Canada: Court Of Appeal Summaries (February 29- March 4, 2016)

Good afternoon.

Cases this week included a couple of commercial leasing decisions involving issues such as insurance and allocation of risk for damage between landlord and tenant and the commencement of the limitation period for suing for ongoing breaches of covenants. Other topics included the enforceability of a choice of law and forum clause in a financial adviser case, MVA, copyright, and a debtor-creditor case where the debtor got the better of the creditor and succeeded in a claim against the creditor for intentional interference with economic relations.

Perhaps the most interesting decisions released this week were the MEDIchair and the Accuworx decisions. In MEDIchair, the Court of Appeal struck down a non-competition covenant that purported to restrict the business of a former franchisee in a particular geographical area where the franchisor had no intention to carry on business in that area. In Accuworx, a successful claim for unjust enrichment was brought against a landlord corporation for environmental clean-up work on its property even though the contract to clean up was not with that corporation but with a related tenant corporation that had gone bankrupt. The court found that the landlord corporation received the benefit of avoiding a potential clean-up order issued by the Ministry of the Environment and therefore should be liable for the clean-up costs even though it was the related tenant corporation that had contracted for the work to be performed. This was a clever way to get around the annoying issues of privity of contract and the corporate veil. No doubt the fact that the landlord and tenant corporations were related (they were closely held corporations with the same controlling mind) played a critical role in the outcome. It would have been interesting to see if the same result would have followed if the corporations had been at arm's length.

Have a nice weekend.

CIVIL DECISIONS

MEDIchair LP v. DME Medequip Inc., 2016 ONCA 168

[Feldman, MacPherson and Miller JJ.A.]

Counsel:

David S. Altshuller and Jennifer Pocock, for the appellants

R.S.M. Woods and Peter Smiley, for the respondent

Keywords: Contracts, Franchise Agreements, Restrictive Covenants, Enforceability, Reasonableness in Scope, Legitimate or Proprietary Interest, Elsley v. J.G. Collins Ins. Agencies, Payette v. Guay, Arthur Wishart Act (Franchise Disclosure), s. 5, Disclosure Statement, Fresh Evidence

Facts: MEDIchair LP is a franchisor that operates a network of franchise stores that sell and lease home medical equipment. One of its franchise locations was in Peterborough, Ontario. It was owned and operated by DME Medequip Inc. ("DME"). DME's latest franchise agreement was dated 2005 (the "2005 Franchise Agreement"). In 2008, the appellants, Ms. Rolph and Mr. Seiderer, incorporated the appellant 2169252 Ontario Inc. to purchase the Peterborough franchise from the owners of DME, and agreed to be bound by the 2005 Franchise Agreement, including the restrictive covenant. That covenant, which was to apply on the termination of the agreement, prevented them from operating a similar store for 18 months within a 30-mile radius of their store or the nearest franchise store. In 2011, the MEDIchair franchise system was sold to Centric Health Corporation ("Centric"). In 2012, Centric also purchased Motion Specialties ("Motion"), a group of corporate stores similar to the MEDIchair stores. One of those stores was in Peterborough, competing directly with the appellants' MEDIchair store. The appellants allege that, following these acquisitions, Centric focused its support on the Motion stores, rather than the MEDIchair stores. The number of MEDIchair stores began to decline. Having become very disenchanted with MEDIchair, the appellants did not renew their franchise agreement when it expired in 2015. Instead, they removed the MEDIchair signage and continued to operate their business at the same premises with the same merchandise and the same employees, and changed their name to Living Well Home Medical Equipment. The respondent franchisor, MEDIchair LP, was successful on its application to enforce the restrictive covenant against the appellants, DME Medequip Inc. (its former franchisee) and related parties.

Issues:

(1) Should the court admit and consider fresh evidence?

(2) Did the application judge err by holding that MEDIchair was not required under the Arthur Wishart Act (Franchise Disclosure) to provide the appellants with a franchise disclosure document when they originally purchased the franchise?

(3) Did the application judge err by holding that the term "similar to" in the restrictive covenant was not ambiguous?

(4) Did the application judge err by finding that the restrictive covenant was reasonable in scope, having regard to the legitimate or proprietary interest that MEDIchair was entitled to protect?

Holding: Appeal allowed.

Reasoning:

(1) No. The appellants sought to introduce fresh evidence regarding the modification of their business in order to try to make it sufficiently dissimilar to the MEDIchair business to comply with the covenant, and the declining state of the MEDIchair franchise system. The court did not call on the respondent to address the issue of the admissibility of this evidence on the appeal. With the limited exception of the current state of the MEDIchair franchise system, all of the other proposed fresh evidence could have been obtained by cross-examination of the respondent's deponents and put before the application judge.

(2) No. Subsections 5(1) and (4) of the Arthur Wishart Act require a franchisor to provide a prospective franchisee with a "disclosure document" that contains prescribed information about the franchise at least 14 days before a franchise agreement is signed or payment is made. However, in a number of cases described in ss. 5(7) of the Act, a franchisor is exempted from that obligation. One is where the grant of the franchise by a franchisee "is not effected by or through the franchisor": ss. 5(7)(a)(iv). The application judge found that the respondent had very little involvement in the sale of the franchise and was therefore exempt from the disclosure requirement. The respondent merely gave its required approval for the transfer, took a transfer fee, and obtained personal covenants from Ms. Rolph and Mr. Seiderer to be bound by the 2005 Franchise Agreement, as well as a guarantee from the appellant numbered company for DME's obligations under the 2005 Franchise Agreement.

(3) No. The application judge found that the respondent has "a method of operation, goodwill, products, and services that it has a legitimate interest in protecting from similar operations specializing in the sale or rental of home medical equipment." In other words, the similarity is found by comparing not only the product line, but also the method of operation, including whether the appellant was trading on the goodwill of the MEDIchair operation from which it had benefitted over the years.

(4) Yes. The basic principles governing the courts' approach to the enforceability of covenants in restraint of trade have been set out in two cases from the Supreme Court of Canada, Elsley v. J.G. Collins Ins. Agencies, [1978] 2 SCR 916, and Payette v. Guay, 2013 SCC 45. In Elsley, Dickson J. (as he was then) stated that a covenant in restraint of trade is enforceable only if it is reasonable between the parties and with reference to the public interests. In Payette, Wagner J. concluded that in the commercial context – i.e. the sale of a business – the courts will treat a restrictive covenant as lawful unless it is shown on a balance of probabilities to be unreasonable. In this case, the application judge erred in finding the scope of the restrictive covenant reasonable. It was clear from the evidence that by deciding not to operate in Peterborough, MEDIchair effectively acknowledged that it had no legitimate or proprietary interest to protect within the defined territorial scope of the covenant. Nor had the respondent attempted to suggest that it would be entitled to enforce the MEDIchair restrictive covenant in order to protect its interest in another business, Motion, owned within the same corporate group. The restrictive covenant was unreasonable as between the two parties in the circumstances of the particular Peterborough franchise because MEDIchair did not have a legitimate or proprietary interest to protect within the territorial scope of the covenant.

Accuworx Inc. v. Enroute Imports Inc. 2016 ONCA 161

[Gillese, Hourigan and Brown JJ.A.]

Counsel:
Tamara Farber and Alexandra L. White, for the appellant
William A. Chalmers, for the respondent

Keywords: Environmental Law, Environmental Protection Act, Remedial Orders, Unjust Enrichment, Quantum Meruit, Summary Judgment

Facts:
The respondent, Accuworx Inc. ("Accuworx"), provided clean-up services for a spill of canola oil. The canola oil was owned by Sunora Foods Ltd. ("Sunora") and the spill occurred at the premises of Enroute Imports Inc. ("Enroute"). The appellant, Pydel Properties Inc. ("Pydel"), owns the property where Enroute carried on their business. Accuworx was not paid for its work and sued. Enroute made a proposal under the Bankruptcy and Insolvency Act and the action was stayed against it.

On summary judgement, the motion judge found that Pydel had been unjustly enriched by the clean-up services on the basis that Pydel's statutory and common law liability for the spill had been eliminated. Accuworx was found to be entitled to $328,067.96 quantum meruit for their services provided regarding the spill even though there was no direct contract between Accuworx and Pydel.

Issue:
Did the motion judge err in finding that Accuworx met the test for showing unjust enrichment?

Holding: Appeal dismissed.

Reasoning:
No. Pydel submitted that it received no direct benefit from the work Accuworx performed in cleaning up neighbouring properties. Pydel also argued that it did not receive a negative benefit from the work done on neighbouring properties because they may not have been subject to a clean-up order under the Environmental Protection Act ("EPA") or a claim from an affected party either at common law or under the EPA. The court held that Pydel could be subject to a remediation order from the Ministry and Environment and Climate Change ("MOE"). The evidence established that Mr. Pileggi, an officer and director of both Pydel and Enroute took steps to clean up the spill to reduce the risk that the MOE would make a remedial order.

Accuworx may have potential claims against other parties but this does not detract from the issue that they have not been paid for their services and thus deprived. There is no juristic reason why Pydel should maintain the negative benefit it received. There is no requirement under quantum meruit for an explicit agreement for services provided so long as they were provided at the request or acquiescence of the opposing party. In this case, the request for services was made by Mr. Pileggi who was a director and officer for both Pydel and Enroute. The argument that Mr. Pileggi acted as an agent for Sunora when he requested Accuworx's services does not change the fact that benefit was conferred on Pydel with the encouragement and acquiescence of its officer and director.

Yasmin v. Alexander, 2016 ONCA 165

[MacPherson, van Rensburg and Miller JJ.A.]

Counsel:

William G. Scott, for the appellant

Michael Chadwick, for the respondent

Keywords: Torts, Motor Vehicle Accidents, Limitation Periods, Discoverability, Reasonable Diligence, Limitations Act, ss. 5(1)(b), Insurance Act, S. 267.5(5), Serious and Permanent Injury

Facts:

The appellant claims that in August 2008 she was struck by a car owned and operated by the respondent Lenard Alexander. As a result she sustained serious, lasting and permanent personal injuries. The appellant retained a lawyer, K, who pursued her claim for statutory accident benefits. K did not, however, commence a tort action. In 2011, the appellant sued K, alleging negligence in his failure to commence the tort action within the prescribed limitation period. At the request of K's lawyers, the appellant's new counsel issued a statement of claim on February 17, 2012 against the respondent. The respondent moved for summary judgment claiming that the action was statute-barred. The motion judge granted the respondent's motion and dismissed the action. The motion judge noted that the appellant's claim may not meet the threshold under s. 267.5(5) of the Insurance Act, in which case she would have no right to sue. If the claim met the threshold, then the question is when a person exercising reasonable diligence would have known this was the case. The motion judge concluded that, according to the available medical reports, from the date of the accident to February 10, 2010 (two years before the statement of claim was issued) little, if anything, had changed. Even if admissible, the appellant's statement in her discovery that she believed she would get better did not address the objective test for discoverability set out in ss. 5(1)(b) of the Limitations Act, 2002. Thus, the appellant, or her former lawyer, did not exercise reasonable diligence to determine the possibility that her injuries were serious and permanent.

Issues:

Did the motion judge err in:

(1) finding that the appellant had no right to sue at all if her claim did not meet the threshold under ss. 267.5(5) of the Insurance Act?

(2) finding that the appellant did not exercise reasonable diligence to determine the possibility that her injuries were serious and permanent?

(3) failing to consider the fact that the defendant obtained an orthopaedic report dated September 6, 2013, that states that the appellant had not sustained a serious impairment of an important bodily function?

Holding: Appeal dismissed.

Reasoning:

(1) No. The motion judge was not making a pre-trial determination that the appellant's injuries failed to meet the threshold, and this was not, on any reasonable interpretation of his reasons, the basis for his dismissal of the claim.

(2) No. The evidence suggests no real change in the appellant's condition since 2008. Indeed, the appellant's new counsel based his opinion that she met the threshold on her description of her injuries together with an x-ray report from 2009. Thus, there was no error in the motion judge's finding that the appellant failed to act with diligence to determine whether her injuries were serious and permanent, and that her claim ought reasonably to have been discovered before February 17, 2010.

(3) No. The orthopaedic report is simply an opinion obtained in the course of the litigation that no serious impairment had occurred, and expresses the opinion that the appellant's condition had almost entirely resolved. It is not evidence that the appellant had "not yet" met the threshold, nor is it determinative of whether the appellant, who had commenced an action seeking damages for her injuries, ought reasonably to have discovered that her impairment was serious and permanent.

Orion Interiors Inc. v. State Farm Fire and Casualty Company, 2016 ONCA 164

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

Counsel:

Stephen Panzer, for the appellant
Christopher R. Dunn and Joanna F. Reznick, for the respondent
Michael Unea, for the third party Metal Craft Mechanical Inc.

Keywords: Real Property, Commercial Tenancies, Leases, Over-Holding Tenancy, All Risks Insurance

Facts:

Orion Interiors Inc. (the "Appellant") is the tenant of commercial premises (the "Leased Premises") owned by the landlord, Rhyl Realty Inc. (the "Respondent"). The parties signed a lease in August 2005 with a term that ended in October 2010. The Appellant continued to occupy the Leased Premises and paid rent. Although there were negotiations, the parties never signed a lease extension or renewal.

The Appellant was to obtain various types of insurance, including "all risks" insurance. The all risks insurance was to be "in an amount equal to the full replacement costs of all improvements, equipment and chattels in or serving the Leased Premises..." The Appellant purchased all risks property insurance from State Farm Fire and Casualty Company ("State Farm") and named the Respondent as an insured.

The lease also had a provision that the Respondent would not be liable for damage to the Appellant's property resulting from the Respondent's negligence, or failure to supply services or utilities beyond the Respondent's reasonable control.

In 2012, the Appellant's Leased Premises and contents were damaged from a flood. A rubber drain plug in a drain line from the roof dislodged. The plug was installed by Metal Craft Mechanical Inc. ("Metal Craft"). The Respondents had contracted with Metal Craft. The Respondent commenced a third party claim against Metal Craft.

On summary judgment, the Appellant's action was dismissed. The motion judge found that the terms of the lease governed the parties at the time of the flood even though the lease term had expired.

Holding: Appeal dismissed.

Issue: Did the motion judge err by granting summary judgment?

Reasoning:

No. The Appellant argued that summary judgment should not have been granted because facts were in dispute. The court found no merit to this argument because the issue was the interpretation of the lease. Also, there was no risk of inconsistent verdicts. Whether or not the flood occurred, the risk of damage to its property was assumed by the Appellant.

The Appellant argued that the terms of the lease do not govern where the lease expired and was never renewed. The court disagreed. The Appellant was an over-holding tenant that remained in the Leased Premises subject to the terms, covenants and conditions in the lease.

The Appellant tried to rely on the landlord's obligation to maintain and repair the roof drain system. However, the terms of the lease regarding insurance shifted the risk of damage to the property to the Appellant, and flooding was an insured peril. This stands regardless of whether the landlord's conduct with regards to the flooding was a breach of the lease.

Manjos v. Fridgant, 2016 ONCA 176

[Cronk, Tulloch and van Rensburg JJ.A.]

Counsel:
Hari Nesathurai and Glen Perinot, for the appellants

Crawford Smith and Lara Guest, for the respondent

Keywords: Contracts, Torts, Negligence, Investment Advisers, Jurisdiction, Forum Selection Clause, Choice of Law Clause, Enforceability, Expedition Helicopters Inc. v. Honeywell Inc.

Facts:

The defendant, Fridgant, was the appellants' investment advisor. In December 2011, he informed the appellants that he was moving to a new firm, PI Financial Corp. (the respondent). Fridgant met with the appellants and asked them to sign documentation to transfer their accounts to PI Financial. The individual appellants signed the documentation, which contained a choice of law and forum clause, which stated that the agreement was governed by the law of British Columbia.

In April 2014, the appellants commenced an action against Fridgant claiming he had mismanaged their accounts and that the respondent was vicariously liable for Fridgant's actions. The respondent successfully moved for a stay on the basis that the choice of forum clause required the appellants to sue them in British Columbia. The appellants appealed that stay.

Issues: Did the motion judge err in exercising his discretion to enforce the forum selection clause?

Holding: Appeal Dismissed.

Reasoning:

No. The appellants argued that the motion judge erred in finding that they failed to show cause to depart from the principle established in Expedition Helicopters Inc. v. Honeywell Inc. that a forum selection clause in a commercial contract should be given effect. The appellants also argued that Expedition Helicopters should be modified to recognize that their agreements were more consumer than commercial in nature.

The court held that the motion judge did not err in exercising his discretion. The individual appellants were educated and sophisticated and the appellants had the opportunity to review the agreements before signing them but chose not to do so. While Fridgant did not draw the impugned clause to the appellants' attention at signing, this conduct did not amount to an improper inducement. Moreover, the appellants were not obliged to transfer their accounts.

The appellants' argument that British Columbia courts would be unable to deal with aspects of the Ontario Securities Act and the Rules and Policies of the Investment Industry Regulatory Organization were also rejected, as Ontario law could be proved without difficulty before the courts of British Columbia. The appellants' argument that the language of the clause was not broad enough to cover all the allegations asserted by them was also rejected and the court instead found the wording to be very broad.

Miguna v. Walmart Canada Corp., 2016 ONCA 174

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

Counsel:
Miguna Miguna, in person
Antonio Turco and Sarah O'Grady for the respondent Walmart Stores, Inc.
Dominique Hussey and Ilan Ishai for the respondent Consortium Book Sales and Distribution LLC

Keywords: Intellectual Property, Copyright Infringement, Misapprehension of Evidence, Summary Judgment

Facts:
The respondent, Miguna Miguna, is the author of the book titled Peeling Back The Mask: A Quest for Justice in Kenya (the "Book") published by Gilgamesh Africa Ltd. ("Gilgamesh"). Mr. Miguna alleges that Gilgamesh and other entities have published and sold unauthorized editions of the Book, including thousands of copies in North America without compensating Miguna.

Mr. Miguna alleges that the respondent, Consortium Book Sales and Distribution ("Consortium") illegally reproduced and sold copies of the Book, sourced by Baker & Taylor Fulfilment, for sale through the website Walmart.com in the U.S. In 2014, Mr. Miguna discovered the Book was for sale on Walmart.com and that Consortium was listed as its publisher. His position is that Consortium had published a version of the Book without his consent and that the respondent Walmart Stores Inc. was selling it in violation of his copyright.

Mr. Miguna brought an action claiming primary and secondary infringement against Consortium, and secondary infringement against Walmart. The respondents brought a motion for summary judgment and were successful in dismissing the action.

Issue:
Did the motion judge make a palpable and overriding error in concluding that neither of the respondents ever physically received or sold a copy of the Book?

Holding: Appeal dismissed.

Reasoning:
No. Mr. Miguna argued that the motion judge misapprehended evidence that established that the respondents held physical copies of the Book. Specifically, he claimed that business records of Consortium documented sales of the Book. The court disagreed, finding that the business records were only sales of unfilled backorders. There was no basis for Mr. Miguna's interpretation of a letter from General Counsel for Walmart that identified Baker & Taylor as the "supplier of the book" which he claimed implied Walmart held a supply. Finally, Mr. Miguna argued that an affidavit from Baker & Taylor in another proceedings established that they had supplied two American universities with copies of the Book they had received from the Consortium. The motion judge reasonably preferred other evidence before him to the uncontested affidavit.

The court rejected Mr. Miguna's argument that the motion judge relied on a letter from Baker & Taylor's lawyer that addressed the affidavit that was referenced in Walmart's factum. The Consortium advised the motion judge that they would be introducing the letter through a forthcoming affidavit. The motion judge shared Mr. Miguna's concern with the letter but dismissed his motion to strike the paragraph from the factum. Mr. Miguna could not point to any place in the motion judge's reasons that suggested he had relied on the material in the factum at issue.

Grand Financial Management Inc. v. Solemio Transportation Inc., 2016 ONCA 175

[Hoy A.C.J.O., Blair and Hourigan JJ.A.]

Counsel:

Tim Gleason and Matthew Tubie, for the appellants/respondents by cross-appeal

Terry Corsianos and George Corsianos, for the respondent/appellant by cross-appeal

Keywords: Debtor-Creditor, Factoring, Torts, Intentional Interference with Economic Relations, Damages At Large, Punitive Damages, Equitable Set-Off, Matters not Pleaded

Facts:

Grand Financial Management Inc. provides factoring services, amongst other financial services, to companies in the transportation industry. This appeal arises in the context of two such agreements that are legally distinct, but that were to operate in an overlapping factual and commercial context. The first was between Grand Financial and Solemio Transportation Inc. ("the Solemio Agreement"). The second was between Grand Financial and Wild Lions Inc. ("the Wild Lions Agreement"). The Solemio Agreement was guaranteed by Solemio's principal, Sami Ullah.

Arnold Bros. Transport Ltd., a large trucking operation, was the source of the commercial link between the two factoring agreements. It subcontracted some of its freight delivery obligations to Solemio, thus creating accounts receivable in favour of Solemio for those services.

Those accounts receivable were, for a short period of time, assigned to Grand Financial pursuant to the Solemio Agreement. In turn, Solemio subcontracted the Arnold Bros. work to Wild Lions, thus creating accounts receivable owing by Solemio to Wild Lions ("the Wild Lions Receivables"). Those accounts receivable were also assigned to Grand Financial, but from Wild Lions and pursuant to the Wild Lions Agreement.

Ultimately, Solemio defaulted on its payments, and Grand Financial sued Solemio and Arnold Bros. The action against Aronold Bros was discontinued before trial, but Solemio and Mr. Ullah defended and counterclaimed for damages for the tort of intentional interference with economic relations.

At trial, the judge granted judgment against Solemio in the amount of $200,000. This amount was arrived at by relying on what the trial judge took to be an admission by Mr. Ullah that Solemio was liable to Grand Financial for about that amount under the Wild Lions Agreement.

At the same time, he awarded Solemio, but not Mr. Ullah, damages "at large" in the amount of $175,000 on the counterclaim. He declined to award punitive damages against Grand Financial. He also declined to award costs because, in his view, success was divided. Both parties appeal from these results, and Solemio and Mr. Ullah appeal against the trial judge's decision not to award any costs.

Issues:

For the purposes of the appeal and cross-appeal, the issues to be addressed are whether the trial judge erred by:

(a) awarding Grand Financial the amount of $200,000 based on Mr. Ullah's admission that about that amount was owing to it under the Wild Lions Agreement, even though that Agreement had not been pleaded as the basis for recovery by Grand Financial;

(b) finding Grand Financial liable for the tort of intentional interference with economic relations;

(c) awarding damages "at large" in the amount of $175,000;

(d) refusing to award Solemio punitive damages on the counterclaim; and

(e) failing to award costs in favour of Solemio.

Holding: Appeal Dismissed. Cross-Appeal Allowed.

Reasons:

(a) The court accepted Solemio's submission on this ground of appeal. The court said that the trial judge was not entitled on these pleadings and this record to grant judgment in favour of Grand Financial for breach of the Wild Lions Agreement- a claim that was neither pleaded nor asserted at trial and which- if treated as having arisen at trial would be considered statute barred. The court set aside the award of $200,000 against Solemio.

(b) Grand Financial argued on the cross-appeal that the trial judge erred in law in holding that it was liable for the tort of intentional interference with economic relations (or, as it is sometimes called, the tort of causing loss by unlawful means). The court ruled that Solemio succeeded in establishing the necessary elements of that tort on the evidence. The court held that Grand Financial intended both to harm Solemio in its business interests and enrich itself. The court found that Grand financial was liable for the tort of intentional interference with economic relations.

(c) The court held that the trial judge's findings that the intentional interference counterclaim was not supported by any reliable documentary, accounting, or expert evidence were well-founded on the record, and there is no basis for interfering with them. Damages at large may be awarded in cases of intentional torts, and to corporations in such circumstances where there has been injury to the corporation's reputation and associated economic loss. As a result of Grand Financial's unlawful conduct, Solemio lost its major client, Arnold Bros. Further, its bank account was emptied and frozen, and the company was unable to make payments for trucks, insurance and salaries. The court agreed with the trial judge's award for damages.

(d) Even though he found that Solemio had made out the tort of intentional interference with economic relations, the trial judge declined to grant Solemio's request for punitive damages in the amount of $250,000. The court saw no error in this determination. The court held that the trial judge's application of the law on punitive damages to the circumstances of this case was a matter of fact and mixed fact and law, and is therefore entitled to deference.

(e) In light of Solemio's success on its cross-appeal, it was not necessary to deal with its arguments regarding costs.

Pickering Square Inc. v. Trillium College Inc., 2016 ONCA 179

[Strathy C.J.O., LaForme and Huscroft JJ.A.]

Counsel:

Courtney Raphael, for the appellant Trillium College Inc.

Alan B. Dryer and Orly Kahane-Rapport, for the respondent Pickering Square Inc.

Keywords: Contracts, Real Property, Commercial Tenancies, Leases, Repudiation, Remedies, Limitation Period, Limitations Act, 2002 s. 4 & s.5(1)-(2), Discoverability, Continuing Breaches

Facts:

Trillium College Inc. (Trillium) and Pickering Square Inc. (Pickering) were parties to a long-term lease of space. Trillium covenanted not only to pay rent but also to occupy the premises and to operate its business continuously, and to restore the premises at the expiry of the lease. Trillium paid rent but did not operate its business continuously and failed to restore the premises when the lease ended. Pickering brought a claim for damages for Trillium's breaches of its covenants following the expiry of the lease. Trillium brought a motion for summary judgment, arguing that Pickering's claim was brought outside the two-year limitation period under s. 4 of the Limitations Act, 2002. The motion judge held that Trillium's breach of the covenant to occupy the premises and operate its business continuously was of a continuing nature, such that each day of the breach gave rise to a fresh cause of action. As a result, only a portion of Pickering's claim against Trillium for breach of its covenant – the portion concerning the breach that occurred more than two years prior to commencement of the action – was barred. The motion judge also held that Pickering's claim for damages for breach of the covenant to restore the premises was not time-barred. Pickering appealed against the judgment but did not pursue its appeal. As a result, this case is concerned solely with Trillium's cross-appeal of the partial summary judgment.

Issues:

(1) Did the motion judge err by finding a continuing breach of the lease giving rise to a new cause of action and a new limitation period each day that Trillium failed to carry on business at the leased premises?

(2) Did the motion judge err by finding that the repair claim was not statute- barred because it concerned repairs at the end of the lease rather than during its term?

Holding: Cross-appeal dismissed.

Reasoning:

(1) No. For the purposes of s. 5(1) of the Limitations Act, 2002, a claim is discovered once a plaintiff knew or ought to have known of sufficient facts on which to base the claim. Under s. 5(2), a claimant is presumed to discover his or her claim on the day the act or omission giving rise to the claim occurs, unless the contrary is proven. In order to determine the discovery date for the claim, the nature of the breach must be determined. In this case, the breach was a continuing obligation under a contract. Trillium breached its covenant to operate its business continuously – "at all times" – for the duration of the lease. Trillium's argument that breach of its covenant to operate its business continuously established a complete cause of action as of October 1, 2008, overlooks the consequences of its breach. In the face of Trillium's action – a serious breach or repudiation of the lease – Pickering had an option. It could either cancel the lease or affirm it and require performance. Pickering elected not to cancel the lease following Trillium's October 1, 2008 breach. It affirmed the lease and, as a result, the parties were required to perform their obligations under it as they fell due.

The motion judge properly concluded that a fresh cause of action accrued every day that breach continued – every day that Trillium failed to carry on its business in accordance with the covenant. The accrual of fresh causes of action has consequences for the innocent party as well as the party in breach of the contract. It sets the clock running for a new two-year limitation period. Pickering's election to affirm rather than cancel the lease does not have the effect of postponing the date for discovery of the breach until expiry of the lease. The limitation period in this case applied on a "rolling" basis. The two-year limitation period commenced each day a fresh cause of action accrued and ran two years from that date. Thus, Pickering was entitled to claim damages for breach of the covenant for the period going back two years from the commencement of its action on February 16, 2012 – the period that ran from February 16, 2010 until the lease expired on May 31, 2011.

(2) No. Trillium submits that Pickering's restoration claim was related to obligations during the lease rather than upon its expiry. This claim was therefore discoverable as of October 1, 2008 and, as a result, is barred by the two-year limitation period under s. 4 of the Limitations Act, 2002. However, the motion judge was entitled to find that the respondent was claiming only for the breach of the covenant to repair and restore at the end of the lease. From this finding it followed that the limitation period for the claim began to run on May 31, 2011, and as a result the action was commenced within two years of discovery of the claim. Whether notice was provided was irrelevant to the nature of the claim and the Limitations Act, 2002 issue.

CIVIL ENDORSEMENTS

Monk v. Farmers' Mutual Insurance Company (Lindsay), 2016 ONCA 181

[Sharpe, Benotto and Huscroft JJ.A.]

Counsel:

David A. Morin, for the appellant

Martin P. Forget, for the respondent Farmers' Mutual Insurance Company (Lindsay)

Demetrios Yiokaris, for the respondent Muskoka Insurance Brokers Ltd.

Keywords: Insurance Law, Motion for Costs, Partial Indemnity Costs Awarded

CRIMINAL DECISIONS

R. v. D.R., 2016 ONCA 162

[Sharpe, Benotto and Huscroft JJ.A.]

Counsel:

R. John McCulligh, for the appellant

Eric Siebenmorgen, for the respondent

Keywords: Criminal Law, Sexual Assault, Minors, Misapprehension of Evidence, Credibility, Reliability, Conviction Quashed, New Trial, Appeal Allowed

R. v. Nero, 2016 ONCA 160

[Sharpe, Benotto and Huscroft JJ.A.]

Counsel:

Alan D. Gold and Melanie J. Webb, for the appellant Nicola Nero

Vincenzo Rondinelli, for the appellant Martino Caputo

Nick Devlin, Amber Pashuk and Jeremy Streeter, for the respondent

Keywords: Criminal Law, Possession for the Purposes of Trafficking Cocaine, Reasonable Apprehension of Bias, Evidence, Spousal Communication Privilege, Parole, Parole Restrictions, Appeal Dismissed

R. v. Phung, 2016 ONCA 170

[Sharpe, Benotto and Huscroft JJ.A.]

Counsel:

Setu Purohit, for the appellant

Lisa Henderson, for the respondent

Keywords: Criminal Law, Possession of Controlled Drugs, Child Pornography, Evidence, Misapprehension of Evidence, Appeal Dismissed

R. v. Arsabekov, 2016 ONCA 169

[Sharpe, Benotto and Huscroft JJ.A.]

Counsel:

Margaret Bojanowska, for the appellant

Alexander Hrybinsky, for the respondent

Keywords: Criminal Law, Possession of Controlled Drugs, Child Pornography, Evidence, Misapprehension of Evidence, Appeal Dismissed

R. v. Dhanaswar, 2016 ONCA 172

[Tulloch, Benotto and Roberts JJ.A.]

Counsel:

Devika Dhanaswar, in person

Gerald Chan, duty counsel

Greg Skerkowski, for the respondent

Keywords: Criminal Law, Fraud over Five Thousand, Real Estate Fraud, Sentencing, Appeal Dismissed

R. v. Mullings, 2016 ONCA 171

[Sharpe, Benotto and Huscroft JJ.A.]

Counsel:

Richard Fedorowicz, for the appellant

Brock Jones, for the respondent

Keywords: Criminal Law, Possession of Marijuana for the Purposes of Trafficking, Possession of Firearms, Evidence, Misapprehension of Evidence, Unreasonable Verdict, Appeal Allowed in Part

R. v. St. Pierre, 2016 ONCA 173

[MacPherson, Tulloch and Benotto JJ.A.]

Counsel:

Dani Raymond St. Pierre, in person

Erika Chozik, duty counsel

Michael Fawcett, for the respondent

Keywords: Criminal Law, Promise to Appear, Failure to Appear, Motion for Directed Verdict, Evidence, Circumstantial Evidence, Appeal Dismissed

R v. Piekarski, 2016, ONCA 183

[Watt, Lauwers and Pardu JJ.A.]

Counsel:

Tina Kaye, for the appellant

Alexander Hrybinsky, for the respondent

Keywords: Criminal Law, Appeal Book Endorsement, Appeal Dismissed

R. v. Laing, 2016 ONCA 184

[Watt, Hourigan and Huscroft JJ.A.]

Counsel:

Tina Kaye, for the appellant

Alexander Hrybinsky, for the respondent

Keywords: Criminal Law, Possession of a Loaded Firearm, Corbett Application, Negligence, Abuse of Process, Evidence, Failure to Preserve, Canadian Charter of Rights and Freedoms, s. 7, Appeal Dismissed

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.