COURT OF APPEAL SUMMARIES (October 26 – October 30, 2020)

November 2, 2020

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Good afternoon.

Please find below our summaries of the civil decisions of the Court of Appeal for the week of October 26, 2020.

The headline decision is 7636156 Canada Inc. (Re). In a 54-page decision, the Court of Appeal canvassed in detail the law relating to letters of credit and the “autonomy” principle, and whether obligations by banks under LC’s are affected by a bankruptcy of the underlying debtor. In this case, the underlying debtor that went bankrupt was a commercial tenant. The application judge held that the landlord was only entitled to draw on the LC for its preferred claim of three months’ rent after the tenant’s trustee in bankruptcy disclaimed the lease. The Court of Appeal disagreed, confirming that under the autonomy principle, the obligation under the LC was independent of the tenant (and trustee’s) obligations under the lease, and as between only the landlord and the bank. In coming to its conclusion, the Court had to choose between conflicting lines of decisions. The result of this decisions is that landlords who were successful in obtaining LC’s to secure their tenant’s obligations under their leases should not be affected by their tenant’s bankruptcies up to the amount of the LC (depending, of course, on the terms of the lease and LC). Given the current economic environment, the decision is quite timely.

Other topics covered this week included the right to notice of municipal tax sales, claims made by judgment creditors against insurers of judgment debtors under section 132 of the Insurance Act to the proceeds of insurance, access in the crown wardship context and the lack of standing of parties under disability who are represented by a litigation guardian.

Happy Halloween!

John Polyzogopoulos
Blaney McMurtry LLP
416.593.2953 Email

Civil Decisions

Wilton v. Northern Bruce Peninsula (Municipality) , 2020 ONCA 0674

Keywords: Municipal Law, Taxation, Tax Sales, Notice, Duty of Good Faith, Registry Act, R.S.O. 1990, c. R.20, Municipal Act, 2001, S.O. 2001, c. 25, s. 374, s. 379(1) and s. 381(1), Municipal Tax Sales Act, R.S.O. 1990, c. M-60, Elliott v. Toronto (City) (1999), 171 D.L.R. (4th) 64 (Ont. C.A.), leave to appeal refused, [1999] S.C.C.A. No. 244, Zeitel v. Ellscheid, [1994] 2 S.C.R. 142

7636156 Canada Inc. (Re) , 2020 ONCA 0681

Keywords: Contracts, Real Property, Commercial Leases, Banking Law, Security, Letters of Credit, Autonomy Principle, Bankruptcy and Insolvency, Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, ss. 136(1)(f), 146, Personal Property Security Act, RSO 1990, c. P10, Commercial Tenancies Act, RSO 1990, c. L.7, s. 38(1), Crystalline Investments Ltd. v. Domgroup Ltd., 2004 SCC 3, Bank of Nova Scotia v. Angelica-Whitewear Ltd., [1987] 1 SCR 59, 430872 B.C. Ltd. v. KPMG Inc., 2004 BCCA 186, Royal Bank v. Gentra Canada Investments Inc. (2001), 147 O.A.C. 96 (C.A.), Cineplex Odeon Corp. v. 100 Bloor West General Partner Inc., [1993] O.J. No. 112 (Gen. Div.), Re Mussens Ltd., [1933] O.W.N. 459 (S.C.), Curriculum Services Canada/Service Des Programmes D’Études Canada (Re), 2020 ONCA 267, Cummer-Yonge Investments Limited v. Fagot, [1965] 2 O.R. 152 (S.C.), Lava Systems Inc. (Receiver & Manager of) v. Clarica Life Insurance Co. (2001), 31 C.B.R. (4th) 284 (Ont. S.C.), rev’d (2002), 161 O.A.C. 53 (C.A.), Titan Warehouse Club Inc. (Trustee of) v. Glenview Corp. (1988), 67 C.B.R. (N.S.) 204 (Ont. S.C.), aff’d (1989), 75 C.B.R. (N.S.) 206 (Ont. C.A.), West Shore Ventures Ltd. v. K.P.N. Holding Ltd., 2001 BCCA 279, 885676 Ontario Ltd. (Trustee of) v. Frasmet Holdings Ltd. (1993), 17 C.B.R. (3d) 64 (Ont. Gen. Div.), Peat Marwick Thorne Inc. v. Natco Trading Corp. (1995), 22 O.R. (3d) 727 (Gen. Div.), Westpac Banking Corp. v. Duke Group Ltd. (1994), 20 O.R. (3d) 515 (Gen. Div.), Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53

Windsor-Essex Children’s Aid Society v. E.W. (Publication Ban) , 2020 ONCA 0682

Keywords: Custody and Access, Children’s Aid Society, Extended Society Care, Fresh Evidence, Domestic Violence, Kawartha-Haliburton Children’s Aid Society v. M.W., 2019 ONCA 316, 432 D.L.R. (4th) 497; Children’s Aid Society of Toronto v. J.G., 2020 ONCA 415, 151 O.R. (3d) 320; L.M. v. Peel Children’s Aid Society, 2019 ONCA 841, 149 O.R. (3d) 18; Children’s Aid Society of Toronto v. V.L., 2012 ONCA 890, 299 O.A.C. 388; Children’s Aid Society of Ottawa v. S.N.-D., 2012 ONCA 590, 26 R.F.L. (7th) 46; Catholic Children’s Aid Society of Metropolitan Toronto v. M. (C.), [1994] 2 S.C.R. 165; Children’s Aid Society of Oxford County v. W.T.C., 2014 ONCA 540, 46 R.F.L. (7th) 290; Children’s Aid Society of Toronto v. C.J.W., 2017 ONCJ 212; Kaiman v. Graham, 2009 ONCA 77, 245 O.A.C. 130; R. v. Ibrahim, 2019 ONCA 631, 147 O.R. (3d) 272; A.M. v. Valoris Pour Enfants et Adultes de Prescott-Russell, 2017 ONCA 818; Child, Youth and Family Services Act, 2017, S.O. 2017, c. 14, Sched. 1, Child and Family Services Act, R.S.O. 1990, c. C.11

Hodgson v. Cheng , 2020 ONCA 0689

Keywords: Family law, Custody and Access, Civil Procedure, Appeals, Jurisdiction, Orders, Costs, Final or Interlocutory, Wachsberg v. Wachsberg, 2018 ONCA 508, Deltro Group Ltd. v. Potentia Renewables Inc., 2017 ONCA 784

Svia Homes Limited v. Northbridge General Insurance Corporation , 2020 ONCA 0684

Keywords: Contracts, Interpretation, Insurance, General Liability, Coverage, Unsatisfied Judgments, Enforcement, Notice, Delay, Prejudice, Insurance Act, RSO 1990, c. l.8 ss. 129, 132. 132(1), Liability Condition 5, Statutory Condition 8, Consolidated-Bathurst v. Mutual Boiler, [1980] 1 SCR 888, Monk v Farmers’ Mutual Insurance Company (Lindsay), 2019 ONCA 616, Becker v Toronto (City), 2020 ONCA 60, Kaiman v Graham, 2009 ONCA 77, The Sovereign General Insurance Company v Walker, 2011 ONCA 597

Huang v. Braga , 2020 ONCA 0645

Keywords: Torts, Negligence, MVA, Civil Procedure, Parties Under Disability, Litigation Guardians, Settlements, Court Approval, Appeals, Standing, Vexatious Litigants, Rules of Civil Procedure, Rules 7.01(1), 7.08, 7.04(1)(b), 37.16, Courts of Justice Act, ss. 140(1) and (3), Ki Ho Kim v. 260 Wellesley Residences Inc., 2017 ONSC 2985, Kavuru (Litigation Guardian of) v. Heselden, 2014 ONSC 6718

Short Civil Decisions

Cooper v. Book, 2020 ONCA 0683

Keywords: Civil Procedure, Orders, Disclosure, Costs, “Last-Chance” Orders, Enforcements, Appeals, Starland Contracting Inc. v. 1581518 Ontario Ltd., 2009 CanLII 30449 (ON SCDC)

National Bank of Canada v. Guibord, 2020 ONCA 0674

Keywords: Civil Procedure, Appeals, Jurisdiction, Orders, Final or Interlocutory, Vexatious Litigants, Rules of Civil Procedure, Rule 2.1.01, Drywall Acoustic Lathing Insulation Local 675 Pension Fund v. SNC-Lavalin Group Inc., 2020 ONCA 375, R. v. Mehedi, 2019 ONCA 387, Currie v. Halton Regional Police Services Board (2003), 233 D.L.R. (4th) 657 (Ont. C.A.)

Franmed Consultants (1993) v. Medcan Health Management Inc./em>, 2020 ONCA 0687

Keywords: Breach of Contract, Civil Procedure, Summary Judgment, Costs

CIVIL DECISIONS

Wilton v. Northern Bruce Peninsula (Municipality), 2020 ONCA 0674

[Doherty, Paciocco and Coroza JJ.A.]

Counsel:

S. Wilton, self-represented for the appellant

N. Lovell, for the respondent Municipality of Northern Bruce Peninsula

facts:

This case involved an appeal to set aside a 2016 municipal tax sale of the home of the appellant’s deceased parent in Lions Head, Ontario (“the Property”).

The appellant brought her application as the estate trustee for her deceased mother’s estate. The appellant did not have a registered interest in the Property when the tax sale was underway, nor was she ever shown as an owner of the Property on the municipal tax assessment rolls. The appellant also did not file a notice of change of address of the Property with the municipality to link to her personal address. Further, no documents relating to the estate were lodged on title.

The appellant presented evidence in her application that she was entitled to notice of the tax sale because municipal employees were aware that:

The appellant had arranged for the payment of the tax arrears on the Property that were outstanding at that time;
In related email correspondence with municipal employees, the appellant referred to the estate and sought receipts in the name of the estate;
The appellant arranged for the Municipality to send prepayment authorizations to her personal address and she and her husband gave prepayment authorization for taxes owing on property they owned, including for the Property, where she signed as trustee for the estate; and
The appellant arranged for the variation of the pre-authorized payment amounts in correspondence that included her contact information.

The Municipality decided to pursue a tax sale of the Property after the necessary searches were conducted and tax arrears were confirmed in the amount of $11,363.27. In January 2015, a tax arrears certificate was registered on title and a copy of the certificate and a Notice of Registration of Tax Arrears Certificates were sent by registered mail to the two addresses of the appellant’s deceased parents – the Property which was shown on the Municipal Assessment Roll and another address that was shown in the registered title document. The registered letters returned unopened. In November 2015, the property search was updated and final notices were sent to the same addresses. Notices of the pending tax sale were also published in regional newspapers and the Ontario Gazette. The Property was then transferred to the successful tenderer in March 2016.

The appellant claimed that the municipal tax sale was null and void because the respondent, the Municipality of Northern Bruce Peninsula (“the Municipality”), had failed to give her notice of the tax sale. The application judge dismissed the application, holding that the Municipality was not required by law to notify the appellant. The appellant appealed from that decision.

issues:

Did the Municipality fail to comply with the statutory notice obligations?
Did the Municipality breach its duty of good faith to the appellant?

holding:

Appeal dismissed.

reasoning:

(1) No. The court found that the Municipality had complied with the relevant notice obligations relating to a tax sale as set out in s. 374, s. 379(1) and s. 381(1) of the Municipal Act, 2001, S.O. 2001, c. 25. The appellant argued that despite this, the notice requirements had not been satisfied based on s. 381(2) and s. 374(5) of the statute relating to evidence to the contrary. The appellant claimed that the return of the registered mail was “evidence to the contrary”, which then rebutted the deemed receipt provision in s. 381(2). The Court, following prior case law, found that the return of the registered letters had no bearing on the sufficiency of the notice provided. The Court held that since ss. 374(1) and 379(1) do not require receipt before a notice that has been sent is effective, s. 381(2) has nothing to do with whether proper notice has been provided. Instead, it was enacted so that if a municipality found value in arguing receipt, it could rely on the evidentiary shortcut that s. 381(2) provides.

In regards to s. 374(5), the appellant argued that the section imposes a duty on the Municipality to undertake a reasonable search of the records mentioned in s. 381(1) and to give notice at the addresses identified. The Court held that this was a misreading of s. 374(5), and that the section does not impose an additional statutory notice obligation of general application.

(2) No. This issue was only first raised on appeal. In any event, the Court held that the municipality did not breach any duty of good faith to the appellant. According to the terms of the statute, the Municipality was not obliged to give the appellant notice of the tax sale and it would not be appropriate in this case to add additional notice obligations on the Municipality not already provided for in the legislative scheme. The Municipality owed no duty to the appellant to give her notice, and in the absence of such a duty, there was no basis for her claim that the Municipality acted in bad faith.

Further, even if the Court were to recognize an additional, non-legislated notice obligation, this would not be an appropriate case in which to do so, as there were multiple other actions the appellant could have taken to ensure that she would have a legal right to receive notice.

7636156 Canada Inc. (Re), 2020 ONCA 0681

[Brown, Paciocco and Nordheimer JJ.A]

Counsel:

J. Finnigan, D.J. Miller, and S. McGrath, for the appellant

H. Chaiton and S. Rappos, for the respondent

facts:

7636156 Canada Inc., (the “Tenant”), leased a building from the appellant Landlord. Pursuant to the terms of the Lease, the Tenant had put in place a $2.5 million letter of credit (“LC”) from the Bank of Nova Scotia (“BNS”) in favour of the appellant. The LOC was to continue to stand as security should the Tenant become bankrupt.

In May 2018, the Tenant made an assignment in bankruptcy and the respondent was appointed Trustee of the bankrupt Tenant’s estate. In July 2018, the respondent disclaimed the Lease. As of the date of bankruptcy, there were no arrears of rent owing under the Lease.

The appellant made draws on the LC after the Tenant’s bankruptcy, both before and after the respondent’s disclaimer of the lease. The draws were for the full amount of the credit.

On a motion brought by the respondent, the motion judge determined that the appellant was only entitled to draw on the LC to recover the amount of its preferred claim for three months’ accelerated rent under s.136(1)(f) of the Bankruptcy and Insolvency Act (“BIA”). In the alternative, the motion judge concluded that, in accordance with the terms of the lease, the LC should have been reduced to approximately $1.35 million on May 1, 2017 (just under a year prior to the date of bankruptcy), with the appellant’s draws limited to the reduced amount.

The Landlord appealed, submitting that the independent obligations created by the LC between the issuer bank, BNA, and itself as beneficiary were not affected by the respondent’s disclaimer of the lease. Nor, on a proper interpretation of the lease, did the amount of the LC reduce in May 2017.

issues:

Did the motion judge err in holding that, upon the disclaimer of the Lease by the Trustee, the appellant was not entitled to draw on the LC for amounts in excess of the appellant’s preferred claim under s. 136(1)(f) of the BIA?
Did the motion judge err in holding that on May 1, 2017, the amount of the LC was reduced to $1,357,135.53?

holding:

Appeal allowed.

reasoning:

Did the motion judge err in holding that, upon the disclaimer of the Lease by the Trustee, the appellant was not entitled to draw on the LC for amounts in excess of the appellant’s preferred claim under s. 136(1)(f) of the BIA? Yes.

Based on the legal principles governing letters of credit, the Court found that the motion judge erred in limiting the appellant’s entitlement to draw on the LC to its preferred claim under BIA s.136 (f) for three months’ accelerated rent.

Principles Governing Letters of Credit

The LC is a standby letter of credit, which consists of an undertaking by the issuing bank to honour a draft or other demands for payment by the beneficiary appellant upon compliance with the conditions specified in the credit. A standby letter of credit is a performance-securing mechanism in that it constitutes an obligation of the issuer to the beneficiary to make payment on account of any default by the applicant customer in the performance of an obligation upon certification by the beneficiary that the applicant has failed to fulfil its obligations to the beneficiary. A fundamental characteristic of standby letters of credit is their autonomy from the underlying transaction between the applicant and the beneficiary. This conclusion was not altered by the principles of insolvency law, in particular those concerning the effect of a trustee’s disclaimer of a commercial property lease.

Fraud Exception

An exception exists to the general rule that an issuing bank is obliged to honour a draft under a documentary credit when the tendered documents appear on their face to be regular and in conformity with the terms and conditions of the credit. The exception arises in the case of fraud by the beneficiary which has been (a) sufficiently brought to the knowledge of the bank before payment of the draft, or (b) demonstrated to a court called on by the customer of the bank to issue an interlocutory injunction to restrain the bank from honouring the draft. However, given the principle of the autonomy of letters of credit, the fraud exception is carefully constrained to protect the commercial utility of the letter of credit.

The Court was not persuaded by the respondent’s argument that the appellant engaged in a fraud related to the transaction between it and the Tenant. The statements by the appellant in the certificates it presented to BNS were not “clearly untrue or false” when assessed in the context of the underlying contract (the Lease) between the beneficiary (the Landlord) and the applicant (the Tenant). The Court found that the agreement between the appellant and Tenant was that the rights of the appellant under the Lease in respect of the LC would continue in full force and effect in the event of the Tenant’s bankruptcy, and any disclaimer therein, as if the Lease had not been disclaimed.

The Effect of the Trustee’s Disclaimer of the Lease

The respondent also argued that when it disclaimed the Lease, the appellant was thereupon precluded by the operation of insolvency law from drawing on the LOC for any amount in excess of the appellant’s preferred claim for three months’ accelerated rent. The respondent contended that such a principle of insolvency law overrides the autonomy principle and imposes a legal limit on the amount the appellant could draw. The Court held that the principle of the autonomy of documentary letters of credit was not altered by the principles of insolvency law, in particular those concerning the effect of a trustee’s disclaimer of a commercial property lease.

The Jurisprudence on the Effect of a Trustee’s Disclaimer of Lease

Based on his review of the case law, the motion judge held it is settled law that a disclaimer of a lease by a trustee in bankruptcy “operates as a voluntary surrender of the lease by the tenant with the consent of the landlord, which extinguishes all obligations of the tenant under the lease”. The Court held that the motion judge overstated the effect of a trustee’s disclaimer of a lease, in part because he did not have the benefit of the Court’s decision in Curriculum Services Canada/Service Des Programmes D’Études Canada (Re).

The Court stated that Curriculum Services clarified that a trustee’s disclaimer does not operate as a voluntary surrender of a lease with the consent of the landlord for all purposes. The decision contains an extensive review of the case law concerning the effect of the disclaimer of a lease by a trustee in bankruptcy on a landlord’s ability to claim for amounts owing under the lease. The review starts with Re Mussens and proceeds through Cummer-Yonge Investments Limited v. Fagot, and Crystalline Investments, decisions which the motion judge also considered in this case. The Court’s review of the jurisprudence led the Court in Curriculum Services to make three main points. First, the key principle that emerged from the Supreme Court’s decision in Crystalline Investments is that the disclaimer of a lease by the tenant’s trustee benefits only the insolvent party. Second, while Crystalline Investments is consistent with the principle stated in Re Mussens that a disclaimer operates to end the bankrupt tenant’s obligations under the lease, the decision does not support an interpretation of Re Mussens that would characterize a disclaimer as a consensual surrender for all purposes. Third, a trustee’s disclaimer of a bankrupt tenant’s lease ends the rights and remedies of the landlord against the bankrupt tenant’s estate with respect to the unexpired term of the lease, apart from the three months’ accelerated rent provided for under the Commercial Tenancies Act (“CTA”) and BIA.

In the Court’s view, the motion judge’s conclusion was in error for two reasons. First, his decision ran counter to first principles. As the Court already stated, the conduct of the Landlord did not fall within the fraud exception so as to constrain the application of the autonomy principle to the Landlord’s ability to draw on the LOC. Second, the motion judge’s decision ran counter to case law regarding the interplay between a trustee’s disclaimer and a landlord’s ability to draw on a letter of credit. The Court drew attention to the decision in Lava Systems Inc. (Receiver & Manager of) v. Clarica Life Insurance Co, which the Court found was the guiding authority.

The Court reviewed the following cases: Titan Warehouse Club Inc. (Trustee of) v Glendview Corp, Lava Systems, West Shore Ventures Ltd. v. K.P.N. Holding Ltd., 885676 Ontario Ltd. (Trustee of) v. Frasmet Holdings Ltd. Peat Marwick Thorne Inc. v. Natco Trading Corp. All the cases pre-dated the decision of the Supreme Court of Canada in Crystalline Investments.

The Court found that Titan Warehouse and West Shore limited the scope of a landlord’s ability to draw on a letter of credit to its statutory preferred claim. Natco did not involve a letter of credit, but in obiter comments supported that approach. By contrast, Frasmet and Lava Systems recognized the landlord’s right under the letter of credit to draw amounts beyond the statutory preferred claim.

Both Titan Warehouse and Lava Systems were decisions of the Court of Appeal. The Court found that the reasoning in Lava Systems was more persuasive for two reasons. First, the decision in Lava Systems addressed the principle of the autonomy of documentary letters of credit, whereas that in Titan Warehouse did not. Second, the brief decision in Titan Warehouse regarded the language in the letter of credit that stated it was “intended to guarantee to the landlord payment of the rent by the tenant” as subject to Cummer-Yonge’s treatment of guarantors of leases in bankruptcies. However, that aspect of Cummer-Yonge was overturned by the Supreme Court in Crystalline Investments and was no longer good law.

The Application of Lava Systems

Lava Systems applied the principle of the autonomy of letters of credit, although it recognized two exceptions to that principle. The Court held that neither applies in the present case. The first exception would arise if BNS had assigned to the respondent any claim it had against the appellant. The respondent, as assignee, would have to prove that the appellant acted fraudulently. The Court stated that BNS made no such assignment and, as stated already, concluded that the appellant’s conduct did not fall within the fraud exception to the autonomy principle. According to Lava Systems, the second situation in which the respondent might have be entitled to redress from the appellant would be if the Tenant had reimbursed BNS for the amount of any “improper” draw by the appellant on the LOC.

In Lava Systems, the Court stated that if the tenant in that case had reimbursed the bank for the amount drawn by the landlord, the tenant or its receiver might have a claim against the landlord for breach of clause 26.01(b) of the lease for the amount of the improper draw. Clause 26.01(b) of the lease provided that if the landlord drew down on the letter of credit, it would hold the proceeds as security for the performance by the tenant of its obligations under the lease. The respondent relied on this portion of the decision to submit that where a bank reimburses itself from the tenant’s property as a result of an improper draw by a landlord on a letter of credit, a trustee may have recourse against the landlord if the draws were improper. As the respondent noted, in the present case the appellant’s draws on the LOC diminished the amount of the GIC held by BNS as security, which otherwise would have been available for distribution to the Tenant’s creditors. The Court did not accept this submission for three reasons.

First, the comments in Lava Systems about the effect of a right of reimbursement from the bankrupt tenant’s estate were anchored in the specific language of the lease in that case. The Court noted, under the law concerning standby letters of credit, the funds an issuing bank pays to a beneficiary are the property of the bank, not the applicant customer. The Court stated that the contract an issuing bank has with the customer applicant may include a right to reimbursement. Where such a contractual right of reimbursement exists, a bank may seek reimbursement for any amounts it is required to pay out under a letter of credit. In this respect, a contractual claim for reimbursement brought by an issuing bank would have the same economic effect on a bankrupt tenant’s estate as a claim for indemnification brought by an original tenant assignor or guarantor. The Court stated that the existence of such a contractual right to reimbursement by an issuing bank would not frustrate the objectives of the BIA or justify treating a trustee’s disclaimer of a lease as its termination for all purposes.

The second reason was that BNS held cash collateral security in the form of a GIC from the Tenant in support of the LC. The bank’s realization on its security following its payments of draws reduced the amount available for distribution to the Tenant’s unsecured creditors. However, the scheme of distribution set out in BIA s. 136 recognizes that the amount available for distribution to unsecured creditors is “subject to the rights of secured creditors”. In the present case, the respondent had not disputed the validity of the BNS security.

Finally, the Court found that to accept the respondent’s position would be tantamount to accepting the proposition that the BIA does not permit a landlord to take security from its tenant, through a letter of credit, that would exceed the amount of a claim for accelerated rent. The Court held that the BIA does not contain any such language of limitation or prohibition.

Conclusion on Issue 1

BNS accepted the appellant’s draws on the LC as complying presentations. The respondent had not established that the appellant’s conduct in drawing on the LC, when assessed in light of the language of the Lease and of the LC, fell within the fraud exception to the principle of the autonomy of letters of credit. Finally, the Court found no provision in the BIA or principle of Canadian bankruptcy law that overrode the autonomy principle and precluded the appellant from drawing on the LC for amounts in excess of its preferred claim against the bankrupt’s estate for three months’ accelerated rent. Consequently, the Court concluded that the appellant was entitled to draw up to the full amount available under the LC.

Did the motion judge err in holding that on May 1, 2017, the amount of the LC was reduced to $1,357,135.53? Yes.

The Court concluded that the motion judge erred in interpreting the Lease to require a reduction of the amount of the LC on May 1, 2017. As an alternative submission on the motion, the respondent argued that the language of the LC mandated a reduction in its value on May 1, 2017 to $1,357,135.53. The motion judge accepted this argument. The Court found that the motion judge erred in his interpretation of the Lease, specifically the LC reduction clause.

The Lease contained a provision concerning reductions in the value of the LC during the term of the Lease. For the value to be reduced, the Tenant must never have been in default and must have “promptly” paid all rent. The Court held that the motion judge erred in his interpretation of the word “promptly”. Any decline in value of the LC during the term of the Lease required that the Tenant had “at all times promptly paid all Rent through the Term”. The motion judge interpreted the word “promptly” to mean “within a reasonable time and not on the actual date that the rent is due.” The Court found that the motion judge made a legal error by not taking into account several provisions of the Lease that were relevant to the interpretation of the word “promptly”. The Court held that, when considered in light of the whole Lease, “promptly” means payment of rent when due – namely, on the first day of each calendar month. There was no dispute that prior to May 1, 2017, the Tenant had twice failed to pay rent when due on the first day of each calendar month. Consequently, there were two occasions prior to May 1, 2017, when the Tenant had failed to pay rent “promptly”. Due to those failures, the Court found that the Tenant had not satisfied the pre-conditions for a reduction in the value of the LC on May 1, 2017. The motion judge erred in finding otherwise.

Windsor-Essex Children’s Aid Society v. E.W.(Publication Ban), 2020 ONCA 0682

[Huscroft, Zarnett and Coroza JJ. A.]

Counsel:

G. S. Campbell for the appellant, E.W.

R. Burnett for the respondent, Windsor-Essex Children’s Aid Society

facts:

The appellant in this case appealed the decision of the Superior Court of Justice (the Appeal Decision), which dismissed an appeal from an order made by the Ontario Court of Justice (the Trial Decision). At trial, the appellant’s two children were found in need of protection and placed in the extended care of the Windsor-Essex Children’s Aid Society (the Society) with no order for the appellant or the children’s respective fathers to have access to the children. The appellant also moved to adduce fresh evidence on appeal.

The appellant is a member of the Eastern Woodland Métis Nation Nova Scotia (“EWMNNS”) and has two children. At the time of appeal, the children had been in the care of the Society for over four years, since July 2016. The children were first apprehended by the Society in 2016 after being exposed to domestic violence between the appellant and her then partner, the father of one of her children. The children were returned to the appellant’s care a few weeks later, but were apprehended again in July 2016 when she breached the conditions of an interim supervision order and of her bail. In 2017, the appellant was also convicted of possessing child pornography and sexual interference involving one of her children. In February 2017, the Ontario Court of Justice granted summary judgment, with the appellant’s consent, awarding the Society wardship of the children for four months and approving a plan of care requiring the appellant to participate in counselling and mental health programs, which the appellant did not complete. In April 2017, the Society began a status review application seeking permanent Crown wardship to secure an adoption placement for the children.

At trial, the trial judge found the children were in need of protection and ordered that they be placed in the Society’s extended care, without ordering access for the appellant or for their respective fathers. The trial judge held that although the appellant is a Métis person and a member of the EWMNNS, the children were not members of the Métis community. However, he accepted the children’s Indigenous heritage would “continue to be important” under the Child, Youth and Family Services Act, 2017, S.O. 2017, c. 14, Sched. 1 (“CYFSA”).

On appeal, the appeal judge allowed the parties to adduce fresh evidence, dismissed the appeal, affirmed the order for extended society care without granting the mother any access order, and refused the appellant’s request for a new trial. As well, between the appellant’s first appeal and the appeal to the Court of Appeal, the Superior Court of Justice overturned the appellant’s criminal conviction.

issues:

On a further appeal to the Court, the appellant raised seven issues:
(1) Did the courts below err in interpreting the time limits for interim care orders under s. 122 of the CYFSA?
(2) Did the courts below misapprehend and undervalue the appellant’s evidence?
(3) Did the trial judge’s conduct of the trial give rise to a reasonable apprehension of bias?
(4) Given that the appellant’s criminal conviction has now been overturned, did the courts below err in relying on it as a basis for a child protection finding?
(5) Did the courts below err in placing the burden of proof on the appellant to demonstrate that an access order would be in the children’s best interests?
(6) Should the appellant’s fresh evidence be admitted on appeal?
(7) Is the appellant entitled to full indemnity costs for this appeal?

holding:

Motion granted to adduce fresh evidence. Appeal allowed in part.

reasoning:

(1) No. The Court did not accept the appellant’s assertion that the courts below erred in finding that s. 122(1)(a) of the CYFSA imposes a strict 12-month time limit for interim society care orders where a child is younger than six. The Court stated that the time limits imposed by the statute must be presumed to reflect its objectives, including, the promotion of the best interests of the children. The judge found that both the trial judge and appeal judge’s decisions were rooted in the children’s best interests and saw no reason to intervene.

(2) No. The court did not accept the appellant’s assertion that they misapprehended and undervalued her evidence. The appellant’s claims were based on the Court’s decision in Kawartha-Haliburton Children’s Aid Society v. M.W., 2019 ONCA 316, 432 D.L.R. (4th) 497, which states that the “special considerations that apply to Indigenous children must be part of every decision involving Indigenous children”. The Court here found that there was no error in the approach or conclusions of the courts below and both the reasons and the record confirm their sensitivity to the children’s Indigenous heritage and highlight the significant efforts to ensure all relevant information was presented.

(3) No. The Court did not accept the appellant’s assertion that the trial judge showed a reasonable apprehension of bias by assuming the role of advocate for the Society. This argument was also not raised in the courts below and as a general rule, the Court will not entertain entirely new issues on appeal. However, based on the evidence presented, the Court still did not find that the trial judge’s handling of the trial supported a claim of reasonable apprehension of bias.

(4) No. The Court did not accept the appellant’s assertion that her criminal conviction played a very significant role in the trial results, and now that the conviction has been overturned, a new trial should be required. Rather, the Court held that it was unnecessary to determine whether the conduct at issue amounted to sexual abuse or sexual exploitation under s. 74(2)(c) of the CYFSA, because the children’s recurring exposure to domestic violence provided a sufficient basis to affirm the conclusion of the courts below that the children were, and continue to be, in need of protection and the appropriateness of an order for extended society care.

(5) Yes. Regarding the assertion that the trial judge’s no-access order failed to recognize that the burden is no longer on the person requesting access to demonstrate that the relationship is beneficial and meaningful to the child (Kawartha), the Court found that the appellant was correct that there has been a significant shift in the approach to access for children in extended care under the CYFSA.
The Court concluded that this is not an appropriate case to order a rehearing on access, however it did find that the ruling that there should be no access was tainted by legal error. Since the trial, the children’s foster mother has communicated through evidence that she wished to adopt both children should they be placed in extended society care with “no access or access by photographs”. Access by photographs would thus not undermine the children’s prospects of being adopted by the foster mother and this very limited access could be significant to the appellant because it would entitle her to notice of the adoption proceedings and would keep the door open to some form of openness in the adoption that might be agreeable to the potential adoptive parent. The Court held that the no-access order would be replaced with an order granting the appellant the right to monthly photograph access to the children.

(6) Yes. The appellant sought to adduce further and fresh evidence which included the appellant’s mental health treatment, her attendance at parenting courses, skills training and employment programs. The Society consented to the admission of at least some of this evidence, but noted some of it was similar to evidence that was not admitted on the first appeal. The Court accepted all the new evidence, it was not given much weight and did not change the result.

(7) No. The Court did not accept the appellants claim for full indemnity costs. The Court found that the appeal presented no “exceptional circumstances” for an award of costs against the Society, and thus made no order as to costs.

Hodgson v. Cheng, 2020 ONCA 0689

[Roberts, Trotter and Thorburn JJ.A]

Counsel:

M. Melito, for the appellant
A. Franks, for the respondent

facts:

The moving party, C, seeks to quash the appeal brought by the responding party, H, from the dismissal of his motion in which he requested that the motion judge entertain further submissions and reconsider or set aside her costs order dated September 20, 2019. Alternatively, she seeks security for costs.

These proceedings arose out of the parties’ acrimonious custody dispute concerning their young daughter. C moved with their daughter to Ontario from Hong Kong where the parties had been residing. H commenced proceedings in Hong Kong and in Ontario to seek their daughter’s return to Hong Kong.

In the Hong Kong proceedings, an order was granted requiring the daughter’s return. Prior to the release of the order, H adjourned his motion for the same relief in Ontario. The motion judge granted C her costs in relation to the adjourned motion and the application commenced by H.

H appealed from this costs order to the Divisional Court, which was dismissed as abandoned with costs to C. H then brought a motion before the motion judge to request that she reconsider or set aside her costs order and that she entertain further costs submissions. The motion judge dismissed H’s motion. H paid the Divisional Court costs order with interest. C sought to quash the appeal brought by H from the dismissal of his motion in which he requested that the motion judge entertain further submissions and reconsider or set aside her costs order.

issues:

Should H’s appeal be quashed on the basis that it was interlocutory in nature?

holding:

Motion granted.

reasoning:

(1) Yes. H’s appeal should be quashed on the basis that it was interlocutory in nature. The motion judge’s order refusing H’s request that she reconsider her costs order and entertain further submissions was clearly interlocutory. It did not finally dispose of any substantive right of the parties or issue in the application but related to the motion judge’s previous final costs order, the appeal from which H had abandoned. Accordingly, the Court did not have jurisdiction to entertain the appeal.

Svia Homes Limited v. Northbridge General Insurance Corporation, 2020 ONCA 0684

[Rouleau, Miller and Zarnett JJ.A.]

Counsel:

T.J. Donnelly and J. Tam, for the appellant

J.G. Norton and J. Tausendfreund, for the respondent

facts:

Between 2004 and 2008, Svia developed a townhouse project in Oakville. Svia hired 139 Limited to install the project’s sewer system. Problems arose with the sewers. In 2008, Svia commenced an action (the “2008 Action”) against 139 Limited and others, claiming damages relating to the defective installation of the sewers. 139 Limited held an insurance policy issued by Northbridge Insurance’s predecessor. 139 Limited had liability coverage in force at the time the loss occurred.

139 Limited defended the 2008 Action until 2011, when its lawyer was removed from the record and its pleading was struck. Examinations for discovery of other parties took place, but 139 Limited did not participate. In 2013, 139 Limited was noted in default.

Northbridge was not provided with notice of the 2008 Action until 2017, nine years after it was commenced. Upon receipt of notice, Northbridge obtained a Non-Waiver Agreement from 129 Limited to allow it to investigate and consider whether coverage applied. Northbridge ultimately denied coverage for the 2008 Action. Northbridge stated that, among other reasons, the delayed notice constituted a breach of policy conditions and precluded an action for coverage under the Policy and, to the extent the 2008 Action made a claim for resultant damage, an action for coverage was barred by the expiry of the applicable limitation period.

In 2018, Svia amended its statement of claim to include broader claims for resultant damage but did not provide the amended claim to Northbridge. Without notice to Northbridge, Svia obtained default judgment against 139 Limited. Subsequently, counsel for Svia provided a copy of the default judgment to Northbridge. After unsuccessful attempts, including by execution, to collect the judgment from 139 Limited, Svia commenced an application under s. 132(1) of the Insurance Act against Northbridge for the amount of the judgment.

The application judge referred to the principle that persons, such as Svia, who seek recovery in a proceeding under s. 132, can stand in no better position than the insured would if it were claiming payment from the insurer. Thus, if Northbridge had a defence to a claim by 139 Limited, it would also be a defence to Svia’s claim.

He then considered whether the judgment fell within the Policy’s terms of coverage. The Policy excluded from coverage the cost to repair the insured’s own defective work. However, consequential damage resulting from the insured’s defective work was within the scope of coverage. This gave Northbridge a partial defence to the claim.

The application judge then examined whether Northbridge had a defence based on the lack of timely notice of the claim. Liability Condition 5 of the Policy required that “If a claim is made or ‘action’ is brought against any Insured, you [139 Limited] must see to it that we [Northbridge] receive prompt written notice of the claim or ‘action’”. He also noted that the Policy permitted Svia to give notice, as Statutory Condition 8 provided that if the insured was absent, unable to provide notice, or refused to do so, notice could be given “by a person to whom any part of the insurance money is payable”. He found that 139 Limited breached Liability Condition 5 by its failure to provide timely notice.

Next, he assessed whether relief from forfeiture could be granted under s. 129 of the Insurance Act. He found that Svia had standing to advance a s. 132 application, but held that the test for relief from forfeiture set out in Monk v. Farmers’ Mutual Insurance Company (Lindsay) had not been met. First, the conduct of 139 Limited in failing to give timely notice was unreasonable. Second, the breach of the condition to give timely notice was substantial and had prejudiced Northbridge’s ability to respond to the 2008 Action on behalf of 139 Limited. Third, although the forfeiture of insurance coverage was significant, the loss of Northbridge’s ability to defend the action was also significant such that there was no disparity between the insured’s loss of coverage and the damage caused to the insurer by the breach of condition. Accordingly, Svia’s application was dismissed.

issues:

(1) Did Svia breach the insurance policy’s relevant notice requirement?

(2) Did the application judge err in finding that there had been prejudice to Northbridge arising from the late notice?

(3) Was the application judge wrong to focus on 139 Limited’s conduct, rather than Svia’s conduct, in deciding whether to grant relief?

holding:

Appeal dismissed.

reasoning:

(1) Statutory Condition 8 Argument

Yes. Svia submitted that Statutory Condition 8, under which Svia had provided notice of the 2008 Action to Northbridge, did not have a timeliness requirement. Therefore, there was no late notice and the Policy’s relevant notice requirement was not breached. Northbridge asserted that Svia’s argument should not be considered, as it had not been advanced before the application judge, nor was it referred to in Svia’s appeal factum.

Following the rationale outlined in Becker v Toronto, the Court stated that a trial judge does not err when he or she considers only the issues and theories actually articulated and advanced by the parties, and a party is generally foreclosed from raising entirely new issues on appeal. The general rule is that it is unfair to spring a new argument upon a party at the hearing of an appeal in circumstances in which evidence might have been led at trial if it has been known that the matter would be an issue on appeal.

The argument raised by Svia was “entirely new”. It was not raised before the application judge. It was not referred to in, and was inconsistent with, Svia’s factum on appeal, in which Svia both conceded that there had been late notice and characterized the issue on appeal as whether the application judge erred in refusing to grant relief from forfeiture. Additionally, this argument does not raise an issue of law alone but rather turns on interpretation of the Policy, which is a question of mixed fact and law. Nevertheless, the Court assessed the merits of Svia’s argument.

Svia maintained that Northbridge conceded all the ingredients necessary to find that it was liable to Svia. Northbridge’s concession was that although Statutory Condition 8 gave Svia a right to provide notice, it imposed no obligations on Svia. Thus, Svia argued it did not breach any obligation to give notice by a particular time and therefore did not forfeit its right to coverage. The Court disagreed. Justice Zarnett read Northbridge’s concession as limited to pointing out that although Statutory Condition 8 gave Svia a right to give notice, it imposed no obligation to do so, and therefore no breach occurred that needed to be relieved against.

The language of s. 132 (1) of the Insurance Act demonstrated that it is those non-conceded items that matter, as the central question is whether the insured (here 139 Limited) would have had a valid claim to coverage if it had satisfied the judgment. Answering this question required interpretation of the Policy, including both Liability Condition 5 and Statutory Condition 8.

Liability Condition 5 required the insured, 139 Limited, to give Northbridge timely notice of an action against it. The purpose of a notice provision such as this one is to make the insurer aware of a claim against its insured so that it has the timely opportunity to deal with it. Statutory Condition 8 does not completely override or displace Liability Condition 5, but rather expands the category of persons who may give notice to the insurer. Reading the Policy this way confers a right on third parties, such as Svia, to give notice and deprives the insurer of the ability to ignore a notice on the basis that its insured did not provide it.

The application judge held that Svia was a person able to provide notice pursuant to Statutory Condition 8. Therefore, Northbridge had to treat such notice as though the insured, 139 Limited, had provided it. Nevertheless, Statutory Condition 8 did not detract from the right of Northbridge to require that notice be timely, as contemplated by Liability Condition 5. Since Svia’s notice was not timely within the meaning of Liability Condition 5, the fact that Svia provided notice under Statutory Condition 8 does not alter that conclusion.

In a case where a Statutory Condition 8 notice is timely, it would fully deprive the insurer of a right to complain of a failure of its insured to provide timely notice. Where a Statutory Condition 8 notice was late, but no prejudice to the insurer arose, the notice and other relevant factors may be sufficient for the court to provide relief from any forfeiture arising from the insured’s breach of the Policy. The fact that the Statutory Condition 8 notice did not have either effect on the facts of this case does not render the provision meaningless. It was not necessary, in order to give Statutory Condition 8 meaning, to read it as requiring the insurer to treat a notice as proper no matter when it was received, even one coming so late that it deprived the insurer of all opportunities that timely notice of a claim was intended to provide.

The question on a section 132 application is whether the insurer would have had a defence to a claim by its insured if the insured had satisfied the judgment. If 139 Limited had satisfied Svia’s judgment, Northbridge would have had a defence to 139 Limited’s claim for indemnity under the Policy because the first notice it received of the 2008 Action (the notice from Svia) came nine years after the action was commenced. Therefore, notice was not timely and was in breach of 139 Limited’s obligations under the Policy.

(2) The Lack of Prejudice Argument

No. Svia argued that had Northbridge received timely notice, it would have denied coverage for the resultant damages and would have declined to participate in the defence of the action. This argument failed on the application judge’s findings of fact.

The notice Northbridge received came well after 139 Limited’s defence had been struck out, discoveries had been conducted, and 139 Limited had been noted in default. The application judge found that, as a result, Northbridge was denied the opportunity to carry out a timely investigation for resultant damages or participate in discovery. Also, by the time Northbridge received notice, the limitation period for bringing an action for contribution and indemnity against other potentially liable parties would have expired. For these reasons, Northbridge suffered significant prejudice.

(3) The Wrong Perspective Argument

No. Svia argued that the application judge should have considered relief from forfeiture solely from the perspective of Svia and based on its conduct, rather than from the perspective of the insured, 139 Limited, and based on its conduct. The Court rejected this argument.

In a section 132 application, the court is to apply the same equities as would apply if the insured had satisfied the judgment and was itself claiming the insurance money from the insurer. Thus, the court would have had to consider the conduct of 139 Limited, including its failure to provide timely notice, why that occurred and the effect of late notice on Northbridge, as equities in deciding whether to grant relief from forfeiture. That was precisely the analysis carried out by the application judge.

Huang v. Braga, 2020 ONCA 0645

[Pepall J.A. (Motion Judge)]

Counsel:

S.H.H., acting in person

O. Holzapfel, for the responding party, the Public Guardian Trustee

A.L. Rachlin, for the responding party, A.M.B.

R.H. Rogers, for the responding party, Aviva Insurance Company of Canada

T. Antoniou, for the responding party, L.F.J.L.

facts:

The moving party was involved in a motor vehicle accident over 20 years ago. The ensuing litigation spanned several years, and prior to trial, a Certified Capacity Assessor concluded that the moving party lacked capacity to act for herself in litigation. Accordingly, the Public Guardian Trustee (“PGT”) was appointed as her litigation guardian pursuant to Rule 7.04(1)(b) of the Rules of Civil Procedure (the “Rules”).

The moving party brought six proceedings seeking to overturn the appointment of the PGT, all unsuccessful. One of the respondents subsequently brought a motion under Rule 37.16 for an order that the moving party be prohibited from bringing further motions or appeals without leave of the court. The motion was granted, with the observation that the motions and appeals were frivolous and excessive.

Once appointed, the PGT retained external counsel to act on its behalf. Based on the external counsel’s advice, the PGT settled the actions, and the settlement was approved pursuant to Rule 7.08. All were in agreement that the settlement was in the best interests of the moving party. The moving party brought this motion to appeal the approval of the judgment, against the advice and notwithstanding the protest of her litigation guardian.

issues:

(1) Should the moving party be granted leave to appeal the judgment approving the settlement?
(2) Does the moving party, being a party under disability, have authority to appeal the judgment approving the settlement independent of the PGT?

holding:

Motion dismissed.

reasoning:

(1) Should the moving party be granted leave to appeal the judgment approving the settlement?

No. Although orders may be granted under Rule 37.16 for a variety of reasons, once an order is granted, it is not clear what test a party must meet when seeking leave. On this issue, the Court looked for guidance from analogous provisions in the Courts of Justice Act (“CJA”). Section 140(1) of the CJA similarly provides a judge with the authority to limit a person’s ability to bring proceedings without leave if the person is found to be acting vexatiously. Section 140(3) expands on this authority and states that leave may be provided if the court is satisfied that the proceeding in question is not an abuse of process, and that reasonable grounds exist.

The Court built on this foundation and posed three questions to consider when leave is sought pursuant to an order under Rule 37.16. First, consideration should be given to the strength of the grounds advanced by the moving party. Second, the court should consider whether the substance of the leave request is simply a continuation of the frivolous, abusive, or vexatious process that generated the order in the first place. The final and overriding consideration is whether granting leave would be in the interests of justice.

The Court concluded that the moving party did not have any reasonable grounds that merited granting leave, and therefore dismissed the motion.

(2) Does the moving party, being a party under disability, have authority to appeal the judgment approving the settlement independent of the PGT?

No. Under Rule 7.01(1), unless the court or a statute provides otherwise, a proceeding shall be commenced, continued, or defended on behalf of a party under disability by a litigation guardian. In Ki Ho Kim v. 260 Wellesley Residences Inc., 2017 ONSC 2985, the Court held that a party under disability had no standing independent of his litigation guardian. Similarly, in Kavuru (Litigation Guardian of) v. Heselden, 2014 ONSC 6718, the court wrote that while it is within the discretion of a motion judge to consider the position of the party under disability, such party no longer had the right to dictate the course of the litigation.

The Court considered that the PGT did not wish to appeal or challenge the approval judgments, and concluded that this alone was sufficient to dismiss the motion.

SHORT CIVIL DECISIONS

Cooper v. Book, 2020 ONCA 0683

[Huscroft, Nordheimer and Harvison Young JJ.A.]

Counsel:

W.G. Punnett, for the appellant

M. Zalev and R. Kamin, for the respondent

Keywords: Civil Procedure, Orders, Disclosure, Costs, “Last-Chance” Orders, Enforcements, Appeals, Starland Contracting Inc. v. 1581518 Ontario Ltd., 2009 CanLII 30449 (ON SCDC)

National Bank of Canada v. Guibord, 2020 ONCA 0677

[Hourigan, Trotter and Jamal JJ.A.]

Counsel:

M. Myers, for the moving party

M. G., acting in person

Franmed Consultants (1993) Inc. v. Medcan Health Management
Inc., 2020 ONCA 0687

[Doherty, Paciocco and Coroza JJ.A.]

Counsel:

R. B. Moldaver, for the appellant
F. R. Schumann, for the respondent

Keywords: Breach of Contract, Civil Procedure, Summary Judgment, Costs

The information contained in our summaries of the decisions is not intended to provide legal advice and does not necessarily cover every matter raised in a decision. For complete information or for specific advice, please read the decision or contact us.

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John Polyzogopoulos
Blaney McMurtry LLP
416.593.2953 Email