Hello everyone.  We apologize for the delay in posting last week’s Ontario Court of Appeal Summaries, but the Court’s website was down on Friday afternoon and over the weekend and therefore the links to the decisions were not functioning.  Below are summaries of last week’s OCA civil decisions (non-criminal). Topics include the recovery by an insurer of overpayments of Long-Term Disability benefits, constructive dismissal, occupiers’ liability and bank fraud.  There is also an interesting summary judgment decision on the rescission of a Franchise Agreement in accordance with the Arthur Wishart Act (Franchise Disclosure), 2000.

Please feel free to share this blog with anyone whom you think would be interested. As always, we welcome your comments and feedback.

John Polyzogopoulos

Blaney McMurtry LLP
jpolyzogopoulos@blaney.com
Tel: 416.593.2953

http://www.blaney.com/lawyers/john-polyzogopoulos

Bunan v. Toronto-Dominion Bank, 2015 ONCA 226

[Sharpe, Pepall and van Rensburg JJ.A]

Counsel:

L. Rosenstein, for the appellant

C. Boswell, for the respondent

Keywords: Banking Law, Fraud, Breach of Contract, Negligence, Account Verification Agreement, Insufficiency of Reasons, Costs

Facts:

The appellant was defrauded by his cousins when he lent over $1 million to a partnership owned and controlled by them. They were able to make withdrawals from a bank account the appellant had established with the respondent bank. The appellant sued his cousins on personal guarantees and promissory notes they signed guaranteeing the debts of the partnership. He sued the respondent for breach of contract and negligence arising from withdrawals from his account, among other things. The respondent asserted the Financial Services Agreement signed by the appellant barred the appellant’s claim. The Financial Services Agreement contained an account-verification provision which, in the absence of 30 days’ written notice of errors, released the respondent from liability.

At trial, the judge found in favor of the appellant in his action against his cousins but dismissed the action against the respondent bank on the basis of the verification agreement. The judge awarded costs in favour of the respondent bank in the amount of $22,000 payable by the cousins, not the appellant.

The appellant appealed from the dismissal of his action against the respondent bank and submits that the judgment should be set aside on the basis of insufficiency of reasons and argued that the Financial Services Agreement did not provide the respondent with a defence in this case. The respondent bank sought leave to cross-appeal on the issue of costs.

Issues:

  1. Should the judgment in favour of the respondent bank be set aside due to an insufficiency of reasons from the trial judge?
  2. Did the trial judge err in finding that the verification agreement relieved the respondent bank of liability?
  3. Should the respondent bank be granted leave to cross-appeal the trial judge’s costs order?

Holding:

Appeal dismissed. Leave to appeal the costs award granted and the cross-appeal on the issue of costs allowed.

Reasoning:

  1. No.  The trial judge made an express finding of fact that the respondent bank’s Customer Services Manager recalled the signing of the Financial Services Agreement. Although more elaborate reasons for his findings would have been preferable, the test on appeal on insufficiency of reasons is whether any deficiency “has occasioned prejudice to the exercise of [the appellant’s] legal right to an appeal (R v Sheppard). The court held that there was ample evidence in the record to support the trial judge’s conclusion that the agreement was executed.
  2. No.  The court held that the trial judge was correct in dismissing the appellant’s claim against the respondent. Courts have repeatedly held that verification agreements may constitute a complete defence to a claim of unauthorized transactions. In the absence of written notification within 30 days, the appellant accepted the transaction information as valid and correct and provided a release to the respondent in regards to those transactions. This was not varied by any reasonableness requirement in the agreement. Despite the fact that the account was a savings account, the appellant still had a responsibility to examine the account.  The court held that even if a reasonableness requirement was imported into the agreement, the appellant’s conduct would not have reflected reasonable care.
  3. Yes.  The court held that the costs award made by the trial judge should be set aside and replaced with that proposed by the appellant in his costs submissions. The trial judge erred in his exercise of discretion as he did not consider all of the parties’ submissions on costs despite writing that he had done so, as they had not yet all been filed by the parties.  The appellant was ordered to pay the respondent bank costs in the amount of $39,000.

Tags: Banking Law, Fraud, Breach of Contract, Negligence, Account Verification Agreement, Insufficiency of Reasons, Costs

Sioux Lookout (Municipality) v. Goodfellow, 2015 ONCA 223

[Sharpe, van Rensburg and Pardu JJ.A.]

Counsel:

Alfred J. Esterbauer and Demetrios Yiokaris, for the appellant

Allan D. McKitrick, for the respondent

Keywords: Civil Procedure, Dismissal for Delay, Rules of Civil Procedure, Rule 48.14

Facts: The appellant commenced ten separate Small Claims Court actions against the respondent municipality. The municipality commenced an action in the Superior Court against the appellant, that he defended with a counterclaim. Pursuant to an order in 2010, the actions were consolidated, and the appellants’ claims against the municipality were all required to be asserted as part of his counterclaim in the Superior Court action.

At a later date, the Court issued a status notice and the appellant requested a status hearing. A consent timetable order was issued requiring a Discovery Plan to be prepared by the parties and requiring affidavits of documents to be served. The appellant’s counsel in the counterclaim did not deliver an affidavit of documents and did not respond to requests for his position. The municipality brought a motion to dismiss the appellant’s claims for delay, which was granted.

Issue(s): Did the motion judge err in dismissing the appellant’s claim for delay under rule 48.14, rather than putting the onus on the municipality as would have been the case under Rule 24?

Held: Appeal dismissed.

Reasoning:

The court found that the motion judge did not err in requiring the appellant to provide some reasonable explanation for his delay in complying with the order made on consent at the status hearing held at his request. The motion judge found that the appellant ignored the timetable and observed that there was merit to the municipality’s submission that the flood and property damage claims from 2007 as set out in the appellant’s claim were now “much more difficult, if not impossible to investigate and defend against in 2014”.

The court also noted that although rule 48.14 does not contain an express provision dealing with the consequences of failure to comply with an order made at a status hearing, rule 60.12 provides that where a party fails to comply with an interlocutory order, the court may, in addition to any other sanction provided by the rules: (a)   stay the party’s proceeding; (b)   dismiss the party’s proceeding or strike out the party’s defence; or (c)   make such other order as is just.

Tags: Civil Procedure, Dismissal for Delay, Rules of Civil Procedure, Rule 48.14

Wilkes v. Deep Foundations Contractors Inc., 2015 ONCA 231

[Feldman, Benotto and Brown JJ.A.]

Counsel:

T. A. Stefanik, for the appellant

P. McKeever, for the respondent

Keywords:   Employment Law, Endorsement, Wrongful Dismissal, Just Cause

Facts:

The respondent’s wrongful dismissal action was successful at trial. The appellant’s alleged just cause for termination was that the respondent continued to perform outside consulting work after the parties agreed this practice would stop. The trial judge weighed conflicting evidence on this issue and found that the respondent did not perform any consulting work after this agreement.

The appellant asked the court to set aside the judgment on the basis that the reasons do not address an important issue of credibility and therefore do not tell the parties why the respondent won and the appellant lost.

Holding: Appeal dismissed.

Reasoning: 

There is no basis to interfere with the decision of the trial judge. Although he did not address the discrepancies in the evidence directly, his finding that the appellant’s evidence did not substantiate its allegations that the respondent continued to perform consulting services after the parties’ agreement effectively dealt with the issue.

Tags:  Employment Law, Endorsement, Wrongful Dismissal, Just Cause

Chand v. Chand, 2015 ONCA 228

[Feldman, Benotto and Brown JJ.A.]

Counsel:

R. Chand, in person

K. Nathens and G. Schwartz, for the respondent

Keywords: Family Law, Endorsement, Net Family Property, Equalization Payment

Facts: The appellant appealed the amount of the equalization payment he was ordered to pay to the respondent by Herman J. of the Superior Court of Justice. The appellant argued that Herman J. erred in calculating the equalization payment in four ways: (1) by including in his net family property (NFP)  money in his bank account that he said belonged to his sister; (2) by including in his NFP proceeds from his share of the sale of a Florida property where the proceeds of the sale had already been divided with the respondent; (3) by not including in the respondent’s NFP approximately $60,000 which he said was in her ING bank account as well as income he said she earned from her rental property in Holland; and (4) in the valuation of the contents of his home and his artwork.

Issues:

  1. Did Herman J. err in calculating the amount of the equalization payment?

Holding: The appeal was dismissed, and costs fixed at $15,000 were payable to the respondent.

Reasoning:

  1. No. Herman J. did not err in any of the ways alleged by the appellant. Firstly, the evidence supported Herman J’s finding that the appellant’s sister did not have any money in the appellant’s bank account.

With respect to the parties’ Florida home, the funds from its sale in 2003 were not excluded property because the  valuation date was May 1, 2012. Therefore, the funds from the sale of the home remaining in the appellant’s bank account on valuation day were properly included in his NFP.

Regarding the ING bank account, Herman J. correctly found that as of the valuation date, the balance in the respondent’s account was $4,190, which she included in the respondent’s NFP. It was also open to Herman J. on the evidence to find that the respondent had no undisclosed income.

Finally, Herman J’s valuation of the artwork and home contents were properly based on the evidence. She did not make any error or misapprehend the evidence.

Tags: Family Law, Endorsement, Net Family Property, Equalization Payment

Natario v. Rodriguez, 2015 ONCA 227

[Gillese, van Rensburg and Pardu JJ.A.]

Counsel:

K. Sherkin and C. Ryan Wozniak, for the appellants

P. Michael Rotondo and Vahe Avagyan, for the respondent

Keywords: Civil Procedure, Amending Statement of Claim, Negligence, Slip & Fall, Occupier’s Liability

Facts: The respondent commenced an action against the defendants for a fall she allegedly sustained in the appellants’ premises. The action was framed in negligence and for breach of the Occupier’s Liability Act. By order dated December 10, 2014, the respondent was granted leave to amend her statement of claim (the “Order”). The appellants appealed this Order claiming that the amendment was outside the limitation period and that the Order had the effect of eliminating their defence under the Limitations Act, 2002. They said that the impugned aspect of the Order is final and, therefore, they have the right to appeal the Court of Appeal.

Issues: Did the motions judge err in granting the Order?

Decision: Appeal quashed.

Reasoning:

In order for the argument to succeed, the court would have to accept that the impugned amendments constituted a new cause of action. The court did not accept this. The motions judge found that the amendment arose from the same facts, namely a fall in the appellants’ premises which engaged the occupier’s duty of liability. He explained that the statement of claim alleged facts in support of an occupier’s liability action and that the amendment arose from the same facts but simply alleged an alternative scenario – a fall through floor boards rather than down stairs. The court saw no error in the motion judge’s analysis or conclusion and held that the amendment did not add a cause of action. It held that the order granting leave to amend paragraphs in the statement of claim was interlocutory and an appeal therefore was to the Divisional Court with leave of a judge of the Superior Court of Justice. The appeal was quashed for lack of jurisdiction.

Tags: Civil Procedure, Amending Statement of Claim, Negligence, Slip & Fall, Occupier’s Liability

Motion Industries (Canada) v McCarthy, 2015 ONCA 224

[Sharpe, Pepall and van Rensburg JJ.A.]

Counsel:

D. McDonald and R. Agarwal, for the appellant

E. O. Gionet, for the respondent

Keywords: Employment Law, Employment Standards Act, 2000, ss. 56(1), (2), (4) and (5), Constructive Dismissal, Judicial Notice, Duty to Mitigate, Reasonable Notice, Lay-Off

Facts: The appellant employer appealed the decision of the trial judge finding that it constructively dismissed the respondent and awarding substantial damages for wrongful dismissal.

Issues:

On appeal, the appellant raised four issues:

  • (1) Did the trial judge inappropriately take judicial notice of certain economic facts when finding that the respondent was constructively dismissed?
  • (2) Did the trial judge err by failing to find the respondent was obliged to accept the recall proposal as part of his duty to mitigate?
  • (3) Was the notice period of 16 months unreasonable?
  • (4) Did the trial judge err in his determination of the respondent’s date of termination on account of the Employment Standards Act, 2000(“ESA”)?

Holding: Appeal dismissed.

Reasoning:

  1. No. First, the trial judge’s comments as to the cyclical nature of the mining industry were made in the context of his assessment of the respondent plaintiff’s response to the position he was offered by the appellant. The reference was merely background to the trial judge’s finding that the respondent was prepared to assume the risk that his former position entailed.  Second, there was evidence in the record to support a finding that the mining industry was indeed cyclical.
  2. No. This was essentially a factual question upon which the trial judge’s findings are entitled to deference. There was evidence to support the finding that the position offered to the respondent was substantially different from the one he had previously enjoyed, and that that change in responsibility amounted to a significant diminution in his status and station.
  3. No. There was no error in the trial judge’s assessment of 16 months as reasonable notice.
  4. No. The appellant argued that the effect of ss. 56(4) of the ESA is that an employer can only terminate an employee on temporary layoff through the expiry of the lay-off period. He argued that subsection 56(4) provides that an employer who lays off an employee without specifying a recall date shall not be considered to terminate the employment of the employee, unless the period of the lay-off exceeds that of a temporary lay-off. The Court of Appeal rejected the appellant’s argument. If accepted, ss. 56(4) would oust the application of the common law doctrine of constructive dismissal during the temporary lay-off period. The Court noted that this argument was not advanced at trial, and the language of ss. 56(4) was not capable of excluding the possibility of constructive dismissal. To accept the appellant’s interpretation would go beyond the purpose of the provision and would defeat the remedial objective of the ESA as a whole.

Finally, the Court rejected the appellant’s argument that the effective date of the end of the 35 week lay-off period was September 27, 2009 and not October 9, 2009. This argument was asserted for the first time on appeal and it would be unfair to permit the appellant to rely on its own error in calculating the ESA time frame at this stage, to deprive the respondent of the benefits to which he would otherwise be entitled.

Tags: Employment Law, Employment Standards Act, 2000, ss. 56(1), (2), (4) and (5), Constructive Dismissal, Judicial Notice, Duty to Mitigate, Reasonable Notice, Lay-Off

Kiani v Smith, 2015 ONCA 232

[Sharpe, van Rensburg and Brown JJ.A]

Counsel:

V. R. Morrison, for the appellant

I. Peck and T. Campisi, for the respondent

Keywords: Civil Litigation, Rule 21, Endorsement

Facts:

The claim asserted by the appellant relates to the alleged conduct of the respondent Smith, a Texas lawyer, in connection with litigation in Texas against a company of which the appellant was the principal and conduct by Smith in relation to enforcement proceedings brought in Ontario. On October 6, 2014, Justice Corbett struck the claim on a rule 21 motion.

Issues:

  1. Did the motion judge err in striking the claim as disclosing no reasonable cause of action?

Holding:

Appeal dismissed.

Reasoning:

  1. No, the court agreed that the claim was misconceived and the motion judge was well within his discretion in striking the claim. The court found that the material statements as pleaded were not actionable. As the respondent was acting for the opposite party in the litigation, she owed the appellant no legal duty.  Additionally, as the claim rested on Smith’s conduct of litigation in Texas, the appellant must raise any objection to that conduct in the courts of Texas. The court agreed with the motion judge that the allegation of a breach of an implied undertaking had to be dealt with within the context of the Ontario action.

Tags: Civil Litigation, Rule 21, Endorsement

Garneau v. Industrial Alliance Insurance and Financial Services Inc., 2015 ONCA 234

[Lauwers, Hourigan and Pardu JJ.A.]

Counsel:

Nikiforos Iatrou and Katharine Montpetit, for the appellant

Stephen Victor, Q.C. and David Cutler, for the respondent

Keywords: Insurance Law, Long-Term Disability Benefits, Overpayments, Policy Interpretation, Fiduciary Duty

Facts: The respondent insurer overpaid about $114,000 in long-term disability (“LTD”) benefits to the appellant. The respondent then reduced the appellant’s monthly benefit payments to reimburse itself for the overpayment. The appellant brought an action for a declaration that the respondent was not entitled to do so.  The motion judge granted the respondent’s motion for summary judgment and dismissed the action.

Issue(s):

  1. Did the motion judge fail to consider and apply the appropriate test for determining whether the respondent owed the appellant an ad hoc fiduciary duty?
  2. Did the motion judge err in interpreting or applying the Clerical Error Clause in the LTD Policy?
  3. Did the motion judge err in interpreting and applying the Reduction of Payable Benefits Clause in the LTD Policy?
  4. Did the motion judge err in his calculation of the reduction in LTD benefits allowable under the Wages Act?
  5. Did the motion judge err in failing to award aggravated, exemplary and punitive damages for breach of the duty of good faith?

Held: Appeal dismissed.

Reasoning:

  1. No.  A fiduciary duty will only be found where the alleged fiduciary has provided an express or implied undertaking to act in the best interests of the other party. The appellant relied on the terms of a release signed by the respondent. However, the release contained no wording which might suggest that it was to function as an undertaking by the insurer to act in the appellant’s best interests, nor did the circumstances in which the appellant provided the release give rise to an implied undertaking by the respondent.
  2. No. The court concluded that the Clerical Error Clause played only a minor role in the motion judge’s reasons. At no point was it suggested that the respondent was entitled to repayment of the overpayment based solely on the Clause.
  3. No. The appellant argued that the respondent’s reduction of monthly payments must be expressly authorized by the language of the LTD Policy, which they are not. More specifically, he argued that differences in the wording of the applicable clause indicated that overpayments were not included.

However, the court did not interfere with the motion judge’s conclusion that the Reduction of Payable Benefits Clause permits the respondent to reduce the appellant’s LTD benefits to account for superannuation payments she received in the past. Rather, the court found that the “lump sum payment” is made before the stream of monthly income benefits begin, making it an amount “paid” in the past, and thus a reduction in monthly payments is allowed by the wording of the policy.

  1. No. There was no palpable and overriding error in the motion judge’s determination that reducing a debtor’s total income by approximately 20 percent in order to discharge a debt obligation was not unreasonable.
  2. No. The court found that since this final ground of appeal is based on the rejected first three grounds of appeal, it too must fail.

Tags: Insurance Law, Long-Term Disability Benefits, Overpayments, Policy Interpretation, Fiduciary Duty

Iannarella v. Corbett, 2015 ONCA 238

[Laskin, Lauwers and Hourigan JJ.A.]

Counsel:

D.A. Zuber and J. Villeneuve, for the appellants

M.P. Forget, for the respondents

Keywords:   Costs Endorsement

Holding: Costs of the appeal fixed in the amount of $33,000 payable to the appellants.

Tags:   Costs Endorsement

Garcia v. Labourers’ International Union of North America, Local 1059, 2015 ONCA 230

[Doherty, Gillese and Lauwers JJ.A.]

Counsel:

D. P. Jacobs and S. G. Bosnick, for the appellant

L. Richmond and C. Sinclair, for the respondents

Keywords:  Labour Law, Union, Entitlement to Benefits, Sun Indalex Finance, LLC v. United Steelworkers, Fiduciary Duty, Conflict of Interest

Facts: The appellant, David Garcia, is a member of the United Brotherhood of Carpenters and Joiners of America (the “Carpenters”). The respondents are associated with the Labourers’ International Union of North America, Local 1059 (“Local 1059”). The appellant was a long-time member of Local 1059 until he was expelled in 2012 due to violating his obligations under Local 1059’s Constitution. He claimed to be a beneficiary of a Benefit Trust and Benefit Plan administered by Local 1059.

The Benefit Trust and Benefit Plan operate as follows: employers bound by collective agreement with Local 1059 are required, by the terms of the collective agreement and the Trust Agreement, to contribute amounts for each Local 1059 member whom they employ, to the Benefit Trust. The contributed amounts are pooled and used by the trust administrator to purchase group insurance that provides members with entitlements under the Benefit Plan.

The Benefit Plan administrator determines employees’ eligibility for benefits using the accounting concept of a “Dollar Bank Account” for each employee. An employee’s Dollar Bank Account tracks the contributions made by each employer for whom that employee has worked. This is the mechanism by which the administrator determines an employee’s eligibility to obtain and maintain coverage under the Benefit Plan. To be eligible for benefits, an employee’s Dollar Bank Account must have a positive balance by way of attributed employer contributions large enough to fund the employee’s share of the monthly insurance premium.

At the date of the appellant’s expulsion from Local 1059, the notional balance in his Dollar Bank Account was about $20,000. The Benefit Plan administrator advised the appellant that his benefits had been suspended effective February 2012. Since then, the appellant had not incurred any expenses that would ordinarily have been covered by the Benefit Plan as he had been covered by the equivalent Carpenters plan. Therefore, he was not out-of-pocket.

The appellant applied for an order permitting him to make claims against the Benefit plan after the termination of his union membership by Local 1059. The application judge dismissed his application.

Issues:

  1. Is the appellant a beneficiary of the Benefit Trust, entitled to claim benefits so long as there is an adequate positive balance in his Dollar Bank Account?
  2. Did the trustees of the Benefit Trust give the appellant adequate notice that he would lose access to the Benefit Plan if he were expelled from Local 1059?
  3. Did the application judge err in taking the approach she did on the issue of conflict of interest?

Holding:  Appeal dismissed.

Reasoning: 

  1. No.  It is permissible to read the Trust Agreement together with the Benefit Plan Text in order to determine the identity of the beneficiaries. Therefore, the application judge did not err in reading the Trust Agreement and the Benefit Plan Text together to determine the beneficiaries of the Benefit Trust, and find that those who ceased to be members of Local 1059 pursuant to article 5.01(a) of the Benefit Plan Text were no longer beneficiaries and, under article 5.02, the notional balance in the Dollar Bank Account attributed to them become “part of the general funds of the Plan.”
  2. No.  The appellant was fully aware that his expulsion from Local 1059 would lead to this result. There is no provision that gives the appellant the beneficial interest he asserted in the balance of his Dollar Bank Account. Common sense suggests that the termination of employment ordinarily results in the loss not only of wages, but also of employment benefits. Applying this logic to the employment structure in the construction industry suggests that termination of union membership – the gateway to employment in the industry – similarly results in the loss of employment benefits.
  3. No.  The application judge did not wrongly follow Cromwell J.’s “structural approach” in Sun Indalex Finance, LLC v. United Steelworkers, 2013 SCC 6 rather than the “contextual approach” adopted by Deschamps and LeBel JJ. As per the contextual approach, the duty of a fiduciary to avoid conflicts of interest may be modified by statute or agreement. Therefore, relevant statutory provisions and plan documents are important contextual factors in determining the extent of any such modification.

In alleging a conflict of interest, the appellant relied on Indalex to posit a sharp disjunction between the role of a union official in union business and the role of a trustee under a benefit trust. However, a number of important contextual factors differentiated this case from Indalex and were relevant to determining whether the union officials were in a conflict of interest. The functions of union management and benefit trust administration did not overlap in the factual context. Jim MacKinnon, as trustee, owed the appellant no specific and individualized duty that was engaged by his prosecution for violation or breach of the union’s Constitution and by-laws. That prosecution did not relate in any way to the administration of the Benefit Trust by the trustees.

Tags:  Labour Law, Union, Entitlement to Benefits, Sun Indalex Finance, LLC v. United Steelworkers, Fiduciary Duty, Conflict of Interest

Bhagria v. 316697 Ontario Inc., 2015 ONCA 243

[Feldman, Benotto and Brown JJ.A.]

Counsel:

M. Wiffen, for the appellants

M. Klaiman, for the respondents

Keywords:  Religious Organizations, Elections, Irregularities, Burden of Proof

Facts: The parties were involved in a dispute about membership and voting rights in connection with a Hindu temple. The appellant objected to the finding by the application judge that the alleged irregularity in the September 24, 2007 By-Law No. 7 vote was not established. The appellant claimed the application judge misapprehended and misapplied the burden of proof.

Holding:  Appeal dismissed.

Reasoning:  The application judge effectively found that the appellant had not “established an irregularity”.  Therefore, the burden of proof never shifted. The test was set out in Leroux v. Molgat (1985), 67 B.C.L.R. 29, where the main issues are whether irregularities are established, and, if so, whether the defendants responsible for the conduct of the election have shown that such irregularities did not affect the result.

Pursuant to Beanibazar Social & Cultural Society of Toronto, Canada v. Nuruddin, [2003] O.J. No. 4475, the onus was on the appellant to show that there was an irregularity, before the onus would shift to the respondent to show that the established irregularity or irregularities did not affect the result.  Because the onus on the respondent is onerous once the burden has shifted, it is important that allegations of irregularity are first “established” with clear, relevant evidence.

Tags:  Religious Organizations, Elections, Irregularities, Burden of Proof

2240802 Ontario Inc. v. Springdale Pizza Depot Ltd., 2015 ONCA 236

[Doherty, Epstein and Tulloch JJ.A.]

Counsel:

D. Altshuller and K. Davies, for the appellants

S.P. Murphy, for the respondents

Keywords: Franchise Law, Arthur Wishart Act (Franchise Disclosure), 2000, Disclosure Document, Financial Statements,  Rescission, Summary Judgment

Facts:

The appellants are franchisors and directors of Springdale Pizza Depot Ltd. The appellants entered into a franchise agreement with the respondents, as franchisees. Less than two years later, the franchise began experiencing financial difficulties and the respondents concluded that the Disclosure Document, provided to them by the appellants, was deficient.

Subsequently, the respondents  delivered a notice of rescission, and by statement of claim dated May 15, 2012, they commenced an action against the appellants for rescission and substantial damages. The respondents then moved for partial summary judgment, seeking a declaration that the franchise agreement was validly rescinded, and that the appellants were liable to them for damages. Greer J. of the Superior Court of Justice granted the respondents’ motion. Greer J. found that the Disclosure Document did not comply with the requirements of the Arthur Wishart Act (Franchise Disclosure), 2000 (“Act”), the franchise agreement documents were validly rescinded, and the appellants were liable for damages in an amount to be determined by a Master, in accordance with the parties’ agreement.

Issues:

  1. Did Greer J. err in finding that there was no genuine issue requiring a trial?
  2. Did Greer J. err in concluding that the variations between the Disclosure Document and the requirements under the Act were deficiencies that entitled the respondents to rescind the franchise agreement?

Holding: The appeal was dismissed, with costs fixed at $5,000 payable to the respondents.

Reasoning:

  1. No. Greer J. correctly applied the test for summary judgment in force at the time she rendered her decision. Specifically, she applied the “full appreciation” test from Combined Air Mechanical Services v. Flesch, 2011 ONCA 764,  which required the court to determine whether it is was possible to fully appreciate the evidence and issues by way of summary judgment, or whether a trial was required. Applying this test, Greer J. had all the evidence available to her to effectively adjudicate the dispute, such that a trial was not required.  While the appellants contended that the evidence of one of their witnesses conflicted with the evidence of one of the respondents witnesses on the issue of the contents of the Disclosure Document, this conflict did not require a trial. Specifically, Greer J. considered whether the respondents were entitled to rescission based on the disclosure that the appellants admitted to having provided. By proceeding in this fashion the motion judge rendered the conflict in the evidence on this point immaterial. Even applying the test currently in force for summary judgment from Hryniak v. Mauldin, 2014 SCC 7, Greer J. appropriately dealt with the important and discrete matter of rescission in an expeditious manner. In turn, she narrowed the dispute in a way that resonates with the approach of this Supreme Court case.
  2. No. The appellants’ failure to meet the statutory disclosure obligations under the Act gave the respondents the right to rescind the franchise agreements. In sum, the Disclosure Document which the appellants provided to the respondent before the franchise agreement was executed effectively amounted to no disclosure under subsection 6(2) of the Act.

The Court of Appeal agreed with Greer J. that there were three major deficiencies in the Disclosure Document, which collectively permitted the respondents to rescind the franchise agreement and recover damages.

One of the deficiencies was the appellants’ failure to either provide financial statements of the franchisor which were audited, or which were prepared according to generally accepted accounting principles that are at least equivalent to the review and reporting standards applicable to review engagements set out in the Canadian Institute of Chartered Accountants Handbook. This failure was contrary to the appellants’ mandatory  obligation outlined in subsections 3(1)(a) and 3(1)(b) of Ontario Regulation 581/00 (“Regulations”).

The second deficiency was the appellants failure to provide a certificate, signed by two or more of its officers or directors, certifying that the Disclosure Document is true and includes all information required by the Act. This failure was contrary to the appellants’ mandatory  obligation outlined in section 7 of the Regulations, because the franchisor was incorporated and had more than one officer and director. Even though the appellants argued that they provided two separate certificates to the respondents, which were signed by two of its directors, this was insufficient to comply with section 7 of the Regulation.

The third deficiency was the appellants’ failure to include in the Disclosure Statement the fact that the franchisor was involved in ongoing litigation against another franchisee, who sought rescission based on the appellants’ insufficient disclosure. This failure was contrary to the appellants’ mandatory obligation under subsection 2(5) of the Regulations.

The Court of Appeal found that Greer J. did not err in her application of the law to the undisputed deficiencies apparent from the record, nor in her conclusion that the Disclosure Document was materially deficient and entitled the respondents to rescission. She correctly considered the case of  Sovereignty Investment Holdings, Inc. v. 9127-6907 Quebec Inc, which confirms that, under the Act, a materially deficient financial statement provides an independent basis for rescission.

Greer J. also applied the reasoning in the case of 4287975 Canada Inc. v. Imvescor Restaurants Inc., 2009 ONCA 308, which held that “if the disclosure document that is provided turns out to be materially deficient, then no disclosure will be found to have been made.” Applying this principle, the Court of Appeal found that subsection 3(1) of the Regulations requires franchisors to provide financial statements that are either independently verified by an accountant in an audit engagement, or appear to contain reasonable figures to an accountant in a review engagement. In this case, the appellants did not provide financial statements to the respondents in accordance with subsection 3(1) of the Regulations, because they were not  independently verified in an audit engagement, nor were they reviewed in a review engagement. Accordingly, this failure alone constituted a material deficiency amounting to no disclosure under the Act.

A collective consideration of the additional deficiencies mentioned previously, together with the deficiency in the financial statements, simply bolsters the fact that the appellants’ Disclosure Document was materially deficient. Therefore, Greer J. did not err in finding the respondents were entitled to rescission pursuant to subsection 6(2) of the Act.

Tags: Franchise Law, Arthur Wishart Act (Franchise Disclosure), 2000, Disclosure Document, Financial Statements,  Rescission, Summary Judgment

McClatchie v. Rideau Lakes (Township), 2015 ONCA 233

[Doherty, Rouleau and Watt JJ.A.]

Joseph Y. Obagi, for the appellant/respondent by way of cross-appeal

Robert J. De Toni, for the respondents/appellants by way of cross-appeal

Keywords: Real Estate Law, Adverse Possession, Easement of Necessity

Facts:

In 2001, the respondents, David and Victoria McClatchie, bought Lot 16, a residential lakefront lot on the southern shore of Rideau Lake in eastern Ontario. Lot 16 is one of a series of lakefront properties created by subdivision plan 198 (“Plan 198”) from a portion of Lot 20, Concession 5, Township of South Elmsley, now Township of Rideau Lakes (“Lot 20-5”). Plan 198 also created a 40-foot road allowance running between the balance of Lot 20-5 and most of the lakefront properties, giving them access to a municipal road. However, no road had been built on the road allowance. Instead, the McClatchies and prior owners of Lot 16, including the Banfords, used a gravel road that cut across Lot 20-5 for access. Lot 20-5 and the road allowance were owned by the appellant, Allen Churchill.

This appeal related to the McClatchies’ successful adverse possession claim over an L-shaped portion of the road allowance bordering Lot 16, (“Part R-1”) as well as an easement of necessity the trial judge found existed over the gravel road on Lot 20-5 that the McClatchies used for access. Mr. Churchill argued that the trial judge erred in finding the McClatchies had demonstrated the required 10-year period of adverse possession over Part R-1. Specifically, the trial judge erred both in interpreting the documentary proof tendered at trial and in failing to consider whether adverse possession had been demonstrated over every part of the land claimed. In Mr. Churchill’s submission, the documents, properly interpreted, show that the 10-year period had been interrupted. Further, the evidence of adverse possession over certain parts Part R-1 was weak or non-existent. Mr. Churchill also appealed the finding of an easement of necessity over the gravel road cutting across his property. For such an easement, necessity is assessed at the time the lot is created. He said that when Lot 16 was created by Plan 198 in 1922, the road allowance created by the same plan provided access, precluding an easement of necessity.

Issues:

  1. Did the trial judge err in finding that the McClatchies and Banfords had extended their use and occupation over the whole of Part R-1?
  2. Did the trial judge err in finding that the period of adverse possession had not been interrupted by a September 1998 agreement or a September 2007 letter sent by Mr. Churchill’s lawyer?
  3. Did the trial judge err in finding an easement of necessity over Parts R-4 and R-5?

Decision: Appeal allowed in part

Reasons:

  1. No. The trial judge’s findings were supported by the evidence led at trial that provided a solid basis for the conclusion that the whole of Part R-1 was occupied and used to the exclusion of the Churchills. After setting out the uses that the Banfords and McClatchies had made of Part R-1, the trial judge went on to find  that “the nature, extent and presence of these elements, together with the location of the overhang of the garage, prevented any other use by Mr. Churchill and constituted obivous, continuous possession by the dominant owner of Lot 16”.
  2. No. A September 1998 agreement between the Churchills and Mrs. Branford, as sole owner of Lot 16 made reference to land immediately to the west and south of lot 16 owned by the Churchills. The issue was whether this reference referred to the road allowance. The trial judge determined it did not. In interpreting the 1998 agreement, the trial judge correctly read it and interpreted its terms in context, taking into account the document as a whole as well as the relevant background and circumstances. He applied the principles of contractual interpretation to the words of the written contract, considered in the light of the factual matrix. As explained in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, this is a question of mixed fact and law, and the standard of review of the trial judge’s findings is thus palpable and overriding error, unless the appellant can point to an extricable error of law. The trial judge interpreted the words “land immediately to the west and south of lot 16” in the 1998 agreement as referring to the lands immediately to the west and south of the road allowance. He concluded that, when the 1998 agreement was entered into, the Churchills’ understanding of who owned the road allowance had changed from their belief in 1988 that they owned the road allowance. By 1998, the Churchills had come to believe that the township owned the road allowance. This finding by the trial judge was supported by the evidence tendered at trial.  A September 2007 letter sent by Mr. Churchill’s lawyer was directed to the issue of a prescriptive easement over Parts R-4 and R-5. It was written shortly after Pedlar J.’s judgment in Churchill v. Irvine (23 May 2007), Perth, 3085/96 (Ont. S.C.), which stated that the road allowance, Part R-1, was owned by the township. As a result, the trial judge found that letter was not intended to protest the McClatchies’ use of Part R-1.
  3. Yes. Easements of necessity are easements presumed to have been granted when the land that is sold is inaccessible except by passing over adjoining land retained by the grantor. The concept arises from the premise that the easement is an implied grant allowing the purchaser to access the purchased lot. Necessity is assessed at the time of the original grant. In the present case, it is obvious from the 1922 subdivision plan, Plan 198, that access to Lot 16 was to be along the 40-foot wide road allowance the plan created. By including a road allowance in Plan 198, the grantors made sure that Lot 16 was not landlocked thereby avoiding the creation of an easement of necessity.

Tags: Real Estate Law, Adverse Possession, Easement of Necessity

Brown v Lloyd’s of London Insurance Market, 2015 ONCA 235

[Cronk, Gillese and Brown JJ.A.]

Counsel:

G. D. Brown, in Person

R.L. Akazaki, for the respondent, Lloyd’s of London Insurance Market

S.M. Sack, for the respondent, the Law Society of Upper Canada

D. Eveleigh, for the respondent, Lawyers’ Professional Indemnity Comopany

W.M. Pepall and L.E. Lung, for the respondent, University of Toronto

J.A. Odumeru, for the respondent, Toronto-Dominion Bank Group

K.A. McGivney and J. Chen, for the respondent, City of Toronto

S. Schmoranz and A. S. Murray, for the respondent, Canada Post Corporation

K. Findlay, for the respondent, West Neighbourhood House

J. Birenbaum, for the respondent, Police Association of Ontario

F. Dada, for the respondent, Her Majesty the Queen in right of Ontario

A. Esden-Tempski, in Person

KeywordsRules of Civil Procedure, Rule 21, Frivolous and Vexatious, Abuse of Process, Justiciability, No Reasonable Cause of Action Facts:

The appellant, Gary David Brown, appealed an order dismissing his action under Rule 21 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, as against all defendants except the defendant Esden-Tempski, the appellant’s former landlord, on the basis that the action was frivolous and vexatious and “[could not] possibly succeed.” The Registrar of the Court of Appeal notified the appellant that his appeal may be stayed or dismissed on similar grounds.

Holding: Appeal dismissed. Reasoning:

The Court of Appeal was satisfied that the appellant’s appeal was frivolous and vexatious or otherwise an abuse of the court’s process and, therefore, that it should be dismissed on the authority of Rule 21. With the possible exception of the claims sought to be advanced against the defendant Esden-Tempski, the allegations in the appellant’s pleading, to the extent that they were discernible, and the associated relief claimed, were either non-justiciable or failed to disclose a reasonable cause of action within the meaning of the Rules. There could be no reasonable expectation that, should the appeal proceed, the appellant could obtain the relief that he sought.

Tags: Rules of Civil Procedure, Rule 21, Frivolous and Vexatious, Abuse of Process, Justiciability, No Reasonable Cause of Action

DeNardi v Opie, 2015 ONCA 239

[Sharpe, van Rensburg and Pardu JJ.A]

Counsel:

M. Hoy, for the appellant

B. Wiseman, for the respondent

Keywords: Costs, Endorsement

Facts:

An appeal from the costs order of Justice Ramsay of the Superior Court of Justice dated April 1, 2014.

Issues:

  1. Did the application judge err in his costs award?

Holding:

Appeal dismissed. Costs for the respondent fixed at $10,000.00 inclusive of all appearances, disbursements and taxes.

Reasoning:

  1. No, the court did not agree that the application judge lacked jurisdiction to make the costs order, or that the appellant did not have adequate notice that costs could be in play. Although costs were not claimed in the Notice of Application, there was a claim for such further and other relief as counsel may advise, a costs order had been made on an earlier appearance and the respondent made an offer to settle which included a claim for costs. This constituted notice that costs were in play.

The court held there was no injustice or unfairness in making the costs order in the circumstances and it was justified given the appellant’s misconduct.

Tags: Costs, Endorsement

Essa v. Mekawi, 2015 ONCA 244

[Feldman, Benotto and Brown JJ.A.]

Counsel:

A.A. Green, for the applicant

R. Peticca, for the respondent

Keywords: Family Law, Endorsement, International Custody Dispute, Interlocutory Injunction, Motion to Stay Pending Appeal, Rules of Civil Procedure, Rules 56.01, 61.06 and 63.02, RJR-Macdonald Inc. v. Canada (Attorney General), Hague Convention on the Civil Aspects of International Child Abduction, 1980, Article 13, Security for Costs

Facts: The appellant mother brought a motion to stay the order of the trial judge, which required her to forthwith return the two children of her marriage to the respondent father in Egypt. The appellant moved to stay this order pending her appeal. The respondent brought a cross-motion for security for costs.

Issues:

  1. Should the appellant be granted a stay of the order pursuant to rule 63.02 of the Rules of Civil Procedure?
  2. Should the respondent’s motion for security for costs be granted pursuant to rules 56.01 or 61.06 of the Rules of Civil Procedure?

Holding: The appellant’s motion was granted, and the respondent’s motion was denied. Costs of these motions were reserved to the panel hearing the appeal.

Reasoning:

  1. Yes. The test for staying an order pending appeal under rule 63.02 of the Rules of Civil Procedure (“Rules”) is the same as the test for an interlocutory injunction established by the Supreme Court of Canada in RJR-Macdonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. Specifically, the court must consider three factors: a preliminary assessment must be made of the merits of the case to ensure that there is a serious question to be tried, it must be determined whether the applicant would suffer irreparable harm if the application were refused, and an assessment must be made as to which of the parties would suffer greater harm from the granting or refusal of the remedy pending a decision on the merits. According to Thomson v. Thomson (1994) 3 S.C.R. 551, these three factors must be applied in a manner that takes the best interests of the children as the paramount consideration.

Applying the test for an interlocutory injunction from RJR-Macdonald, the appellant established that there is a serious question to be tried- whether the trial court erred in declining to accept jurisdiction and decide her claim for custody in Ontario, having regard to the evidence that the respondent was not actually exercising custody rights at the time the appellant unilaterally removed the two children to Ontario in June, 2012. More specifically, serious issue to be tried is whether Article 13 of the Hague Convention on the Civil Aspects of International Child Abduction, 1980, applies; that is whether, although the respondent had guardianship of the children, he was not exercising custody rights at the time of the mother’s removal of the child. If it is found to apply, pursuant to the Convention, the appellant does not need to return the children to the father.

Applying the second step of the test for an interlocutory injunction, it was found that irreparable harm would be suffered by the children, which could not be compensated for by a costs award. Specifically, if the children were to be removed to Egypt now, they would lose the balance of their school year in Ontario. This would be prejudicial to them and is not in their best interests.

Applying the third step of the test, the balance of convenience favoured the granting of the stay to the appellant. The court found that it was not presented with any actual plan of care for the children in the event the order was not stayed and the children were returned to Egypt. Furthermore, an appeal date for the appeal to be heard is available in August or September.

As all three steps of the test for an interlocutory injunction were met, a stay was granted. It was conditional on the respondent not removing the children from Ontario, and that their Canadian and Egyptian passports and any other travel documents be deposited with the appellant’s counsel. No decision as to access to the children during the period of the stay was granted.

  1. No. Applying rule 56.01 of the Rules, even though the appellant allegedly has another proceeding for the same relief pending in Egypt, there was no evidence in the record that the relief claimed is the same in both proceedings. Further, on the issue of outstanding costs orders, the appellant was only ordered to pay costs to the respondent at the end of litigation, and costs of trial have not been assessed.

Applying subrule 61.06(c) of the Rules, the court considered the fact that the appellant fraudulently obtained a custody order in her favour in Egypt. However, since the respondent was aware of this order but made no attempt to set it aside before the appellant left Egypt with the children, this did not constitute security for costs being ordered for “other good reason.”

Tags: Family Law, Endorsement, International Custody Dispute, Interlocutory Injunction, Motion to Stay Pending Appeal, Rules of Civil Procedure, Rules 56.01, 61.06 and 63.02, RJR-Macdonald Inc. v. Canada (Attorney General), Hague Convention on the Civil Aspects of International Child Abduction, 1980, Article 13, Security for Costs