which was not the function of an appeal. The appeal judge conducted a best interests analysis, and considered whether the relationship was beneficial and meaningful to the child in light of the criteria and relevant circumstances set out in s. 74(3) of the Child, Youth and Family Services Act, 2017. The Court saw no error by the appeal judge that warranted intervention.

The most significant consideration was the degree of risk to the child that led to the protection finding. During the short time she was cared for by the appellant, D.R. was seriously injured on two occasions. The trial judge found that either or both of the parents had intentionally inflicted the injuries on D.R. or failed to protect her from the other parent. The trial judge rejected the appellant’s explanation for how D.R.’s injuries occurred. By contrast, D.R. has spent most of her life in her foster parents’ care and has thrived due to the continuity of the care she has received.

The appeal judge’s finding that the most significant circumstance was the degree of risk that led to the protection finding was supported by the evidence and was reasonable. So too was the appeal judge’s finding that there was no factual foundation to support that the parental relationship was beneficial and meaningful to D.R., regardless of how well the access visits had gone. The appeal judge’s decision was fortified by the affidavit evidence of D.R.’s foster father. Therefore, there was no basis to interfere with the appeal judge’s no access order.


Sub-Prime Mortgage Corporation v. Kaweesa, 2021 ONCA 215

[Paciocco J.A. (Motion Judge)]

Counsel:

G. Cohen, for the moving parties Sub-Prime Mortgage Corporation and Elle Mortgage Corporation

R. Das, for the moving party T.W.

M. Tubie, for the responding parties

Keywords: Contracts, Real Property, Mortgages, Civil Procedure, Settlements, Enforcement, Writs of Possession, Appeals, Security for Costs, Rules of Civil Procedure, Rule 61.06(1)(a), Rule 63.01(1), Rule 63.02(1), Courts of Justice Act, s. 7(2), s. 134(2), Heidari v. Naghshbandi, 2020 ONCA 757, Hakim Optical Laboratory Ltd. v. 1570710 Ontario Ltd., 2010 ONCA 627, Waxman v. Waxman (2003), 168 O.A.C. 217 (C.A.), Abuzour v. Heydary, 2015 ONCA 249, RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311

facts:

This motion concerned a heavily encumbered residential property in Toronto (the “Property”). The moving party mortgagees (the “Mortgagees”) collectively hold first, second and fifth mortgages over the Property. When these mortgages fell into default, the Mortgagees initiated enforcement proceedings, while the responding parties issued a counterclaim.

The parties eventually executed minutes of settlement (the “Minutes”) in November 2020. A key term of the Minutes required the responding parties to pay $2.1 million to one of the Mortgagees before January 25, 2021. If the responding parties failed to make such payment, the Mortgagees would be entitled to a payment of $2.7 million, a dismissal of the responding parties’ counterclaim, as well as leave to issue a writ of possession for possession of the Property.

When the responding parties failed to make the payment before the deadline, the Mortgagees brought a motion for judgment in accordance with the Minutes. The responding parties contested the motion and requested an extension of the payment deadline, arguing that the Minutes had been frustrated due to difficulties securing financing as a result of the ongoing COVID-19 pandemic.

The extension was denied and the Minutes were enforced. Namely, by awarding a monetary judgment in the amount of $2.7 million, terminating the respondents’ counterclaim, and issuing a writ of possession against the Property (the “Judgment”). However, the writ of possession was temporarily stayed for a period of 90 days following the termination of Ontario’s state of emergency. Further still, such temporary stay was conditional on the responding parties making monthly payments of $3,000 to the City of Toronto in connection with realty tax arrears (the “Stay Condition”).

The responding parties subsequently failed to comply with the Stay Condition, but argued that they were no longer required to comply because of an apparent agreement with the City of Toronto relieving them from paying the tax arrears until this action was settled.

issues:
  1. Should an order be granted requiring the responding parties to post security for the moving parties’ costs of the appeal?
  2. Should an order be granted revoking the temporary stay of the writ of possession?
  3. Should an order be granted requiring the responding parties to post further security for the costs awarded in the Judgment?
  4. Should an order be granted expediting the hearing of the appeal?
holding:

Motion granted in part.

reasoning:
  1. Should an order be granted requiring the responding parties to post security for the moving parties’ costs of the appeal?

Yes. Under Rule 61.06(1)(a) of the Rules of Civil Procedure, an order for security may be made if: (i) there is good reason to believe that the appeal is frivolous and vexatious; and (ii) the responding parties have insufficient assets in Ontario to pay the costs of their appeal.

With respect to the first condition, the motion judge concluded that the appeal appeared to be both frivolous and vexatious. It was frivolous in the sense that there was good reason to believe that the various grounds of appeal were “devoid of merit, with little prospect of success” (Heidari v. Naghshbandi, 2020 ONCA 757).

Vextiousness was established by the finding that various allegations made by the responding parties did nothing to actually advance the appeal on its merits, but simply served to impugn the integrity and/or professionalism of various individuals involved in the proceedings. As further noted in Heidari, an appeal is vexatious when it is “taken to annoy or embarrass the respondent or conducted in a vexatious manner.”

With respect to the second condition, it was apparent that the Property was the sole asset claimed by the responding parties. Notwithstanding the valuation of the Property at $3.5 million, its heavily encumbered nature meant that there was insufficient equity to cover the proven encumbrances, plus the costs of the appeal. Accordingly, both requirements under Rule 61.06(1)(a) were established.

2. Should an order be granted revoking the temporary stay of the writ of possession?

Yes. First, the motion judge rejected the responding parties’ argument that they were not in breach of the Stay Condition as a result of the apparent agreement with the City of Toronto. First, the responding parties provided no evidence that this agreement actually existed. Second, even if such agreement did exist, the Stay Condition was never contingent on the City of Toronto demanding payment, it simply provided that monthly payments were to be made in reduction of the realty tax arrears.

The motion judge also rejected the responding parties’ argument that a conditional writ of possession is automatically stayed on appeal pursuant to Rule 63.01(1). It was clear that Rule 63.01(1) is intended to automatically stay monetary remedies pending appeal, not in rem remedies.

The motion judge also cited his authority for making an order revoking the temporary stay, being section 134(2) of the Courts of Justice Act (the “CJA”). The jurisdiction conferred by s. 134(2) of the CJA may be exercised by a single judge of the Court of Appeal pursuant to s. 7(2) of the CJA (Hakim Optical Laboratory Ltd. v. 1570710 Ontario Ltd., 2010 ONCA 627). However, while the authority under s. 134(2) is broad, it is not unlimited, and any remedy provided under s. 134(2) must be focused on the interests of justice and preventing prejudice (Waxman v. Waxman (2003), 168 O.A.C. 217 (C.A.).

Accordingly, the test under s. 134(2) is the same test for granting a stay pending appeal pursuant to Rule 63.02(1) (Abuzour v. Heydary, 2015 ONCA 249), which is in turn based on the test for an interlocutory injunction as set out by the Supreme Court of Canada in RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311. Specifically, the following criteria must be considered: (i) whether there is a serious question to be adjudicated on appeal; (ii) whether the moving party would suffer irreparable harm if the relief were refused; and (iii) whether the balance of convenience favours the moving party.

With respect to the first criterion, the motion judge simply reiterated his earlier finding that the appeal was frivolous and vexatious as grounds for concluding that there was no serious question to be adjudicated. With respect to the second criterion, the motion judge noted the heavily encumbered nature of the Property, and how the passage of time meant that the prospect of full collection ever being achieved by the Mortgagees was increasingly threatened.

The motion judge did acknowledge the reality of the responding parties being displaced from their residence while considering the third criterion. However, it was also noted that displacement in the event of non-payment was a consequence that they accepted, that the responding parties have been living in the residence without paying the associated expenses for some time, and that there was never any guarantee that the responding parties could continue to possess the Property until the end of their appeal. In sum, the motion judge concluded that the interests of justice favoured lifting the temporary stay, even when considering the relevant “equitable arguments”.

3. Should an order be granted requiring the responding parties to post further security for the costs awarded in the Judgment?

No. The motion judge simply commented that although making such an order was within his authority, he would not exercise his discretion to order payment of a costs order that remained a live issue.

4. Should an order be granted expediting the hearing of the appeal?

No. Given the orders made regarding security for costs and lifting the temporary stay, there was no need to expedite the appeal.


Atlas (Brampton) Limited Partnership v. Canada Grace Park Ltd., 2021 ONCA 221

[Lauwers, Miller and Nordheimer JJ.A.]

Counsel:

J. A. Kaufman and B. Adams, for the appellants

P. H. Starkman, for the respondents

Keywords: Contracts, Debtor-Creditor, Security Agreements, Control Agreements, Share Pledges, Enforcement, Foreclosure, Notice of Intention to Enforce Security, Right of Redemption, Statutory Interpretation, Principle of Implied Exclusion, Personal Property Security Act, R.S.O. 1990, c. P.10, ss. 17.1 and 63(4), Securities Transfer Act, 2006, S.O. 2006, c. 8, s. 24, Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27, University Health Network v. Ontario (Minister of Finance) (2001), 208 D.L.R. (4th) 459, Casse v. Credifinance Securities Ltd. (1999), 14 P.P.S.A.C. (2d) 352

facts:

One of the appellants, Romlex International Ltd. (“Romlex”), and one of the respondents, Canada Grace Ltd. (“Canada Grace”), were each shareholders in a development venture incorporated as Atlas Springbank Developments Ltd. (“Atlas”). Atlas later loaned $1.8 million to the appellant limited partnership (“Atlas Brampton”). When Atlas Brampton failed to make the first interest payment, the loan fell into default.

To address the default, the parties entered into a security agreement (the “Security Agreement”), whereby Romlex agreed to pledge all of its shares in Atlas to Canada Grace. The terms of this pledge of shares included that upon a default by Atlas Brampton, the shares would be “transferred” to Canada Grace, that the principal of Canada Grace was to have an irrevocable power of attorney to effect such a transfer as necessary, and that the principal of Romlex would be deemed to be removed as a director of Atlas.

Almost immediately after executing the Security Agreement, Atlas Brampton was put into receivership by a third party, constituting an event of default under the Security Agreement. Following an exchange of messages, the solicitor for Atlas wrote to the principal of Romlex on behalf of Canada Grace to inform him that the pledged shares had been transferred, and that he was removed as a director of Atlas. The letter did not offer any possibility of curing the default.

Afterwards, the appellants issued a notice of application seeking a declaration that the transfer of the pledged shares was null and void because the respondents failed to give appropriate notice of their intention to foreclose on the pledged shares. Specifically, the appellants contended that they were entitled to notice under s. 63(4) of the Personal Property Security Act, R.S.O. 1990, c. P.10 (“PPSA”), and were also entitled to an opportunity under s. 66 of the PPSA to redeem the pledged shares by paying the amount due under the loan.

The application judge found that Canada Grace did in fact fail to provide the requisite notice under the PPSA. However, he went on to add that this failure was inconsequential, as the respondents had acted in accordance their contractual rights under the Security Agreement, which effectively gave them the right to foreclose without any notice requirements. Because the respondents had not pursued a remedy under the PPSA, the appellants were therefore not entitled to invoke their right of redemption under the PPSA.

issues:
  1. What was the nature of Canada Grace’s security interest in the pledged shares?
  2. Does s. 17.1(2) of the PPSA permit Canada Grace to foreclose on the pledged shares?
  3. If s. 17.1(2) of the PPSA does not permit foreclosure, did Canada Grace foreclose on the pledged shares in accordance with the requirements of Part V of the PPSA?
holding:

Appeal dismissed.

reasoning:
  1. What was the nature of Canada Grace’s security interest in the pledged shares?

Despite not being argued before the application judge, the Court requested the parties’ submissions on s. 17.1 of the PPSA, which allows a secured party that has control over investment property to sell, transfer, use or otherwise deal with the collateral, subject only to the terms of the security agreement. The Court’s analysis on whether s. 17.1 applied to the pledged shares hinged on the interpretation of the term “control”.

Under the PPSA, “control” is determined with reference to the Securities Transfer Act, 2006 (the “STA”). Specifically, s. 24(1)(b) of the STA applies with respect to uncertificated securities, which was the case with the pledged shares. Per s. 24(1)(b), control is established if the issuer has agreed to comply with instructions prescribed by the secured party, without the further consent of the registered owner. Such circumstances are commonly known as a “control agreement”.

The Court found that the Security Agreement doubled as a control agreement by virtue of the aforementioned terms granting an irrevocable power of attorney to Canada Grace’s principal. Importantly, the Security Agreement was executed by all the necessary parties to constitute a proper control agreement as contemplated by s. 24(1)(b) of the STA: the issuer of the shares (Atlas), the registered owner of the shares (Romlex), the debtor (Atlas Brampton), and the secured party (Canada Grace). Aside from this important requirement, the Court noted that control agreements need not take on any particular form, and may be interpreted functionally rather than formalistically. Accordingly, the Court concluded that Canada Grace’s security interest in the pledged shares fell within the scope of s. 17.1 of the PPSA.

2. Does s. 17.1(2) of the PPSA permit Canada Grace to foreclose on the pledged shares?

No. Section 17.1(2) of the PPSA gives the secured party the right to “sell, transfer, use or otherwise deal with the collateral in the manner and to the extent provided in the security agreement”. Accordingly, the respondents submitted that they were entitled to foreclose on the pledged shares without providing any notice to the appellants, given that the Security Agreement did not require any such notice.

The Court disagreed with this argument, with the analysis once again turning on the interpretation of certain terms, this time being the phrase “sell, transfer, use or otherwise deal”. The Court found that according to the principles of statutory interpretation, this phrase cannot be said to include actions relating to foreclosure. This required interpreting the words in their entire context and ordinary sense, harmoniously with the scheme of the Act and the intention of Parliament (Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27). The Court’s conclusion on this issue was broken down into four reasons.

First, because s. 17.1(2) creates an exception to the general enforcement scheme of Part V of the PPSA, and the effect of that exception is to reduce statutory protections for debtors in the name of contractual freedom, such exception must be construed narrowly.

Second, the principle of implied exclusion, as set out in University Health Network v. Ontario (Minister of Finance) (2001), 208 D.L.R. (4th) 459, was applied on a plain reading of the words. Given specific attention afforded to actions of foreclosure elsewhere in the PPSA, its absence from s. 17.1(2) implies that it was intentionally excluded.

Third, the fact that foreclosure entails different legal and practical consequences than a sale, transfer or use meant that its inclusion would not assimilate well with the elaborate debtor-protective statutory scheme that is characteristic of Part V of the PPSA. Again, related to this point was the fact that Part V expressly imposes certain requirements on a foreclosing secured party.

Last, the Court noted that an interpretation permitting foreclosure under s. 17.1(2) would not make sense given the primary reason for which s. 17.1(2) was enacted in the first place – namely, to facilitate capital markets transactions. In this respect, a foreclosing creditor cannot be said to be in a similar position to a broker or securities intermediary, who must act quickly to liquidate rapidly depreciating accounts.

3. If s. 17.1(2) of the PPSA does not permit foreclosure, did Canada Grace foreclose on the pledged shares in accordance with the requirements of Part V of the PPSA?

Yes. Notwithstanding the rejection of the respondents’ argument that they were not required to give notice at all as a result of s. 17.1(2), the Court subsequently found that Canada Grace did in fact provide the requisite notice under Part V of the PPSA. This was established by the correspondence submitted as evidence.

The Court noted that the applicable notice provisions in Part V mandate a list of necessary recipients of the notice, but do not set out required contents of the notice. As a result, the evaluation of the adequacy of notice’s contents falls to the courts. The Court commented that adequate notice of an intention to foreclose on collateral should: (i) cite the PPSA; (ii) include the amount of the secured obligation; (iii) include a description of the collateral; (iv) express a clear intention to retain the collateral in satisfaction of the debt (and not as continuing security); and (v) indicate that the recipients have 15 days to object.

Related to the fourth point, the Court endorsed the law as described in Casse v. Credifinance Securities Ltd. (1999), 14 P.P.S.A.C. (2d) 352, where it was held that “the court must be able to conclude on all the evidence that the debtor knew that the purpose of the secured party in retaining the collateral was to satisfy the obligation”. In this respect, the Court considered the cumulative effect of the numerous messages exchanged between the parties leading up to the foreclosure, and concluded that all requirements were met. Similarly, the Court also found that the appellants were provided with an opportunity to redeem the pledged shares, but provided no evidence that such redemption was ever a realistic possibility.

SHORT CIVIL DECISIONS

Ritchie v. Castlepoint Greybrook Sterling Inc., 2021 ONCA 214

[Doherty, Rouleau and Miller JJ.A.]

Counsel:

G. D. E. Adair, for the appellants

S. J. Tenai and B. Chung, for the respondents

Keywords: Contracts, Real Property, Agreements of Purchase and Sale of Land, Exclusion of Liability Clauses, Allocation of Risk


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