Good afternoon.

We hope everyone is enjoying this Canada Day long weekend.

Please find below our summaries of the civil decisions of the Court of Appeal for Ontario for the week of June 27, 2022.

In Sakab Saudi Holding Company v Jabri, the respondents characterized their claim as an action in conspiracy to defraud. The appellants, who had no presence in Ontario, contested the jurisdiction over them and moved to have the action permanently stayed or dismissed against them. The Court upheld the dismissal of that motion by the motion judge, finding that the motion judge did not err in applying the Van Breda test for jurisdiction.

In Deemme v Healthcare Insurance Reciprocal of Canada, the appellant was fired as a nurse upon the Hospital discovering that she had misused an automatic medication dispensing unit to obtain Percocet tablets. The respondent insured the Hospital and their employees, however did not appoint counsel to represent the appellant due to a lack of coverage under the Policy. The appellant argued that the insurer had a duty to defend her, and that she was entitled to liability coverage, however, the motion judge found to the contrary. The appellant’s appeal was dismissed by the Court. The Court agreed with the motion judge and found that the true nature of the claims against the appellant were the intentinal tort of intrusion against seclusion, which was not covered by the policy.

In Leaf Homes Limited v. Khan, the appellants were parties to an agreement of purchase and sale of a new home. When the appellants could not close on the purchase, the respondent obtained a default judgment against the appellants for the difference between the sale price to the appellants and the ultimate sale price. Gillese J.A. held that the motion judge, who had dismissed the appellants’ motion to set aside the default judgment, made palpable and overriding errors in her assessment of the merits of the appellants’ defence, relying on the Mountain View test. The Court set aside the default judgment and the costs order made against the appellants and their lawyer personally.

In 2257573 Ontario Inc. v. Furney, the motion judge granted judgment on certain mortgages, including some interest, even though criminal rates of interest were being charged. The Court dismissed the appeal. The appellants had argued on the motion that interest should be lowered, not eliminated. The motion judge could therefore hardly be faulted for granting some interest.

In Caledon (Town) v. Darzi Holdings Ltd., Justice Brown in chambers granted the appellant’s former lawyer the right to intervene in the upcoming appeal. The appellant appeals a $1 million fine imposed on it as the sentence for contempt in failing to abide by an injunction order made against it in favour of the Town of Caledon. One ground of appeal the appellant will be raising will be ineffective assistance of counsel. There will also be an issue of fresh evidence on appeal regarding that issue. Apparently, former counsel had recorded conversations with their client, which recordings may or may not be admitted into the record. That issue will be determined by the panel on the appeal. Stay tuned.

Table of Contents

Civil Decisions

Sakab Saudi Holding Company v. Jabri, 2022 ONCA 496

Keywords: Torts, Fraud, Conspiracy, Fraudulent Misappropriation, Solloway v Klondex Mines Ltd, 2014 ONSC 391, Club Resorts Ltd v Van Breda, 2012 SCC 17, Knowles v Lindstrom, 2014 ONCA 116, Canada v South Yukon Forest Corporation, 2012 FCA 165, Vahle v Global Work & Travel Co Inc, 2020 ONCA 224, Ontario v Rothmans Inc, 2013 ONCA 353, Boyd v Cook, 2016 BCCA 424, Lapointe Rosenstein Marchand Melançon LLP v Cassels Brock & Blackwell LLP, 2016 SCC 30

Demme v. Healthcare Insurance Reciprocal of Canada, 2022 ONCA 503

Keywords: Contracts, Insurance, Commercial and General Liability Insurance, Coverage, Duty to Defend, Exclusions, Torts, Intrusion Upon Seclusion, Bodily Injury, Personal Health Information Protection Act, 2004, S.O. 2004, c. 3, Sched. A, Class Proceedings Act, 1992, S.O. 1992, c. 6, s. 5(1)(a), Stewart v. Demme, 2022 ONSC 1790 (Div. Ct.), Stewart v. Demme, 2020 ONSC 83, Jones v. Tsige, 2012 ONCA 32 , Non-Marine Underwriters, Lloyd’s of London v. Scalera, 2000 SCC 24, Monenco Ltd. v. Commonwealth Insurance Co., 2001 SCC 49, Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, 2010 SCC 33, Panasonic Eco Solutions Canada Inc. v. XL Specialty Insurance Company, 2021 ONCA 612, Tedford v. TD Insurance Meloche Monnex, 2012 ONCA 429, Oliveira v. Aviva Canada Inc., 2018 ONCA 321, Keys v. Intact Insurance Company, 2015 ONCA 400, Martin v. American International Assurance Life Co., 2003 SCC 16, Mutual of Omaha v. Stats, [1978] 2 S.C.R. 1153, Sansregret v. The Queen, [1985] 1 S.C.R. 570, Consolidated-Bathurst v. Mutual Boiler, [1980] 1 S.C.R. 888, Barbara Billingsley, General Principles of Canadian Insurance Law, 3rd ed. (LexisNexis Canada, 2020)

Leaf Homes Limited v. Khan, 2022 ONCA 504

Keywords: Contracts, Real Property, Agreements of Purchase and Sale of Land, Civil Procedure, Default Judgments, Setting Aside, Procedural and Natural Justice, Reasonable Apprehension of Bias, Costs, Personal Liability, Lawyers, Fresh Evidence, Rules of Civil Procedure, Rule 19.09, 57.07(1), (2), Mountain View Farms Ltd. v. McQueen2014 ONCA 194, Palmer v. The Queen, [1980] 1 S.C.R. 759, HSBC Securities (Canada) Inc. v. Firestar Capital Management Corporation, 2008 ONCA 894, BHL Capital v. 2281165 Ontario Ltd., 2018 ONSC 7289, Zeifman Partners Inc. v. Aiello, 2020 ONCA 33, Peterbilt of Ontario Inc. v. 1565627 Ontario Ltd., 2007 ONCA 333, Techlantic v. Modellista, 2021 ONSC 746, Dentons Canada LLP v. Khan, 2021 ONSC 5261, Ross v. Filip, 2021 ONSC 1496, Yukon Francophone School Board, Education Area #23 v. Yukon (Attorney General), 2015 SCC 25, Galganov v. Russell (Township), 2012 ONCA 410,  Rutman v. Rabinowitz, 2018 ONCA 279, Niagara Structural Steel (St. Catharines) Ltd. v. W.D. Laflamme Ltd. (1987), 58 O.R. (2d) 773 (C.A.)

2257573 Ontario Inc. v. Furney, June 30, 2022

Keywords: Contracts, Real Property, Mortgages, Damages, Interest, Usury, Canadian Charter of Rights and Freedoms, ss. 7, 12 and 15, Criminal Code, R.S.C., 1985, c. C-46, s. 347, Mortgages Act, R.S.O. 1990, c. M.40, Housen v. Nikolaisen, [2002] 2 S.C.R. 235, Transport North American Express Inc. v. New Solutions Financial Corp., [2004] 1 S.C.R. 249, Cheung v. Moskowitz Capital Mortgage, 2018 ONSC 1322

Caledon (Town) v. Darzi Holdings Ltd., 2022 ONCA 513

Keywords: Civil Procedure, Orders, Contempt, Sentencing, Fines, Appeals, Interveners, Ineffective Assistance of Counsel, Professional Conduct, Recording Clients, Fresh Evidence, Rules of Civil Procedure, Rule 13.01(2), Rules of Professional Conduct, Rule 4.03(2), Caledon (Town) v. Darzi Holdings Ltd., 2022 ONCA 455, Cowles v. Balac (2006), 83 O.R. (3d) 660 (C.A.), Gagnon v. Pritchard (2002), 58 O.R. (3d) 557 (S.C.), Dumais v. Zarnett (1996), 30 O.R. (3d) 431 (S.C.), John Sopinka, Sidney N. Lederman & Alan W. Bryant, The Law of Evidence in Canada, 6th ed. (Lederman, Fuerst, Stewart) (LexisNexis, 2022)

Short Civil Decisions

Marmer Penner Inc. v. Vacaru, 2022 ONCA 506

Keywords: Civil Procedure, Appeals, Costs

Just Energy Group Inc. (Re), 2022 ONCA 498

Keywords: Bankruptcy and Insolvency, Civil Procedure, Appeals, Leave to Appeal, Costs, Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36, Stelco Inc. (Re) (2005), 2005 CanLII 8671 (ON CA), Timminco Ltd. (Re), 2012 ONCA 552 Nortel Networks Corp. (Re), 2016 ONCA 332, 9354-9186 Québec inc. v. Callidus Capital Corp., 2020 SCC 10, Laurentian University of Sudbury (Re), 2021 ONCA 199


CIVIL DECISIONS

Sakab Saudi Holding Company v. Jabri, 2022 ONCA 496

[Pardu, Roberts and Miller JJ.A.]

COUNSEL:

H. Underwood, A. Max, E. Young and E. Fraser, for the appellants

M. Mohamed, QC, D. Fenton, A. McLachlan and J. Bell, for the respondents

Keywords: Torts, Fraud, Conspiracy, Fraudulent Misappropriation, Solloway v Klondex Mines Ltd, 2014 ONSC 391, Club Resorts Ltd v Van Breda, 2012 SCC 17, Knowles v Lindstrom, 2014 ONCA 116, Canada v South Yukon Forest Corporation, 2012 FCA 165, Vahle v Global Work & Travel Co Inc, 2020 ONCA 224, Ontario v Rothmans Inc, 2013 ONCA 353, Boyd v Cook, 2016 BCCA 424, Lapointe Rosenstein Marchand Melançon LLP v Cassels Brock & Blackwell LLP, 2016 SCC 30

FACTS:

The respondents alleged a massive international fraud in which billions of dollars were misappropriated from corporations in Saudi Arabia and dissipated around the world. They sued the S.K.A., Toronto resident, the alleged chief architect of that fraud, along with his son, M.A., and several companies alleged to have conspired with S.K.A. The appellants, who had no presence in Ontario, contested the Superior Court of Justice’s jurisdiction over them. They moved to have the action permanently stayed or dismissed against them. The motion judge dismissed the appellants’ motion. The appellants contended that in coming to her decision, the motion judge made factual errors, as well as multiple errors of mixed fact and law in applying the test for jurisdiction set out in Club Resorts Ltd v Van Breda.

The motion judge dismissed the appellants’ motion. The appellants contended that in coming to her decision, the motion judge made palpable and overriding factual errors, as well as multiple errors of mixed fact and law in applying the test for jurisdiction set out in Club Resorts Ltd v Van Breda.

There were two competing characterizations of the claim. The respondents characterized their claim as an action in conspiracy to defraud, which began with a misappropriation of assets in Saudi Arabia and continued with manipulation of assets from Toronto by S.K.A, with the assistance and cooperation of others, particularly M.A. The appellants argued that the tort alleged is simply fraudulent misappropriation, and the tort would have been completed in Saudi Arabia. The interjurisdictional component was simply the remedy of tracing assets misappropriated elsewhere, and the tort alleged had no connection to Ontario.

ISSUES:

Did the motion judge make errors in fact and law in applying the Van Breda test for jurisdiction?

HOLDING:

Appeal dismissed.

REASONING:

No.

(a) The factual errors

S.K.A stated in a sworn declaration that he gifted substantially all of his assets to his son M.A through a gift deed that he prepared himself in Turkey without legal advice. Later, when pressed to produce a copy of this gift deed, he corrected his evidence to say that the gift deed itself was not created until he chose to memorialize the gift by typing it out in Toronto in December 2018.

As the appellants argued, the finding that S.K.A continued to direct – from Ontario and in furtherance of the alleged conspiracy – the use of the funds gifted to M.A, was central to the motion judge’s conclusions on each ground for jurisdiction. The motion judge found that a prima facie case had been made that the gift was a ruse, and a key step in the conspiracy to keep the assets out of the reach of the respondents. She found that S.K.A continued to direct the management of the gifted assets from Ontario. The appellants argued that the motion judge was led to the erroneous conclusion that the gift was a ruse by misapprehending or simply failing to consider the appellants’ evidence on the motion.

The standard of review for the ground of appeal is palpable and overriding error. The inferences that the motion judge drew – including that M.A had less apparent involvement in the management of the assets than the motion judge would have expected from someone whose full-time job was managing those assets – were available to the motion judge on the evidence before her, and her failure to expressly mention other evidence that the appellants argued supporting a contrary inference did not mean that the motion judge ignored or misapprehended that evidence. Whether the motion judge was incorrect in some respects, and some of the transactions post-dated the alleged making of the oral gift and pre-dated the gift deed would not, by themselves, be enough to displace the inferences drawn by the motion judge on this record. Thus, the motion judge did not make any reviewable error.

(b) The legal errors

The appellants claimed two overarching legal errors: the motion judge was said to have (1) lumped all the appellants together in the Van Breda analysis and failed to give any reasons for finding jurisdiction over the corporate appellants; and (2) relied on connections between other defendants and Ontario, to find jurisdiction over the appellants (the “claim as a whole” argument).

(i) Failure to perform an individualized assessment of each defendant

The appellants argued that the motion judge’s analysis proceeded on the erroneous belief that if she found a single presumptive connecting factor in relation to one defendant, it would be sufficient to ground jurisdiction over all defendants, and for that reason she failed to perform a Van Breda analysis with respect to the claims brought against each defendant.

The motion judge found jurisdiction on the basis of a factual matrix proper to each defendant acting in concert with S.K.A, said to have orchestrated the fraudulent scheme from Ontario, and the alleged role of each in the conspiracy. Implicit in the motion judge’s analysis was that a prima facie case of conspiracy had been made out with respect to each defendant. S.K.A was the prime mover, and the means he used were the gift deed to M.A, and transactions from M.A to and from the corporate defendants. There was no need to mechanically run through the Van Breda factors since each defendant was alleged to have acted in an interconnected way.

(ii) Lumping the appellants in with S.K.A

The appellants argued that the motion judge illegitimately moved from a finding that Ontario had jurisdiction over S.KA, to a finding that it must therefore have jurisdiction over the other defendants, including the appellants. Again, the motion judge did not proceed on the basis that a finding of jurisdiction over one defendant will always be sufficient to ground jurisdiction over any others. The finding of jurisdiction over M.A and the corporate defendants was tightly connected with the allegation of conspiracy and the parties’ respective roles in carrying out the conspiracy from Ontario. Thus, the motion judge did not make the overarching errors alleged.

(iii) Real and substantial connection to Ontario

The motion judge accurately set out the legal principles related to the assumption of jurisdiction against a foreign defendant, citing Ontario v Rothmans Inc, at para. 54, for the proposition that “an Ontario court will assume jurisdiction against a foreign defendant only where the plaintiff establishes ‘a good arguable case’ for assuming jurisdiction through either the allegations in the statement of claim or a combination of the allegations in the statement of claim and evidence filed on a jurisdiction motion.” The ‘good arguable case’ for assuming jurisdiction is assessed according to criteria set out in Van Breda, particularly “on the basis of objective factors that connect the legal situation or the subject matter of the litigation with the forum”.

Van Breda set out a list of objective presumptive connecting factors that would ground jurisdiction over a tort. The non-exhaustive list includes: (1) the defendant is domiciled or resident in the province; (2) the defendant carries on business in the province; (3) the tort was committed in the province; and (4) a contract connected with the dispute was made in the province.

The motion judge concluded that there was a real and substantial connection between the defendants, the subject matter of the litigation, and Ontario. The Court found that the motion judge did not err in any material respect in that analysis.

The appellants argued that the motion judge bootstrapped jurisdiction onto defendants against whom there was no or, at best, a weak connection to Ontario. However, the motion judge ought not to be read as committing to the doubtful proposition that jurisdiction over one defendant entails jurisdiction over them all. Furthermore, given the centrality of the claim of conspiracy within the claim as a whole, the motion judge’s focus of analysis was appropriately not on the actions of individual defendants in isolation, but on their actions – sometimes separate, sometimes together – in working towards a common end.


Demme v. Healthcare Insurance Reciprocal of Canada, 2022 ONCA 503

[Gillese, Pardu, and Brown JJ.A.]

COUNSEL:

M. Burgar and S. Cox, for the appellant

M. Girard and J. Gutman, for the respondent

Keywords: Contracts, Insurance, Commercial and General Liability Insurance, Coverage, Duty to Defend, Exclusions, Torts, Intrusion Upon Seclusion, Bodily Injury, Personal Health Information Protection Act, 2004, S.O. 2004, c. 3, Sched. A, Class Proceedings Act, 1992, S.O. 1992, c. 6, s. 5(1)(a), Stewart v. Demme, 2022 ONSC 1790 (Div. Ct.), Stewart v. Demme, 2020 ONSC 83, Jones v. Tsige, 2012 ONCA 32 , Non-Marine Underwriters, Lloyd’s of London v. Scalera, 2000 SCC 24, Monenco Ltd. v. Commonwealth Insurance Co., 2001 SCC 49, Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, 2010 SCC 33, Panasonic Eco Solutions Canada Inc. v. XL Specialty Insurance Company, 2021 ONCA 612, Tedford v. TD Insurance Meloche Monnex, 2012 ONCA 429, Oliveira v. Aviva Canada Inc., 2018 ONCA 321, Keys v. Intact Insurance Company, 2015 ONCA 400, Martin v. American International Assurance Life Co., 2003 SCC 16, Mutual of Omaha v. Stats, [1978] 2 S.C.R. 1153, Sansregret v. The Queen, [1985] 1 S.C.R. 570, Consolidated-Bathurst v. Mutual Boiler, [1980] 1 S.C.R. 888, Barbara Billingsley, General Principles of Canadian Insurance Law, 3rd ed. (LexisNexis Canada, 2020)

FACTS:

The appellant was a former registered nurse who worked at the Brampton Civic Hospital until December 2016, when the Hospital ended her employment upon discovering that she had misused an automatic medication dispensing unit (“ADU”) over an extended period to obtain Percocet tablets. The Hospital notified the patients whose medical records were affected, and eight civil actions were subsequently started by patients against the appellant and the Hospital (the “Underlying Action”).

The respondent insured the Hospital and their employees and appointed counsel to represent the Hospital in the Underlying Action. In July 2017, the respondent advised the appellant that there was no coverage under the Policy for the allegations advanced against her.

The appellant then commenced the current action against the respondent seeking a declaration that it owed her a duty to defend the Underlying Action and related relief. In late 2020, the appellant moved for summary judgment for such a declaration, and a further declaration that she was an additional insured under certain policies of insurance and therefore was entitled to liability coverage.

On the motion, the respondent pleaded that the allegations in the Underlying Actions did not amount to an “occurrence” because the bodily injury arising from the appellant’s conduct was expected or intended by her and thus the allegations were excluded by the Policy. It further pleaded that the allegations against the appellant constituted the performance of a criminal act, which was excluded by Policy exclusion 1(e).

The motion judge dismissed the motion and concluded that the true nature of the claims against the appellant was the intentional tort of intrusion upon seclusion and that there can be no liability for such tort unless there was a finding that the defendant intended to intrude upon the seclusion of another.

ISSUES:

(1) Did the motion judge misapply the pleadings rule?

(2) Did the motion judge err in his treatment of the issue of intentionality in respect of coverage for an occurrence and the intention act exclusion?

(3) Did the motion judge err in applying the criminal act exclusion?

(4) Did the motion judge fail to interpret the Policy so as to avoid nullifying its coverage?

HOLDING:

Appeal dismissed.

REASONING:

(1) No.

The motion judge grounded his duty to defend analysis in the statement of claim in the Underlying Actions and admissions contained in the appellant’s defences. The appellant argued that the motion judge failed to give sufficient weight to two sets of facts pleaded in her defences when ascertaining whether there was a mere possibility that a pleaded claim would trigger coverage and therefore a duty to defend.

The Court found that the motion judge’s analysis properly focused on considering the nature of the claims asserted against the appellant within the terms of coverage provided by the Policy, rather than on her pleaded explanations for what she did or why she did it. The Court found no basis for this complaint, and found that what use the appellant may or may not have made of the narcotics she obtained did not play a role in the motion judge’s analysis.

(2) No.

The motion judge found that the claims pleaded against the appellant did not involve an occurrence and fell outside the Policy’s coverage by operation of the intentional act exclusion. The appellant advanced three submissions about why the conclusions by the motion judge were in error:

(i) The decision in Oliveira

The appellant submitted that the motion judge erred by failing to follow the decision of the Court in Oliveira. The Court concluded that the issues about the language of coverage and exclusion at play on this appeal were not considered in Oliveira and consequently did not receive judicial comment or analysis.

(ii) The element of “reckless” in intrusion upon seclusion

The appellant argued that since the tort of intrusion upon seclusion covers conduct that is intentional or reckless, the motion judge erred by failing to find a mere possibility existed that the claims alleged against her could be regarded as claims for damages for bodily injury arising out of reckless conduct.

The Court held that an accident can include a negligent or grossly negligent act. Nevertheless, accident conveys the idea that the consequences of certain actions are unexpected. Reckless conduct stands very close to the intentional end of the conduct spectrum, far away from the unintentional end where the appellant tried to place it. The Court concluded that for the appellant to contend that in the face of such claims there existed a mere possibility that her alleged conduct could be characterized as causing injury that was neither expected nor intended from her standpoint lacked any air of reality.

(iii) The intention to obtain pills as distinguished from the intention to access patient records

The appellant contended that the motion judge erred by failing to accept her argument that a material distinction existed between her intention to obtain the Percocet pills and her intentions regarding the patient’s records. As a result, the appellant argued those unintended consequences constituted a type of bodily injury that fell within the Policy’s coverage of an occurrence.

The motion judge did not accept her argument and focused his analysis on the nature of the claims brought against the appellant in the Underlying Actions. The motion judge held that their true nature was the intentional tort of intrusion upon seclusion. The relevant intention is the defendant’s intention to access private patient records. The motion judge concluded that the pleading of intrusion upon seclusion took the claims against the defendant outside the Policy’s definition of occurrence and, as well, within the ambit of the intentional act exclusion.

The Court found no error in the motion judge’s conclusion, and held that it flowed logically from the elements of the pleaded tort of intrusion against seclusion, which he found to be the true nature of the claims against the appellant.

(3) No determination of this issue.

Given that the motion judge did not err in his conclusions that the claims pleaded against the appellant in the Underlying Actions were not occurrences under the Policy and fell within its intentional act exclusion, the Court found that it was not necessary to comment on the motion judge’s treatment of the criminal act exclusion.

(4) No

The appellant submitted that by determining that the claims against her for intrusion upon seclusion did not give rise to a mere possibility of coverage and therefore did not attract a duty to defend, the motion judge erroneously adopted an interpretation of the Policy that nullified coverage for liability for bodily injury arising out of invasion or violation of the right of privacy.

The Court found no error in the motion judge’s conclusion that since the Policy would cover bodily injury arising from negligence-based invasions of privacy, the lack of coverage for the intentional tort of intrusion upon seclusion would nullify the Policy’s coverage.


Leaf Homes Limited v. Khan, 2022 ONCA 504

[Gillese, Miller and Coroza JJ.A.]

COUNSEL:

A. Farooq and S. Balcharan, for the appellants

M. Kersten, for the respondent

Keywords: Contracts, Real Property, Agreements of Purchase and Sale of Land, Civil Procedure, Default Judgments, Setting Aside, Procedural and Natural Justice, Reasonable Apprehension of Bias, Costs, Personal Liability, Lawyers, Fresh Evidence, Rules of Civil Procedure, Rule 19.09, 57.07(1), (2), Mountain View Farms Ltd. v. McQueen2014 ONCA 194, Palmer v. The Queen, [1980] 1 S.C.R. 759, HSBC Securities (Canada) Inc. v. Firestar Capital Management Corporation, 2008 ONCA 894, BHL Capital v. 2281165 Ontario Ltd., 2018 ONSC 7289, Zeifman Partners Inc. v. Aiello, 2020 ONCA 33, Peterbilt of Ontario Inc. v. 1565627 Ontario Ltd., 2007 ONCA 333, Techlantic v. Modellista, 2021 ONSC 746, Dentons Canada LLP v. Khan, 2021 ONSC 5261, Ross v. Filip, 2021 ONSC 1496, Yukon Francophone School Board, Education Area #23 v. Yukon (Attorney General), 2015 SCC 25, Galganov v. Russell (Township), 2012 ONCA 410,  Rutman v. Rabinowitz, 2018 ONCA 279, Niagara Structural Steel (St. Catharines) Ltd. v. W.D. Laflamme Ltd. (1987), 58 O.R. (2d) 773 (C.A.)

FACTS:

The appellants entered into an agreement of purchase and sale with the respondent to buy a home to be built in a new residential community in Whitchurch-Stouffville (the “Property”) for $1,518,888 (the “Agreement”). The deal was to close on October 4, 2018.

When the appellants could not get mortgage approval, they told the respondent they would be unable to close on the purchase and sale. The respondent kept the appellants’ $180,000 down payment, sold the Property a few months after the closing date for less than two-thirds of the purchase price that the appellants had agreed to pay, and obtained default judgment against the appellants for over $400,000. The respondent then began to take steps to realize on the judgment.

On learning that their bank account had been garnisheed by the respondent, the appellants retained counsel. Counsel moved to set aside the default judgment and be permitted to enter a defence and counterclaim.

The motion judge ordered that the default judgment be set aside but only to the extent that the appellants could litigate the amount of damages. Despite their partial – but significant – success on the motion, the appellants were ordered to pay costs on a substantial indemnity basis, and a personal costs order was made against counsel for the appellants. On appeal, the appellants challenged the validity of all those orders.

ISSUES:

(1) Did the motion judge err in misapplying r. 19.08?

(2) Did the motion judge err in validating service of the Statement of Claim?

(3) Did the motion judge err in making palpable and overriding errors of fact?

(4) Did the motion judge err in demonstrating a reasonable apprehension of bias?

(5) Did the motion judge err in making the Personal Costs Order?

(6) Did the motion judge err in ordering costs of the Motion against the appellants on a substantial indemnity basis?

HOLDING:

Appeal allowed.

REASONING:

(1), (2), (3) Yes

Because a motion judge’s decision to set aside a default judgment is a discretionary one, it attracts deference on appeal. The decision should not be interfered with absent an error in law or principle, a palpable and overriding error of fact, or unless the decision is so clearly wrong as to amount to an injustice: Mountain View Farms Ltd. v. McQueenHSBC Securities (Canada) Inc. v. Firestar Capital Management Corporation

As the motion judge correctly noted, the test for setting aside a default judgment requires the court to consider the following five factors:

(a) whether the motion to set aside the default judgment was brought promptly after the [appellants] learned of it;

(b) whether there is a plausible excuse or explanation for the [appellants’] default in complying with the Rules;

(c) whether the facts establish that the [appellants] have an arguable defence on the merits;

(d) the potential prejudice to the [appellants] should the motion be dismissed, and the potential prejudice to the [respondent] should the motion be allowed; and

(e) the effect of any order the court might make on the overall integrity of the administration of justice.

In the Court’s view, the motion judge made reversible errors in her assessment of the merits of the appellants’ defence. Consequently, the Court owed no deference to her determination of this factor. An arguable defence on the merits alone may justify the court in exercising its discretion to set aside a default judgment. In this case, on the basis of the appellants’ defence alone, the Court set aside the default judgment.

(c) The motion judge fundamentally misunderstood the appellants’ defence. The appellants’ defence and counterclaim were intertwined so both had to be considered when assessing this factor. The motion judge did not mention or consider the counterclaim in her Reasons. In short, the appellants’ defence alleged pressure tactics and various misrepresentations that induced them to enter into the Agreement and not, as the motion judge stated, simply an offer to help obtain financing. The motion judge also erred in law in her approach to determining whether the arguable defence factor had been satisfied. The appellants did not need to show that their defence would inevitably succeed; they only had to show that it had an air of reality: Mountainview. There was an air of reality to the defence.

(a) In concluding that the appellants had not acted promptly after learning of the default judgment, the motion judge both relied on a factual finding that is the result of a palpable and overriding error and erred in principle. The motion judge found that the appellants received copies of the Statement of Claim in September of 2018 based on the “contemporary notes of [the process server’s] actions taken on the day in question”. The process server made no such contemporary notes.

In addition to this palpable and overriding factual error about the process server’s “contemporary notes”, the motion judge erred in principle on this factor in two ways. First, the relevant period of delay is the delay that occurs after default judgment is granted. The history of the proceeding has nothing to do with this factor: see Zeifman Partners Inc. v. Aiello. Instead of considering the period after default judgment was granted, the motion judge considered the appellants’ actions from the point that the Statement of Claim was allegedly served. Non-attendance at examinations may be considered as part of the fifth Mountain View factor, but it is not a relevant consideration for the purpose of this factor. It was an error in principle to take non‑attendance at examinations into consideration when deciding whether the Motion was brought promptly after learning of the default judgment.

(b) In finding against the appellants on the factor of a plausible excuse or explanation for the appellants having failed to comply with the Rules, the motion judge relied heavily on her finding that the appellants had been personally served with the Statement of Claim in September 2018, a finding infected by palpable and overriding error. Consequently, the motion judge’s determination of this factor warranted no deference.

(d) The motion judge erred in two ways in finding that the respondent would suffer prejudice if the Motion were granted. First, the motion judge accepted that the respondent would suffer because it would incur further costs. That was an error in principle. For the purposes of this factor, prejudice is something that is not compensable in costs: Peterbilt of Ontario Inc. v. 1565627 Ontario Ltd.,; Techlantic v. Modellista. It is self-evident that a claim of incurring further costs is one that is compensable by a costs order.

Second, the motion judge accepted the respondent’s bald assertion that witnesses’ memories would have faded by the passage of time. This, too, was an error in principle. Prejudice must be real and not merely speculative: Dentons Canada LLP v. Khan. There was nothing in the record to support the statement that the passage of time had led to problems with witnesses’ memories.

(e) The factor of the effect on the overall integrity of the administration of justice required the motion judge to consider the global effect of the other factors. Because the motion judge erred in her assessment of the other factors, her decision on this matter warranted no deference.

(4) No

There is a strong presumption of judicial impartiality that is not easily displaced. The presumption will be rebutted only where there is a real likelihood or probability of bias: Yukon Francophone School Board, Education Area #23 v. Yukon (Attorney General). The appellants submitted that the cumulative effect of the motion judge’s “problematic decisions” and her comments about them and their counsel overcome this presumption. While the motion judge made a number of errors, an objective and informed observer would not conclude there was a real likelihood or probability of bias.

(5) Yes

The Personal Costs Order could not stand. The motion judge breached the procedural requirements in r. 57.07(2) and, as a result, was without jurisdiction to make the order. Further, she made the order based on palpable and overriding errors of fact.

Rule 57.07(1) empowers the court to order a lawyer to personally pay a party’s costs if the lawyer “caused costs to be incurred without reasonable cause or to be wasted by undue delay, negligence or other default”. However, r. 57.07(2) imposes a mandatory requirement on the court: “no such order shall be made unless the lawyer is given a reasonable opportunity to make representations to the court.” Rule 57.07 is not concerned with the discipline or punishment of a lawyer but only with compensation for conduct that caused unreasonable costs to be incurred: Galganov v. Russell (Township).

While the motion judge referred to r. 57.07(1) in making the Personal Costs Order, unfortunately, she failed to refer to r. 57.07(2) or abide by its requirement: she gave the appellants’ lawyer no opportunity to make representations before she made the Personal Costs Order.  Because he had been given no right of reply to the respondent’s costs submissions, he could not respond to these allegations or the respondent’s request for a personal costs order against him. On the basis of the breach of r. 57.07(2) alone, the Personal Costs Order was set aside.

In addition, the fresh evidence demonstrated that the Personal Costs Order was based on two palpable and overriding factual errors. The motion judge stated that: (1) The appellants’ lawyer knew the appellants were not going to attend the cross-examinations “at least a week before they were to occur” and (2) he “agreed” to the appellants’ request to leave the country for an unspecified reason. The fresh evidence showed that both of those reasons for making the Personal Costs Order were the result of palpable and overriding factual errors. It made clear that the appellants’ lawyer did not know until February 24, 2020, the day before the cross-examinations were to take place, that the appellants would not be in attendance at them. It also made clear that he never agreed that the appellants did not need to attend the cross-examinations.

(6) Yes

Since the appellants were fully successful on the Motion, the Costs Order against them necessarily fell and it became unnecessary to address the alleged errors in the making of the Costs Order.


2257573 Ontario Inc. v. Furney, 2022 ONCA 505

[Brown, Roberts and Paciocco JJ.A.]

COUNSEL:

S. Dyment, for the appellant AF and MF

HH, acting in person

H. Reininger, for the respondent

Keywords: Contracts, Real Property, Mortgages, Damages, Interest, Usury, Canadian Charter of Rights and Freedoms, ss. 7, 12 and 15, Criminal Code, R.S.C., 1985, c. C-46, s. 347, Mortgages Act, R.S.O. 1990, c. M.40, Housen v. Nikolaisen, [2002] 2 S.C.R. 235, Transport North American Express Inc. v. New Solutions Financial Corp., [2004] 1 S.C.R. 249, Cheung v. Moskowitz Capital Mortgage, 2018 ONSC 1322

FACTS:

These grouped appeals arose out of the appellants’ default under several mortgages and guarantees. The appellants were MF, who is a licensed mortgage agent and an experienced real estate investor, her husband, AF, and their acquaintance, HH, who was interested in investing in one of their properties.

In February and March 2017, MF and AF negotiated several high-interest, short-term loans from the respondent 2257573 Ontario Inc. to assist them in refinancing the mortgages on their properties. These loans were secured by mortgages on MF and AF’s properties in Niagara-on-the-Lake and on a Woodstock property owned by HH.

MF and AF could not refinance their mortgages and from the outset went into default on their mortgage agreements. In late 2017, the respondent sued the appellants for defaulting under the mortgage agreements and on their guarantees and brought a motion for summary judgment. The appellants asserted counterclaims, alleging damages caused by the respondent because of its failure to fulfill an alleged oral agreement relating to the discharge of executions registered against MF as part of the refinancing arrangements, its deficient mortgage discharge statements, and the mortgage interest charged at a criminal rate.

The appellants argued that the motion judge erred by granting interest under the mortgages because of the respondent’s allegedly improper conduct. The appellants also argued that the motion judge erred in calculating the amounts owing under the mortgages.

Additionally, HH argued that his rights to a fair hearing was breached in violation of ss. 7, 12, and 15 of the Canadian Charter of Rights and Freedoms and because of an apprehension of judicial bias.

ISSUES:

(1) Did the motion judge err by granting interest under the mortgages due to the respondent’s alleged improper conduct?

(2) Did the motion judge err in calculating the amounts owed under the mortgages?

(3) Was HH’s right to a fair hearing breached in violation of ss. 7, 12, and 15 of the Charter and because of an apprehension of judicial bias?

HOLDING:

Appeals dismissed.

REASONING:

(1) No

The motion judge was not required to impose a particular remedy. The motion judge’s assessment of the impact of the respondent’s conduct and of the appropriate remedy and interest to be awarded in the circumstances of this case was an exercise of his discretion.

The respondent charged interest under the mortgages at a criminal rate of interest contrary to s. 347 of the Criminal Code, R.S.C., 1985, c. C-46, which the respondent admitted, and failed to provide timely and accurate mortgage discharge statements. The appellants argued that the motion judge erred in effectively rewarding the respondent’s improper conduct by granting interest under the mortgages in these circumstances.

The appellants’ submission before the motion judge was that any interest awarded under the mortgages should be reduced, not eliminated, as they argued on appeal. It was hardly fair to fault the motion judge for failing to give effect to a submission that was not before him. The motion judge correctly recognized that “a spectrum of remedies are available to a judge in civil proceedings when a violation of s. 347 of the Criminal Code is found” and applied the guiding principles concerning the appropriateness of notional severance as a remedy from the leading case, Transport North American Express Inc. v. New Solutions Financial Corp.

The motion judge concluded that notional severance would be appropriate and would not subvert the purpose of s. 347 of the Criminal Code. Accordingly, he ordered the severance of illegal interest in relation to each of the mortgages to allow the respondent judgment “for only the principal sum of the mortgage funds advanced plus interest thereon at the rates agreed to by the parties”.

(2) No

The motion judge made no error in evaluating the evidence that grounded his findings.

The appellants submitted that the motion judge misapprehended the evidence and therefore erred in his calculation of the amounts owing under two of the mortgages.

First, it was not contested that $547,000 was advanced under the one mortgage. Second, the trial judge was entitled on the evidence to conclude that the $73,000 advance under the second mortgage was made up of $67,000 principal, plus $6,000 in brokerage fees paid by the respondent on closing to the mortgage brokers involved as per the signed mortgage commitments.

(3) No

These submissions were rejected, as HH’s bald allegations were unsubstantiated by anything in the record, including the motion judge’s reasons, and were wholly without merit.


Caledon (Town) v. Darzi Holdings Ltd., 2022 ONCA 513

[Brown J.A. (Case Management Judge)]

COUNSEL:

K. D. Sherkin and K. Sonshine, for the appellants

M. Winch and R. Sniderman, for the respondent

A. Hershtal, for the appellants’ former counsel

Keywords: Civil Procedure, Orders, Contempt, Sentencing, Fines, Appeals, Interveners, Ineffective Assistance of Counsel, Professional Conduct, Recording Clients, Fresh Evidence, Rules of Civil Procedure, Rule 13.01(2), Rules of Professional Conduct, Rule 4.03(2), Caledon (Town) v. Darzi Holdings Ltd., 2022 ONCA 455, Cowles v. Balac (2006), 83 O.R. (3d) 660 (C.A.), Gagnon v. Pritchard (2002), 58 O.R. (3d) 557 (S.C.), Dumais v. Zarnett (1996), 30 O.R. (3d) 431 (S.C.), John Sopinka, Sidney N. Lederman & Alan W. Bryant, The Law of Evidence in Canada, 6th ed. (Lederman, Fuerst, Stewart) (LexisNexis, 2022)

FACTS:

The endorsement addresses two procedural issues from the preparation of the appellants’ motion to adduce fresh evidence on their appeal from a $1 million fine, imposed by way of sentence in civil contempt proceedings. The motion for fresh evidence related to the appellants’ ground of appeal that alleges ineffective assistance of counsel by one of their former counsel in the proceedings below (“Former Counsel”).

The appellants, Darzi Holdings Ltd., Rafat General Contractors Inc., and LRS, appeal the $1 million fine imposed by Myers J. as the sentence for their contempt of the 2019 Injunction Order obtained by the respondent, The Town of Caledon (the “Town”).

The appellants have only refused to produce two items in Former Counsel’s file: both are recordings he made of conversations with his clients, the appellants, during the course of his retainer. The appellants have waived privilege over the balance of Former Counsel’s file.

ISSUES:

(1) Did the motion judge agree with the appellants’ refusal to produce two items in the Former Counsel’s file?

(2) Can Former Counsel file evidence that responds to the appellants’ allegations of ineffective assistance of counsel and can Former Counsel file a factum and motion record on the motion for fresh evidence?

HOLDING:

Appeals dismissed.

REASONING:

(1) No

In the present case, any issue concerning the admissibility of evidence on the motion to adduce fresh evidence on the appeal will be heard and decided by the appeal panel at the hearing. It will be for the panel to determine whether Former Counsel made the two recordings in violation of the Rules of Professional Conduct and, if he did, what effect, if any, that may have on the use of the recordings on the appellants’ motion for fresh evidence.

The motion judge was not persuaded by the appellants’ submission that the two recordings do not form part of Former Counsel’s file, which the Endorsement ordered produced. The recordings exist and were located in Former Counsel’s file. No party takes the position that the recordings’ contents do not relate to the issue of the allegation of ineffective assistance of counsel.

The motion judge ordered the appellants to make available to the Town’s counsel the two recordings made by Former Counsel. However, to preserve the ability of the appellants to ask the panel to refuse to admit the two recordings into evidence on the appeal, the motion judge directed that the parties confine any reference about the content of the two recordings, and any pre-hearing examination conducted on the recordings, to the materials filed on the motion to adduce fresh evidence. The motion judge further directed that all materials relating to that fresh evidence motion be filed with the Court on a sealed basis, in accordance with the standard practice of the Court on motions for fresh evidence.

(2) Yes

The well-established practice in criminal appeals where ineffective assistance of counsel is advanced as a ground of appeal is that responding Crown counsel adduces the evidence responding to the appellant’s allegations. Typically, Crown counsel will file an affidavit from the former counsel that responds to the allegations of ineffective assistance of counsel. Either party may file the transcript of any cross-examination on that affidavit. This reflects the principle that the preparation of the materials for a motion for fresh evidence is controlled by the parties to the appeal.

The same principle should apply in this civil appeal. Consequently, it will be for the Town’s counsel to file any affidavit from Former Counsel and file any necessary responding motion record regarding the fresh evidence.

However, given the novelty of the appellants’ attempt to advance ineffective assistance of counsel as a ground of appeal and the obvious reputational interest of Former Counsel in the motion for fresh evidence, the motion judge granted Former Counsel leave to intervene as an added party on the appeal pursuant to r. 13.01(2) of the Rules of Civil Procedure, but with his rights limited as follows:

(i) Former Counsel may file a responding factum on the motion to adduce fresh evidence of no more than 10 pages, limited to the issue of whether ineffective assistance of counsel exists as a ground of appeal in civil proceedings in this province;

(ii) That factum shall be delivered following the appellants’ delivery of their formal fresh evidence motion record, with supplementary factum; and

(iii) Whether Former Counsel may make submissions at the hearing of the motion for fresh evidence was a matter to be decided by the panel hearing that motion and the appeal.



SHORT CIVIL DECISIONS

Marmer Penner Inc. v. Vacaru, 2022 ONCA 506

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

COUNSEL:

F. Vacaru, as self-represented

T. Pagliaroli, for the respondants, Legge & Legge and John Legge

M.E. Girard, for the respondent, Marmer Penner Inc.

Keywords: Civil Procedure, Appeals, Costs

Just Energy Group Inc. (Re), 2022 ONCA 498

[Benotto, Zarnett and Sossin JJ.A.]

COUNSEL:

K. Rosenberg, J. Larry and D. Glatt, for the moving party

J. MacDonald, M. Wasserman, M.D. Lellis, J. Dacks and K. Sachar, for the responding parties Just Energy Group Inc. et al.

A. Merskey, J.M. Picone and C. Selby, for the DIP Lenders

Keywords: Bankruptcy and Insolvency, Civil Procedure, Appeals, Leave to Appeal, Costs, Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36, Stelco Inc. (Re) (2005), 2005 CanLII 8671 (ON CA), Timminco Ltd. (Re), 2012 ONCA 552 Nortel Networks Corp. (Re), 2016 ONCA 332, 9354-9186 Québec inc. v. Callidus Capital Corp., 2020 SCC 10, Laurentian University of Sudbury (Re), 2021 ONCA 199