Good afternoon.

Following are this week’s summaries of the Court of Appeal for Ontario for the week of July 11, 2022. There were many interesting cases this week.

In Humphrey v. Mene Inc., the Court allowed an appeal in part and reduced damages for wrongful dismissal from twelve months to seven as a result of the plaintiff’s failure to reasonably mitigate by accepting another comparable position seven months after she had been dismissed. The awards of aggravated and punitive damages were upheld.

In Sirius Concrete Inc (Re), the Court allowed an appeal from the order of a bankruptcy judge that found that certain funds were part of the bankrupt’s estate and could be distributed to creditors. There was a triable issue as to whether the claimant had a constructive trust claim over the funds, which, if successful, would take the funds out of the bankrupt estate.

In Flight (Re), another bankruptcy decision, the Court allowed an appeal from a judge’s decision that permitted a claim against a trustee in bankruptcy to proceed. The matter was remitted to the court below for a determination of whether leave to bring the claim should be granted under section 215 of the Bankruptcy and Insolvency Act.

Maple Leaf Foods Inc v Ryanview Farms is a case about damages for breach of the sale of breeding pigs. The appeal was allowed in part, but not on the basis of reasonable apprehension of bias.

In Cronos Group Inc. v. Assicurazioni Generali S.p.A., the Court upheld the application judge’s decision permitting an insured to extend coverage under an excess policy that mirrored the terms of a primary policy.

In 2544176 Ontario Inc. v. 2394762 Ontario Inc., the Court allowed an appeal from a judgment setting aside the sale of a property under power of sale. The fact that a mortgagee had defaulted in its obligation to provide a default statement to the mortgagor upon request did not entitle the mortgagor to set aside the sale of the property to an innocent third-party purchaser. The mortgagor’s remedy was against the mortgagee for damages for breach of its obligations.

In 1734934 Ontario Inc. v. Tortoise Restaurant Group Inc., the Court dismissed an appeal from a refusal to allow the plaintiff to add a party defendant in a ten year old franchise dispute.

Wishing everyone an enjoyable weekend.

Table of Contents

Civil Decisions

Sirius Concrete Inc (Re) , 2022 ONCA 524

Keywords: Bankruptcy and Insolvency, Property of the Bankrupt, Property Held in Trust, Torts, Deceit, Unjust Enrichment, Remedies, Constructive Trust, Bankruptcy and Insolvency Act, RSC 1985, c. B-3, s. 67(1)(a), Ontario Securities Commission v Money Gate Mortgage Investment Corporation, 2020 ONCA 812, Credifinance Securities Limited v DSLC Capital Corp, 2011 ONCA 160, 306440 Ontario Ltd v 782127 Ontario Ltd(Alrange Container Services), 2014 ONCA 548, Moore v Sweet, 2018 SCC 52

Flight (Re) , 2022 ONCA 526

Keywords: Bankruptcy and Insolvency, Claims against Trustees, Undischarged Bankrupts, Civil Procedure, Appeals, Leave to Appeal, Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, s. 215, s. 66.11, s. 193, s. 71, s.2, Family Law Act, R.S.O. 1990, c. F.3, Lloyd W. Houlden, Geoffrey B. Morawetz and Janis P. Sarra, Bankruptcy and Insolvency Law of Canada, loose-leaf (2022-Rel. 6), 4th ed. (Toronto: Thomson Reuters, 2009), Canadian Glacier Beverage Corp. v. Barnes & Kissack Inc., 1999 CanLII 6577 (BCSC), Re 298157 Alberta Ltd., 2005 ABQB 941, Environmental Metal Works Ltd. v. Murray, Faber & Associates, 2013 ABQB 479, Mercure v. Marquette & Fils, [1977] 1 S.C.R. 547, 2403177 Ontario Inc. v. Bending Lake Iron Group Limited, 2016 ONCA 225, Romspen Investment Corporation v. Courtice Auto Wreckers Limited, 2017 ONCA 301, Business Development Bank of Canada v. Pine Tree Resorts Inc., 2013 ONCA 282, GMAC Commercial Credit Corporation – Canada v. T.C.T. Logistics Inc., 2006 SCC 35, Braich (Re), 2007 BCSC 1604, R. v. Nowegijick, [1983] 1 S.C.R. 29, R. v. Penunsi, 2019 SCC 39, Grimanis v. Harris & Partners Inc., 2009 CanLII 10673 (Ont. S.C.), The Bank of Nova Scotia v. David Allin, 2013 ONSC 7937, Society of Composers, Authors and Music Publishers of Canada v. Armitage (2000), 50 O.R. (3d) 688 (C.A.), Mpampas v. Schwartz Levitsky Feldman Inc., 2008 ONCA 581, World Class Bakers Corporation, Re, 2005 CanLII 47752 (Ont. S.C.), Re New Alger Mines Limited (1986), 54 O.R. (2d) 562 (C.A.)

Cronos Group Inc. v. Assicurazioni Generali S.p.A. , 2022 ONCA 525

Keywords: Contracts, Interpretation, Insurance, Coverage, Commercial General Liability, Directors’ and Officers’ Liability, Optional Extension Period, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, Teal Cedar Products Ltd. v. British Columbia, 2017 SCC 32, Northwest Pipe Co. v. RLI Insurance Co., 2013 WL 3712418, Re Canada 3000 Inc. (2002), 35 C.B.R. (4th) 37 (Ont. S.C.). S.A. v. Metro Vancouver Housing Corp., 2019 SCC 4

1734934 Ontario Inc. v. Tortoise Restaurant Group Inc. , 2022 ONCA 528

Keywords: Contracts, Franchise Agreements, Civil Procedure, Amending Pleadings, Adding Parties, Delay, Abuse of process, Costs, Rules of Civil Procedure, Rule 5.03(4), Plante v. Industrial Alliance Life Insurance Co. (2003), 66 O.R. (3d) 74 (S.C.), Downtown Eatery (1993) Ltd. v. Ontario (2001), 54 O.R. (3d) 161 (C.A.), 1734966 Ontario Inc. v. Tortoise Restaurant Group Inc., 2020 ONSC 888, Klassen v. Beausoleil, 2019 ONCA 407, Belsat Video Marketing Inc. v. Astral Communications Inc. et al. (1999), 118 O.A.C. 105 (C.A.), Hamilton v. Open Window Bakery, 2004 SCC 9, St. Jean v. Cheung, 2009 ONCA 9

Humphrey v. Mene Inc. , 2022 ONCA 531

Keywords: Employment Law, Wrongful Dismissal, Termination Without Cause, Reasonable Notice, Duty of Good Faith, Damages, Mitigation, Aggravated Damages, Punitive Damages, Bardal Factors, Employment Standards Act, 2000Bardal v. The Globe & Mail Ltd. (1960), 24 D.L.R. (2d) 140 (Ont. H.C.), Strudwick v. Applied Consumer & Clinical Evaluations Inc., 2016 ONCA 520, Honda Canada Inc. v. Keays, 2008 SCC 39, Love v. Acuity Investment Management Inc., 2011 ONCA 130, Lin v. Ontario Teachers’ Pension Plan Board, 2016 ONCA 619, Red Deer College v. Michaels, [1976] 2 S.C.R. 324, Beatty v. Best Theratronics Ltd., 2015 ONCA 247, Link v. Venture Steel Inc., 2010 ONCA 144, Dussault v. Imperial Oil Limited, 2019 ONCA 448, Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701, Colistro v. Tbaytel, 2019 ONCA 197,  leave to appeal refused, [2019] S.C.C.A. No. 173, Doyle v. Zochem Inc., 2017 ONCA 130, Ruston v. Keddco MFG. (2011) Ltd., 2019 ONCA 125,  Boucher v. Wal-Mart Canada Corp., 2014 ONCA 419, Bank of Montreal v. Marcotte, 2014 SCC 55, Whiten v. Pilot Insurance Co., 2002 SCC 18, Pate Estate v. Galway-Cavendish and Harvey (Township), 2013 ONCA 669

Maple Leaf Foods Inc v Ryanview Farms , 2022 ONCA 532

Keywords: Contracts, Sale of Goods, Damages, Date of Assessment, Civil Procedure, Reasonable Apprehension of Bias, Sale of Goods Act, RSO 1990, c. S.1, s. 15 & s. 51(2), Maple Leaf Foods Inc v Ryanview Farms, 2015 ONCA 566, Rougemount Capital Inc v Computer Associates International Inc, 2016 ONCA 847, Kinbauri Gold Corp v Iamgold International African Mining Gold Corp (2004), 246 DLR (4th) 595 (Ont CA), Filice v Complex Services Inc, 2018 ONCA 625

2544176 Ontario Inc. v. 2394762 Ontario Inc. , 2022 ONCA 529

Keywords: Real Property, Doctrine of Indefeasibility of Title, Statutory Interpretation, Contracts, Mortgages, Enforcement, Power of Sale, Mortgages Act, R.S.O. 1990, c. M.40, s 22, s 35, s 36, Land Titles Act, R.S.O. 1990, c. L.5, s 99, Cranberry Cove Tower Inc. v. Monarch Trust Co., 2003 CanLII 14548 (Ont. S.C.), 1173928 Ontario Inc. v. 1463096 Ontario Inc., 2018 ONCA 669, Stanbarr Services Limited v. Metropolis Properties Inc., 2018 ONCA 244, Durrani v. Augier (2000), 50 O.R. (3d) 353, Belende v. Patel, 2009 CanLII 74 (Ont. S.C.)

Short Civil Decisions

Sparr v. Downing , 2022 ONCA 537

Keywords: Family Law, Child Support, Sparr v. Downing , 2020 ONCA 793


CIVIL DECISIONS

Sirius Concrete Inc (Re), 2022 ONCA 524

[Benotto, Zarnett and Sossin JJ.A.]

COUNSEL:

S. Turton, for the appellant Ayerswood Development Corporation

M. Vine and J. DiFruscia, for the respondent BDO Canada Limited, as Trustee for the Estate of Sirius Concrete Inc.

Keywords: Bankruptcy and Insolvency, Property of the Bankrupt, Property Held in Trust, Torts, Deceit, Unjust Enrichment, Remedies, Constructive Trust, Bankruptcy and Insolvency Act, RSC 1985, c. B-3, s. 67(1)(a), Ontario Securities Commission v Money Gate Mortgage Investment Corporation, 2020 ONCA 812, Credifinance Securities Limited v DSLC Capital Corp, 2011 ONCA 160, 306440 Ontario Ltd v 782127 Ontario Ltd(Alrange Container Services), 2014 ONCA 548, Moore v Sweet, 2018 SCC 52

FACTS:

The appellant, Ayerswood Development Corporation (“Ayerswood”), appealed the order of the bankruptcy judge, made on a motion for directions brought by the respondent, BDO Canada Limited, as trustee in bankruptcy of Sirius Concrete Inc. (“Sirius”). In particular, Ayerswood appealed from those parts of the order by which the bankruptcy judge directed that the amount of $381,578.40 (the “funds”) that Ayerswood paid to Sirius on March 1, 2019, one business day before Sirius made an assignment into bankruptcy on March 4, 2019, formed part of the bankrupt estate of Sirius and was to be distributed to its creditors.

The bankruptcy judge rejected Ayerswood’s position that it had a claim to a remedial or constructive trust over the funds, such that the funds were not property of Sirius that became available for distribution to creditors upon its bankruptcy, and that adjudicating this claim required a fuller evidentiary record. Ayerswood contended that payment of the funds had been induced by Sirius’s deceit and constituted an unjust enrichment, and Ayerswood provided evidence about the circumstances of the payment that the bankruptcy judge described as raising a “live question as to whether Ayerswood was manipulated and duped” into paying the funds. However, the bankruptcy judge held that even accepting that evidence as true, “none of … [it] could possibly lead to the imposition of a trust.”

ISSUES:

Did the bankruptcy judge err in establishing that the funds formed part of the bankrupt estate of Sirius and were to be distributed to its creditors?

HOLDING:

Appeal allowed.

REASONING:

Yes.

The bankruptcy judge did not cite any authority for his conclusion that Ayerswood’s evidence, taken as true, could not possibly establish a trust. Property of the bankrupt divisible among creditors did not include property that the bankrupt held in trust for any other person.

Unjust enrichment, arising from certain types of debtor misconduct prior to bankruptcy, may impress funds with a constructive trust in favour of a third party and the successful assertion of a constructive trust means that the property subject to it does not form part of the property of the bankrupt that vests in the trustee under s. 71 of the BIA.

To establish unjust enrichment, a claimant must show an enrichment, a corresponding deprivation, and the absence of a juristic reason: Moore v Sweet. The payment to Sirius by Ayerswood on March 1, 2019 met the requirements of a benefit and a corresponding deprivation. It was not clear that the existence of a contract would have constituted a juristic reason, given that on Ayerswood’s evidence, the payment was procured by deceit and a breach of the duty of honest performance, and the amount paid was not owing.

Where an unjust enrichment is established, a court may award a proprietary remedy in the form of a constructive trust where a personal remedy is inadequate and the plaintiff’s contribution is linked to the property over which the trust is claimed. A personal remedy was inadequate given the bankruptcy, and the funds paid by Ayerswood on the eve of bankruptcy may have been traceable into the funds in the trustee’s hands.

The Court did not accept the argument that policy reasons necessarily precluded the finding of a constructive trust since giving effect to one would allow money paid to the bankrupt to be clawed back by the payor instead of being shared rateably among all creditors. Parliament has answered this policy question by exempting property that the bankrupt holds in trust from property of the bankrupt that is divisible among creditors.

Nor did the Court accept the argument that nothing in the evidence distinguished the March 1, 2019 payment made by Ayerswood from any of the prior payments it made to Sirius. On Ayerswood’s uncontradicted evidence, it decided to treat that payment differently and would not have turned the funds over but for being lied to.

Since, accepting the evidence of Ayerswood as true, a trust was a legally viable potential remedy, the decision of the bankruptcy judge, rendered on the basis that it was not a viable potential remedy, could not stand.


Flight (Re), 2022 ONCA 526

[Lauwers, Nordheimer and Zarnett JJ.A.]

COUNSEL:

H.M., for the appellants

T.V., for the respondents

J.P and J.L.C, for the intervener the Superintendent of Bankruptcy

Keywords: Bankruptcy and Insolvency, Claims against Trustees, Undischarged Bankrupts, Civil Procedure, Appeals, Leave to Appeal, Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, s. 215, s. 66.11, s. 193, s. 71, s.2, Family Law Act, R.S.O. 1990, c. F.3, Lloyd W. Houlden, Geoffrey B. Morawetz and Janis P. Sarra, Bankruptcy and Insolvency Law of Canada, loose-leaf (2022-Rel. 6), 4th ed. (Toronto: Thomson Reuters, 2009), Canadian Glacier Beverage Corp. v. Barnes & Kissack Inc., 1999 CanLII 6577 (BCSC), Re 298157 Alberta Ltd., 2005 ABQB 941, Environmental Metal Works Ltd. v. Murray, Faber & Associates, 2013 ABQB 479, Mercure v. Marquette & Fils, [1977] 1 S.C.R. 547, 2403177 Ontario Inc. v. Bending Lake Iron Group Limited, 2016 ONCA 225, Romspen Investment Corporation v. Courtice Auto Wreckers Limited, 2017 ONCA 301, Business Development Bank of Canada v. Pine Tree Resorts Inc., 2013 ONCA 282, GMAC Commercial Credit Corporation – Canada v. T.C.T. Logistics Inc., 2006 SCC 35, Braich (Re), 2007 BCSC 1604, R. v. Nowegijick, [1983] 1 S.C.R. 29, R. v. Penunsi, 2019 SCC 39, Grimanis v. Harris & Partners Inc., 2009 CanLII 10673 (Ont. S.C.), The Bank of Nova Scotia v. David Allin, 2013 ONSC 7937, Society of Composers, Authors and Music Publishers of Canada v. Armitage (2000), 50 O.R. (3d) 688 (C.A.), Mpampas v. Schwartz Levitsky Feldman Inc., 2008 ONCA 581, World Class Bakers Corporation, Re, 2005 CanLII 47752 (Ont. S.C.), Re New Alger Mines Limited (1986), 54 O.R. (2d) 562 (C.A.)

FACTS:

The respondent made assignments into bankruptcy on four occasions. The appellant was the trustee in respect of each of these bankruptcies. During his fourth bankruptcy, the respondent discovered that between 2003 and 2018, his former spouse, bookkeeper and power of attorney, had misappropriated substantial sums from the appellant’s business, approximately $206,000.

The respondent recovered about $30,300 from his former spouse, which he did not turn over to the appellant trustee. In 2018, he complained to the Office of the Superintendent of Bankruptcy about the trustee’s failure to detect what his wife had done. As a consequence of the complaint, the appellant learned of the respondent’s former spouses’ activities and the payments the respondent recovered. Disputes arose between the trustee and the respondent concerning whether and on what terms he would be discharged from bankruptcy and how the payments from his former spouse should be treated.

In 2019, the respondent and his current spouse commenced an action against the appellant seeking declaratory and monetary relief (the “Action”). The central allegation in the Action is that the appellant, as the Licensed Insolvency Trustee for each of the bankruptcies, ought to have detected the respondent’s former spouses’ misappropriations. The appellant objected to the Action on the basis that at the time of its commencement, (i) the respondent had not been discharged from bankruptcy, and (ii) no permission was obtained under s. 215 of the Bankruptcy and Insolvency Act (the “BIA”) to bring the Action.

Section 215 of the Bankruptcy and Insolvency Act (the “BIA”) requires that permission of the court be obtained to bring an action against, among others, a trustee in bankruptcy “with respect to a report made under, or any action taken pursuant to, this Act”.

The motion judge decided that the respondents did not require permission of the court, under s. 215 of the BIA, to bring an action against the appellant, related to the administration of four bankruptcies of the respondent. The motion judge held that the section did not apply because the action was against the trustee in a personal capacity and because it alleged omissions.

ISSUES:

(1) Is the appeal as of right, and if not, should leave to appeal be granted?

(2) Does s. 215 apply to the Action?

(3) Should the matter be returned to the Bankruptcy Court to determine whether permission to sue should be granted?

HOLDING:

Appeal allowed.

REASONING:

(1) No, the appeal is not as of right. Yes, leave to appeal should be granted.

The appellants argued that the appeal may be brought as of right because either s. 193(b) or s. 193 (c) applies to the decision concerning whether permission under s. 215 of the BIA was required. The Court found that neither section is applicable.

Section 193(b) applies only where the order sought to be appealed is likely to affect other cases in the same bankruptcy proceeding. There are no other cases in the respondent’s bankruptcy that would be affected by the decision about the applicability of s. 215. Section 193(c) does not apply to orders that refuse permission to proceed with an action. This provision does not apply to an order determining that no permission to sue is required.

The Court held that leave to appeal should be granted under s. 193 because the proposed appeal, which related to the proper scope of s. 215 of the BIA, met the test for leave to appeal. It (a) raised an issue that is of general importance to the practice in bankruptcy/insolvency matters; (b) was prima facie meritorious; and (c) did not unduly hinder the progress of the bankruptcy proceedings.

(2) Yes.

The Court held that the motion judge erred in finding that s. 215 did not apply.

Nature of the Action

The Action named the appellant as the only defendant. The amended statement of claim sought a number of declarations based on common law causes of action. The claim was rooted in an alleged relationship between the respondent, and the appellant in his role as trustee in the respondent’s bankruptcies.

After describing the respondent’s former spouses’ alleged defalcations and their discovery, the claim alleged that the appellant’s wrongdoing consisted of the failure to: (i) correct records and reports; (ii) investigate the respondent’s former spouses’ fraud; (iii) have the respondent promptly discharged from bankruptcy; and (iv) sue the respondent’s former spouse.

In summary, the Action sued the appellant as trustee. The claims against him, although common law causes of action, were grounded in, and were alleged to flow from, his role and responsibilities as trustee.

Section 215 of the BIA The duty of the trustee is to protect both the creditors and the public interest in the proper administration of the bankrupt estate. However, the BIA does not, except for specific matters, confer immunity from suit on a trustee. Section 215 serves a gatekeeping function. It allows the bankruptcy court to screen out or prevent actions that are frivolous or vexatious or that do not disclose a cause of action, or for which there is no factual support, so that the trustee need not respond to them.

Is the Action against the appellant in a personal capacity and therefore outside the scope of s. 215 of the BIA?

The appellants submitted that when an individual who is a director, officer, or employee of a corporate trustee is sued in relation to the performance of the trustee’s duties, s. 215 is applicable. The Court found that it was unclear that the motion judge was relying on the distinction between the appellant and the appellant’s company, when she referred to the Action as being brought against the trustee in its personal capacity.

Section 215 requires a relationship between the substance of the action and the role of the defendant as trustee. The Court held that neither the descriptive tags applied to the cause of action, such as negligence or breach of fiduciary duty, not the assertion in the statement of claim that those causes of action are advanced against the appellant in a personal capacity are determinative.

Where a person sued was involved in the acts complained of as a trustee in a bankruptcy, is alleged to have been performing duties incidental to the administration of the estate, and is alleged to have owed the plaintiff duties as a trustee, the claim falls within s. 215.

The Court held that the motion judge erred in finding that because the Action alleged that the appellant was sued in his “personal capacity”, the Action was outside the scope of s. 215.

Does an action complaining of omissions fall outside of s. 215?

The Court concluded that s. 215 applied to the Action, and the motion judge erred in concluding otherwise. The Court determined that an action is outside of s. 215 only where the gist of the Action is the omission to do something expressly and specifically required by the BIA.

The Court held that while a trustee who fails to do something expressly required by the BIA is not acting pursuant to the BIA within the meaning of s. 215, nothing in the language of s. 215 requires giving similar effect to other kinds of alleged omissions. An action can be in relation to anything done pursuant to the BIA, even if it involves an alleged omission in the course of acting pursuant to the BIA that is said to make the trustee’s performance of its role under the BIA wrongful and therefore actionable.

The central omission asserted by the respondents – that the appellant failed to detect or prevent the misappropriation or take the right steps as a consequence of learning about them – are not omissions to do things specifically and expressly required by the BIA akin to the duty to insure the debtor’s property in Mercure v. Marquette & Fils Inc. The omissions were asserted as breaches of common law duties arising from the role of trustee, making aspects of the performance of the trustee role wrongful and actionable. The Court held that s. 215 therefore applies.

(3) Yes.

The motion judge explicitly declined to express her opinion as to whether, if she had decided s. 215 was applicable, she would have granted permission to bring the Action.

The appellants submitted that the conclusion must be that the respondent could not commence the Action while an undischarged bankrupt, and that this was an incurable defect despite the subsequent annulment of his bankruptcy. None of the authorities cited by the appellants expressly dealt with the ability of an undischarged bankrupt to sue the trustee.

The Court, despite the motion judge not expressing a view on this issue, held that the appropriate disposition would be to return the matter to the bankruptcy court to determine whether leave under s. 215 should be granted.


Cronos Group Inc. v. Assicurazioni Generali S.p.A., 2022 ONCA 525

[Fairburn A.C.J.O., Brown and Sossin JJ.A.]

COUNSEL:

G. Karayannides and M. Mandelker, for the appellant

A. Laing, D. McLeod and G. Sheppard, for the respondent

Keywords: Contracts, Interpretation, Insurance, Coverage, Commercial General Liability, Directors’ and Officers’ Liability, Optional Extension Period, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, Teal Cedar Products Ltd. v. British Columbia, 2017 SCC 32, Northwest Pipe Co. v. RLI Insurance Co., 2013 WL 3712418, Re Canada 3000 Inc. (2002), 35 C.B.R. (4th) 37 (Ont. S.C.). S.A. v. Metro Vancouver Housing Corp., 2019 SCC 4

FACTS:

Cronos Group Inc. (“Cronos”) is a global cannabinoid company that manufactures and markets cannabis and cannabis-derived products.

Cronos held a primary Executive and Corporate Securities Insurance Policy issued by AXA XL (the “Primary Policy”) and a secondary Excess Directors’ and Officers’ Liability Policy by the appellant, Assicurazioni Generali S.P.A. (“Generali”) (the “Excess Policy”). Cronos was the named insured under the Primary Policy and the Excess policy for the period February 27, 2019 to February 27, 2020.

The Primary Policy included an Optional Extension Period (“OEP”) option that allowed the insured to extend the period of coverage beyond the expiration date of the Primary Policy within 30 days of its expiry. The Excess Policy provides that it is subject to the same terms, conditions, limitations and exceptions as are contained in the Primary Policy, with certain exceptions. The OEP option is not identified as an exception.

Cronos sought to exercise the OEP option under the Excess Policy. Generali took the position that the Excess Policy did not contain an OEP option.

The application judge held that: (i) the Excess Policy provided Cronos with a contractual right to exercise an OEP option in respect of the Excess Policy; (ii) Cronos had successfully exercised that right by complying with each of the option requirements; and (iii) the cost payable for the OEP was US$486,000 (or CDN$704,700), twice the original premium of the Excess Policy.

Generali appealed, seeking to set aside the order below and dismiss the application.

ISSUES:

 

 

(1) Did the application judge err in finding that Generali did not act in good faith towards Cronos when the latter sought to exercise an OEP option?

(2) Did the application judge err in finding Cronos was entitled to purchase an OEP under the Excess Policy?

(3) Did the application judge err in finding that the premium for the Excess Policy’s OEP was twice the amount of the policy’s original premium?

HOLDING:

 

 

Appeal dismissed.

REASONING:

(1) No

A review of the application judge’s reasons disclosed that she did not make any finding to the effect that Generali failed to act in good faith in respect of the efforts of Cronos to exercise an OEP option. Her reference to some of the case law regarding the contractual principle of good faith was obiter.

(2) No

Generali submitted that the application judge’s conclusion that the Excess Policy entitled Cronos to exercise the OEP option was flawed because several terms of the Excess Policy, and one aspect of the factual matrix, implicitly indicated that such a right would be inconsistent with the agreement of the parties reflected in the Excess Policy. Specifically, Generali pointed to five matters to support its submission that the application judge erred in her interpretation:

(1) The Excess Policy does not contain an explicit reference to an OEP option;

(2) Condition 2 of the Excess Policy expressly excludes “renewal agreements” as a follow-form term;

(3) Condition 8 of the Excess Policy prevents Cronos from electing to make unilateral extensions of coverage;

(4) The Excess Policy lacks an express mechanism, or formula, for calculating a premium for the OEP option; and

(5) Generali’s interpretation that the Excess Policy did not contain an OEP option was consistent with the view expressed by an employee of Aon (Cronos’ insurance broker), not at the time of execution of the Policies, but at the time Cronos sought to exercise the OEP option.

The Court dealt with each of these arguments as follows.

(1):

The OEP is included in the Excess Policy. The OEP in the Primary Policy clearly states that if the Policy is not renewed, the insured shall be entitled to the extension upon payment of the additional premium. The Excess Policy follows form with the Primary Policy “(except as regards the premium, the amount and limits of liability, any deductible or self-insurance provision, the obligation to investigate and defend and the renewal agreement (if any)).” Notably, Condition 2 of the Excess Policy does not exclude the OEP option.

(2):

The application judge concluded that the exercise of the OEP option did not give rise to a policy renewal, which Condition 2 would exclude from the follow-form terms. The OEP merely extends the discovery period and only arose in the event the insurer did not renew the policy. In this case, the applicant was specifically denied the chance to renew both the Primary Policy and the Excess Policy. It was the non-renewal event that triggered the right to exercise the OEP.

(3):

The 13-month extension of the Primary Policy did not offend either Conditions 2 or 8 of the Excess Policy.

Condition 2 stipulated, in part, that “[t]he Primary and Underlying Policy will be maintained in full effect during the currency of this Policy”; Condition 8 provided, in part, that no amendment to the Primary Policy would “be effective in extending the scope of cover of [the Excess Policy] unless and until agreed in writing by [Generali]”.

The amendment to the Primary Policy which extended the policy period for a further 13 months did not abrogate or reduce that policy’s coverage limits. The maximum aggregate limit of liability under the Primary Policy remained that set out in Item 3 of the Primary Policy’s Declaration, namely US$5 million.

It was undisputed that the respondent did not provide its written consent to the amendment to the Primary Policy. Therefore, it did not agree to any change to the scope of the cover, and it would not be bound by any such change. The coverage under the OEP to be provided by the respondent would continue to be limited to wrongful conduct that occurred prior to the expiry of the Primary Policy; but the discovery period for those claims would be extended by an additional twelve months.

The respondent raised no objection to the extension at that time. At no time during the discussions between the parties did it assert this extension somehow invalidated the OEP option.

(4):

The application judge assessed this submission in light of the principle that contracts of insurance are to be interpreted to give effect to their terms and in a commercially reasonable manner. The application judge found support from Re Canada 3000 Inc. (2002), recognizing that while in Canada 3000 the insurer took a different position than Generali, appearing to agree that an OEP option was available under the excess policy, the application judge adopted the analysis in Canada 3000 that the excess policy was “subject to the same insuring clauses, definitions, terms, conditions, exclusions and other provisions as those set forth in the Primary Policy,” except as regards the premium, and the amounts and limits of liability. Since the Excess Policy did not list the OEP as an exclusion in Condition 2, it was one of the follow-form terms.

(5):

The application judge did not refer to a March 9, 2020 internal email amongst employees of Aon, the brokers for Cronos at the time, in which the author wrote in respect of Conditions 2 and 8 of the Excess Policy.

However, there was no error in the application judge failing to advert in her reasons to this email. The email was not one in which the broker volunteered an opinion on whether the Excess Policy contained an OEP option as a follow-form term. The email simply stated the common-sense proposition that Generali was not bound by what AXA XL, the primary insurer, may do but by the obligations that bind Generali under the Excess Policy.

(3) No

The Excess Policy did not specify the premium payable in the event Cronos exercised its option for an OEP. While the Primary Policy stipulated the premium payable in the event Cronos purchased the OEP option under the Primary Policy – twice the basic premium – it made no mention of the premium payable in respect of the OEP under the Excess Policy.

The application judge rejected Generali’s submission that the amount of the premium for the Excess Policy’s OEP should not follow the form of the premium structure in the Primary Policy where the OEP premium was twice the amount of the basic premium for the initial term. Instead, the premium for the Excess Policy OEP should be exactly the same as that specified for the Primary Policy OEP, namely US$1.5 million.

The application judge reasoned that the relationship between the Excess Policy’s basic premium and OEP premium should follow the 1:2 ratio set out in the Primary Policy for two reasons. First, the application judge was persuaded by the reasoning in the Canada 3000 decision about the appropriateness of such an approach. Second, the application judge did not regard Condition 2’s exclusion of “premium” from the follow-form terms as applying to the premium for the OEP.

Lastly, the application judge was not persuaded that the Excess Policy impliedly gave Generali the right to fix the amount of the OEP premium stating that the premium is determined at the time the policy is written, not when the loss arises.


1734934 Ontario Inc. v. Tortoise Restaurant Group Inc., 2022 ONCA 528

[Lauwers, Roberts and Nordheimer JJ.A.]

COUNSEL:

D. J. MacKeigan and C. Vegso, for the appellants

A. Boudreau and L. Baker, for the respondents, Tortoise Restaurant Group Inc., Turtle Jack’s Marketing Fund Inc., and Tortoise Restaurant Group (2019) Inc.

E. Mayzel and J. Shepherd, for the respondent, 11554891 Canada Inc.

Keywords: Contracts, Franchise Agreements, Civil Procedure, Amending Pleadings, Adding Parties, Delay, Abuse of process, Costs, Rules of Civil Procedure, Rule 5.03(4), Plante v. Industrial Alliance Life Insurance Co. (2003), 66 O.R. (3d) 74 (S.C.), Downtown Eatery (1993) Ltd. v. Ontario (2001), 54 O.R. (3d) 161 (C.A.), 1734966 Ontario Inc. v. Tortoise Restaurant Group Inc., 2020 ONSC 888, Klassen v. Beausoleil, 2019 ONCA 407, Belsat Video Marketing Inc. v. Astral Communications Inc. et al. (1999), 118 O.A.C. 105 (C.A.), Hamilton v. Open Window Bakery, 2004 SCC 9, St. Jean v. Cheung, 2009 ONCA 9

FACTS:

The appellants are several Turtle Jack’s restaurant franchisees. They had commenced this action in December 2012. They sought an accounting of the advertising fund as required under their franchise agreements and damages for the misuse of those funds. The appellants claimed that the respondents, Tortoise Restaurant Group Inc., Turtle Jack’s Marketing Fund Inc., and Tortoise Restaurant Group (2019) Inc., had exclusive control over the advertising fund, its accounting, and the accounting for each of the franchisees’ locations. The appellants further alleged that advertising for Turtle Jack’s consisted primarily of in-store promotions to benefit suppliers, which were created, developed, implemented, and paid for by the advertising fund and/or the franchisees.

1734934 Ontario Inc., 2187195 Ontario Inc., 2137362 Ontario Inc., 1901164 Ontario Inc., and KE Restaurants Inc. appealed from the order of the motion judge, who allowed an appeal from the decision of Associate Judge (formerly Master) Donald Short and set aside his order (i) adding 11554891 Canada Inc. as a defendant and (ii) allowing amendments to the statement of claim relating to supplier contributions to an advertising fund and for production of certain documents relating thereto.

The motion judge had concluded that the Associate Judge had erred in law by incorrectly describing the test to add a party. In that regard, the Associate Judge had said that r. 5.03(4) of the Rules of Civil Procedure provided “that any person whose presence as a party is necessary to enable the court to adjudicate effectively and completely on the issues in the proceeding shall be added as a party”. The motion judge had stated that the use of the word “shall” had not appeared in the operative portion of r. 5.03(4). Rather, the subrule used the permissive language of “may” in relation to the court’s jurisdiction to add a party.

Regarding the addition of parties, the motion judge found that adding 115 as a party would constitute an abuse of process. In particular, he found that it would add unnecessary costs, require further discoveries, and likely result in further motions for production. Ultimately, it was the motion judge’s view that all of this “would add to the already lengthy procedural history of this case and would be disproportionate to the nature of the dispute and the interests involved, given 115’s potential limited liability, if any.”

In terms of the order to permit amendments to the statement of claim, the motion judge had found that the Associate Judge had both failed to provide sufficient reasons for his conclusion and misapprehended the evidence in relation to whether to allow the amendments. The motion judge had found that permitting the amendments would also constitute an abuse of process, even if they were not statute-barred.

The motion judge had allowed the appeal and set aside the Associate Judge’s order that added 115 as a party and permitted the amendments, along with the production of related documents. The motion judge had ordered the appellants to pay costs of the appeal and the underlying motion to Tortoise Restaurant Group Inc., Tortoise Restaurant Group (2019) Inc., and Turtle Jack’s Marketing Fund Inc. collectively, as well as to 115.

ISSUES:

(1) Did the motion judge err in finding 115 was not a necessary party and that adding it to the proceedings would be an abuse of process?

(2) Did the motion judge err in concluding that the supplier contribution amendments were not tenable, statute-barred, and an abuse of process, and that the related productions were therefore not relevant?

(3) Did the motion judge err in awarding costs of the motion to Tortoise Restaurant Group Inc., Tortoise Restaurant Group (2019) Inc., and Turtle Jack’s Marketing Fund Inc.?

HOLDING:

Appeal dismissed.

REASONING:

(1) No.

In terms of the order adding 115 as a party, the Court agreed with the motion judge that it amounted to an abuse of process. The potential liability of 115 to the appellants was dubious, at best. Adding 115 as a party would have further delayed and complicated a proceeding that had already been significantly delayed in getting to trial. The Court noted that the manner in which this case had wound its way through the justice system over the prior seven (now almost ten) years was “nothing short of disgraceful.”

The Court rejected the appellants’ complaint that the motion judge failed to assess which parties delayed the case or to what extent. The motion judge was not required to embark on the civil equivalent of the detailed analysis undertaken in criminal proceedings when considering whether delay breaches an accused person’s right to trial within a reasonable time under s. 11(b) of the Canadian Charter of Rights and Freedoms. The Court noted that it was unnecessary to allocate delay between the parties since all parties in a civil proceeding bear responsibility for moving the action forward in a timely fashion.

In a civil proceeding, the Court emphasized that the plaintiff bears the principal responsibility for advancing the case since it is the plaintiff who commenced the action and it was the plaintiff’s claim that was to be adjudicated. In that regard, this was not an overly complicated action, nor will it involve a lengthy trial. The fact that the case was approaching the tenth anniversary of the commencement of the action was, by itself, a sufficient reason to find inordinate delay.

The Court rejected that the appellants would have suffered the degree of prejudice that they claimed they would if 115 was not added as a party. The nature of the claim advanced had not directly related to 115. Rather, it appears that 115 was only sought to be added as a possible additional source for payment of any judgment that the appellants might obtain.

The Court also rejected the appellants’ claim that failing to add 115 will result in “unnecessary legal costs, duplicative proceedings, risks of inconsistent findings, estoppel, prejudice, and delays”. Given the limited involvement of 115 in these matters, the legal costs of a separate proceeding against it would have not been sufficiently different from the legal costs associated with pursuing the claim in this proceeding.

(2) No.

On the issue of the amendments to the statement of claim, the Court stated that the appellants’ contention that they were merely particularizing their existing claims did not withstand scrutiny. A comparison of the existing statement of claim with the proposed amended statement of claim revealed that, in fact, the appellants were attempting to add entirely new claims. For example, the Court noted that in the existing statement of claim, with respect to the advertising fund, the appellants had claimed “damages in the amount of $5,000,000 for loss of profits as a result of the improper and/or misuse of Advertising Fund contributions”. In the proposed amended statement of claim, the appellants’ claim regarding the advertising fund was, in addition to adding claims for an accounting and various declarations, for “damages in the amount of $20,000,000 for breach of contract, breach of duty to act in good faith, breach of the duty of fair dealing, misuse of Advertising Contributions for supplier promotions and co-branding and loss of profits, payable to the Plaintiffs”.

The Court concluded that the appellants were seeking to add new claims to the existing statement of claim. The motion judge was correct in holding that the Associate Judge had failed to consider this issue and, further, had failed, as a consequence, to determine if these new claims were statute-barred. Further still, the Associate Judge had failed to consider whether allowing new claims to be added, at this late juncture, constituted an abuse of process.

Regarding whether the claim was statute-barred, the Court stated that the appellants were aware of the facts underlying these claims more than two years prior to bringing the motion to amend. The expiry of a limitation period was one form of non-compensable prejudice: Klassen v. Beausoleil at para 26. Further, it was a basic principle that a party cannot circumvent the operation of a limitation period by amending their pleadings to add additional claims after the expiry of the relevant limitation period: Klassen, at para. 26. To permit such amendments in these circumstances would amount to an abuse of process, for the reasons expressed by the motion judge. A court retains the discretion not to permit amendments that constitute an abuse of process: Belsat Video Marketing Inc. v. Astral Communications Inc. et al. at paras 3-4. The Court concluded that the amendments ought not to be allowed, and that the order requiring production of documents relating to those proposed claims had to be set aside.

(3) No.

The appellants had not shown that the motion judge made an error in principle or that the costs award was plainly wrong: Hamilton v. Open Window Bakery at para. 27. As the motion judge noted, the appellants were “entirely successful in the result” on appeal. The were therefore entitled to their costs of the motion below: St. Jean v. Cheung at paras. 4-5.


Humphrey v. Mene Inc. , 2022 ONCA 531

[van Rensburg, Nordheimer and Harvison Young JJ.A.]

COUNSEL:

J. M. McHenry, K. McMillan and J. Donen, for the appellant/respondent by way of cross-appeal

J. Goldblatt and J. Howell, for the respondent/appellant by way of cross-appeal

Keywords: Employment Law, Wrongful Dismissal, Termination Without Cause, Reasonable Notice, Duty of Good Faith, Damages, Mitigation, Aggravated Damages, Punitive Damages, Bardal Factors, Employment Standards Act, 2000Bardal v. The Globe & Mail Ltd. (1960), 24 D.L.R. (2d) 140 (Ont. H.C.), Strudwick v. Applied Consumer & Clinical Evaluations Inc., 2016 ONCA 520, Honda Canada Inc. v. Keays, 2008 SCC 39, Love v. Acuity Investment Management Inc., 2011 ONCA 130, Lin v. Ontario Teachers’ Pension Plan Board, 2016 ONCA 619, Red Deer College v. Michaels, [1976] 2 S.C.R. 324, Beatty v. Best Theratronics Ltd., 2015 ONCA 247, Link v. Venture Steel Inc., 2010 ONCA 144, Dussault v. Imperial Oil Limited, 2019 ONCA 448, Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701, Colistro v. Tbaytel, 2019 ONCA 197,  leave to appeal refused, [2019] S.C.C.A. No. 173, Doyle v. Zochem Inc., 2017 ONCA 130, Ruston v. Keddco MFG. (2011) Ltd., 2019 ONCA 125,  Boucher v. Wal-Mart Canada Corp., 2014 ONCA 419, Bank of Montreal v. Marcotte, 2014 SCC 55, Whiten v. Pilot Insurance Co., 2002 SCC 18, Pate Estate v. Galway-Cavendish and Harvey (Township), 2013 ONCA 669

FACTS:

This was an appeal and a cross-appeal of a summary judgment in a wrongful dismissal action. The respondent, J.H., was employed by the appellant, Mene Inc. (“Mene”), and its parent company, for approximately three years. At the time of her dismissal, she was Mene’s Chief Operating Officer (“COO”), earning an annual salary of $90,000, with participation in Mene’s bonus/stock option plan. Ms. H was terminated, allegedly for cause, shortly after she asked for a raise. She remained unemployed at the date of the motion for summary judgment.

Although Mene asserted in its defence that it terminated Ms. H’s employment for cause, it withdrew the allegation of cause in the course of the litigation, and instead relied on a contractual provision limiting Ms. H’s compensation to the minimum provided under the Employment Standards Act, 2000 (the “ESA”). Ms. H alleged bad faith in the manner of her termination, and other misconduct by Mene during her employment and the litigation. The motion judge awarded Ms. H damages of $81,275.45 (in lieu of 12 months’ notice less one month’s compensation for unreasonable mitigation and the ESA amount she had already received), as well as aggravated damages of $50,000 and punitive damages of $25,000.

ISSUES:

(1) Does the 12-month notice period fall outside an acceptable range and, if so, what is the appropriate notice period?

(2) Did the motion judge err in reducing the damages by only one month’s compensation to account for the respondent’s failure to mitigate?

(3) Did the motion judge err in her award of aggravated damages?

(4) Did the motion judge err in her award of punitive damages?

HOLDING:

Appeal allowed in part. Cross-appeal dismissed.

REASONING:

(1) No.

The Court recognized the “fact-specific and contextual approach to the period of reasonable notice, limited by a range of reasonableness”: Strudwick v. Applied Consumer & Clinical Evaluations Inc. The Court was not persuaded that the motion judge’s characterization of Ms. H’s employment reflected a palpable and overriding error. Her conclusion that Ms. H was operating at a COO level within Mene was fully supported by the evidence. The motion judge reasonably rejected Mene’s argument, based on Mr. S’s description of Ms. H’s role, that although she held the title of COO, the court should find that her role was something less.

A fair reading of the motion judge’s reasons made it clear that she considered all of the Bardal factors. As noted earlier, the question of the weight to be given to each factor was within her discretion, having regard to the particular circumstances of the case. The motion judge reviewed and applied the Bardal factors of age, length of service, character of employment, and availability of similar employment, having regard to the experience, training and qualifications of the employee: Bardal. She considered the authorities put forward by both parties and, after weighing all of the Bardal factors, she fixed the reasonable notice period at 12 months.

Because no single Bardal factor should be given disproportionate weight or be treated as determinative, a short period of service will not always lead to a short period of notice: Honda Canada Inc. v. Keays. It would have been an error for the motion judge to overemphasize the short duration of Ms. H’s employment as a factor. It is important to keep in mind the object of fixing a reasonable notice period, which is to determine, in the particular circumstances of the case, how long it would reasonably take the terminated employee to find comparable employment: Lin v. Ontario Teachers’ Pension Plan Board. The determination of reasonable notice depends on the context and particular circumstances of the case. Mene failed to demonstrate any legal error or error in principle in the motion judge’s approach, or any palpable and overriding error of fact that would justify interfering with her determination that 12 months was a suitable notice period.

(2) Yes.

The Court rejected Mene’s first two arguments: (1) that the notice period ought to have been reduced further by virtue of Ms. H’s six-month delay in sending out applications, and (2) that Ms. H applied for too narrow a range of positions, and failed to apply for comparable positions that were reasonably available.

There is no precise formula for determining the reasonableness of an employee’s mitigation efforts or the effect of any delay in mitigation on the employee’s damages. The motion judge’s assessment of the reasonableness of Ms. H’s efforts, and the effect of Ms. H’s delay in applying for jobs on the damages to which she is entitled, revealed no error in principle or palpable and overriding error of fact. The Court found no reason to interfere with the motion judge’s findings of fact. She concluded that Ms. H was qualified for the positions for which she applied, and that, although Mene had conducted various searches to show that there were many jobs for which Ms. H did not apply, it failed to demonstrate that those positions were comparable to Ms. H’s position at Mene.

The Court accepted Mene’s third argument that Ms. H unreasonably rejected a suitable comparable position seven months post-termination. Comparable employment does not mean identical employment. It means “a comparable position reasonably adapted to [the plaintiff’s] abilities”: Link v. Venture Steel Inc. It was sufficient for Mene to rely on evidence that Ms. H had been offered a senior management position with compensation that was comparable to or greater than what she earned at Mene. The availability of this comparable role seven months post‑termination meant that Ms. H turned down a position that could reasonably have mitigated her damages. While the onus on a defendant in this context was a heavy one, on the evidence before the motion judge, Mene met its obligation of demonstrating that Ms. H’s damages for the balance of the notice period could reasonably have been avoided. Together with the reduction in damages arising from Ms. H’s delay in applying for jobs (a reduction of one month’s compensation), the Court limited Ms. H’s damages in lieu of notice to the equivalent of six months’ compensation, and reduced her damages accordingly.

(3) No.

An award of aggravated damages can be made in wrongful dismissal cases where an employer engages in conduct that is “unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive”: Wallace v. United Grain Growers Ltd. However, the “normal distress and hurt feelings resulting from dismissal are not compensable”: Honda. Assessing aggravated damages is “an imprecise, fact-specific exercise”, entitled to deference on appeal: Colistro v. Tbaytel.

Contrary to Mene’s assertions on appeal, there was no error in the motion judge’s conclusion that there was bad faith in the manner of Ms. H’s termination. The motion judge concluded that the termination for cause was in bad faith – that the various performance issues and misconduct allegations that Mene had raised at the time of Ms. H’s suspension and removal from the position of COO (which amounted to constructive dismissal, a finding not challenged on appeal) and formal termination were a pretext for terminating her for cause. There was no basis to interfere with the motion judge’s conclusion that there was bad faith in the circumstances of Ms. H’s dismissal that would warrant an award of aggravated damages.

The time frame relevant to an award of aggravated damages is not limited to the moment of dismissal. Pre- and post-termination conduct may be considered so long as it is “a component of the manner of dismissal”: Doyle. The motion judge carefully considered all of the evidence respecting the circumstances and timing of Ms. H’s dismissal, as well as the manner in which Mene handled the termination and then conducted itself in the litigation that followed. The finding of bad faith was not, as Mene suggests, premised on the unprofessional and bullying manner in which Ms. H was treated by Mene’s CEO during the course of her employment. As the Court noted in Doyle, “while some conduct [in relation to a dismissal] viewed in isolation would not constitute bad faith, the same conduct when part of a course of conduct on the part of an employer that inflicts mental distress on an employee may legitimately inform the result”.

The motion judge did not err when she concluded, that the abuse Ms. H suffered was ongoing throughout her employment and that it was “directly related to the manner of her dismissal” The motion judge was satisfied that Ms. H suffered compensable and reasonably foreseeable damages for mental distress. All of these findings were amply supported by the evidence, and constituted harm of the nature and extent that would justify an award of aggravated damages: see, e.g., Ruston v. Keddco MFG. (2011) Ltd. The motion judge considered the positions and authorities provided by the parties. The Court saw no basis to interfere with the conclusion.

(4) No.

An appellate court may interfere with a trial court’s assessment of punitive damages where (1) there is an error of law; or (2) the amount is not rationally connected to the purposes for which the damages are awarded, namely prevention, deterrence (both specific and general), and denunciation: Bank of Montreal v. Marcotte. When the amount of punitive damages awarded is challenged, the question on appeal is “whether a reasonable jury, properly instructed, could have concluded that an award in that amount, and no less, was rationally required to punish the defendant’s misconduct”: Whiten v. Pilot Insurance Co.

First, Mene demonstrated no palpable and overriding error in the motion judge’s factual conclusions and analysis. She concluded that Mene’s conduct, particularly in connection with the litigation, was “reprehensible” and “consistent with a litigant who sees itself as above the rules.” All of her findings were supported by the evidence and were entirely reasonable. Second, with respect to the amount of punitive damages, the motion judge considered the range of punitive damages awarded in other cases and settled on an amount that she considered necessary in the circumstances of this case. She specifically adverted to the requirement to avoid double recovery as between compensatory and punitive damages, and she “calculated the damages with this in mind”. There was no reason for the Court to interfere with her assessment of the amount of punitive damages.

As for the cross-appeal, the Court rejected Ms. H’s first argument: that the motion judge failed to consider the objective of denunciation. Although she did not identify “denunciation” as a specific objective of punitive damages, she referred to the relevant case authorities, and there was nothing to suggest that she failed to consider all of the purposes of punitive damages. Reading her reasons as a whole, it was apparent that she determined that the compensatory damages were insufficient in this case in light of all of the objectives of a punitive damages award, including denunciation. The Court rejected Ms. H’s second argument on the cross‑appeal: that the motion judge ought to have considered the manner of termination and Mene’s pre-termination conduct in fixing the amount of punitive damages. While Ms. H was correct that the same conduct can justify an award of both aggravated and punitive damages, no double-compensation or double-punishment can be awarded: Honda. The Court found that the motion judge’s observation that “there should be no double recovery as between aggravated and punitive damages” was an acknowledgment that a higher amount for punitive damages was not warranted where the same conduct had been punished by the award of aggravated damages. There was no basis for increasing the award of punitive damages to offset the reduced compensatory damages to which she was entitled by virtue of her failure to mitigate.


Maple Leaf Foods Inc v Ryanview Farms , 2022 ONCA 532

[Doherty, Tulloch and Thorburn JJ.A.]

COUNSEL:

M.A. Cook, for the appellants

B. Waterman, for the respondent

Keywords: Contracts, Sale of Goods, Damages, Date of Assessment, Civil Procedure, Reasonable Apprehension of Bias, Sale of Goods Act, RSO 1990, c. S.1, s. 15 & s. 51(2), Maple Leaf Foods Inc v Ryanview Farms, 2015 ONCA 566, Rougemount Capital Inc v Computer Associates International Inc, 2016 ONCA 847, Kinbauri Gold Corp v Iamgold International African Mining Gold Corp (2004), 246 DLR (4th) 595 (Ont CA), Filice v Complex Services Inc, 2018 ONCA 625

FACTS:

This was a second appeal on the issue of damages. The appellants were pig farmers. In 2004 and 2005, they decided to repopulate their herds and purchased breeding pigs (gilts) and boars from the respondent. The respondent represented to the appellants that the gilts would produce healthy segregated early weaners (“SEWs”). In February 2006, the respondent delivered gilts that were in poor health which eventually infected the entire herd at the isolation barn where they were housed.

In anticipation of the SEWs that would be produced from the new gilts and boars, the appellants had entered into a contract with a third party in July 2006 for the sale of approximately 550 SEWs per week (the “Werden Contract”). The spread of disease among the animals at one of the appellants’ isolation barns, however, rendered the appellants incapable of fulfilling the Werden Contract.

The parties negotiated a replacement delivery of the gilts in November 2006 that were infected upon arrival which spread across the rest of the farm. The parties negotiated again in 2007. The parties disputed the terms of this agreement at trial: the appellants claimed the respondent agreed to provide additional replacement gilts and purebred animals for free; the respondent, however, later issued invoices for the delivery.

The appellants ultimately lost their farm through foreclosure and appealed Desotti J.’s assessment of damages.

ISSUES:

1. Did Desotti J.’s remarks, taken together with his reasons for judgment, give rise to a reasonable apprehension of bias?

2. Did Desotti J. err in his assessment of damages in that: a) He failed to assess damages as of the date of the breach; b) He erroneously considered the hindsight evidence of the PRRSV outbreaks in November 2006 and 2007; and c) His assessment of loss for the period between January 1, 2007 and November 30, 2007 is plainly wrong and not grounded in the evidence.

HOLDING:

Appeal allowed in part.

REASONING:

1. No.

The appellants argued that the decision by Desotti J. gave rise to a reasonable apprehension of bias because the trial judge’s comments in the course of the trial, taken together with the reasons for judgment, indicated that he was biased toward affirming findings and methodologies made in prior proceedings rather than hearing the trial on its own merits.

Both parties relied on evidence filed in the first trial. Having regard to both the filed and live evidence, Desotti J. outlined the facts which were not in dispute. He also recognized that some of the findings in the first trial were tainted by error and could not be relied upon. The trial judge considered this evidence in conjunction with the contested arguments and conclusions in the expert reports and engaged in a thorough analysis to determine which portions of the contested evidence he accepted or did not.

2. a) & b) No.

The appellants argued that the trial judge erred by assessing damages as of the date of trial rather than as of the date of the breach, and that it was an error to consider hindsight evidence of the PRRSV outbreaks in November 2006 and November 2007 in assessing damages.

The presumptive date for assessment of damages in contract law is the date of breach. There was sufficient evidence before the trial judge on which to justify deviation from the presumptive assessment date, particularly in light of s. 51(2) of the Sale of Goods Act. The presence of significant intervening events, which the trial judge found made the loss suffered more uncertain, must be considered in determining what measure of damages fairly reflected the appellants’ loss as a direct and natural consequence of the breach. To do otherwise would not be just in all the circumstances and risked burdening the respondent with more than its fair share of liability. Setting the date of the trial as the date of assessment of damages permitted the trial judge to properly consider the direct and naturally resulting loss in the circumstances of this case, particularly in light of ancillary factors such as the PRRSV outbreak and the crashing market for SEWs.

2. c) Yes.

The appellants argued that Desotti J. erred in deducting $139,859 from the lost profits between January 1, 2007 and November 30, 2007, which totalled $283,678. They argued the trial judge misapprehended $139,859 as being actual revenue earned by the appellants when in fact it represented lost profits suffered from selling SEWs at lower than market price.

The trial judge’s characterization of the $139,859 figure as reduced revenue received by the appellants misapprehended the expert report prepared for the respondent (“the expert report”). Had the appellants been able to sell 7,311 pigs at the OMAFRA (Ontario Ministry of Agriculture and Rural Affairs) average price of $38.75 per SEW, they would have had a revenue of $283,301. However, they actually sold 7,311 pigs for $19.62 per SEW on average, which is a revenue of $143,442. The difference in revenue between the OMAFRA selling price average and the appellants’ selling price average totaled $139,859. This figure, as indicated in the expert report, consisted of the portion of the lost profit attributable to selling at a below market price.

The $139,859 figure was not the reduced revenue the appellants earned, and it was an error for the trial judge to reduce the lost profits of $283,678 by $139,859.


2544176 Ontario Inc. v. 2394762 Ontario Inc. , 2022 ONCA 529

[Gillese, Miller and Coroza JJ.A.]

COUNSEL:

Jonathan Rosenstein, for the appellant

Mark A. Klaiman, for the respondent

A. Paul Gribilas, for 2394762 Ontario Inc., Steven Gallen and Debra Gallen

Keywords: Real Property, Doctrine of Indefeasibility of Title, Statutory Interpretation, Contracts, Mortgages, Enforcement, Power of Sale, Mortgages Act, R.S.O. 1990, c. M.40, s 22, s 35, s 36, Land Titles Act, R.S.O. 1990, c. L.5, s 99, Cranberry Cove Tower Inc. v. Monarch Trust Co., 2003 CanLII 14548 (Ont. S.C.), 1173928 Ontario Inc. v. 1463096 Ontario Inc., 2018 ONCA 669, Stanbarr Services Limited v. Metropolis Properties Inc., 2018 ONCA 244, Durrani v. Augier (2000), 50 O.R. (3d) 353, Belende v. Patel, 2009 CanLII 74 (Ont. S.C.)

FACTS:

2544176 Ontario Inc. (the “Mortgagor”) owned a parcel of commercial property located at 197 Bellamy Road North in Toronto (the “Property”). The Property was encumbered by a mortgage in favour of 2394762 Ontario Inc., S.G. and D.G. (the “Mortgagees”).

2815608 Ontario Inc. (the “Purchaser”) bought the Property from the Mortgagees through the exercise of their power of sale. The application judge found that the Purchaser was a bona fide third party without notice of any defects in the power of sale process (i.e. an innocent purchaser).

On March 2, 2021, the Mortgagees’ APS closed and title to the Property was transferred to the Purchaser (the “Transfer”). After the Transfer took place, the Mortgagor applied to have it set aside. The application judge agreed and ordered that the Transfer be set aside with costs to the Mortgagor fixed at $19,000 by judgment dated April 16, 2021 (the “Judgment”). The application judge declared that the Mortgagees had violated s. 22 of the Mortgages Act by failing to provide a default statement requested by the Mortgagor. The application judge set aside the Transfer, and declared that the Transfer was null and void as against the Mortgagor. The innocent Purchaser appealed.

ISSUES:

Did the application judge err in setting aside the Transfer?

HOLDING:

Appeal allowed.

REASONING:

Yes. The Court first stated that it is well established that questions of statutory interpretation are questions of law and reviewed on a correctness standard: Harvey v. Talon International Inc. at para 32.

The Purchaser submitted that its rights take precedence over those of the Mortgagor who, at the time of the Transfer, had a claim against the Mortgagees for the improper exercise of the power of sale. Further, the Purchaser said that the Safe Harbour Protections, on their face and as a matter of policy, must “trump”, otherwise no purchaser under power of sale – for value and without notice – could ever be assured of good title. The Mortgagor submitted that the application judge correctly decided that its rights, pursuant to the provisions in s. 22 of the Mortgages Act, prevented the Mortgagees from selling the Property. Because the Mortgagees were in breach of s. 22 and their enforcement rights were suspended at the time they completed the Transfer, the Transfer was not valid as against the Mortgagor.

The Court accepted the Purchaser’s submissions. The Court noted that although the Mortgagees’ enforcement rights were suspended at the time of the Transfer, pursuant to s. 22(3) of the Mortgages Act, the Safe Harbour Protections operated to protect the Purchaser, an innocent purchaser, who registered title to the Property under the Land Titles Act system after receiving both the Compliance Declaration and the Compliance Statements from the Mortgagees.

The Court had first stated three underlying principles of the Land Titles Act: namely, the mirror principle, where the register was a perfect mirror of the state of title; the curtain principle, which holds that a purchaser need not investigate the history of past dealings with the land, or search behind the title as depicted on the register; and the insurance principle, where the state guaranteed the accuracy of the register and compensated any person who suffers loss as the result of an inaccuracy. These principles formed the doctrine of indefeasibility of title and [are] the essence of the land titles system: Stanbarr Services Limited v. Metropolis Properties Inc., at para. 13.

The Court disagreed with the application judge’s ruling that found another exception to the mirror principle other than fraud: namely, when a mortgagee was subject to a suspension of its enforcement rights under s. 22(3) of the Mortgages Act.

The Court interpreted that the application judge had understood the effect of ss. 35 and 36 of the Mortgages Act and s. 99(1.1) of the Land Titles Act was to provide “conclusive evidence of compliance” with the legislation. The Court noted that while it was correct that those provisions do afford the Purchaser that protection, they go further: they stipulate that, on registration under the Land Titles Act system, the transfer gave the (innocent) Purchaser “good title” to the Property.

In this case, it was not the Mortgagees who sought to enforce their rights; it was the Purchaser. The Mortgagor cannot rely on s. 22(3) to invalidate the Purchaser’s title: its recourse was against the Mortgagees for the improper exercise of the power of sale.

The Court noted that “once the sale of the property under the power of sale is closed, s. 22 is no longer applicable and the mortgagor is left to its remedy in damages against the mortgagee.”: Cranberry Cove Tower Inc. v. Monarch Trust Co at para 180. Further, the Superior Court stated that the court’s decision in Cranberry Cove “held that the s. 36 underlying principle of protecting bona fide purchasers for value should be extended to purchases under s. 22.”: Belende v Patel at para 14.

The Court allowed the appeal, set aside paras. 2, 3, and 4 of the Judgment, and ordered that the Application be dismissed with costs payable by the Mortgagor, below and on appeal, fixed at the agreed all-inclusive sums of $19,000 and $10,000, respectively.



SHORT CIVIL DECISIONS

Sparr v. Downing , 2022 ONCA 537

[Pardu (motion judge]

COUNSEL:

Marc J. Coderre for the appellant

Ryan Garret for the respondent

Keywords: Family Law, Child Support, Sparr v. Downing , 2020 ONCA 793