COURT OF APPEAL SUMMARIES (May 1, 2023 – May 5, 2023)

May 6, 2023

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Good afternoon.
Following are this week’s summaries of the Court of Appeal for Ontario for the week of May 1, 2023.

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In Ontario (Auditor General) v. Laurentian University, the Auditor General brought an application for a declaration that s. 10 of the Auditor General Act gave it the right to certain solicitor-client privileged documents belonging to Laurentian University in the course of an audit of the university. The Court reaffirmed the principle that there must be a clear and unambiguous legislative intention to abrogate privilege, which was not present in this case. Accordingly, the Auditor General was not entitled to the privileged information.

In Ferraro v. Neilas, the appellants appealed the summary judgment granted against them on guarantees they gave in respect of a 2012 syndicated first mortgage financing of a small residential condominium project. The motion judge interpreted the related agreements so as to extend the guarantee of the mortgage to a guarantee of the investors’ investment in that mortgage. A majority of the Court agreed. However, Hoy J.A. dissented. She was of the view that it was not the Court’s job to rescue the investors from their decision to participate in risky mortgage investments which they knew involved related parties without the independent legal advice they were strongly advised to obtain.

In Fareau v. Bell Canada, the appellants claimed that the respondents charged unreasonable and unconscionable telephone rates for sending and receiving long-distance calls from provincial correctional facilities. The motion judge granted permanent stays of most of the causes of action on the basis that the Canadian Radio-television and Telecommunications Commission had jurisdiction. However, it remained to be seen whether the CRTC would assert jurisdiction. Accordingly, the Court set aside the permanent stay and replaced it with a temporary one, pending the CRTC’s decision.

In Petrochemical Commercial Company International Ltd v. Nexus Management Group SDN BHD, the appellants alleged that a settlement they entered into with Iranian corporations was breached because criminal charges outstanding against them in Iran had not been withdrawn. The Court agreed with the motion judge that there was no such breach, as the parties understood that the corporations did not control the Iranian prosecutor’s office.

Doria v. Warner Bros. Entertainment Canada Inc. deals with section 139 of the Courts of Justice Act, which reads as follows:

Where two or more persons are jointly liable in respect of the same cause of action, a judgment against or release of one of them does not preclude judgment against any other in the same or a separate proceeding.

The appellant in that case sued a movie production company by way of arbitration for damage done to his home during a film shoot. He was not satisfied with the amount awarded to him (which he recovered). He then sued the movie studio, Warner Bros, for the same heads of damages he had already been awarded and collected. The motion judge dismissed the claim as an abuse of process. The Court agreed with the motion judge. Section 139 does not preclude the dismissal of a subsequent claim as an abuse of process. The appellant’s entire damages claim had been adjudicated in the arbitration and he had been paid those damages.

In Leroux v. Ontario, the Court overturned a Divisional Court decision that set aside the decision of a motion judge who certified a class action under s. 5(1) of the Class Proceedings Act. The proposed class action pertained to adults with developmental disabilities who, like the appellant, were assessed and approved to receive three specific types of supports and services, but did not receive them because of institutional delays. They sued the provincial government for, among other things, operational negligence in administering the program and for breach of section 7 of the Charter. The Court agreed with the motion judge and held that that the Divisional Court erred in finding that it was plain and obvious that the proposed class proceeding would not succeed.

Other topics covered included breach of fiduciary duty in a partnership dispute, a dispute about the repayment of loans to investors who had invested in tax schemes, arbitration clauses that failed for want of consideration in the employment context and mortgage enforcement.

Wishing everyone an enjoyable weekend.

John Polyzogopoulos
Blaney McMurtry LLP
416.593.2953 Email

Ines Ferreira
Blaney McMurtry LLP
416.593.2953 Email

Civil Decisions

Ontario (Auditor General) v. Laurentian University , 2023 ONCA 299

Keywords: Public Law, Universities, Privilege, Statutory Interpretation, Auditor General Act, R.S.O. 1990, c. A.35, ss. 10, 27.1, Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36, Law Society Act, R.S.O. 1990, c. L.8, s. 49.8(1), Health Insurance Act, R.S.O. 1990, c. H. 6, s. 43.1(6), Archives and Recordkeeping Act, 2006, S.O. 2006, c. 34, Sched. A, s. 8(6), Auditor General Act, S.N.S. 2010, c. 33, s. 14(1), Alberta (Information and Privacy Commissioner) v. University of Calgary, 2016 SCC 53, Canada (Privacy Commissioner) v. Blood Tribe Department of Health, 2008 SCC 44, Lizotte v. Aviva Insurance Company of Canada, 2016 SCC 52

Hayer v. Bertasiene , 2023 ONCA 302

Keywords: Contracts, Real Property, Mortgages, Fraud, Usury, Civil Procedure, Amending Pleadings, Appeals, New Issues on Appeal, Criminal Code R.S.C., 1985, c. C-46, s. 347

Ferraro v. Neilas , 2023 ONCA 297

Keywords: Real Estate, Syndicated Mortgage, Contracts, Interpretation, Trust Law, Summary Judgment, Pre- and Post Judgment Interest, Contra Proferentum Rule, Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, Mortgage Brokerages, Lenders and Administrators Act, 2006, S.O. 2006, c. 29, Resolute FP Canada Inc. v. Ontario (Attorney General), 2019 SCC 60, Valard Construction Ltd. v. Bird Construction Co., 2018 SCC 8, Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), 2010 SCC 4, Orwinski v. Hi-Rise Capital, 2019 ONSC 3975, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, Fuller v. Aphria Inc., 2020 ONCA 403, Frenette v. Metropolitan Life Insurance Co., [1992] 1 S.C.R. 647, Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, Neely v. MacDonald, 2014 ONCA 874, Cathcart Inspection Services Ltd. v. Purolator Courier Ltd., (1981), 34 O.R. (2d) 187 (S.C.), aff’d 39 O.R. (2d) 656 (C.A.), Toronto (City) v. Toronto Railway, [1907] A.C. 315 (P.C.); Solway v. Lloyd’s Underwriters (2006), 80 O.R. (3d) 401 (C.A.), Spina v. Shoppers Drug Mart Inc., 2012 ONSC 5563, Pass Creek Enterprises Ltd. v. Kootenay Custom Log Sort Ltd., 2003 BCCA 580, Adamastos Shipping Co. v. Anglo-Saxon Petroleum Co., [1958] 1 All E.R. 725 (H.L.), BG Checo International Ltd. v. British Columbia Hydro & Power Authority, [1993] 1 S.C.R. 12, Peter Cotton-O’Brien, “A Trustee’s Fiduciary Duty to Disclose the Existence of a Trust” (2018) 37:3 Est. Tr. & Pensions J. 251, Geoff R. Hall, Canadian Contractual Interpretation Law, 4th ed. (Toronto: LexisNexis, 2020), Chitty on Contracts, 34th ed., vol. 1 (London: Sweet & Maxwell, 2021)

Fareau v. Bell Canada , 2023 ONCA 303

Keywords: Constitutional Law, Division of Powers, Taxation, Ultra Vires, Pith and Substance Doctrine, Consumer Protection, Telecommunications, Administrative Law, Contracts, Unconscionability, Crown Liability, Breach of Fiduciary Duty, Unjust Enrichment, Civil Procedure, Class Proceedings, Certification, Arbitration, Injunctions, Telecommunications Act, S.C. 1993, c. 38, ss. 27(1)-(3), 32(g), 34(1)-(3), Constitution Act, 1867, Class Proceedings Act, 1992, S.O. 1992, c. 6, s.5(1)(d), Bell Canada v. Bell Aliant Regional Communications, 2009 SCC 40, Penney v. Bell Canada, 2010 ONSC 2801, Weber v. Ontario Hydro, [1995] 2 S.C.R. 929, 620 Connaught Ltd. v. Canada (Attorney General), 2008 SCC 7, Toronto Distillery Company Ltd. v. Ontario (Alcohol and Gaming Commission): 2016 ONCA 960, Atlantic Lottery Corp. Inc. v. Babstock, 2020 SCC 19, R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42, Unfiltered Brewing Inc. v. Nova Scotia Liquor Corporation, 2019 NSCA 10, Steam Whistle Brewing Inc. v. Alberta Gaming and Liquor Commission, 2018 ABQB 476, QCTV Ltd. v. Edmonton (City) (1983), 48 A.R. 255 (Q.B.), Bell Canada c. Aka-Trudel, 2018 QCCA 829, Morin c. Bell Canada, 2012 QCCS 4191, Brown v. Hanley, 2019 ONCA 395, Mahar v. Rogers Cablesystems Ltd. (1995), 25 O.R. (3d) 690 (Ont. Gen. Div.), Sprint Canada Inc. v. Bell Canada (1999), 86 C.P.R. (3d) 285 (Ont. C.A.), Bazos v. Bell Media Inc., 2018 ONSC 6146, Telecom Decision CRTC 2004-8, Telecom Decision CRTC 2002-37, Telecom Decision CRTC 1997-19, Bell’s General Tariff Item 292 (Inmate Service)

Petrochemical Commercial Company International Ltd v. Nexus Management Group SDN BHD , 2023 ONCA 308

Keywords: Contracts, Interpretation, Civil Procedure, Settlements, Enforcement, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53

Doria v. Warner Bros. Entertainment Canada Inc., 2023 ONCA 321

Keywords: Contracts, Joint Liability, Civil Procedure, Striking Pleadings, Abuse of Process, Multiplicity of Proceedings, Arbitration, Courts of Justice Act, R.S.O. 1990, c. C.43, ss. 138, 139(1), Rules of Civil Procedure, r. 21.01(3)(d), Toronto (City) v. C.U.P.E., Local 79, 2003 SCC 63, 402 Mulock Investments Inc. v. Wheelhouse Coatings Inc., 2022 ONCA 718, Winter v. Sherman Estate, 2018 ONCA 703, Telus Communications Inc. v. Wellman, 2019 SCC 19, The Catalyst Capital Group Inc. v. VimpelCom Ltd., 2019 ONCA 354, Feinstein v. Freedman, 2014 ONCA 205

Leroux v. Ontario, 2023 ONCA 314

Keywords: Crown Liability, Negligence, Core Policy Decisions, Operational Negligence, Anns/Cooper Test, Proximity, Reasonable Foreseeability, Charter Claims, Right to Life, Liberty and Security of the Person, Civil Procedure, Class Proceedings, Certification, Reasonable Cause of Action, Preferable Procedure, Canadian Charter of Rights and Freedoms, s. 7, Class Proceedings Act, 1992, S.O. 1992, c. 6, s. 5(1), Services and Supports to Promote the Social Inclusion of Persons with Developmental Disabilities Act, 2008, S.O. 2008, c. 14, s. 3, s. 14, s.17 (1)(a), s. 17(1)(b), s. 18, s. 19, Crown Liability and Proceedings Act, 2019, S.O. 2019, c. 7, Sched. 17, s. 11(4), s. 11(5)(c), Ontario Disability Support Program Act, 1997, S.O. 1997, c. 25, Sched. B, Proceedings Against the Crown Act, R.S.O. 1990, c. P.27, s. 5(2), Rules of Civil Procedure, r. 21.01(1)(b), Cooper v. Hobart, 2001 SCC 79, Wareham v. Ontario (Minister of Community and Social Services), 2008 ONCA 771, Wynberg v. Ontario (2006), 82 O.R. (3d) 561 (C.A.), leave to appeal refused, [2006] S.C.C.A. No. 441, Chaoulli v. Quebec (Attorney General), 2005 SCC 35, Atlantic Lottery Corp. Inc. v. Babstock, 2020 SCC 19, R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42, Operation Dismantle v. The Queen, [1985] 1 S.C.R. 441, Darmar Farms Inc. v. Syngenta Canada Inc., 2019 ONCA 789, leave to appeal refused, [2019] S.C.C.A. No. 409, Nelson (City) v. Marchi, 2021 SCC 41, Just v. British Columbia, [1989] 2 S.C.R. 1228, Brown v. British Columbia (Minister of Transportation and Highways), [1994] 1 S.C.R. 420, Francis v. Ontario, 2021 ONCA 197, Carter v. Canada (Attorney General), 2015 SCC 5, Bowman v. Ontario, 2022 ONCA 477, Gosselin v. Quebec (Attorney General), 2002 SCC 84, Flora v. Ontario (Health Insurance Plan, General Manager), 2008 ONCA 538, Sagharian v. Ontario (Education), 2008 ONCA 411, New Brunswick (Minister of Health and Community Services) v. G. (J.), [1999] 3 S.C.R. 46, Fischer v. IG Investment Management Ltd., 2012 ONCA 47, aff’d on other grounds, 2013 SCC 69, Cirillo v. Ontario, 2021 ONCA 353, leave to appeal refused, [2021] S.C.C.A. No. 296

1346134 Ontario Limited v. Wright , 2023 ONCA 307

Keywords: Contracts, Interpretation, Debtor-Creditor, Demand Loans, Agency, Civil Procedure, Limitation Periods, Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), Limitations Act, 2002, S.O. 2002, c. 24, Sched. B, 1195303 Ontario Inc. v. Glen Grove Suites Inc., 2015 ONCA 580, Housen v. Nikolaisen, 2002 SCC 33, Hav-A-Kar Leasing Ltd. v. Vekselshtein, 2012 ONCA 826, Levac v. James, 2023 ONCA 73, Farej v. Fellows, 2022 ONCA 254, R. v. G.F., 2021 SCC 20, R. v. Sheppard, 2002 SCC 26

Rassouli-Rashti v. Tayefi , 2023 ONCA 315

Keywords: Partnerships, Winding Up, Breach of Fiduciary Duty, Damages, Mitigation, Civil Procedure, Trials, Witnesses, Credibility, Cross-Examination, Courts of Justice Act, R.S.O. 1990, c. C.43, s. 134, Southcott Estates Inc. v. Toronto Catholic District School Board, 2012 SCC 51, Hunt v. T.D. Securities Inc., 66 O.R. (3d) 481, Canson Enterprises Ltd. v. Boughton & Co., [1991] 3 S.C.R. 534, R. v. Samaniego, 2022 SCC 9, Katz v. Zentner, 2022 BCCA 371, R. v. Wesaquate, 2022 SKCA 101, Ker v. Sidhu, 2023 BCCA 158, Deep v. Wood (1983), 143 D.L.R. (3d) 246 (Ont. C.A.)

Goberdhan v. Knights of Columbus , 2023 ONCA 327

Keywords:Contracts, Enforceability, Consideration, Employment, Wrongful Dismissal, Independent Contractors, Civil Procedure, Arbitration Jurisdiction, Courts of Justice Act, R.S.O. 1990, c. C. 43, s. 106, Arbitration Act, 1991, S.O. 1991, c. 16., s. 7, Employment Standards Act, 2000, S.O. 2000, c. 41, s. 3(1)), Rules of Civil Procedure, r. 21.01, TELUS Communications Inc. v. Wellman, 2019 SCC 19, Huras v. Primerica (2000), 137 O.A.C. 79 (C.A.), Toronto Standard Condominium Corporation No. 1628 v. Toronto Standard Condominium Corporation No. 1636, 2020 ONCA 612, Peace River Hydro Partners v. Petrowest Corp., 2022 SCC 41, Uber Technologies Inc. v. Heller, 2020 SCC 16, Irwin v. Protiviti, 2022 ONCA 533, Dalimpex Ltd. v. Janicki (2003), 64 O.R. (3d) 737 (C.A.), 1476335 Ontario Inc. v. Frezza, 2021 ONCA 822

Short Civil Decisions

Boyer v. Callidus Capital Corporation , 2023 ONCA 311

Keywords: Civil Procedure, Anti-SLAPP, Costs, Full Indemnity, Courts of Justice Act, R.S.O. 1990, c. C.43, s. 137.1, Park Lawn Corporation v. Kahu Capital Partners, 2023 ONCA 129

Cipponeri Construction Services Inc. v. Orsi ,2023 ONCA 296

Keywords: Civil Procedure, Pleadings, Standing, Abuse of Process, Multiplicity of Proceedings, Limitation Periods, Stay of Proceedings, Rules of Civil Procedure, r. 21.01(3)(d), r. 26.02(c), Abarca v. Vargas, 2015 ONCA 4

Palichuk v. Palichuk , 2023 ONCA 309

Keywords: Civil Procedure, Costs, Rules of Civil Procedure, r. 57.01

Grewal v. 2390364 Ontario Inc., 2023 ONCA 316

Keywords: Contracts, Real Property, Agreements of Purchase and Sale of Land, Conditions Precedent, Remedies, Specific Performance

CIVIL DECISIONS

Ontario (Auditor General) v. Laurentian University , 2023 ONCA 299

[Tulloch, Thorburn and George JJ.A.]

Counsel:

R. Dearden, H. Fisher and C. Schropp, for the appellant

F. Schumann and Y. Satheaswaran, for the respondent

C.L. Spry and M.R. Bookman, for the intervener The Advocates’ Society

Keywords: Public Law, Universities, Privilege, Statutory Interpretation, Auditor General Act, R.S.O. 1990, c. A.35, ss. 10, 27.1, Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36, Law Society Act, R.S.O. 1990, c. L.8, s. 49.8(1), Health Insurance Act, R.S.O. 1990, c. H. 6, s. 43.1(6), Archives and Recordkeeping Act, 2006, S.O. 2006, c. 34, Sched. A, s. 8(6), Auditor General Act, S.N.S. 2010, c. 33, s. 14(1), Alberta (Information and Privacy Commissioner) v. University of Calgary, 2016 SCC 53, Canada (Privacy Commissioner) v. Blood Tribe Department of Health, 2008 SCC 44, Lizotte v. Aviva Insurance Company of Canada, 2016 SCC 52

facts:

The appellant, Laurentian University (“Laurentian”), was a grant recipient and had received annual grants from the Government of Ontario. The appellant, the Auditor General, is an Officer of the Legislative Assembly of Ontario. In February 2021, Laurentian entered creditor protection under the Companies’ Creditors Arrangement Act (“CCAA”) because it was facing a liquidity crisis. In response to Laurentian CCAA application, the Standing Committee on Public Accounts passed a motion requesting the Auditor General to conduct a value-for-money audit on Laurentian University’s operations from the period of 2010 to 2020.

As part of the audit, the Auditor General sought production of Laurentian’s privileged information and records. However, Laurentian declined this request on the basis that the Auditor General did not have the right to access these documents. In response, the Auditor General brought an application for a declaration that s. 10 of the Auditor General Act (the “Act”) grants the authority to pierce solicitor-client, litigation, and settlement privilege.

Subsection 10(1) of the Act provided that “[e]very ministry of the public service, every agency of the Crown, every Crown controlled corporation and every grant recipient shall give the Auditor General the information regarding its powers, duties, activities, organization, financial transactions and methods of business that the Auditor General believes to be necessary to perform his or her duties under this Act.” Subsection 10(2) specified that the Auditor General is entitled to have free access to all books, accounts, financial records, electronic data processing records, reports, files and all other papers, things or property belonging to a grant recipient that the Auditor General believes to be necessary to perform his or her duties. Finally, subsection 10(3) stated that “disclosure to the Auditor General under subsection (1) or (2) does not constitute a waiver of solicitor-client privilege, litigation privilege or settlement privilege.”

The application judge observed that solicitor-client privilege is a “civil right of supreme importance” that must “remain as close to absolute as possible” to be effective. The application judge held that while privilege can be abrogated by statute, the language of any statutory provision must be explicit and demonstrate a clear and unambiguous intent to do so. The application judge rejected the argument that Bill 18, which amended the Act, and an extrinsic aid called the 2003 Interim Protocol on Access by the Office of the Provincial Auditor of Ontario to Privilege Documents (the “2003 Interim Protocol”), evinced a clear intention to abrogate privilege. Furthermore, the application judge stated that the Auditor General’s arguments required him to read words into the Act that were not there. The application judge ultimately concluded that the Act did not contain a clear and unambiguous intention to abrogate privilege.

issues:

Does s. 10 of the Act allow the Auditor General to abrogate privilege?

holding:

Appeal dismissed.

reasoning:

It is well-established that privilege is sacrosanct. In its modern form, solicitor-client privilege is not merely a rule of evidence, but an important civil and legal right as well as a principle of fundamental justice in Canadian law. Therefore, privilege must be safeguarded and protected. The Court stated that privilege cannot be abrogated by inference and open-textured language governing production of documents will not be read to include solicitor-client documents. Privilege can only be set aside by legislative language that is “clear, explicit, and unequivocal”.

The Auditor General first submitted that the application judge erred in holding that the 2003 Interim Protocol and Hansard debates on Bill 18 did not assist in interpreting the Act. The Court disagreed, stating that the 2003 Interim Protocol predated Bill 18, and the Hansard debates regarding Bill 18 did not refer to abrogating privilege. Rather, the Hansard debates showed that Bill 18 was understood as being substantively the same as the predecessor bills that had been introduced in the previous years.

The Auditor General further submitted that, according to the Supreme Court of Canada’s decision in Lizotte v. Aviva Insurance Company of Canada, an abrogation can be clear, explicit and unequivocal where the legislature uses “another expression” that can be interpreted as referring unambiguously to the privilege. The Auditor General argued that, when s. 10 is read in its entirety and in the context of the Act as a whole, s. 10 clearly and unambiguously abrogates privilege because s. 10(3) inextricably linked s. 10(3) to an auditee’s mandatory disclosure duties under ss. 10(1) and (2). In other words, the legislature had intended s. 10(3) to safeguard privileged documents which were mandatorily disclosed.

The Court held that the application judge was correct to give no effect to this argument for two reasons. First, read in context, the statement from Lizotte was clearly not intended to usurp the principle that privilege cannot be abrogated by inference. Second, even if the rule from Lizotte that “another expression” rather than abrogating privilege were applied, the Act still did not unambiguously do so. The Court agreed with the application judge that there were other plausible ways to interpret the Act without abrogating privilege. For example, the legislature could have created safeguards in subsections 10(3) and 27.1(3) to protect privileged documents which were either inadvertently disclosed or disclosed with the consent of the privileged holder.

Further, the Court agreed with the submission of Laurentian that there are sound policy reasons why the legislature would want to allow, but not require, the disclosure of privileged information to the Auditor General without it resulting in a waiver of privilege. The Court concluded that, as there are other plausible ways to interpret the Act, s. 10 fell short of evincing the clear, explicit, and unequivocal legislative intention necessary to abrogate privilege.

Hayer v. Bertasiene , 2023 ONCA 302

[Doherty, Zarnett and Sossin JJ.A.]

Counsel:

T. Corsianos, for the appellants

H. Dhaliwal, for the respondents JH and BH

E.P. Youssoufian, for the respondents OI and VI

A. Schorr, for the respondents VK and SK

Keywords: Contracts, Real Property, Mortgages, Fraud, Usury, Civil Procedure, Amending Pleadings, Appeals, New Issues on Appeal, Criminal Code, R.S.C., 1985, c. C-46, s. 347

facts:

The respondents each sued in separate actions to enforce certain mortgages. The appellant LB was alleged to be the mortgagor under each mortgage; her son, the appellant SB was also alleged to be a mortgagor under a mortgage in favour of OI and VI (the “I’s”).

The motion judge heard summary judgment motions brought by the respondents in each action together and granted the judgments sought. The appellants, LB and SB, appealed the following relief:

In H’s action, JH recovered judgment against LB for payment of the amount due on a $2.78 million mortgage, both JH and BH recovered judgment against LB for payment of the amount due under a $711,000 mortgage, and LB was ordered to deliver possession of the mortgaged property to the H’s.
In K’s action, the K’s recovered judgment against LB for payment of the amounts due under a $750,000 registered mortgage and a $800,000 unregistered mortgage, and LB was ordered to deliver possession of the property to them subject to the prior rights of the H’s.
In I’s’ action, the I’s recovered judgment against LB and SB for payment of the amount due under mortgages securing a $400,000 debt. LB was ordered to deliver possession of the property to the I’s subject to the prior rights of the H’s and K’s, and SB was ordered to deliver possession of an apartment to the I’s.

issues:

The Appeal in the H’s Action

(1) Can LB amend her pleadings to allege that the interest rate on this mortgage exceeded 60% and was thus a criminal rate proscribed by s. 347of the Criminal Code, and the Court return the matter to the Superior Court to litigate the issue?

The Appeal in the K’s Action

(2) Did the motion err in finding that the mortgage was unregistered and that LB failed to discharge the mortgage?

The Appeal in the I’s Action

(3) Did the motion judge err in finding that SB was not a victim of mortgage fraud?

holding:

Appeals dismissed.

reasoning:

(1) No

The Court found that LB was not allowed to amend her pleadings. The Court explained that permitting such a request would simply allow a “do-over” and that the interests of the finality in litigation preclude such an approach.

(2) No

The Court held that the motion judge did not err and that was no merit in the complaint that the motion judge referred to the mortgage as unregistered. The Court noted that it was LB’s position that the mortgage was unregistered.

(3) No

The Court held that the motion judge did not err in finding that SB was not a victim of mortgage fraud. The Court found that LB was cross-examined after the affidavits were delivered and LB identified SB’s signature and testified that both her and SB signed the various mortgage documents. In addition, the Court found that the motion judge was entitled to prefer LB’s evidence on cross-examination over her earlier affidavit evidence about advice from SB that he did not sign these documents.

Ferraro v. Neilas , 2023 ONCA 297

[Hoy, Brown and Coroza JJ.A.]

Counsel:

A. Koshal and H. Kallmeyer, for the appellants

J. Binavince, for the respondents

Keywords: Real Estate, Syndicated Mortgage, Contracts, Interpretation, Trust Law, Summary Judgment, Pre- and Post Judgment Interest, Contra Proferentum Rule, Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, Mortgage Brokerages, Lenders and Administrators Act, 2006, S.O. 2006, c. 29, Resolute FP Canada Inc. v. Ontario (Attorney General), 2019 SCC 60, Valard Construction Ltd. v. Bird Construction Co., 2018 SCC 8, Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), 2010 SCC 4, Orwinski v. Hi-Rise Capital, 2019 ONSC 3975, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, Fuller v. Aphria Inc., 2020 ONCA 403, Frenette v. Metropolitan Life Insurance Co., [1992] 1 S.C.R. 647, Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, Neely v. MacDonald, 2014 ONCA 874, Cathcart Inspection Services Ltd. v. Purolator Courier Ltd., (1981), 34 O.R. (2d) 187 (S.C.), aff’d 39 O.R. (2d) 656 (C.A.), Toronto (City) v. Toronto Railway, [1907] A.C. 315 (P.C.); Solway v. Lloyd’s Underwriters (2006), 80 O.R. (3d) 401 (C.A.), Spina v. Shoppers Drug Mart Inc., 2012 ONSC 5563, Pass Creek Enterprises Ltd. v. Kootenay Custom Log Sort Ltd., 2003 BCCA 580, Adamastos Shipping Co. v. Anglo-Saxon Petroleum Co., [1958] 1 All E.R. 725 (H.L.), BG Checo International Ltd. v. British Columbia Hydro & Power Authority, [1993] 1 S.C.R. 12, Peter Cotton-O’Brien, “A Trustee’s Fiduciary Duty to Disclose the Existence of a Trust” (2018) 37:3 Est. Tr. & Pensions J. 251, Geoff R. Hall, Canadian Contractual Interpretation Law, 4th ed. (Toronto: LexisNexis, 2020), Chitty on Contracts, 34th ed., vol. 1 (London: Sweet & Maxwell, 2021)

facts:

The appellants, JN and 1249 Queen E. Inc. (“1249”) appealed the summary judgment granted against them on guarantees they gave as part of a 2012 syndicated first mortgage financing of a small residential condominium project planned at 1249 Queen Street East, Toronto (the “Project”).

In 2012, the respondents invested a total of $483,000 in a syndicated first mortgage. At the time of their investments, they signed Trust Agreements with the appellant, Hi-Rise Capital Ltd. (“HRC”). Attached to each Trust Agreement was a Loan Participation Agreement (“LPA”) made between the investor and HRC. HRC was used as the vehicle by which to create a syndicate of investors for a $5.5 million first mortgage on the Project’s property.

The Loan Commitment stated that HRC, as lender, was prepared to provide the appellant 1249 Queen E. Inc. (“1249”) with a first mortgage of $5.5 million, at an annual interest rate of 18%. HRC was to earn certain fees for the loan, which would be syndicated. Section 17 of the Loan Commitment specified the “security” the Borrower was required to deliver, which included a first mortgage charge and “Guarantees from the Guarantors.”

The Investment Documents included an Investor/Lender Disclosure Statement for Brokered Transaction (the “Disclosure Statement”), a Trust Agreement between HRC as Trustee and a respondent investor as Beneficiary (the “Trust Agreement”), and the LPA. The Disclosure Statement identified HRC as the mortgage brokerage and it was signed by the appellant JN.

The Disclosure Statement stated that: HRC and a related company would make a profit from the Project if it was successful; the Borrower was 1249, “a company owned by the same principal” as HRC; and a related company would hold title to the Project’s property. The Disclosure Statement also contained a standard form “Caution” that “this mortgage investment cannot be guaranteed by the mortgage brokerage.” The Trust Agreement was signed by JN as “Managing Director” of HRC and each investor. The Trust Agreement recited that the Trustee would hold an interest in the first mortgage on the Project’s property and an amount advanced by a Beneficiary “as trustee for the Beneficiaries” and indicated that the rights and obligations of the parties were more particularly set out in the LPA. Each LPA contained a clause titled, “Fixed Interest Rate”, which stated that “HRC agrees to pay the Participant a fixed rate of [x]% per annum as and when received from the Borrower.” All but one of the LPAs specified an interest rate of 10%.

Although the investors received some payments on their investments, the Project never proceeded. The property was sold at a loss, with the investors receiving part of the sale proceeds around October 2017. The respondent investors commenced an action to recover the losses on their investments.

The motion judge granted summary judgment and interpreted the LPAs as incorporating, by reference, the terms of a July 2, 2012 First Mortgage Loan Commitment (“Loan Commitment”) under which HRC was the Lender and 1249 was the Borrower. He interpreted the Loan Commitment as containing guarantees of the loan by 1249 and JN personally.

The motion judge held that the respondent investors were entitled to the benefit of those guarantees. He gave judgment against JN and 1249 for the losses suffered by the respondents. He awarded pre- and post-judgment interest at an annual rate of 18% (the “Judgment”). The motion judge held that applying the relevant legal principles to the documentary record led to the conclusion that there was no genuine issue requiring a trial regarding the liability of 1249 and JN to the investors based on their guarantees in the Loan Commitment.

issues:

(1) Did the motion judge err in his application of the principles of contract interpretation and trust law in concluding the respondent investors were entitled to the benefit of guarantees contained in the Loan Commitment?

(2) Did the motion judge err in the interest rate he used to calculate damages and pre- and post-judgment interest?

holding:

Appeal allowed, in part.

reasoning:

(1) No.

The majority of the Court found no reversible error in the motion judge’s interpretation of the Trust Agreement, the LPAs and the Loan Commitment, nor in the motion judge’s conclusion that JN and 1249 were jointly and severally liable to the respondent investors on the guarantees they gave in the Loan Commitment.

The Court cited Resolute FP Canada Inc. v. Ontario (Attorney General) for the proposition that the principles of Canadian contract law focus on determining the objective, not subjective, intentions of the parties, as expressed by the language of an agreement, understood in light of the surrounding circumstances or factual matrix. The Court found that the objective intentions and the plain language of the Trust Agreements and LPAs supported the motion judge’s interpretation that the reasonable expectations of the parties to the LPAs, as expressed by their language, objectively viewed, were that HRC, as Trustee, would advance the investors’ funds to the borrower, 1249, on the “terms and conditions contained in the Loan Commitment.” Those terms and conditions included the guarantees from JN and 1249.

The Court was not persuaded that the investors’ lack of knowledge about all the details of an incorporated document undermined the motion judge’s interpretation of the Trust Agreements and LPAs as incorporating by reference the “terms and conditions contained in the Loan Commitment”, including the guarantees. The Court held interpretation was open to the motion judge on the plain language of the contractual documents. Accordingly, the Court found that the motion judge did not err in concluding that “[t]he investors’ lack of knowledge as to the specific loan commitment is not relevant as such resulted only due to non-disclosure.”

Finally, with respect to the limiting language in the Disclosure Statement, the Court noted that while the Disclosure Statement stated that the mortgage investment could not be guaranteed by HRC, it only applied to the possibility of a guarantee by HRC specifically, as the mortgage brokerage, and did not apply to the two guarantees provided by JN and 1249. This finding was supported by Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), where the Supreme Court held that when interpreting whether an exclusion clause applies in the circumstances, the key principle of contractual interpretation is that the words of one provision must not be read in isolation but should be considered in harmony with the rest of the contract and in light of its purposes and commercial context. As a result, the Court held that the interpretive result of the motion judge’s decision was not unfair to JN. He was heavily conflicted in this transaction, and he failed to disclose material information to the respondent investors. He therefore could not rely on language designed to protect HRC in its capacity as Trustee to avoid liability on his personal guarantee given to support the borrower.

(2) Yes.

The majority of the Court found that the motion judge erred in using an 18% per annum interest rate to calculate the respondents’ losses on their investments and the pre- and post-judgment interest rates. The motion judge’s reasons were silent on why he applied an 18% interest rate to calculate the judgment amounts when the LPAs specified interest at 10% or 12%. The record disclosed that the interest rate payable by the Borrower, 1249, to HRC on the syndicated first mortgage was 18% but the motion judge’s reasons were silent on why the motion judge applied that rate.

The majority held that the interest rates applicable to calculate the respondents’ losses and pre- and post-judgment interest should be those contained in the LPAs. Accordingly, the motion judge committed a palpable and overriding error by applying a different interest rate of 18%.

Dissenting Decision of Hoy J.A.

(1) Yes.

Justice Hoy found that the motion judge made several errors in his interpretation of the Trust Agreement that justified appellate intervention. Relying on Sattva Capital Corp. v. Creston Moly Corp., Justice Hoy noted the objective of contractual interpretation was to determine “the intent of the parties and the scope of their understanding” at the time they entered into the agreement. This requires a consideration of the language of the agreement as well as the surrounding circumstances or “factual matrix” in which the agreement was made.

Justice Hoy found that the motion judge erred in resolving what he characterized as conflicting terms in the agreements without regard to the surrounding circumstances known to HRC and the investors at the time the Trust Agreements were signed. At the time the investors entered into the Trust Agreements they believed they were investing in a first mortgage on the Property. The document which they were aware of. i.e., the LPA, provided that there was no guarantee. As a result, Justice Hoy would have held that by applying Tercon, the Relationship clause of the LPA providing that “… repayment of the Participant’s Participation is in no way, either directly or indirectly, guaranteed by HRC or any of its affiliates, subsidiaries, employees or officers…” was both clearly applicable and enforceable. As JN and the Borrower did not deliver guarantees, as the Loan Commitment had contemplated, the parties to the Trust Agreements, HRC and the investors, intended that the mortgage on the Property was to constitute the investors’ only security. Therefore, there would have been no unfairness to the investors in interpreting the trust agreement in a manner consistent with the parties’ mutual intention at the time the contract was entered into.

Justice Hoy also found the motion judge failed to consider the headings to the paragraphs in the LPA when attempting to resolve the apparent inconsistency. Justice Hoy noted that absent an indication to the contrary in an agreement, the headings form part of the agreement and are to be considered when interpreting it. The inconsistency in the LPA could have been resolved by giving effect to the heading “Use of Funds” in the LPA, which suggested that the provisions of the Loan Commitment were not to be incorporated by reference and that the purpose of referring to the Loan Commitment was to describe the nature and purpose of the loan.

Justice Hoy further found that the motion judge erred by failing to give effect to the principle that when terms are incorporated into a contract by terms that do not give the incorporated terms priority, that is, the terms of the LPA (host contract) with its Relationship clause, prevail over any inconsistent terms incorporated by reference (that is, the provisions of the Loan Commitment regarding JN’s guarantee). In Justice Hoy’s view, this principle would have had particular force where, as here, the parties to the contract incorporated by reference differ from the parties to the host contract.

Finally, Justice Hoy found that the motion judge misapplied the principle that where there is an apparent conflict between a general term and a specific term, the terms may be reconciled by taking the parties to have intended the scope of the general term, and not by extending the subject-matter of the specific term. Justice Hoy found it clear that the guarantee by JN contemplated by the Loan Commitment was not a term of the Trust Agreement.

Unlike the majority, Justice Hoy found it necessary to go through all of the steps as set out in Tercon because when interpreting the exclusion clause, regard must be had to the commercial context known to the parties. As the Disclosure Statement disclosed that the Borrower and HRC were owned by the same principal, the investors were aware both that their investment could be lost, and of the close interrelationship between HRC and the Borrower. In Justice Hoy’s view, the Relationship clause in the Disclosure Statement was clear and unambiguous and it applied in the circumstances. The second stage of the Tercon analysis asks whether the Relationship clause in the Disclosure Statement was unconscionable. Justice Hoy found that it was not unconscionable as each investor completed an Investor Profile, was aware of the risks, and were strongly advised to obtain independent legal advice. Finally, at the third stage of the Tercon analysis, determining whether there was an overriding public policy that outweighed the very strong public interest in the enforcement of the contract. Justice Hoy found that it was not the Court’s job to rescue the investors from their decision to participate in risky mortgage investments which they knew involved related parties without the independent legal advice they were strongly advised to obtain.

(2) As Justice Hoy would have allowed the appeal on the first issue, it was unnecessary to address the second issue.

Fareau v. Bell Canada , 2023 ONCA 303

[Harvison Young, Thorburn and Copeland JJ.A.]

Counsel:

J. Brown, M. Seddigh, D. Sterns, K. L. Mercer and G. Philipupillai, for the representative appellants, VF and RC

P. Le Vay and C. di Carlo, for the respondent Bell Canada

C. P. Thompson, S. Z. Green and A. Jin, for the respondent His Majesty the King in Right of Ontario

facts:

Between 2013 and 2021, inmates in Ontario correctional facilities were only permitted to make collect telephone calls and only on a phone service provided by Bell Canada (“Bell”). Her Majesty the Queen in Right of Ontario (“Ontario”) awarded Bell the contract to provide those telephone services. Ontario received a percentage commission from Bell pursuant to Bell’s contract with Ontario.

The appellant, VF, spent time in an Ontario correctional facility. She alleged that during that time, she faced significant hardship in maintaining contact with her loved ones because of the rates charged by Bell.

The appellant, RC, is the father of AC, who was detained in solitary confinement in Ontario for more than four years. RC alleged that the cost of the collect calls from his son caused him considerable stress and hurt his ability to maintain contact with his son.

The appellants sought to bring a class action on behalf of prisoners in Ontario correctional facilities and everyone who paid for collect calls originating from such facilities during the relevant period. They claimed that Bell charged unreasonable and unconscionable telephone rates for sending and receiving long-distance calls from provincial correctional facilities.

The appellants pleaded various causes of action: (1) unjust enrichment against both Bell and Ontario; (2) breach of consumer protection legislation and unconscionable contracts against Bell only; and (3) and breach of fiduciary duty and the imposition of an ultra vires indirect tax against Ontario alone.

The appellants brought a certification motion, and Bell and Ontario brought cross-motions seeking a stay or dismissal of the action on the basis that the claims were within the jurisdiction of the Canadian Radio-television and Telecommunications Commission (“CRTC”).

The central issue before the motion judge was which claims should be allowed to proceed and before whom. On the certification motion, the motion judge found that it was plain and obvious that: (1) the claim that the commission paid to Ontario was an indirect ultra vires tax, and (2) the claim against Bell and Ontario pursuant to s. 72(1) of the Telecommunications Act, disclosed no cause of action. The appellants did not appeal the dismissal of the claim for breach of the Telecommunications Act.

The motion judge granted a permanent stay of the remaining claims of (1) unjust enrichment claim against Bell and Ontario, (2) breach of consumer protection legislation and unconscionable contract claims against Bell, and (3) breach of fiduciary duty against Ontario on the basis that the pith and substance of the appellants’ claims were within the jurisdiction of the CRTC, it was therefore appropriate to defer to the jurisdiction and expertise of the CRTC, and meaningful remedies were available from the CRTC.

The appellants challenged the dismissal of their ultra vires tax claim on the basis that the charges amounted to an indirect tax on class members. They also challenged the permanent stay of the remaining claims.

issues:

(1) Did the motion judge err in dismissing the appellants’ claim that the commissions paid to Ontario were an ultra vires tax?

(2) Did the motion judge err by deferring jurisdiction to the CRTC and permanently staying the unjust enrichment, unconscionable contract and breach of consumer legislation claims?

(3) Did the motion judge err in permanently staying the claim for breach of fiduciary duty?

holding:

Appeal allowed, in part.

reasoning:

(1) No.

The Court held that the motion judge was alive to the threshold for striking a claim. He recognized that the “plain and obvious” test called on courts to read the claim as generously as possible because cases should, if possible, be disposed of on their merits at trial. However, he also recognized that “the power to strike hopeless claims is ‘a valuable housekeeping measure essential to effective and fair litigation’”: Babcock, at para. 18, citing R. v. Imperial Tobacco Canada Ltd.

The Court also saw no error in the motion judge’s conclusion that the commissions were a proprietary charge. In the context of the constitutional limitations on taxation, nothing turned on whether a given payment was best characterized as a “proprietary charge” or a “contractual payment”, since neither was a tax. Neither involved the element of compulsion, which was a threshold requirement for characterizing a payment as a tax.

The Court did not accept that there was a procedural fairness concern because the proprietary charge issue was not specifically argued. The core argument advanced by Ontario before the motion judge was that Bell paid the commission to Ontario subject to voluntary private law obligations and not under legislative compulsion.

Finally, the Court held that the motion judge did not err in taking into account the contract between Bell and Ontario in determining that it was plain and obvious the commissions were not a tax. It was clear, as a matter of law, that a payment made pursuant to a contract was not in the nature of a tax, which involved a payment compelled by or under a statute.

While the Court accepted that the appellants were not party to the agreement between Bell and Ontario, and had no choice but to pay if they wanted to make a phone call, this did not change the fact that payment of commissions was a matter of contract law and not a public law matter: the payments were payable by Bell to Ontario pursuant to a contract and, as the respondent Ontario stressed, Bell’s contractual obligation to pay the commissions existed regardless of whether Bell successfully collected any revenue from payors. If Bell failed to pay, Ontario’s only recourse would have been a contract claim.

(2) Yes.

The Court held that the decision to stay a proceeding is a discretionary decision that is normally entitled to deference. A discretionary decision may be interfered with if it was “based on a wrong principle, a failure to consider a relevant principle or a misapprehension of the evidence”: Brown v. Hanley.

While the Court agreed with the motion judge’s analysis of the CRTC’s jurisdiction and the pith and substance of these claims, the Court found that he erred in not taking into account the possibility that the CRTC may be precluded from or may elect not to adjudicate whether long-distance rates charged to class members were just and reasonable.

Further, the Court determined that unless the CRTC was held to have forborne from regulating these rates, it had the jurisdiction and the mandate to determine just and reasonable rates and had broad authority to order damages payable for the failure to do so. Moreover, the CRTC may have ordered remedies on a class-side basis, including retroactive relief.

However, if the CRTC declined to assume jurisdiction to determine whether the rates were just and reasonable either because it could not or chose not to do so, a permanent stay would have left the appellants without adjudication of the issue of the reasonableness of the rates charged either by the CRTC or the Superior Court.

Thus, the Court found that the judge erred in not considering the possibility that the CRTC may have not adjudicated whether long-distance rates were just and reasonable. Accordingly, the Court substituted a temporary stay for the permanent stay ordered by the motion judge, holding that a temporary stay, unlike a permanent stay, ensured that the appellants and the Class would not be left without a forum for the adjudication of their claims, which was consistent with the principle of access to justice. Ordering a temporary stay would provide the CRTC with the opportunity to address the forbearance issue and then possibly, decide whether the rates were just and reasonable.

(3) Yes.

The Court noted that there was good reason for the motion judge to have exercised his discretion in categorizing the breach of fiduciary duty claim as falling under the rate-regulating purview of the CRTC. The Court reasoned that the breach of fiduciary duty claim, at its core, raised questions about rate-setting and the allocation of certain proceeds derived from those rates, and the Supreme Court has identified that addressing such quarrels is a “polycentric exercise with which the CRTC is statutorily charged and which it is uniquely qualified to undertake”: Bell Aliant. Indeed, “[p]ursuing policy objectives through the exercise of its rate-setting power is precisely what s. 47 [of the Act] requires the CRTC to do in setting just and reasonable rates”: Bell Aliant.

The Court held that the issue of whether the rates were reasonable and just should therefore be brought to the CRTC to decide if it forbore from all regulation of long-distance calls to and from correctional institutions, and if it did, whether it had the ability to reconsider its own decision to forbear. If the CRTC decided that issue and or adjudicated the issue of reasonable rates, the Superior Court would be in a position to decide whether there was a cause of action for breach of fiduciary duty, which could proceed in Ontario. Buttressed by the CRTC’s broad remedial powers, such an approach would ensure that the appellants were not at risk of a real deprivation of ultimate remedy.

As such, the Court varied the permanent stay to a temporary stay until such time as the CRTC elects to decide whether to forbear or to decide whether the rate was just and reasonable.

Petrochemical Commercial Company International Ltd v. Nexus Management Group SDN BHD , 2023 ONCA 308

[Miller, Trotter and Favreau JJ.A.]

Counsel:

A. Bouchelev, A. Wray and J. Echavarria, for the appellants

J. Stainsby and M. Murray, for the respondents

Keywords: Contracts, Interpretation, Civil Procedure, Settlements, Enforcement, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53

facts:

The individual appellants, father and son, were together suspected of defrauding the corporate respondents of over US $71 million. The respondents were Iranian companies that engaged in the sale of petroleum and other commodities. The respondents employed the appellants as intermediaries in order to evade US sanctions on Iranian produced petroleum products. The respondents alleged that the appellants embezzled substantially all of the funds they obtained on the respondents’ behalf from the international sale of the respondents’ oil.

The respondents brought civil actions against the appellants in various jurisdictions, including Portugal, Malaysia, Singapore, Australia, Cyprus, and Canada, and obtained a Mareva injunction in support of a world-wide freezing order from the Ontario Superior Court of Justice. In addition, criminal proceedings against the appellants were commenced in Iran, and International Criminal Police Organization (“Interpol”) Red Notices were issued for the arrest of the appellants.

Subsequently, the parties agreed to settle all proceedings between them and memorialized their agreement in a document entitled “Mutual Agreement”. The Mutual Agreement contemplated that the parties’ respective obligations would be particularized in written “Minutes of Settlement”, which would be filed with the court registries in the various jurisdictions.

Pursuant to the Minutes of Settlement, which were finalized shortly after the Mutual Agreement, the appellants agreed to deliver to the respondents millions of dollars’ worth of property, including real estate, cash, cryptocurrency, gold bullion, and shares in private companies. In return, the respondents agreed to discontinue proceedings against the appellants.

The scope of the respondents’ obligations to discontinue proceedings was at the heart of this appeal. The respondents discontinued civil proceedings in various jurisdictions, and the appellants delivered up a significant proportion of the promised assets. But the appellants asserted that the respondents failed to uphold their end of the settlement because the criminal proceedings in Iran had not been discontinued, and the Interpol Red Notices had not been withdrawn.

The appellants brought a motion compelling the respondents to fulfil their obligations by having the Red Notices withdrawn and the criminal proceedings discontinued. In the alternative, they sought to set aside the Minutes of Settlement based on non-performance, or because the respondents acted in bad faith. The motion judge dismissed the motion.

issues:

(1) Did the motion judge err in failing to interpret the Minutes of Settlement in light of the Mutual Agreement?

(2) Did the motion judge err in relying on evidence of surrounding circumstances to overwhelm the clear meaning of the Minutes of Settlement?

(3) Did the motion judge err in failing to find that the respondents acted in bad faith by agreeing to have the criminal prosecution discontinued when they knew they could not?

(4) Did the motion judge err in misapprehending evidence regarding the independence of the Iranian prosecutor?

holding:

Appeal dismissed.

reasoning:

(1) No.

The Court did not agree that the motion judge erred by not using the Mutual Agreement as an interpretive aid in the manner proposed by the appellants. The motion judge’s interpretation of the Minutes of Settlement was accorded substantial deference: Sattva Capital Corp. v. Creston Moly Corp. The Court held it was not unreasonable, nor an error in principle, for the motion judge to have concluded that the Mutual Agreement was superseded by the Minutes of Settlement, and that the latter was the sole contract governing the parties’ obligations. As the motion judge noted, several provisions of the Minutes of Settlement contradicted the Mutual Agreement, which supported her conclusion that the two documents were not meant to be coordinate, but instead that the Minutes of Settlement displaced the Mutual Agreement.

Furthermore, the Court reasoned that there was no need to use the Mutual Agreement as part of the factual matrix for interpretation, as the text of the Minutes of Settlement was not ambiguous. The only uncertainty was resolved both by the surrounding circumstances and the text of the Minutes of Settlement read as a whole. Therefore, the Court held that the motion judge was not required to interpret the Minutes of Settlement in a manner that would give interpretive priority to the Mutual Agreement.

(2) No.

The Court held that the motion judge correctly applied the analytical framework in Sattva. She started with the text of the agreement and came to her conclusion as to its meaning before considering surrounding circumstances. She found it clear from the text that the respondents did not and could not undertake the obligation articulated by the appellants. That is, the respondents could not do anything more than request a discontinuation of the criminal proceedings or the withdrawal of the Interpol Notices, since they lacked authority to guarantee such discontinuance. The Court further found that the motion judge’s interpretation was entitled to deference.

(3) No.

The Court held that having found that the motion judge’s interpretation of the Minutes of Settlement was reasonable entailed that the respondents did not make the misrepresentation complained of in bad faith.

(4) No.

The appellants’ argued that Dr. L contradicted the evidence of other witnesses preferred by the motion judge. The Court held that Dr. L was one witness among others. He testified as to various meetings that took place between representatives of the parties and the Iranian prosecution office and offered opinion evidence on the nature of the respondents’ obligations.

The Court reasoned that having cited the evidence of Dr. L, the motion judge clearly did not overlook it. Although the appellants would have preferred the motion judge to have been more impressed with Dr. L’s evidence than she was, she was not required to address it in any greater measure than she did.

The Court then determined that the only remaining question was whether the motion judge misapprehended his evidence, having found that he had “acknowledged” that the respondents were only in the position to make requests of the Iranian prosecution. To this point, the Court held that although Dr. L advanced the proposition in his affidavit that the respondents were in breach of their obligations because they had “failed to take the necessary steps to dismiss the proceedings” and “failed to withdraw the Interpol Notices”, his account of the various meetings and telephone calls between his clients and various individuals from the prosecution office in Iran supported the motion judge’s characterization of his evidence as an acknowledgment (whether intended or not) that withdrawing the criminal charges was solely within the authority of the prosecution office.

Doria v. Warner Bros. Entertainment Canada Inc., 2023 ONCA 321

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

Counsel:

S.A. Alexanian, for the appellant

J. Tam and N. O’Toole, for the respondents, Warner Bros. Entertainment Canada Inc., Warner Bros. Television Group, and Time Warner Inc.

A. Perumal, for the respondent, 9818642 Canada Inc., operating as Bulletproof Location Support

facts:

Pursuant to a “location agreement”, the appellant, AD, rented his home to Renraw Productions Services Inc. (“Renraw”) for $27,500 to be used as a film set for a television show. The family room floor was scratched during filming. Renraw accepted liability for AD’s damages, but the parties could not agree on the amount. AD invoked the arbitration clause in the location agreement and sought a damages award of more than $650,000. The arbitrator awarded damages of $49,668.38, including anticipated repair costs and displacement expenses for a 21-day repair period. AD unsuccessfully sought to have the arbitral award set aside.

After Renraw paid the arbitral award, AD sued the respondents, Warner Bros. Entertainment Canada Inc., Warner Bros. Television Group, Time Warner Inc. (the “WB parties”) and 9818642 Canada Inc., operating as Bulletproof Location Support, who were parties involved in the filming, for more than $500,000. The respondents moved successfully pursuant to r. 21.01(3)(d) of the Rules of Civil Procedure to have AD’s action dismissed as an abuse of process.

In resisting the dismissal motion, AD relied upon s. 139(1) of the Courts of Justice Act (“CJA”) which provides that where two or more persons are jointly liable in respect of the same cause of action, a judgment against or release of one of them does not preclude judgment against any other in the same or a separate proceeding.

The motion judge summarized in his decision that “section 139 does not apply to circumstances like the one before me where the plaintiff has had a full opportunity to have his entire claim adjudicated in a first proceeding, was awarded judgment, and has fully collected on the judgment. The plaintiff is simply dissatisfied with the amount he was awarded. Section 139 does not give parties the right to relitigate issues simply because the adjudicator of the first proceeding did not award the level of damages that the plaintiff asked for.”

issues:

(1) Did the motion judge err by purporting to use his inherent jurisdiction to override the right conferred in s. 139 of the CJA and by not giving effect to its plain meaning?

(2) Did the motion judge err by treating the private Renraw arbitration proceeding as binding on other parties, and by effectively treating AD as having waived his rights against other parties through the Renraw location agreement?

(3) Did the motion judge err in treating the action as re-litigation even though it raised distinct liability issues not raised during the arbitration?

(4) Did the motion judge err by “purporting to extinguish AD’s claim on the grounds of political expediency”?
(5) Did the motion judge err by effectively treating the r. 21.01(3)(d) motion as if it was a summary judgment motion?

(6) Did the motion judge err by distinguishing the authorities that AD relied upon?

holding:

Appeal dismissed.

reasoning:

(1) No.

The Court held that the motion did not err by purporting to use his inherent jurisdiction and by not giving effect the plain meaning of s. 139. The Court clarified that s. 139 does not confer an affirmative or even a “presumptive” right to sue jointly liable parties separately. On its plain wording, it provides that separate suits against jointly liable parties are “not preclude[d]” if a judgment has been obtained against one of them. The Court further stated that the fact that actions are “not precluded” by prior judgments against a jointly liable party does not mean that such actions must always be permitted to proceed, regardless of the circumstances. If a judge appropriately determines that the subsequent proceeding constitutes an abuse of process, that subsequent proceeding can be stayed or dismissed.

(2) No.

The Court rejected this argument because the Court found that they were not accurate characterizations of the motion judge’s decision. The Court found that the motion judge did not purport to rest his decision on the legal effect of the arbitration decision or of the Renraw location agreement.

(3) No.

The Court found the fact that liability issues would differ in the two proceedings was immaterial to the motion judge’s decision.

(4) No.

The Court rejected this argument because the Court found that it was not premised on a fair reflection of the motion judge’s decision. The Court noted that the principle of “judicial economy” supports the use of the abuse of process doctrine in appropriate cases by precluding re-litigation. The motion judge recognized explicitly that “judicial economy cannot undermine substantive rights” and expressed “confidence” that dismissing the proceeding “causes no injustice”. The Court held that the motion judge did not err in noting that considerations of judicial economy would be served by dismissing the action that he judged to be abusive.

(5) No.

The Court found that there was no reasonable issue with the motion judge’s conclusion, as AD instituted the proceedings against the respondents because he was dissatisfied with the arbitral award. The Court held that no weighing of evidence was required to make this determination, nor did it stretch the motion judge’s function on a pleadings motion.

(6) No.

The Court agreed with the motion judge in his finding that Telus Communications Inc. v. Wellman (“Wellman”) does not support the proposition that there will always be a right to proceed with separate proceedings whenever one of the claims may have to resolved by arbitration. The Court found that Wellman did not even engage the discretionary determination of judges that the particular proceedings before them are an abuse of process.

Leroux v. Ontario , 2023 ONCA 314

[Doherty, Zarnett and Coroza JJ.A.]

Counsel:

K. Baert, C. Poltak, and C. Leach, for the appellant

D.B. McPherson, V. Glasser, and R. Amarnath, for the respondent

Keywords:Crown Liability, Negligence, Core Policy Decisions, Operational Negligence, Anns/Cooper Test, Proximity, Reasonable Foreseeability, Charter Claims, Right to Life, Liberty and Security of the Person, Civil Procedure, Class Proceedings, Certification, Reasonable Cause of Action, Preferable Procedure, Canadian Charter of Rights and Freedoms, s. 7, Class Proceedings Act, 1992, S.O. 1992, c. 6, s. 5(1), Services and Supports to Promote the Social Inclusion of Persons with Developmental Disabilities Act, 2008, S.O. 2008, c. 14, s. 3, s. 14, s.17 (1)(a), s. 17(1)(b), s. 18, s. 19, Crown Liability and Proceedings Act, 2019, S.O. 2019, c. 7, Sched. 17, s. 11(4), s. 11(5)(c), Ontario Disability Support Program Act, 1997, S.O. 1997, c. 25, Sched. B, Proceedings Against the Crown Act, R.S.O. 1990, c. P.27, s. 5(2), Rules of Civil Procedure, r. 21.01(1)(b), Cooper v. Hobart, 2001 SCC 79, Wareham v. Ontario (Minister of Community and Social Services), 2008 ONCA 771, Wynberg v. Ontario (2006), 82 O.R. (3d) 561 (C.A.), leave to appeal refused, [2006] S.C.C.A. No. 441, Chaoulli v. Quebec (Attorney General), 2005 SCC 35, Atlantic Lottery Corp. Inc. v. Babstock, 2020 SCC 19, R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42, Operation Dismantle v. The Queen, [1985] 1 S.C.R. 441, Darmar Farms Inc. v. Syngenta Canada Inc., 2019 ONCA 789, leave to appeal refused, [2019] S.C.C.A. No. 409, Nelson (City) v. Marchi, 2021 SCC 41, Just v. British Columbia, [1989] 2 S.C.R. 1228, Brown v. British Columbia (Minister of Transportation and Highways), [1994] 1 S.C.R. 420, Francis v. Ontario, 2021 ONCA 197, Carter v. Canada (Attorney General), 2015 SCC 5, Bowman v. Ontario, 2022 ONCA 477, Gosselin v. Quebec (Attorney General), 2002 SCC 84, Flora v. Ontario (Health Insurance Plan, General Manager), 2008 ONCA 538, Sagharian v. Ontario (Education), 2008 ONCA 411, New Brunswick (Minister of Health and Community Services) v. G. (J.), [1999] 3 S.C.R. 46, Fischer v. IG Investment Management Ltd., 2012 ONCA 47, aff’d on other grounds, 2013 SCC 69, Cirillo v. Ontario, 2021 ONCA 353, leave to appeal refused, [2021] S.C.C.A. No. 296

facts:

The appellant was a young adult with a developmental disability and is non-verbal, requiring 24/7 support and services to meet her basic living needs. Her statement of claim alleges that, prior to her eighteenth birthday in February 2016, Ontario provided services to the appellant through the Ministry of Children and Youth Services (the “MCYS”). Despite her needs not changing, the MCYS terminated these services when the appellant turned 18 years old. In anticipation of MCYS services ending, the appellant’s family applied approximately six months before her eighteenth birthday for services and supports under the Services and Supports to Promote the Social Inclusion of Persons with Developmental Disabilities Act, 2008 (the “2008 Disabilities Act”) which is administered by the Ministry of Community and Social Services (the “MCSS”).

In August and September 2016, the appellant was assessed for her eligibility under the 2008 Disabilities Act by the regional Developmental Services Ontario (“DSO”) office in Timmins, for which Ontario is responsible. She was assessed as eligible and approved by the DSO for Developmental Services. Despite this approval, Ontario neither provided nor funded such services to meet her daily living needs. Instead, the appellant was placed on a waitlist, referred to in the claim as a “DSO Waitlist”, with no estimate as to the length of wait. The claim alleges that the appellant has remained on a DSO waitlist, resulting in her receiving only the supports and services that her family have been able to provide at their own expense, through to the time of the commencement of the action in April 2017 and its amendment in January 2019.

On the basis that the appellant’s experience is one shared by others who are similarly situated, the appellant, through her litigation guardian commenced a proposed class action against the Government of Ontario and moved for certification under s. 5(1) of the Class Proceedings Act (the “CPA”). The proposed class is composed of adults with developmental disabilities who, like the appellant, have been assessed and approved to receive three specific types of supports and services under the Services and Supports to Promote the Social Inclusion of Persons with Developmental Disabilities Act, but did not receive them or experienced substantial delays. The motion judge held that the criteria for certification were met. In particular, he was satisfied that the statement of claim disclosed a cause of action as required by s. 5(1)(a) of the CPA, both for negligence and breach of s. 7 of the Canadian Charter of Rights and Freedoms, which guarantees “the right to life, liberty and security of the person and the right not to be deprived thereof except in accordance with the principles of fundamental justice”. Taking the facts alleged in the statement of claim as true, the motion judge was of the view that each claim had a reasonable chance of success and neither was doomed to fail.

The motion judge characterized the negligence claim as one complaining of operational negligence rather than core policy decisions for which the government enjoys immunity: “[t]he complaint, in a nutshell, is about the negligent operation of a social assistance system that has approved the delivery of much-needed support and services but then fails to follow up”. Although he was skeptical of the s. 7 Charter claim, he did not consider the appellant’s claim that Ontario’s conduct deprived class members of “some measure of security of the person” to be foreclosed by the existing jurisprudence. The motion judge also held that the balance of the certification criteria under ss. 5(1)(b)-(e) had been satisfied.

The majority of the Divisional Court allowed Ontario’s appeal and set aside the certification order. The Divisional Court was unanimous in its view that the s. 7 Charter claim was precluded by binding jurisprudence. In the majority’s view, the negligence claim was also doomed to fail as it complained of core policy decisions about the allocation of scarce resources. The dissenting judge would have permitted the negligence claim to continue on the basis that the motion judge correctly characterized it as impugning operational rather than policy matters.

issues:

(1) Did the Divisional Court err in concluding the appellant’s negligence claim did not disclose a reasonable cause of action?

(2) Did the Divisional Court err in concluding the appellant’s s. 7 Charter claim did not disclose a reasonable cause of action?

holding:

Appeal allowed.

reasoning:

(1) Yes.

The Court found that the Divisional Court erred in its treatment of the appellant’s negligence claim. The majority of the Divisional Court fell into error by: (a) mischaracterizing the claim in two ways; and (b) interpreting Wynberg and Wareham as determinative. In holding that the appellant’s negligence claim impugned a core policy decision, the majority of the Divisional Court recharacterized the claim.

Every negligence claim must be based on a duty of care owed to the plaintiff by the defendant. In a case against a government authority, the Anns/Cooper framework is used to determine whether a duty of care exists, applied in a manner that has regard to whether the plaintiff’s claim falls within or is analogous to an established duty of care or is novel because proximity has not been recognized before. In novel cases, the full two-stage framework is followed. At the prima facie duty stage, the court asks whether the harm was a reasonably foreseeable consequence of the defendant’s conduct, and whether there is a relationship of proximity in which the failure to take reasonable care might foreseeably cause loss or harm to the plaintiff. The Court, in citing Anns/Cooper detailed that proximity arises in those relationships where the parties are in such a close and direct relationship that it would be “just and fair having regard to that relationship to impose a duty of care in law upon the defendant”. The Court found that in holding that the appellant’s negligence claim impugned a core policy decision, the majority of the Divisional Court recharacterized the claim. The appellants’ claim made an allegation of entitlement, asserting that despite being assessed and approved for Developmental Services, the entitlement to such services was arbitrarily denied by unreasonably managed waitlists. The Divisional Court erred by making a distinction between “entitlement” and “eligibility” for Developmental Services, which mischaracterized the claim. The Court held that the legal “entitlement” claimed for the class is that Ontario must take reasonable care in implementing the process to deliver Developmental Services to those it has assessed and approved to receive them.

The Court found that the Divisional Court further erred by relying on a description of the program that missed the essential nature of the allegation, which shifted the claim to one that challenged decisions concerning what resources to devote to a triage system addressing a complex problem in which demand outstrips supply. But those are not the decisions the appellant impugned. The appellant pleaded that Ontario has no consistent and rational scheme for allocating pre-existing resources, and that the cause of the non-receipt or delayed receipt of support and services by class members was that very failure. As a result, the Court held that the motion judge and the dissenting Divisional Court judge correctly observed that the complaint as pleaded was about the negligent administration of DSO waitlists “within existing resources” and not about “insufficient funding”.

Thirdly, the Court held that the majority of the Divisional Court erred in concluding that Wareham or Wynberg were indistinguishable. In Wareham, the Court of Appeal for Ontario upheld the motion judge’s decision to strike the class members’ negligence claim against Ontario, which related to the delay in receiving ODSP payments. The motion judge had held that it was plain and obvious that no duty of care was present between Ontario and the class members because of a lack of proximity, or the claim impugned a core policy decision. The Court, on this appeal, held that Wareham was distinguishable because the class included those who merely applied for ODSP and because the class members’ allegation of reliance was only based on the existence of a former disability statute. In Wynberg, the Court of Appeal for Ontario upheld a trial judge’s conclusion that the plaintiffs’ negligence claim related to a core policy decision. At issue was Ontario’s decision to restrict access to the Intensive Early Intervention Program (the “IEIP”) to autistic children between two and five years old. The Court, on this appeal, held that those facts were distinct from the case at bar since the class members did not challenge the scope of eligibility for Developmental Services, and instead made allegations that were not made in Wynberg about operational negligence.

The Court further held that it was not plain and obvious that the negligence claim targeted core policy decisions. The overarching guiding principle for core policy immunity and the separation of powers, would remain respected if this claim were to proceed to trial, as it has the potential to be adjudicated without compromising the institutional roles and competencies of the three branches of government. As a result, the Court held that it was not plain and obvious that the appellant’s negligence claim had no reasonable prospect of success.

(2) Yes.

The Court held that the Divisional Court erred in finding the s. 7 Charter claim was doomed to fail because it was completely foreclosed by existing jurisprudence. The Divisional Court interpreted the claim as imposing a positive constitutional obligation on Ontario to provide Developmental Services to the class members. However, when the claim is read generously, the appellant’s s. 7 Charter claim included an allegation of deprivation of the security of the person that stems from the manner in which Ontario administers DSO waitlists for Developmental Services for persons it has already assessed and approved. It did not simply allege that the failure to receive Developmental Services or the existence of the waitlist deprives class members of a s. 7 right.

The Court shared the motion judge’s skepticism about the ultimate success of the s. 7 Charter claim, but agreed with the motion judge that the claim should be allowed to proceed. It was not plain and obvious that, if proven, the psychological harm allegedly caused by Ontario’s management of DSO waitlists for Developmental Services to the vulnerable class members could not amount to a deprivation of the security of the person. The Court further held that, taken at its highest, the appellant’s s. 7 claim argued that the deprivation of the security of the person experienced by class members has no rational connection to the purpose of the state action. Accordingly, the Court was satisfied that the appellant’s pleadings alleged the constituent elements to make out a viable s. 7 Charter claim and should be allowed to proceed to trial.

Finally, the Court found that the motion judge did not err in concluding that a class action would be a preferable procedure. The motion judge reasonably exercised his discretion and determined that the resolution of the common issues would promote the objective of access to justice and, even if a substantial number of individual assessments remained, would meaningfully advance the litigation for class members.

1346134 Ontario Limited v. Wright , 2023 ONCA 307

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

Counsel:

C. D. Bredt and L. Daniel, for the appellants/respondents by way of cross-appeal

S. Tenai and M. Muñoz, for the respondent/appellant by way of cross-appeal

facts:

This appeal arose from a series of tax shelter schemes orchestrated by Open Access Limited (“OAL”), a retirement management business run by JWL. The appellants, 1346134 Ontario Limited (“134”) and 2398094 Ontario Limited (“239”), known collectively as the “Fincos”, advanced loans to investors in tax shelter schemes. One such investor was the respondent, DW, a highly sophisticated investor, who between 2001 and 2013, invested $10.92 million in eight OAL tax schemes. 134’s principal was JP and 239’s principal was JB; both accountants. The Fincos loaned DW a total of $6.29 million. The appeal concerned four of those eight tax schemes.

The OAL tax schemes functioned as follows. An investor would purchase a number of “units” in a limited partnership with OAL through a “Subscription Agreement”. The investor would become a limited partner. The limited partnership would then enter into a “Service Agreement” with OAL. This agreement allowed OAL’s business expenses to “flow through” to the investors, who claimed them as deductions on their tax returns. The investors also received common shares of OAL, though the evidence was that these shares were of minimal value. DW testified that the tax deductions were the dominant purpose of his investment.

Once an investor’s funds passed to OAL, OAL would then loan the funds to one of the Fincos, which in turn loaned the funds back to the investor. The interest on the loan from the Finco to the investor would effectively be paid by OAL pursuant to a “Consulting Agreement”.

The investor then reinvested the funds from the loan into the limited partnership, which continued to pay OAL’s business expenses. This step was crucial as the Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.) (“ITA”) allows taxpayers to deduct business expenses only up to the amount they invested, the understanding of the parties was that by effectively investing the same money twice, investors could claim deductions of twice their actual “out of pocket” investment.

To incentivize further equity financing, investors who took part in an OAL tax scheme after 2008 were assigned preferred shares in OAL directly. These preferred shares were held in trust, with the investors as beneficial owners. Each trust had several beneficiaries.

The preferred shares were assigned a notional value of $1. The number of shares assigned to the investor equaled the dollar amount loaned from the Fincos. The deemed value of the preferred shares equaled the value of the loans.

This change in structure of the tax scheme was initially accompanied by “Defeasance Terms”, meant to incentivise further investment by offering a route to repay the loans. These Defeasance Terms set out that the shares held in trust could be delivered by the Trustees to repay the loans.

After 2013, rather than defeasance terms, new preferred shares (assigned based on further investment) were held in trust under two “Trust Agreements”, both dated April 10, 2014. Common to both the Defeasance Terms and the Trust Agreements were the Trustees’ powers, notably the power to satisfy the loan-debt owed to the Fincos.

At trial, it was agreed that preferred shares could be so used in at least some circumstances, but the parties differed on when and how. DW claimed that they could be used, at his direction, to satisfy the loans at any time a demand was made for repayment, while the Fincos and their aligned parties maintained that the preferred shares were only available to satisfy the investors’ loans if OAL was unable to deliver the tax-deductible business expenses for which the investors had bargained. The appellants were careful to maintain that the purpose of the tax schemes, and of the trusts and preferred shares in particular, was only to provide the opportunity to claim deductions, and in no way guaranteed that the deductions would be successful.

By the summer of 2014, changes in Canadian accounting rules meant that the tax schemes could no longer provide their intended benefit to OAL. DW was informed of OAL’s decision to wind up by letter dated September 24, 2014. On November 11, 2014, OAL employee JL sent an email to DW’s brother, advising that DW’s “investments will be settled with the exchange of preferred shares and common shares.” At trial, however, she stated that this was incorrect, and had been based on a misunderstanding on her part. By letter dated April 23, 2015, OWL advised DW that OAL’s board had decided to call the outstanding partnership loans and by letter dated April 28, 2015 OAL requested repayment one subset of loans (the “Earlier Loans”) to 134 either by cheque dated May 1, 2015, or by way of five payments over four years with the first payment due May 1, 2015.

On June 16, 2015 (effective June 17), JWLFS and the Trustees executed equivalent terminations of the Trust Agreements. This was also done earlier on April 27, 2015 (effective April 28), for the Defeasance Terms relating to the Earlier Loans. The Trustees agreed to resign and terminate the Trust Agreements (though not terminate the trusts themselves), and to “reassign” the shares held in trust to JWLFS. JWLFS then returned the preferred shares to OAL, which cancelled them on June 29, 2015. In February 2017, the Fincos demanded repayment of all of DW’s loans.

The Fincos commenced this action seeking repayment of their loans to DW. DW denied that he was obligated to repay the loans. He argued that he was provided with security, principally preferred shares held in trust, and that these were to be used to repay the loans. DW counterclaimed against the Fincos, JWL, OAL, as well as HK and RF – who held his preferred shares in trust (the “Trustees”). In his counterclaim, DW alleged that if the preferred shares could be used to satisfy his debt to the Fincos, but were not in fact used for that purpose, then the defendants to the counterclaim were liable for breach of trust.

Deciding in DW’s favour, the trial judge held that (1) with respect to the Earlier Loans, the Fincos’ claim was statue-barred; and (2) with respect to the other subset of loans (the “Later Loans”), the return of the preferred shares to OAL satisfied DW’s debt. The appellants submitted that the trial judge erred (1) in finding that the Earlier Loans were statute-barred; (2) in finding that the Later Loans were repayable with preferred shares; and by (3) holding that the Later Loans were repaid with shares without conducting a proper trust analysis under DW’s counterclaim.

issues:

The main appeal raised the following issues:
(1) Did the trial judge err in finding the claims relating to the Earlier Loans were statute-barred?

(2) Did the trial judge err in finding that the loans were repayable with preferred shares?

(i) Did the trial judge err by overlooking the entire agreement clauses contained in the Loan Agreements?
(ii) Did the trial judge err by not undertaking a proper analysis of whether a collateral oral agreement existed?
(iii) Did the trial judge err by improperly importing a trusts analysis when looking at the terms of the Loan Agreements?
(iv) Did the trial judge err in not considering tax consequences?

(3) Did the trial judge err in finding that the loans were actually repaid with preferred shares?

(4) If the preferred shares were only available to repay DW’s loans in the event he did not receive tax expenses, should any damages owing be reduced by the amount of deductions rejected by CRA?

DW’s cross-appeal raised the following issues:

(1) Was the counterclaim statute-barred?

(2) Did the Trustees breach their duties?

(3) If the Trustees breached their duties, were OWL and OAL liable for aiding in and/or benefitting from those breaches?

holding:

Appeal and cross-appeal dismissed.

reasoning:

Main Appeal

(1) No.

The trial judge held that the two-year limitation period, pursuant to the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B, commenced on or around April 28, 2015, when OAL, acting as 134’s agent, demanded repayment of the Earlier Loans. Since the statement of claim in this action was not issued until May 29, 2018, more than two years after that demand was made, it was out of time.

The appellants argued that the trial judge erred in finding that OAL was 134’s agent. The existence of an agency relationship is a question of fact and it is therefore entitled to deference, absent palpable and overriding error. The appellants submitted that OAL’s correspondence could not have created an agency relationship for 134. It relied on Hav-A-Kar Leasing Ltd. v. Vekselshtein, 2012 ONCA 826, for the proposition that while agency relationships may be created by implied representation, the representation “must be that of the principal, not that of the agent.” The Court did not view this principle as assisting 134 in this case.

The Court found It was open to the trial judge to find 134 had made implied representations that OAL was acting as its agent. The loans from 134 were part of a broader arrangement by OAL to raise capital for its business. 134 was aware of and permitted OWL and OAL to act as its “point person”. OWL communicated with DW about 134’s loans, including discussions around restructuring. OWL’s evidence at trial was that 134 was aware that OAL would be demanding payment of the Earlier Loans and did not object to OAL doing so. The Court found this evidence, considered together, supported a finding of an agency relationship.

(2) No.

The parties agreed in principle that the loans to DW were repayable using the preferred shares held in trust. They disagreed on the circumstances in which this repayment through return and cancellation of shares was possible. The Court first addressed adequacy of the trial judge’s reasons. “Even if the trial judge expresses themselves poorly, an appellate court that understands the ‘what’ and the ‘why’ from the record may explain the factual basis of the finding to the aggrieved party”. The Court found the trial judge’s reasons met the threshold of adequacy. The trial judge found that the Loan Agreements did not preclude repayment of the loan through shares. He further found that the 2014 Trust Agreements placed preferred shares in trust for DW, which could be returned to OAL to satisfy DW’s debt to the Fincos.

(i) No.

The appellants submitted that the entire agreement clauses prevented any oral representations from affecting the later Loan Agreements. The first problem with this argument was that it contradicted the appellants’ position that satisfaction of the loan through preferred shares was possible in at least some circumstances. Second, the Loan Agreements were silent on the method of payment once the loans were called. The Court found the trial judge did not rely on oral representations between the parties to the Loan Agreement. Rather, he relied on the parties’ entire relationship. The Loan Agreements and the Trust Agreements, when read together and considered in the context of the entire commercial relationship, were sufficient to bear out that the loans could be repaid with the shares held in trust.

(ii) No.

The appellants submitted that the trial judge’s holdings required a finding that a collateral oral agreement had been reached. The Court disagreed. It was not necessary to find that a separate oral agreement existed. This was only one of the possible ways to make a bridge between the Loan Agreements and the Defeasance Terms and Trust Agreements. The trial judge’s reasoning focused on the entire relationship between the parties to determine their common intent, and the meaning of the terms contained in the multiple agreements. The trial judge’s reasons showed that, based on the Trust Agreements, he found there to be an agreement that the Later Loans from the Fincos to DW were repayable through the transfer of preferred shares held in trust.

The Court found an oral agreement was not necessary because the terms of the Trust Agreements provided the mechanism by which a loan may be satisfied by shares held in trust. The trial judge’s conclusion on the scope and purpose of the trusts was borne out by the surrounding circumstances. It was anchored in his finding that the trust structures were meant to induce additional investment.

Further, the Trust Agreement covering the Later Loans shared a direct origin and purpose with the Defeasance Terms, which covered the Earlier Loans. The evidence at trial demonstrated more clearly the specific purpose of the arrangement in the Defeasance Terms, which was to induce further investment by holding shares in trust for the benefit of an investor. While these shares did not explicitly secure the loans, the trial judge found that the intent of the parties in this arrangement was for the shares to be available to satisfy the loan-debt. In the circumstances of the whole arrangement, the trial judge did not find any limitation on when and how the shares could be so used.

(iii) No.

The appellants’ third argument was that the loan agreement should be interpreted separately and that, on its terms alone, the satisfaction of the loan-debt through repayment of shares was not possible. The Court found this argument misconceived the trial judge’s conclusions.

First, he did not find that the Loan Agreements were modified by collateral agreements. Rather, these agreements, properly interpreted in context, allowed for “full payment and satisfaction” through the shares. The trial judge further concluded that the Trust Agreements provided the mechanism and structure for this repayment, at least as it concerned the Later Loans.

The appellants’ argument also ran contrary to a long line of authority which held that an agreement should be interpreted in its entire context and with an understanding of the surrounding circumstances. In his analysis of whether the Later Loans could be repaid with shares, it was essential that the trial judge be mindful of the complex relationship that existed between these parties. In fact, the trial judge likely would have erred had he not incorporated the Trust Agreements into his analysis. The fact that DW was not a signatory to the agreements in no way diminished their relevance to the Later Loans. The Trust Agreements were an essential piece of the puzzle and necessary to understand the underlying bargain of the post-2008 contributions to the tax scheme. Whether DW was a party to the Trust Agreements mattered little when he was one of the beneficiaries and the debt to the Fincos was central in the trusts’ terms.

The appellants also submitted that the issues related to the Trust Agreements should have been dealt with in DW’s counterclaim for breach of trust. In the circumstances of this case the determination of whether the appellants should succeed in their action for the loan-debt included the determination of whether there was an amount owing. The submission that the preferred shares satisfied the debt went to the defence of the action, rather than the counterclaim. Therefore, it was necessary to read together the Loan Agreement and the Trust Agreement, and to consider the entire relationship between the parties.

(iv) No.

The parties’ scheme was to raise funds in exchange for tax advantages. The potential success of the tax scheme therefore informed consideration of the parties’ common intention. However, this was a consideration that went to contractual interpretation, a question of mixed fact and law. The Court found no palpable and overriding error in the trial judge’s conclusion. He found that the central bargain was that, to induce further investment, OAL offered investors a more advantageous opportunity by providing for the repayment of the associated loans through preferred shares on top of potential tax benefits. On this point, the trial judge properly noted that the appellants did not guarantee the success of any claimed deductions. The trial judge considered the appellants’ argument regarding tax consequences, and, in the end, reasonably found that it did not detract from nor alter his understanding of the agreement, which was that the Loans were repayable with preferred shares.

(3) No.

It was open to the trial judge to find that the transfer of the shares held in trust back to JWLFS, and then back to OAL, did provide repayment of the Later Loans. It was also open to the trial judge to find that the Trustees only agreed to the termination of the Trust Agreement for the benefit of the beneficiaries. There was no evidence that the power to terminate the Trust Agreements on consent of the Settlor and Trustees was exercised in a way that extinguished the beneficiaries’ interest in the preferred shares. There was no basis to presume a breach of trust on these facts.

In reading the letters of termination, the respective Trust Agreements (which set out the structure of the trust) were terminated. However, the trust itself and the beneficial interest in the shares were not extinguished. After the Trust Agreements were terminated, OWL, on behalf of JWLFS, transferred the shares to OAL for cancelation. The corresponding cancellation sheets demonstrated that the transfer was not a gift but was “FOR VALUE RECEIVED”. The evidence supported the trial judge’s conclusion that the shares satisfied the loan-debt. On the evidence, the trial judge found that the cancellation of the preferred shares did effectively satisfy DW’s loan-debt, and the Court saw no error in that conclusion.

(4) Given the Court’s conclusion on the first three grounds, there was no need to consider DW’s argument that any damage award should be reduced by the amount of the deductions rejected by CRA.

The Cross-Appeal

The thrust of DW’s counterclaim was that if the transfer of his preferred shares to OAL and their subsequent cancellation, without his direction to do so, did not have an effect on DW’s loan-debt, this constituted a breach of trust. The Fincos submitted that the counterclaim for breach of trust was out of time, that the preferred shares could not be used by the Trustees to repay the loan-debt, and that the Trustees acted within the scope of their powers. The Court concluded that the loan-debt could be and had been satisfied by the preferred shares held in trust. This obviated the need to consider the merits of DW’s cross-appeal.

Rassouli-Rashti v. Tayefi , 2023 ONCA 315

[Roberts, George and Favreau JJ.A.]

Counsel:

J.W. Thomas, for the appellant

J.P. Maggisano, for the respondents

facts:

Two brothers, the respondents, and their brother-in-law, the appellant, entered into a partnership to purchase and construct residential houses on properties at 393 and 395 Elm Road in Toronto (hereafter referred to as “393” and “395”). The partnership decided to sell 395, but prior to closing, the partners had a falling out and discussed terminating the partnership. The appellant proposed a dissolution and distribution agreement, allocating values to each property. Unknown to the respondents, on July 17, 2018, the appellant had accepted an offer to purchase 395 for $2.545 million. In the dissolution discussions with his partners, the appellant proposed a value for 395 that he knew was $200,000 less than the actual sale price.

The respondents learned of the sale from others in late July 2018. The appellant did not confirm the sale until mid-August 2018, nor that a deposit cheque dated July 18, 2018 for $230,000 was paid by the purchasers. In fact, the appellant changed the date of the deposit cheque to August 18, 2018. The sale of 395 closed on October 3, 2018. The appellant then arranged to partially discharge the mortgage on 395 and misrepresented to the mortgagor that he was the only one with an interest in the property. All of the sales proceeds, less the amount that was forwarded to the mortgagor, was paid to the appellant. On October 4, 2018, the respondents advised the mortgagor of their interest in 395 and of their refusal to agree to a partial discharge of the mortgage. The mortgagor did not complete the partial discharge and eventually applied the amount received to the full mortgage on both properties.

At the beginning of November 2018, the respondents commenced litigation against the appellant. In the course of the proceeding, approximately $983,000 of the funds released to the appellant from the sale of 395 were subsequently frozen by court order. 393 was listed for sale in May 2019 and the sale of the property closed on January 24, 2020. The mortgage was fully discharged on closing. The remaining proceeds were distributed among the partners in accordance with their partnership shares. However, the funds received from the sale of 393 were insufficient to put the respondents on the same footing as the appellant given the funds that had already been distributed from the sale of 395.

The trial judge found that the partnership did not terminate in July 2018 and that it was in force and effect at the time of the sale of 395. He held that the appellant was in breach of his fiduciary duties to his partners, notably, by concealing the sale of 395, by proposing a value for 395 that was $200,000 less than the actual sale price, and by attempting to partially discharge the mortgage on only 395. The trial judge accepted the respondents’ calculation of damages, finding that $164,396.79 should be paid to the respondents to place them on the “same footing” as the appellant in terms of the already distributed funds.

issues:

(1) Did the trial judge fail to address whether the respondents failed to mitigate their damages by their delay in listing 393 for sale?

(2) Did the trial judge err in his conduct of the trial and in his failure to ensure trial fairness for the appellant?

(3) Did the trial judge err by accepting the respondents’ evidence of their project expenses and by failing to consider the appellant’s evidence of his project expenses?

holding:

Appeal allowed, in part.

reasoning:

(1) No.

The appellant argued that the respondents delayed by nine months in listing 393 for sale and that, as a result, unnecessary mortgage interest was incurred for which the respondents should be entirely responsible. The Court disagreed. While the trial judge did not expressly address this issue in his reasons, his findings that the appellant’s breaches solely caused the additional mortgage interest sufficed to dispose of it. Moreover, the appellant provided no evidence to support his arguments that the respondents failed to mitigate their damages. 393 originally sat on the market for 70 days with no offers, and there was no evidence that comparable properties were being sold or that 393 would have been sold earlier had it been listed at an earlier date. Based on the trial judge’s findings and the evidence in the record, the appellant had not discharged his burden of showing that the respondents’ conduct was unreasonable in the circumstances of this case and that they failed to mitigate their damages.

(2) No.

Given the discretionary nature of trial management powers, absent error in principle or unreasonable exercise, deference is owed on appeal to trial management decisions. The Court noted that appellate review of trial management decisions required a contextual approach; it is important to consider them in the context of the trial as a whole, rather than as isolated incidents. First, the appellant argued that it was not fair to not permit him to cross-examine one of the respondents on his prior professional discipline conviction. The Court agreed with the trial judge in that this line of questioning would have been more prejudicial than helpful. The Court noted, however, that it would have been permissible if the questions were to establish prior findings of professional misconduct against him involving dishonesty, in an attempt to impugn his credibility as a witness. However, that is not what the appellant did or requested to do in this case.

In addition, the appellant argued that the trial judge erred in not allowing him to use his outline. The Court found no error in the trial judge’s discretionary treatment of the appellant’s request to use his outline. The appellant had completed a good portion of his evidence in chief before he asked to rely on his outline. The respondents objected to its use. The trial judge noted that the appellant was doing “a decent job of going through the chronology” without relying on it and that he should keep following the chronology. The appellant did not produce his outline nor was it described for the record other than as a chronology aid. It is therefore not possible to know what it contained and whether the appellant’s proposed use of his outline was permissible, or if his outline was admissible evidence. There is no dispute that the appellant could not simply read in whatever was contained in the chronology.

(3) Yes, but only regarding the appellant’s project expenses.

The Court stated that it was open to the trial judge to accept the respondents’ evidence of their project expenses which were supported by documentary and oral evidence. There was no evidence that the appellant raised any issues about the respondents’ project expenses during the partnership. At trial, he did not seriously challenge them during his cross-examination of the respondents’ witnesses. Therefore, the Court held that there was no basis to intervene.

With respect to the appellant’s project expenses, the Court held that the trial judge erred in not addressing the appellant’s list of attachments that were marked as Trial Exhibit 21. Therefore, pursuant to s. 134 of the Courts of Justice Act, the Court undertook its own analysis. The Court found that a majority of the appellant’s claimed expenses, less $1,376.44, were not supported by cogent evidence. Therefore, this ground of appeal was allowed to the extent that $1,376.44 was to be factored into the distribution of the unallocated partnership assets in accordance with the parties’ respective partnership shares.

Goberdhan v. Knights of Columbus , 2023 ONCA 327

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

Counsel:

T. Carsten and G. Di Sauro, for the appellant

J. P. McCoy, for the respondent

Keywords: Contracts, Enforceability, Consideration, Employment, Wrongful Dismissal, Independent Contractors, Civil Procedure, Arbitration Jurisdiction, Courts of Justice Act, R.S.O. 1990, c. C. 43, s. 106, Arbitration Act, 1991, S.O. 1991, c. 16., s. 7, Employment Standards Act, 2000, S.O. 2000, c. 41, s. 3(1)), Rules of Civil Procedure, r. 21.01, TELUS Communications Inc. v. Wellman, 2019 SCC 19, Huras v. Primerica (2000), 137 O.A.C. 79 (C.A.), Toronto Standard Condominium Corporation No. 1628 v. Toronto Standard Condominium Corporation No. 1636, 2020 ONCA 612, Peace River Hydro Partners v. Petrowest Corp., 2022 SCC 41, Uber Technologies Inc. v. Heller, 2020 SCC 16, Irwin v. Protiviti, 2022 ONCA 533, Dalimpex Ltd. v. Janicki (2003), 64 O.R. (3d) 737 (C.A.), 1476335 Ontario Inc. v. Frezza, 2021 ONCA 822

facts:

The appellant is a fraternal benefit society that offers insurance products to its members. The respondent was a field agent who sold insurance through the appellant. The parties signed three field agent contracts. The respondent’s field agency was terminated on April 30, 2019. In June 2020, he sued for wrongful dismissal asserting that he was entitled to severance pay and termination notice pay, based on his claim to be an employee of the appellant, as well as outstanding wages and commissions and punitive damages.

The appellant filed a notice of intent to defend and then moved under r. 21.01(3) of the Rules of Civil Procedure and s. 106 of the Courts of Justice Act for an order to stay the wrongful dismissal action pursuant to s. 7(1) of the Arbitration Act, 1991. The appellant relied on mandatory arbitration clauses that were contained in the second and third contracts signed by the parties.

The motion judge dismissed the motion. He concluded that: (1) the respondent was an employee, not an independent contractor; and (2) the second and third contracts were invalid for want of fresh consideration, as were the mandatory arbitration clauses contained within them.

issues:

(1) Does the Court have jurisdiction to hear the appeal?

(2) Did the motion judge err in concluding that there was no valid arbitration clause?

(3) Did the motion judge err in deciding on its stay motion, about whether the respondent was an employee?

holding:

Appeal dismissed.

reasoning:

(1) Yes.

The respondent argued that the Arbitration Act, 1991 foreclosed an appeal of the motion judge’s decision. The respondent asserted that the appellant’s motion was brought under s. 7(1) and that the motion judge, after determining that there was an absence of consideration for the agreements containing a mandatory arbitration clause, concluded that the arbitration agreements were invalid and dismissed the motion.

The Court gave no effect to this objection by the respondent. The Court held that the fact that the appellant brought its stay motion relying on the Arbitration Act, 1991, and that the motion judge’s determination was that the arbitration agreement was “invalid” under s. 7(2), was not determinative. The Court held that, as the motion judge had held there were no second and third contracts, and accordingly no mandatory arbitration clauses, the Arbitration Act, 1991 had no application whatsoever. The Court therefore had jurisdiction.

(2) No.

The appellant argued that the motion judge erred in two ways. First, the appellant asserted that the motion judge was required to grant a stay so long as it was “arguable” that the dispute fell within the scope of arbitral jurisdiction.

The Court rejected this submission. The Court, citing Peace River Hydro Partners v. Petrowest Corp., 2022 SCC 41, held that there was a two-step process to be applied in determining whether court proceedings should be stayed in favour of arbitration. First, the party relying on an arbitration provision must establish the technical requirements for a mandatory stay of proceedings, including that there is an agreement to arbitrate. Then, a stay in favour of arbitration will follow unless the opposing party establishes one of the exceptions from Peace River applied.

The Court held that there was clear evidence in this case for the motion judge to determine whether there was fresh consideration to support the contracts containing the arbitration clauses. The Court held that the finding of the motion judge that there was no fresh consideration was not “arguable”, and accordingly rejected the appellant’s first challenge to the decision.

Second, the appellant asserted that the motion judge’s conclusion that the second and third contracts were void for want of fresh consideration was based on insufficient evidence. The Court again rejected the appellant’s submission.

The Court held that the respondent’s evidence that the additional contracts were not advantageous to him and that he had not received any benefit other than continued employment was sufficient to show a lack of fresh consideration. The Court held that the appellant’s arguments that additional provisions in the contract could constitute fresh consideration were properly dismissed by the motion judge. In the result, the Court agreed with the motion judge’s decision that the respondent “had no practical choice but to sign the new contracts if he wished to continue to work for the [appellant].”

(3) No.

The appellant asserted that the motion judge erred in determining that the respondent was an employee and not an independent contractor.

The Court held that the motion judge’s finding that the respondent was an employee, which was made in the context of the stay motion, at the outset of proceedings and before a statement of defence had been delivered, was not a final determination of what was a central issue in these proceedings.

The Court held that it was open to the appellant to argue, on the basis of a full record, that the respondent was an independent contractor. The Court found that this was an issue in the action that remained to be determined.

SHORT CIVIL DECISIONS

Boyer v. Callidus Capital Corporation , 2023 ONCA 311

[Gillese, Benotto and Coroza JJ.A.]

Counsel:

P. Griffin and J. McDaniel, for the appellant

D. Moore and K. Jones, for the respondent

Keywords: Civil Procedure, Anti-SLAPP, Costs, Full Indemnity, Courts of Justice Act, R.S.O. 1990, c. C.43, s. 137.1, Park Lawn Corporation v. Kahu Capital Partners, 2023 ONCA 129

Cipponeri Construction Services Inc. v. Orsi , 2023 ONCA 296

[Gillese, Benotto and Coroza JJ.A.]

Counsel:

W. Rapoport, for the appellant

C. Pendrith and R. Sniderman, for the respondents

Palichuk v. Palichuk , 2023 ONCA 309

[Doherty, Feldman and Trotter JJ.A.]

Counsel:

J. Figliomeni and Q. Giordano, for L.P.

J. Waxman and J. Chumak, for S.P.

Keywords: Civil Procedure, Costs, Rules of Civil Procedure, r. 57.01

Grewal v. 2390364 Ontario Inc., 2023 ONCA 316

[Roberts, Miller and Coroza JJ.A.]

Counsel:

B. Nagra, for the appellants

H. Korosis and M. Slater, for the respondent

Keywords: Contracts, Real Property, Agreements of Purchase and Sale of Land, Conditions Precedent, Remedies, Specific Performance

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

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CIVIL DECISIONS

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SHORT CIVIL DECISIONS

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John Polyzogopoulos
Blaney McMurtry LLP
416.593.2953 Email

Ines Ferreira
Blaney McMurtry LLP
416.593.2953 Email